Spring Statement glow could soon fade

Posted: March 27, 2025 | Author: julesbirch | Filed under: Affordable housing, Housebuilding, Welfare reform | Tags: Spring Statement |Leave a comment

Originally written as a column for Inside Housing.

Just for a change, housing looks like one of the winners from the Spring Statement – but is everything quite what it seems?

On housebuilding overall, the Office for Budget Responsibility (OBR) gave Rachel Reeves a big boost as it delivered a positive verdict on the planning reforms introduced by the government in the Autumn. 

The chancellor boasted in her speech that measures such as the new National Planning Policy Framework, the release of ‘grey belt’ land and the restoration of mandatory housing targets would permanently boost GDP by 0.2 per cent by 2029/30 and 0.4 per cent within ten years. 

She said: ‘That is the biggest positive growth impact that the OBR have ever reflected in their forecast, for a policy with no fiscal cost.’

Just as good for the chancellor was the watchdog’s forecast on housing numbers: ‘The OBR have concluded that our reforms will lead to housebuilding reaching a 40-year high of 305,000 a year by the end of the forecast period,’ she said. ‘And changes to the National Planning Policy Framework alone will help build over 1.3 million homes in the UK over the next five years, taking us within touching distance of delivering our manifesto promise to build 1.5 million homes in England in this parliament.’ 

The chancellor phrased that carefully but the Treasury press release was more gung-ho as it boasted that this would be ‘bringing the UK one step closer to its Plan for Change mission to build 1.5 million homes’.

That really would be good news, since almost nobody believes the target can be met, but read that paragraph again and you may spot a problem with it.

The issue, of course, is that the target is for England only whereas the forecast is for the UK as a whole (and both are for net additions to the stock not just new homes). 

Take the most recent year for which figures are available and there were 269,000 net additions across the UK in 2023/24, of which 221,000 were in England. 

Even if that gap shrinks slightly, as it should do because the planning reforms do not apply to the rest of the UK, that will still leave net additions in England well short of the target, peaking at perhaps 270,000 in 2029/30 and totalling between 1.1 and 1.2 million over the parliament. 

That may be ‘within touching distance’ but only if you bring a long bargepole. 

The OBR does expect the positive impact of the planning changes to continue, with net additions reaching 320,000 for the UK by 2034/35, but even that will be short of the average 300,000 a year needed for England to meet the current target. 

Indeed, ten years on from the Conservative manifesto pledge to hit 300,000 a year by the end of the last parliament in 2024, we will still not be meeting that. 

Supporters of planning reform point out that more changes – and more growth – will be on the way due to changes in the Planning and Infrastructure Bill that the OBR cannot yet take into account.

However, I’ve also come across scepticism about the OBR forecasts, with some questioning whether they take into account the effect on land prices and others doubtful that transactions in the market as a whole will rise by as much as it thinks in the context of higher interest rates. 

There were also some hype in the pre-announcement of more money for affordable housing. Hailed by Reeves as ‘an additional £2bn of investment in social and affordable homes next year’ this will be made in 2026/27 and is described as the Treasury’s ‘down payment’ on the next Affordable Homes Programme. 

This could help prevent stop-start problems as we switch from one AHP to another but £2 billion a year on its own is not enough to match current annual investment and is only a small step towards ‘the biggest boost in social and affordable housing in a generation’ promised again by Reeves and deputy prime minister Angela Rayner on Tuesday. 

Delivering that at the same time as rebalancing the programme towards social rent will take far more investment in the spending review in June. If it happens, there could be another boost to overall housebuilding numbers but watch this space.

However, all that has to be seen in the context of the latest round of welfare reform that includes cuts in disability benefits that even the government’s impact assessment says will drive an extra 250,000 people into poverty. Some families with a disabled adult stand to lose over £12,000 a year by 2029/30. 

Think about that for more than a second, add the impact of the freeze in Local Housing Allowance, and any lingering glow from the prospect of more housebuilding very quickly starts to fade. 

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