The towns most exposed to Labour’s housing revolution

Labour will reinstate compulsory housebuilding targets for councils and raise the number of new homes in Britain to 370,000 a year, Angela Rayner has announced.

The Government has also revealed plans to double housing targets in some areas of the North of England, while slashing targets in major cities including London, Birmingham and Bristol.

The deputy prime minister on Tuesday committed to 1.5 million new homes over this Parliament in a bid to fast-track thousands more first-time buyers onto the property ladder.

“Today I’m calling on local authorities, housing associations and industry to work with me to deliver a council house revolution,” Ms Rayner told the Commons, promising the “biggest boost to social and affordable housing in a generation”.

Labour’s ambitions also include overhauling planning laws, reforming the green belt policy and building what it calls “the next generation of new towns” in order to meet its home building targets.

Ms Rayner made explicit that the default answer to brownfield development should be “yes” with more homes in urban centres, like towns and cities.

To enable this, the Government will allow the targeted release of so-called grey belt land, which includes disused petrol stations and car parks on parts of protected land known as the green belt.

Mandatory homebuilding targets were previously scrapped under the Conservatives. In the 2022-23 financial year, 234,400 new homes in England were built.

Labour’s housing plans at a glance: 

• Reinstate mandatory housing targets by updating the National Planning Policy Framework, and raise the targets given to councils to 370,000 homes a year.
• If councils are unable to meet targets, they will be required to look to “brownfield land” within their local green and grey belts, prioritising areas near stations and existing settlements.
• Grey belt land will only be built upon if the Government’s “golden rules” are met – this means half of the homes must be affordable, the plans must enhance the local environment and necessary infrastructure must be in place, such as schools and GP surgeries.
• Labour intends to build the next generation of new towns in order to “deliver for local people, unlock economic growth and deliver genuinely affordable housing”.

The Labour target areas most exposed

Labour has revealed its new annual housing targets for different parts of the country. 

Overall, housing targets will double from 6,123 to 12,202 in the North East, and rise by 75pc from 21,497 to 37,817 in the North West. Some urban areas – including parts of London – will see their targets fall by over half. 

Redcar will see its home building target jump from 46 homes to 462, while Burnley will need to build 369 instead of 51, a 623pc increase. Westmorland and Furness and Hyndburne will also see building targets raised by over 500pc.

Meanwhile, several major cities will see their targets slashed – London’s overall target will fall from 100,000 to 80,000, while Bristol, Nottingham and Birmingham will also see theirs lowered. London borough Tower Hamlets will see its annual target fall from 5,190 to 2,177, a 58pc drop.

Labour’s decision to cut housing targets in London and other major cities while slashing those in areas in the North of the country – where demand for homes is much lower – has drawn criticism.

Samuel Hughes, head of housing at think tank Centre for Policy Studies said: “It is good that Labour has raised overall national targets and made them more binding. But the distribution of those targets is deeply concerning.

“Labour has cut targets in London, where the housing shortage is concentrated, while raising them in the North, where housing is relatively abundant. More generally it has cut targets in cities, where it is most needed, and raised them in rural areas, where demand is generally lower.

“These reforms may still be an improvement overall. But Labour could have done far more to alleviate housing shortage if it focussed building in the places where housing is most scarce. We hope that Labour will redress this in its response to the upcoming consultation.”

Anthony Breach, associate director at the think tank Centre for Cities, said: “We need to supply much more housing in and near our cities where demand to live and work is greatest.

“If the Government wants the greatest benefits from their planning reforms, then they need to increase housebuilding in and near London and the other expensive cities of the South East.”

Brownfield sites will be key to Labour hitting its housing targets in the South East

Lucian Cook, a housing expert at estate agency Savills, said: “Even though Labour is cutting its targets for building in parts of the South East, they’re still very high, and hitting them will be a stretch.”

Labour is overhauling the green belt policy, which protects around 13pc of the land in England from development. Building on “brownfield sites” will be key for the Government to reach its ambitious housing targets.

Brownfield sites are areas that have previously been developed, but are not currently in use – these make up less than 1pc of the green belt, according to analysis carried out by estate agent Knight Frank.

