PLANNING REFORM Will it work?

Clare Jones Madison Thomas

Clare is a Director of BPS and has a range of valuation experience gained over many years, both for principals and in private practice. She joined BPS in 2020 and has since advised on projects including Earls Court, Fulham and Holloway Prison, Islington.  Madison is a Director of BPS Chartered Surveyors, having worked in planning viability and valuation there for the past 6 years. She has advised on a range of significant developments including Northfleet Harbourside, Gravesham and Barnsbury Estate, Islington.

Clare and Madison set out all the changes made by this Labour government, indicating that the emphasis is continually on market-led housing. “However, the end goal for open market housing is affordability. Any increases in house prices push longed-for affordability further away from the grasp of the average voter.” 

In the febrile early summer of 2024, Labour pledged to “get Britain building again” and deliver 1.5 million new homes over the next five-year parliament. The party’s pre-election manifesto positioned the housing crisis as not only a key election issue in itself, but also a major constraint to economic growth. Labour recognised the importance of both home ownership and affordable housing, but 18 months after the party’s resounding election win, what has changed? 

Labour’s goal requires the delivery of 300,000 new homes p.a. across England, a level that has not been achieved since the late 1970s, and the biggest increase to affordable housing in a generation. It is therefore not surprising that this has been met with scepticism by many commentators; nevertheless, Labour remains confident that ‘fixing’ the planning system, together with its other proposed measures, will ensure delivery at these levels. 

The current Labour government has introduced, or tabled, a number of changes, which we summarise as follows:  

July 2024	Mandatory local housing targets reintroduced (collective annual target of 370,000 homes)
December 2024	National Planning Policy Framework (‘NPPF’): Greybelt (land no longer contributing to the Greenbelt) can be developed subject to the “Golden Rules”  National Planning Practice Guidance (‘NPPG’): development in Greenbelt to provide up to 50% affordable housing  Greater London Council Accelerating House Delivery Practice Note prioritises social rent homes and changes viability review mechanism requirements for London Boroughs
July 2025	Government backed Mortgage Guarantee Scheme launched for deposits as small as 5%, includes new builds, and no price cap  Spending Review includes £39bn for new Social and Affordable Homes Programme (2026-2036)
September 2025	12 New Towns announced with construction on three towns to begin before the end of this Parliament
October 2025	Renters Right Act becomes law (starts May 2026). Bans no fault evictions and intends to strengthen tenant security
December 2025	Planning and Infrastructure Bill becomes law. Intended to accelerate the planning process for nationally significant infrastructure and sub-regional development projects, improve consistency in planning decisions, strengthen development corporations, and reform the CPO process  NPPG Viability updated with more emphasis on social rent homes, and transparency and reasonableness in the viability testing process  Trial of exemptions to Building Safety Levy for SME developers and Biodiversity Net Gain requirements on small sites
For 2026 implementation:	New NPPF in consultation (until March 2026). Changes include faster identification of development land, presumption in favour of sustainably located development, higher density development in sustainable areas, more standardised viability inputs  Package of support for housebuilding in London in consultation (until January 2026). Changes include temporary Community Infrastructure Levy relief, increases in density, time limited planning route  New Local Plan system, streamlining of plan preparation and examination, 30-month deadline to ensure all councils have up to date plans

What housing crisis? 

The media has dubbed this a ‘housing crisis’ but this term remains largely undefined. The key areas of concern appear to be affordability of open market housing and availability of affordable housing. The drivers for each of these issues and possible solutions to both are unlikely to be identical, but what are the solutions, and do they overlap or could they conflict? 

Tweaking supply 

Much of Labour’s strategy has focussed on harnessing private sector development to fix the crisis. This is not revolutionary; the private sector has been the main focus of policy for successive governments over many decades. 

While some of the planning reforms seek to improve the supply of development land, such as proposals concerning the Greybelt and designating New Towns, many of the reforms focus on ‘oiling the wheels’ of the planning system, making it more efficient and more equitable.

