LODGE: A Living Sector Update - Summer 2025
New homes - 1.5m Target

By Tegan Johnson and David Savage
This article is an update to our previous article Can Labour deliver 1.5m new homes? from 17 April 2025, with specific updates for recent developments and a focus on the Living Sector.
The demand for new build homes in the UK is undeniable, driven by significant population growth and migration trends. The population of the UK has risen by nearly five million people in the last decade, and net migration to the UK for the year ending June 2024 was 728,000 people, having reached an unprecedented peak of 906,000 people in the previous year. Population increases at these levels obviously create challenges for the UK housing market, such demographic shifts present substantial challenges for the Living Sector, particularly in terms of housing availability, affordability, and the capacity to accommodate diverse needs. To put the numbers in further context, the average number of persons per dwelling in the UK is circa 2.3, so for a population increase of 0.75m per annum, you would need 326,000 new dwellings just to accommodate that net migration growth. Add in the decreasing popularity of multi-generational homes, individuals living alone for longer and starting families later, and you’re looking at our existing housing stock providing homes to fewer people. Labour's 2024 manifesto has responded to these pressures with a pledge to "get Britain building again," aiming to deliver 1.5 million new homes during their first parliamentary term. This ambitious target reflects a recognition of the critical role the Living Sector plays in ensuring social stability and economic growth. Figures for 2021-22 and 2022-23 showed annual housebuilding rates of around 235,000 units per year – far short of the 300,000 new builds that would be required annually to deliver Labour’s new ambitious target. Projections for 2024/25 suggest a further decline to around 190,000 new homes, underscoring the urgency for increased construction activity in the Living Sector. Given that any changes being implemented will take time to come into effect and be felt in practice, current delivery numbers will need to increase drastically in the later years of this parliamentary term for Labour to stand any chance of reaching the 1.5m goal.
The demand for new build homes in the UK is undeniable, driven by significant population growth and migration trends. The population of the UK has risen by nearly five million people in the last decade, and net migration to the UK for the year ending June 2024 was 728,000 people, having reached an unprecedented peak of 906,000 people in the previous year. Population increases at these levels obviously create challenges for the UK housing market, such demographic shifts present substantial challenges for the Living Sector, particularly in terms of housing availability, affordability, and the capacity to accommodate diverse needs. To put the numbers in further context, the average number of persons per dwelling in the UK is circa 2.3, so for a population increase of 0.75m per annum, you would need 326,000 new dwellings just to accommodate that net migration growth. Add in the decreasing popularity of multi-generational homes, individuals living alone for longer and starting families later, and you’re looking at our existing housing stock providing homes to fewer people. Labour's 2024 manifesto has responded to these pressures with a pledge to "get Britain building again," aiming to deliver 1.5 million new homes during their first parliamentary term. This ambitious target reflects a recognition of the critical role the Living Sector plays in ensuring social stability and economic growth. Figures for 2021-22 and 2022-23 showed annual housebuilding rates of around 235,000 units per year – far short of the 300,000 new builds that would be required annually to deliver Labour’s new ambitious target. Projections for 2024/25 suggest a further decline to around 190,000 new homes, underscoring the urgency for increased construction activity in the Living Sector. Given that any changes being implemented will take time to come into effect and be felt in practice, current delivery numbers will need to increase drastically in the later years of this parliamentary term for Labour to stand any chance of reaching the 1.5m goal.
Overview/Positives
Despite the Government's commitment, industry experts remain sceptical about achieving these targets. The Chancellor, Rachel Reeves, has acknowledged the challenges in her spring statement, reflecting the sector's concerns about feasibility. Overall confidence is very low that the target numbers are remotely feasible. To meet the target, a significant ramp-up in construction is necessary, but various constraints, including regulatory changes, economic headwinds, and the availability of land, complicate this acceleration. Positive developments have emerged from Labour's changes to the National Planning Policy Framework (NPPF), which include mandatory housebuilding targets for local authorities and revised planning rules. These adjustments are seen as steps in the right direction for the Living Sector, promoting a brownfield-first approach and introducing "grey belt" rules to optimise land use. The focus on utilising previously-defined green belt land that does not contribute to its intended purposes could unlock significant potential for new housing developments. However, new affordable housing regulations impact project viability, necessitating careful policy balance to ensure that affordability does not compromise the quality and sustainability of housing projects. The postponement of the Building Safety Levy to Autumn 2026 offers some relief to developers concerned about project viability. This delay provides breathing space for the Living Sector to adapt to new safety regulations without immediate financial pressure.