Knight Frank looked at the brownfield sites upon which Labour may target most and where they are found.

Narrowing it down to specific counties, Buckinghamshire was identified as having the most brownfield sites, with 489. Cheshire East is host to 388, while Cheshire West and Cheshire have 376 sites. Tandridge and Sevenoaks offer 294 and 281 brownfield sites respectively, while Guildford has 272.

Some 4,612, or 41pc of the sites identified by Knight Frank, sit within the stretch of green belt surrounding London, with the greatest density of sites to the north west of the city.

London, Merseyside and Manchester green belts boast most brownfield sites, with Buckingham, Cheshire and Tandridge the top counties for building potential.

The Merseyside and the Greater Manchester green belt area boasts the second highest number of brownfield sites at 1,968. Birmingham’s green belt came third with 1,351 sites, with South and West Yorkshire close behind with 1,129 sites. Bristol and Bath and their surrounding areas offer 606 brownfield sites.

Labour also wants to utilise something it calls the “grey belt”, which it defines as parts of the green belt that it deems ugly or poor quality, made up of, for example, “car parks and wastelands”.

On top of this, it will give local mayors more powers over planning to make it easier to push through housing investment in local authorities.

Could your house price be hit?

The supply of homes in the UK is highly inelastic, which means it doesn’t respond much to changes in demand. This is because it’s very difficult to build homes in the UK because of restrictions on planning and the areas of land that can be built upon.

So if demand for property goes up – as it has for decades – prices follow, and sharply.

Demand for homes is also highly inelastic – people will always want to buy them, even if prices increase substantially. Prices were widely forecast to crash in 2023, with soaring mortgage costs and a cost of living crisis predicted to deter buyers and cause a double digit market fall. Yet prices dipped just 1.8pc over the year, according to Nationwide.

Even if the supply of homes increases at a faster rate, demand for property is so strong – and supply is still so stiff – experts believe there will be little impact on price.

Christian Hilber, professor of economic geography at London School of Economics, said: “Even if the incoming government were to deliver and were successful in creating a building boom, this is unlikely to have a dramatic adverse effect on prices.

“We haven’t built enough houses for 40 or 50 years now – one or two years of a building boom won’t reverse that. We would need a sustained substantial increase in construction over several years to achieve that.

“I think it’s more likely that increased construction numbers will have a small dampening effect on long run house price growth. Welcome in terms of housing affordability, but these are moderate effects rather than dramatic ones.”

However, he added that some parts of the country were more vulnerable to dips. 

“If new homes are built in regions where housing affordability is less of an issue – chiefly the North and North East of England, unlike London and the South East – it’s possible that prices there could fall.”

This is because weaker demand for homes may not be sufficient in maintaining strong price growth.

Andrew Wishart, of research firm Capital Economics, said: “The 1960s saw the highest levels of housebuilding on record, but house prices still rose by about 2pc a year in real terms over the course of the decade.”

In some instances, an increased level of building in an area can actually drive property prices up, according to Dr Nikodem Szumilo, a professor of economics at University College London.

“New developments in London are often associated with increasing price rises in the neighbourhood as they improve infrastructure and amenities,” he said.

For Labour’s policy to slow soaring house prices, it first needs to meet its annual targets. This is a feat Mr Hilber of LSE views as unrealistic. He thinks overhauling planning rules may not be enough – the UK construction industry would need to grow, too.

He said: “It seems very unlikely that Labour will be able to deliver 300,000 new homes a year right away or in the near future, if at all. Dramatic and sustained increases in supply would require a substantive expansion of the building sector. That can happen, but would likely take a few years.”

Dr Szumilo added: “This Government is not the first to promise to build many new homes - it’s not even the first to set a target of 300,000. Even if there is a real long-term commitment it will take many years to get planning regulations and the construction industry ready for this much development.”

Richard Donnell, of property website Zoopla, said: “We don’t believe prices will be pushed lower even where there are large areas of development. This is because builders do not flood markets with too much supply, as it pushes the value of their homes down, which will not encourage demand and buyers.

“The Government will be able to build more homes by building a wider range of property types, sizes and price points, making the market impact minimal.”