While speed and fairness are vital considerations for developers, once the planning system has been kick-started again, much of the benefit of these improvements to the planning process will be to de-risk the process for developers, presumably therefore cutting development costs. 

It is well known that rising build costs have become a major barrier to housing delivery in recent years, driven by increased labour and materials costs and a sustained period of higher interest rates. Additional pressures, including the recently introduced Building Safety Levy, Biodiversity Net Gain requirements, and costly delays linked to the building safety gateway approvals, have further squeezed developers’ margins. 

At the same time, house price growth has remained relatively modest, with London reporting some of the lowest growth, and with prices even falling in certain periods. The contrast between continued rising costs and limited house price growth has become a critical challenge for developers (see graph). 

Relative House Price vs. Build Cost Chart

Source: Building Cost Information Service TPI and Land Registry HPI 

It is clear that if house price growth does not keep pace with cost inflation, then the economics of housing delivery simply do not add up in many cases, posing a fundamental barrier to efforts to increase housing supply. This is borne out in the stark lack of housing starts in London over the past year. 

What about market demand? 

The introduction of a new mortgage guarantee scheme widens the previous scheme to include new build homes, no value cap, and not only first time buyers, but also any buyers of their primary residence. This scheme will provide a boost to demand for both new build and existing housing stock and should in turn encourage development. The impact on house prices, however, of increased access to bank lending, is well documented. 

The elephant in the room 

The lack of house price growth remains a critical issue as it is necessary in order to overcome rising build costs, but conversely impacts affordability. The government appears primarily focussed on boosting market led development, and so improving the availability of housing. Part of this push to develop involves measures such as mortgage guarantees which will exert upward pressure on house prices. However, the end goal for open market housing is affordability. Any increases in house prices push longed-for affordability further away from the grasp of the average voter.

The golden ticket appears to be for an increase in supply to be achieved with neither house price falls - which can exert a chokehold on new development - nor price increases in excess of wage growth. Household incomes would need to rise faster than house prices to lessen the impact of price growth on affordability. This appears a tall order without significant wage growth 

Will ‘oiling the wheels’ work? 

The government’s latest data (year up to March 2025) reveals that approximately 235,000 homes were granted permission in England. This falls substantially short of the collective target of 370,000 homes now required by the mandatory housing targets. 

While oiling the planning wheels may result in a short term boost to the number of consented homes in the pipeline, will these changes actually incentivise developers to deliver? 

Some of the measures should assist in lowering the costs of delivery. However, it is not convincing at this stage that change, to the planning system in isolation is capable of resolving the imbalance between house price growth and build cost inflation. Without resolving these issues, the economics of housing delivery will not stack up. 

Is there hope for the open market housing sector? 

In an effort to improve the affordability of market housing, the government has focussed on a market led approach which is likely to lower build costs and increase demand (and therefore prices), although excessive price growth may hinder the resolution of this crisis. It is clear that more development land is required and that the current system of bank funded lending for house purchase is not currently allowing affordable purchasing for most. The government has a further 3.5 years remaining on its current term, so what other tools could they employ?  

The government’s focus has been on owner occupied housing, but this forms a minority of the stock in many countries. Longer tenancies, with a shift towards increased tenant protections, would improve the appeal of rented stock to tenants and may encourage new investors seeking long-term income streams. Build to Rent and Co-living have been increasingly prominent in recent years, backed by institutional investment.  

Are there other unexplored rental models which would appeal to investors and tenants? 

And what about affordable housing, is all lost? 

The government’s attempts to improve availability of affordable housing have been two pronged. The previous government’s strategy of private sector delivery continues but appears less robust in some respects, particularly in London, arguably an inevitable result of reduced development viability. We now appear to be largely reliant on the announced increased grant funding which is likely to give a more direct boost to delivery. 

In short, it appears from the measures announced to date, the government’s planning reforms are largely welcome but are unlikely to resolve the housing crisis in isolation.