"This government has stated their commitment to quantity, but the danger is that this will be to the detriment of quality"
- Nick Cunningham - Stacks Property Search
As part of Labour’s five missions for the government, Kier Starmer promised “shovels in the ground and cranes in the sky. So it’s time to get Britain building again. It’s time to build one and a half million new homes across the country."
An ambitious target to say the least, not unnoticed by the industry with Barratt Redrow chief executive, David Thomas stating that Labour’s plans were "unachievable" due to "a severe skills shortage, an ageing workforce, and Brexit."
However, should the government achieve the unachievable, are we likely to see a meaningful reduction in house prices and if so, at what cost?
As a basic rule and backed up by multiple research papers, a 1% increase in supply typically leads to a 1-2% decrease in prices, indicating that increasing the available supply of a product can significantly impact its price by reducing pressure from high demand.
As you've probably guessed by now, the answer is not quite this simple when it comes to the housing market, which seemingly operates under its own rules where the basic laws of supply and demand do not necessarily apply, and as ever, the property market mantra of "location, location, location" certainly comes into play.
Location
Simply increasing the housing supply is unlikely to have a significant impact on house prices unless the type, size, and tenure of the homes align with market demand. The true impact, according to e.surv Chartered Surveyors, will depend on "balancing supply and demand across various housing sectors. Consideration should also be given to where the proposed 1.5 million homes are likely to be built and are in areas where people need and want to live."
“We need supply to be made available, particularly via private sales in those areas of highest demand where people most want to live," explains Jeremy Leaf, north London estate agent and a former RICS residential chairman, "There is no point ticking the boxes of meeting targets if you are building in remote areas with little infrastructure, poor communication and few job opportunities. There needs to be a balance between achieving numbers and finding in areas where people want to live and creating stock in places where people want to live."
"If these homes are built in areas of high demand, such as London and the South East, they might help stabilise prices, but a dramatic nationwide house price reduction is unlikely," says Robin Edwards Partner at Curetons Property Finders, "Beyond affordability, the plan could bring benefits in terms of more housing options for renters by potentially easing rental costs and offering greater choice for tenants. For many renters, who are often the most affected by housing shortages, this could provide some much-needed relief.
"However, to deliver on this vision Labour would need to address challenges such as the skills shortage, ageing workforce and infrastructure demands. This isn’t just about building houses, it’s about creating vibrant and sustainable communities with the infrastructure like schools, transport and healthcare facilities needed to support them."
"If these properties aren’t near jobs or transport, or if they’re priced out of reach, they won’t fix the housing crisis," says Donia Yousef, Director at Monster Publishing & Productions, "Developers also face major challenges like skills shortages and rising costs, which could slow progress. That said, if done right, this could ease pressure on house prices and rents, create jobs, and bring more balance to the market. It’s ambitious, but the potential rewards are worth it."
Playing catch up
In 2023-24, England added 221,070 new homes, a 6% decrease from the previous year. This underscores the ongoing pressure on the housing market and the challenge of meeting the government’s homebuilding targets.
In fact, BBC Verify analysis has revealed that the number of new homes built in England continued to decline in the first six months of Labour’s government. Data from energy performance certificates, a key indicator of new housing, showed that just 107,000 new homes were recorded since last July’s election - a 10% drop compared to the same period in the previous year. Every region in England experienced a year-on-year decrease, with the North West seeing the steepest decline at over 27%.
Trudy Woolf, Director of Lender Services at e.surv Chartered Surveyors, argues that to tackle this challenge, new housing must meet diverse population needs, not just in quantity but also in tenure and property type. She explained, "While demand for homeownership remains strong in the rented sector, as ever affordability challenges persist. According to the 2023/24 English Housing Survey, 57% of private renters and 25% of social renters expressed a desire to own a home in the future.
"Meeting this demand requires not only increasing the supply of homes for sale but also addressing the broader housing system. Expanding affordable options such as shared ownership and rent-to-buy schemes, alongside ensuring a robust supply of social and private rental homes, can provide a pathway to ownership while supporting those for whom buying remains out of reach.
"A varied property mix, including smaller, more affordable homes, would also help address gaps in the market. Over the past decade, nearly two-thirds of privately built new home completions were 3+ bed properties. However, demand for smaller properties—especially among first-time buyers—is rising. With higher interest rates and stretched affordability, smaller homes offer an affordable entry point into the market. These homes may help facilitate downsizing for older homeowners, freeing up larger family homes for second steppers."
Environmental impact
Last month Labour announced that they would strip environmental quangos of powers to delay housebuilding and infrastructure developments.
The current requirement that developers must mitigate the environmental damage caused by new buildings before construction can start has now been removed. The initiative is designed to ensure that developers can start projects without delays and later pay into a new national “nature restoration” fund to “offset” any potential damage.
Additionally, by prioritising brownfield sites and exploring "grey belt" areas for development, the government can potentially address the housing crisis with limited environmental impact.
But to achieve this, planning policies will need to evolve. Trudy Woolf explained, "Currently, larger, high-value homes dominate many new developments, leaving smaller, affordable homes underrepresented. Reforms to prioritise sustainable, high-density housing will ensure that a broader mix of property types is built to meet both local needs and long-term environmental goals. To build more sustainably, developers may look to increase the use of modern methods of construction to not only build at scale but quicker and more sustainable with off-site construction methods."
Nick Cunningham of Stacks Property Search warned, “This government has stated their commitment to quantity, but the danger is that this will be to the detriment of quality.
“In the Southwest new homes are being built on land which will worsen the current flooding issues.
“Another big problem is more houses without more infrastructure. We know about schools, doctor’s surgeries, local shops and dentists, but an even greater problem can be a lack of employment. This results in many towns with hundreds of newly built homes becoming dormitories for larger conurbations with residents working 20 miles away during the day.”
Trudy Woolf concludes, "It is difficult to understate the challenges faced by the government to achieve their target. Building 1.5 million homes is a significant challenge, and any success won’t be measured simply in numbers.
"It seems that the real success lies in striking a balance between enough homes in the right locations with the least environmental impact, improving affordability and stabilising the market over time,"
A tough ask indeed.
