What the Budget needs to deliver to resolve the housing crisis

The Government has spent considerable political capital to address the housing crisis - in fact, it has done pretty much everything the planning sector has asked for. And yet the housing crisis remains, because planning reform can only take us so far. Planning permission does not automatically make a development investable, nor does it mean there will be buyers ready to purchase the home once they are built.

That’s the other side of the housing delivery equation, which we would like to see the Budget address. If the Government want its planning reforms to translate into more homes, it also needs to create the conditions that give developers the confidence to commit investment and start building.

Your First Home is one of the clearest opportunities. Helping more first time buyers into the market will support sales and give developers greater confidence to invest in new development. But the scheme’s detail will determine its effectiveness. If the developer contribution creates a substantial upfront cost, there’s a risk that the measure which is intended to stimulate sales actually prevents starts on site. Regional price cap variations, access for SME builders and a clear launch timetable will be crucial.

Additionally, before committing to a site, a developer needs confidence that the cost of land, construction, finance and policy requirements can be covered by what buyers can afford to pay. Too often, those sums no longer add up.

On a site we are advising on for a PLC housebuilder, the land is identified as a draft allocation in the emerging Local Plan. However, significant increases in build costs and slower sales rates mean the developer is currently unable to bring the site forward without a reduced affordable housing contribution, below that of the emerging policy allocation. This is where the Budget could make a tangible difference: addressing the viability gap between an allocated site and construction.

An overall assessment of the combined cost of affordable housing, biodiversity, infrastructure and building safety and other requirements is long overdue. Each of these requirements has an important policy objective, but their cumulative impact on viability and housing delivery needs to be better understood. If all of those objectives are to be delivered alongside boosting housing numbers, the overall development model has to stay viable.

The Government must not ignore the important role of SMEs: smaller builders have less capacity to absorb delays, additional costs and slower sales. If they stop bringing sites forward, we also risk losing the contractors and skilled trades needed to increase delivery. That would make Government’s housing ambitions harder, rather than easier, to achieve.

The test of this Budget from a planning and development perspective is whether it will change the investment decision on sites that already have planning permission. In the current circumstances, that is the only way the housing crisis will be resolved.