Labour’s plan to build 1.5 million new homes by 2030 is being “undermined” by a fall in planning consents, according to a report by Investec.  

Just 241,000 housing units received planning permission in England last year, a 3% fall from 2023, reveals the study by the specialist bank.

This shortfall is particularly acute in the South East, the study says, with London facing a substantial housing gap, with only 32,160 homes delivered in 2023, “less than half the estimated amount required”. 

To hit its target – a 50% uplift on the previous five years — the government aims to build around 300,000 homes a year. 

However, the report, called UK Housebuilding: Challenges and Opportunities, points to some signs of progress.  

Housebuilding inflation costs slowed to 2% in 2024, compared with 15% in 2022 and 10% in 2023.  

It adds: “Coupled with this, urban brownfield and prime central London land prices spiked in 2021 and 2022 before declining sharply in 2023, suggesting that land may become cheaper for builders.” 

The report comes as the latest S&P Global UK Construction Purchasing Managers’ Index today showed that housebuilding was the weakest-performing segment in its construction survey, with a 45.1 mark in May. A level above 50.0 indicates growth. 

Overall, the S&P building activity survey posted a 47.9 mark in May, up from 46.6 in April, showing an easing of a slowdown that has endured since the start of the year. 

The government hopes that its relaxing of planning restrictions and green-lighting previously shelved housing projects will lead to greater building from the middle of this parliament.

Chancellor Rachel Reeves’ spending review next Wednesday, is also expected to boost the housing department’s budget over the next five years.

Investec building and construction equity analyst Aynsley Lammin says: “While we are currently not seeing the levels of construction needed to achieve the government’s targets, there are some positive signs in the market, with both land prices and cost inflation in construction beginning to normalise to pre-pandemic levels. 

“As well as costs, the adoption of a partnership model—where local authorities and developers work together—may accelerate building levels.  

Lammin adds: “These collaborations reduce development risks and capital requirements, allowing for a more flexible approach to delivering new homes.  

“By leveraging co-investment from housing associations and institutional investors, we can create a capital-light growth model that helps unstick the housebuilding process.”