Labour hopes that a mixture of planning reforms and rate cuts will kick-start housebuilding, says Knight Frank.  

The government introduced the Planning and Infrastructure Bill on Tuesday, which builds on earlier National Planning Policy Framework reforms.  

The new planning framework made housing targets mandatory again and introduced more flexibility to develop on green belt land, the new Bill aims to remove councillors’ ability to block most applications and reduce the number of official bodies that get a say in planning decisions in a drive to cut red tape.   

This is part of the government’s strategy to build 1.5 million homes over the next five years, compared with around one million over the previous half decade. 

Chancellor Rachel Reeves may also unveil further reforms to boost housebuilding alongside her Spring Statement on 26 March. 

Meanwhile, the Bank of England cut rates by a quarter point to 4.5% last month, the third cut in six months, and signalled it expects to continue to reduce borrowing costs, despite predicting inflation to tick up from 3% to 3.7% towards the end of the year. 

Knight Frank senior analyst Anna Ward says: “The government’s heavy focus on housing delivery, coupled with the decline in finance costs, should create new opportunities in the residential development market.” 

Large and small housebuilders put interest rate cuts and planning reform top the list of what would most increase the appetite of firms for development, according to the property agency’s latest survey of the sector. 

“As rates come down in the short term, moves to accelerate planning and bolster resources will be key to incentivising new projects to come forward,” adds Ward. 

But she points out: “Currently, housing delivery is being held up as local authority planning departments struggle with staffing shortages.

“This lack of resources is a key factor deterring developers from bringing new housing projects forward and is viewed as a bigger constraint than either uncertain timescales or the UK’s economic outlook.”

The government has promised a £46m investment package to recruit and train 300 officers.

However, the number of public sector planning officers in England tumbled by 3,100, or around 20%, between 2010 and 2020, according to professional body the Royal Town Planning Institute. 

Ward adds that recent economic instability has led to a dip in developer appetite and a drop in approvals.  

The latest Housing Pipeline Report from the Home Builder’s Federation and Glenigan shows just 242,610 units received planning permission in 2024, the lowest since 2014. 

Ward points out that although there are undoubtedly shortfalls in skilled housebuilding labour, this will not present a problem until new home construction significantly picks up. 

Trading updates and results from housebuilders Vistry, Persimmon and Barratt Redrow over the last few weeks suggest supply chain and labour force pressures are “low risk,” says Ward.

Residential building fell for the fifth consecutive month, in the latest S&P Global UK Construction Purchasing Managers Index, and was the weakest-performing area of construction activity in February. Pandemic aside, the rate of decline for housebuilding was the fastest since early 2009. 

Ward adds: “But when activity picks up as housing demand increases, this could further strain the availability of skilled subcontractors and materials, resulting in increased costs and construction delays. 

“Post-Brexit immigration rules, low apprenticeship enrollment, and worker retirements have already made it more difficult to retain and recruit workers in construction. 

“In its manifesto, the government pledged to end the long-term reliance on overseas workers in areas of the economy including construction.” 

Ward points out: “Expanding training programmes and increasing hiring in UK planning departments and the wider construction sector is crucial for delivering the large-scale residential projects the country needs.  

“While the government’s signals have been encouraging, this spring presents a key opportunity to outline concrete proposals that could attract more talent and drive greater investment in the sector.”