Despite being constrained by strict fiscal rules, the Chancellor has also announced various funding schemes for the industry - including £2 billion in grant funding for affordable housing development (purportedly equating to 18,000 new homes) through the existing Affordable Homes Programme which runs to 2026 and £600m in skills training to train up to 60,000 new construction professionals, which are vital for bolstering the Living Sector's capacity. The 11 June 2025 spending review also included details of a longer-term grant funding scheme for new homes, with £39 billion allocated for a new 10‑year Affordable Homes Programme from 2026-27 to 2035-36. Spending will be tapered, and is intended to “reach £4 billion per year in 2029-30 and rise in line with inflation subsequently”. An OBR forecast published alongside the Chancellor's Spring Statement noted that changes to the NPPF would result in a total of 1.3 million homes constructed over the course of this Parliament, with additional sums for the Affordable Homes Programme not included and “expected to add further numbers”. Despite these efforts, Labour faces several headwinds in delivering their housing targets. So, against this background, and the political ambition to deliver, what are the challenges that Labour will face in seeking to deliver their 1.5m number?
A shortage of skilled construction workers
A shortage of skilled construction workers, exacerbated by Brexit, poses a critical barrier to meeting housing goals. The reduction in the number of European Union nationals working in the UK construction sector has intensified existing skill shortages, with nearly 100,000 fewer construction workers employed compared to five years earlier. This shortage is compounded by an ageing workforce, with many tradespeople nearing retirement age, highlighting the urgent need for a robust talent pipeline. The Home Builders Federation (HBF) warns that the UK lacks a sufficient talent pipeline to meet the Government's ambitious housing goals.
Declining planning approvals
The decline in planning approvals further hinders progress, with 2024 witnessing the lowest approval rates in a decade. Only 242,610 homes received approval, a 25% decrease from the 2019 peak. This decline is attributed to factors such as high-interest rates, changes in planning policies, and increased caution among local authorities. The Government's target of 370,000 annual planning approvals requires a 53% increase from current levels, a feat that many consider unachievable without more substantial reforms. Financial constraints on housing providers Financial constraints on housing providers, coupled with resistance from local councils, highlight the disconnect between national ambitions and local realities. Housing associations and local councils, pivotal in delivering affordable homes, face significant financial challenges. In 2023–24, housing associations started just over 32,000 homes, a 30% decrease from the previous year. Issues such as capped rental incomes, rising construction costs, and a £2.2 billion funding shortfall by 2028 are major constraints. Without an emergency cash injection and a sustainable financial model, many affordable housing projects are being delayed or cancelled, undermining the Government's housing objectives.
Resistance from local councils Resistance from local
As the primary authorities responsible for granting planning permissions, local councils have significant influence over the pace and scale of housing development within their jurisdictions. They are tasked with ensuring that new developments align with local plans, environmental considerations, and community priorities, making them essential gatekeepers in the housing delivery process. Furthermore, councils often manage public land and resources, which can be leveraged for affordable housing projects and community infrastructure. However, those local councils, including those governed by Labour, have expressed concerns about the feasibility of the 1.5 million homes target. Councils argue that the centralised approach to housing targets does not account for local needs and capacities. For instance, Broxtowe Borough Council described the targets as "impossible," while South Tyneside Borough Council labelled them "wholly unrealistic". These objections highlight the tension between national ambitions and local realities, with councils emphasizing the need for more flexibility and local input in housing planning.
The need for more radical planning reform?
The Government has a revenue target of £3.4bn after exchequer funding, industry pledges and contractual obligations have been considered. This target will stay under review and may change as deemed necessary. The Government has alluded to the fact that the levy will be around for at least the next ten years after implementation. However, it says that it will only be a fraction (4%) of the figure raised by the Community Infrastructure Levy over the same period.
The Living Sector requires more radical planning reforms to streamline processes and facilitate higher housing delivery. Many experts, including the Centre for Cities think tank, argue that the Government's current planning reforms are insufficient to meet their housing target. The Centre for Cities suggests that more radical changes, such as implementing zoning laws, are necessary to streamline the planning process and facilitate higher housing delivery. However, such reforms are politically contentious and have not been fully embraced by the Government, limiting their potential impact on housing number delivery.
The existing post-Grenfell new Building Control regime?
As Noble Francis, Economics Director at the Construction Products Association, has pointed out, planning is not the only constraint for housebuilding. Rising mortgages are affecting consumer demand, while housebuilder’s costs are still rising due to new laws introduced in previous years – from sustainability regimes on Biodiversity Net Gain and water and nutrient neutrality. However, it is also the new building safety rules with revised Building Regulations and the Building Safety Levy, plus the new three stage gateway building control system introduced by the Building Safety Act 2022 for Higher Risk Buildings (18m, 7 stories or above etc). The Building Safety Regulator is nowhere near hitting target processing times for either Gateway 2 (pre-construction start) or Gateway 3 (completion) applications. The Building Safety Regulator is struggling to meet target processing times for Gateway 2 (pre-construction start) and Gateway 3 (completion) applications. Developers are experiencing meaningful delays, which disrupt economic models for investors, particularly in sectors like affordable homes and Build-to-Rent (BTR). Initial challenges with new regulatory frameworks are inevitable. Nonetheless, as developers, contractors, and consultants begin to adjust to the new requirements and associated risk allocations, it is crucial for the Building Safety Regulator to seriously consider calls for enhanced transparency in projects navigating the gateway process. Additionally, the establishment of a pre-application procedure to facilitate substantive engagement with the Building Safety Regulator, alongside proposals to employ AI for expediting validation checks on applications, warrant careful attention. These measures are essential if the industry is to fulfil the Government's ambitions. Whilst many projects have yet to get to Gateway 3 - so there is limited data on this particular Gateway stage - there will be concerns that projects reaching Gateway 3 will encounter similar delay issues to Gateway 2 experience to date, at least in the short term, with investors frustrated by the impact that this will be having on their portfolios.
