Government set to miss 1.5m target, housebuilders warn

Housebuilders have warned the government’s budget watchdog that ministers’ target of building 1.5 million homes in England by the end of the decade is too optimistic.

The Home Builders Federation (HBF) has written to the Office for Budget Responsibility (OBR) to say that unless the government does something to boost affordability for first time buyers and cut taxes the target will be missed, as first reported in The Times.

The letter is a blow to Chancellor Rachel Reeves ahead of next month’s Budget, given that a surge in new homes is central to the OBR’s forecasts for economic growth.

The government says it will “leave no stone unturned” to meet the 1.5 million new homes target for England.

The chancellor has promised to “defy” gloomy forecasts for the UK economy after it emerged the government is facing a bigger-than-expected hole in the public finances.

The OBR is expected to downgrade productivity – a measure of the output of the economy per hour worked – when it delivers its final draft forecast to the Treasury on Friday, ahead of Reeves’ Budget on 26 November.

The chancellor will be hoping that the warning from housebuilders will not drag the OBR’s outlook down even further.

The watchdog’s decision in March to including the government’s planning reforms in its economic forecasts was a major boost to Reeves, as it increased growth forecasts by 0.2% of GDP.

The OBR did not endorse the 1.5 million target – but it did say that changes such as mandatory local housing targets and building on green belt land could result in 1.3 million homes across the entire UK over the next five years.

But the Home Builders Federation is warning that this is an “extremely ambitious” target without further changes to government policy.

The HBF is keen to stress that it welcomes the government’s planning reforms – but it fears that these alone are not enough to kick start building in a flat market.

The organisation, which says its members are responsible for building 80% of new homes in England and Wales, says there has been no government help for first time-buyers since the Help to Buy scheme closed to new applications in 2022.

It has also criticised increases to the “landfill tax”, which aims to reduce the amount of waste sent to landfill sites, which it claims will add £14,000 to the cost of building a new home.

The introduction of a new building safety levy next year will also add costs, it says.

HBF spokesman Steve Turner said: “Whilst the planning reforms overseen by ministers last year are very positive, government also continues to oversee increases in policy costs and taxes on new homes making many sites unviable.

“We need to see a reversal of these additional burdens and action to support first-time buyers in a market that they are increasingly frozen out of.

“It is the first time in decades there is no government support scheme in place to help people buy a home and the suppressed level of effective demand is preventing builders investing in sites to build the homes the country needs.”

Earlier this month, the government announced plans to shake up the house-buying system to speed up sales and save first-time buyers money.

A spokesperson for the Ministry of Housing Communities and Local Government said: “We will leave no stone unturned to build the 1.5 million homes this country desperately needs and restore the dream of homeownership.

“On top of the major planning changes we have already introduced to get developers building and our huge £39bn investment in social and affordable housing, we are going further and faster to accelerate reforms and bring about the biggest era of housebuilding in our country’s history.”