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Labouring for housebuilders

Posted on 9 July 2024

The FT reports that among a general post-election stock market bounce on Friday, housebuilder shares have figured strongly. Indeed, well-known names seem to have experienced 2-3.5 times the percentage increase of the rest of the FTSE250. 

The market clearly thinks that the new Government's election promises for the planning system are good news for the industry. So, is there cause for optimism?

Certainly Labour's commitment to reinstating housing targets (and quickly, with a revised National Planning Policy Statement expected this month) will be music to a housebuilder's ears. Angela Rayner, the new Deputy Prime Minister and Minister for Housing, Communities and Local Government is clearly prepared to bring a more interventionalist top-down approach, backed by Rachel Reeves, the new Chancellor. The Conservatives had tried doing so but shied away in recent years after the entirely foreseeable consequences of forcing delivery where houses were needed, despite local objection, began to cost them politically. One can almost hear the dust being blown off plans which had been shelved for the last few years in areas of tight constraint but desperate need. 

Also exciting for housebuilders is the new Government's position on green belt and in particular a proposal to identify so-called "grey belt" areas which fall into current green belt but are of limited green belt value. Targeted release of these areas has the potential to deliver much needed homes. This is a longer-term proposal however, especially if it requires councils to bring forward release sites through the sometimes glacial Local Plan process. 

It isn't all plain sailing, however. Several other manifesto proposals will require significant policy changes or legislation. These changes always throw some level of uncertainty and delay into the system which investors are never keen on. Affordable housing policies will remain strong under Labour and that is a major part of the cost equation when assessing housing sites, especially on the target brownfield sites. Indeed, to meet the ambitious housing targets the Government has set for itself, the public and registered provider sectors are going to have to invest heavily in their own housebuilding. Even in the most productive years, the private sector has never churned out even close to the necessary 300,000 new homes per annum. 

On balance then, the industry may be right to be optimistic, as may those keen to see more homes in their area for themselves and their children. The real test will be how quickly the new ministers can bring reform and, crucially, how well they can resist further changes and instead let the dust settle and the changes work through before shifting the goal posts once more.

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