New UK Government Unveils Housing and Planning Reforms

Labour's recent election victory has ushered in a new administration and a new era for the UK property market. The centre-left party, known for its emphasis on social equity and robust public sector involvement, has pledged to tackle the UK's housing crisis head-on with a series of reforms designed to boost supply and improve access to affordable housing.

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In her first major speech as the new Chancellor, Rachel Reeves unveiled a series of housing and planning reforms designed to restore stability to the UK housing sector and drive growth. According to Reeves, the new Labour government plans to build 1.5 million new homes over the next five years and relax planning restrictions in some areas of the green belt.

Chancellor of the Exchequer, Rachel Reeves, said on Monday:

This Labour Government has been elected to get things done to get Britain building again.

In 2019, the Conservatives pledged to build 300,000 new homes a year, with mandatory building targets for local authorities. However, these targets became advisory following a Tory backbench rebellion last year.

Mandatory housebuilding targets will be restored under the new administration. Local communities will continue to shape housebuilding in their areas, but the government has said it will intervene if necessary.

Building in “Grey Belt” Areas

The Labour government has announced plans to build new homes on the “grey belt”—a term used to describe poor quality and ugly areas of the green belt, such as disused car parks and wasteland.

Making up around 13% of England, the green belt was created more than 70 years ago to limit the growth of large, built-up areas. Currently, planning restrictions make it very difficult to build on the green belt. Now, however, the new government wants to harness the development potential of poor-quality “grey belt” areas in order to reach its housebuilding target. Moreover, half of the homes built on the grey belt will be affordable housing.

In a recent report, Knight Frank identified 11,000 previously developed sites on the green belt. These potential “grey belt” areas made up less than 1% of the green belt and were mostly concentrated in the south of England, with over 40% located within the London green belt area. According to the estate agent, between 100,000-200,000 new family homes could be built on the sites.

National and Local Infrastructure

The new government has also announced a series of planning reforms relating to UK infrastructure. Labour has indicated that planning decisions for major infrastructure projects will be made nationally rather than locally to help speed up delivery.

Increased spending on local infrastructure will boost connectivity and improve amenities in certain areas. This will drive local economies and put upward pressure on property values, opening up new opportunities for UK investors. Meanwhile, regeneration projects will transform derelict areas into vibrant new communities with strong investment potential.

Already, the Labour government has ended the ban on onshore wind farms in England, with energy projects critical to the nation given priority in the planning system. The government has also suggested that decisions on onshore developments will be made at a national rather than local level.

Any development may have environmental consequences, place pressure on services and rouse voices of local opposition, but we will not succumb to a status quo which responds to the existence of trade-offs by always saying ‘No’.

There may also be hope on the horizon for the northern leg of the HS2 rail link. In Monday’s speech, Reeves refused to rule out reintroducing this part of the project with the help of private money. Darren Jones, Chief Secretary to the Treasury, has also suggested that Labour will discuss its intentions with Greater Manchester Mayor, Andy Burnham. The resurrection of the HS2 line from Birmingham to Manchester would be a huge win for the North, boosting connectivity and driving growth.

Impact on Property Investors

Labour’s series of housing and planning reforms are set to reshape the UK property landscape. Some have argued that a large increase in the supply of homes could slow house price growth, dampening long-term returns for investors. However, there is a huge shortfall of homes in Britain, and even Labour’s ambitious plans to build 1.5 million homes over the next five years will not satisfy demand. According to the Financial Times, England needs nearly half a million new homes every year to keep up with the country’s growing population. Therefore, a significant supply and demand imbalance will continue to drive growth and deliver substantial returns for investors.

Labour’s policies could influence the type of properties that receive planning permission and investment support. On the other hand, the government’s commitment to reducing inequality and providing more affordable housing options could open up further opportunities for investment. High demand, coupled with possible tax incentives, could make affordable housing an attractive venture for discerning property investors.

Economists have warned that the new government will likely implement tax hikes to fund public services. Labour ruled out increases to income tax, national insurance and VAT in their election campaign, instead highlighting economic growth as the focus. However, overseas buyers are looking at an additional 1% stamp duty surcharge.

As we await the date of the first budget in the Autumn, many are anticipating more policy details and possible changes that could impact the profitability of UK investments.

To conclude, Labour’s election victory presents both challenges and opportunities for those with a stake in the UK property market. The new government’s reforms are designed to tackle key issues in the UK housing market and drive growth on a national scale. Its target to build 1.5 million new homes is ambitious, yet it still falls short of what will be needed to meet demand, according to experts.

Investors across the UK and from abroad are likely to take a cautious approach over the next few weeks, particularly as we await clear policy details and the first budget. Those with a stake in the UK property market must stay informed of any changes made by the new government and adjust their strategies accordingly. Monitoring the latest housing trends and focusing on regions with strong growth potential will be key to unlocking opportunities under the new Labour government.

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