Further changes to Building Control following the publication of the Grenfell Phase 2 Public Inquiry
The Government appears committed to seeing through implementation of all 58 recommendations of the Grenfell Phase 2 Public Inquiry Report, as published last autumn. The political difficulty of not doing so is easy to understand, but many construction industry experts are doubtful about whether some of the recommendations will significantly enhance building safety. Either way, what is clear is that the construction industry itself wants a period of consolidation around the existing legal and regulatory changes that have already been introduced.
Strategies
To navigate these challenges and contribute effectively to housing delivery, companies active in the Living Sector can adopt several strategies:
Innovation in Construction Techniques
Embracing modern construction methods, such as modular and prefabricated building, can significantly reduce construction times and costs. These techniques allow for faster assembly and can be particularly effective in delivering affordable housing at scale.
Investment in Workforce Development
Addressing the skills shortage is crucial. Companies can invest in training programmes and apprenticeships to develop a skilled workforce. Collaborating with educational institutions to create tailored training courses can help build a robust talent pipeline.
Partnerships and Collaborations
Forming strategic partnerships with local councils, housing associations, and private investors can facilitate the pooling of resources and expertise. By fostering collaboration between councils, developers, residents, and other stakeholders, the industry can facilitate more inclusive and effective housing strategies. This is crucial in balancing national housing targets with local realities, ensuring that development is both feasible and beneficial to the communities they serve.
Sustainability and Community Engagement
Focusing on sustainable building practices and engaging with communities can improve project acceptance and long-term viability. Companies should prioritise energy-efficient designs and materials, and actively involve local communities in planning processes to ensure developments meet their needs.
Advocacy for Policy Reform
Engaging with policymakers to advocate for necessary reforms can help shape a more conducive regulatory environment. Companies can contribute to consultations and provide evidence-based recommendations to influence policy changes that support housing delivery.
Strategies
To navigate these challenges and contribute effectively to housing delivery, companies active in the Living Sector can adopt several strategies:
Innovation in Construction Techniques
Embracing modern construction methods, such as modular and prefabricated building, can significantly reduce construction times and costs. These techniques allow for faster assembly and can be particularly effective in delivering affordable housing at scale.
Investment in Workforce Development
Addressing the skills shortage is crucial. Companies can invest in training programmes and apprenticeships to develop a skilled workforce. Collaborating with educational institutions to create tailored training courses can help build a robust talent pipeline.
Partnerships and Collaborations
Forming strategic partnerships with local councils, housing associations, and private investors can facilitate the pooling of resources and expertise. By fostering collaboration between councils, developers, residents, and other stakeholders, the industry can facilitate more inclusive and effective housing strategies. This is crucial in balancing national housing targets with local realities, ensuring that development is both feasible and beneficial to the communities they serve.
Sustainability and Community Engagement
Focusing on sustainable building practices and engaging with communities can improve project acceptance and long-term viability. Companies should prioritise energy-efficient designs and materials, and actively involve local communities in planning processes to ensure developments meet their needs.
Advocacy for Policy Reform
Engaging with policymakers to advocate for necessary reforms can help shape a more conducive regulatory environment. Companies can contribute to consultations and provide evidence-based recommendations to influence policy changes that support housing delivery.
Conclusion
Labour's dedication to tackling the UK's housing issues is admirable, particularly in the context of the Living Sector's pressing demands. However, the ambitious goal of delivering 1.5 million new homes seems increasingly unattainable given the myriad challenges facing the sector. A critical shortage of skilled construction workers, dwindling planning approvals, financial pressures on housing providers, and resistance from local councils are just a few of the obstacles that hinder progress. Additionally, the need for more radical planning reforms and the complexities introduced by the new building control regime further complicate efforts to meet these targets. To realise such an ambitious goal, a comprehensive and coordinated approach is essential, involving all levels of government and the private sector. This requires addressing systemic issues in tandem, rather than resolving one constraint only to encounter another, such as the stringent requirements of the Building Control regime for Higher Risk Buildings. The real challenge lies in simultaneously eliminating layers of concurrent critical path and capacity challenges to ensure effective housing delivery. As Labour marks the one-year anniversary of their historic electoral victory, there is widespread scepticism that they will be able to surmount these challenges in such short timescales.
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