As last week’s King’s Speech confirmed, Rachel Reeves is staging a planning revolution.
The Chancellor aspires to deliver no fewer than 1.5m homes over this parliament to revive the economy – and solve the chronic housing shortage.
The Government has made a pledge to be ‘builders not blockers’ and its hugely ambitious policies should allow hundreds of thousands of young people to fulfil the dream of climbing on to the housing ladder.
But will these ground-breaking measures mean bumper profits for Britain’s household name developers, making their shares an essential buy for your portfolio?
Or will the reforms be blocked by a range of challenges, including legal action from locals determined to safeguard the identity of their town or village from a new housing scheme?
Here’s what you need to know about the plans, the obstacles – but also the opportunities that could allow you to make the most of a future construction boom.
Chancellor Rachel Reeves has unveiled ambitious plans to build 1.5million new homes
THE PLANS
The reforms risk opening a chasm of dissent.
The Yimby (yes in my back yard) pro-development group are set to be ranged against those who fear for the desecration of our countryside.
Even those who would not call themselves Nimbys (not in my back yard) will fear that the policies will allow more urban sprawl, producing scores of poorly constructed homes without roads, schools and GP surgeries and other amenities vital to a community.
As legal firm Michelmores highlights, the Government intends to make ‘full use of intervention powers’ to drive through its pledge to be ‘builders not blockers’.
Local councils will be compelled once more to meet compulsory housing targets, able only to determine ‘how, not if’ homes are built.
Ideally, housing policies should turn Nimbys into Slimbys (something logical in my backyard), confident that new housing will be beautiful, durable and surrounded by a wealth of amenities.
But winning hearts and minds does not seem to be the Government’s priority.
Particular apprehension surrounds the proposal to create a series of new towns.
The Cambridge area is seen as a likely location for one of these 21st century new towns which are intended to have ‘well-designed homes, green spaces, reliable transport links and bustling high streets’. The Government will also be seeking ‘fast track approval and delivery of high-density housing on urban brownfield sites’.
But not all such plots – which have been developed in the past – are in city centres.
Knight Frank, the property consultancy which has identified likely sites in England, says that 4,612 (or 41pc) are within the stretch of Green Belt surrounding London, the bulk of them to the north-west of the city.
Equally controversial is the aim to designate lower quality areas of green belt land as ‘grey-belt’ ripe for development.
THE OBSTACLES
Over the Reeves revolution hangs the spectre of the failed housing policies of past governments. As one expert said: ‘Back in 1997, Tony Blair’s deputy prime minister John Prescott promised seven millennium communities as part of his planning revolution. They didn’t happen, did they?’
Nimbys may be blamed for the lack of new housing. But other factors hamper development and will continue to do so. Politicians may talk of building homes and like to be pictured wearing hard hats.
But the actual construction is done by major housebuilders who will only get shovels in the ground if customers have the finance. Aneisha Beveridge, residential research director at estate agency Hamptons, says: ‘Housebuilders will only ramp up if they know there will be buyers willing and able to purchase.
‘And so, Labour’s housebuilding ambitions are equally at the whim of decisions on interest rates.’
Buyers continue to struggle with high borrowing costs, although interest rates could fall later this summer. The cost of the average five-year fixed rate mortgage is 4.97pc, which is below the peak of 6.11pc in July 2023. But back in July 2021, the typical rate was 2.51pc.
Meanwhile, Help to Buy, the taxpayer-subsidised scheme operated by the previous government, has been withdrawn, although it helped those not able to rely on the Bank of Mum and Dad.
New estates such as this one face obstacles such as the sclerotic planning system
A housebuilder will usually sell the affordable portion of a large development to a housing association. These not-for-profit bodies are responsible for the provision of social and lower-priced homes.
But, as Richard Donnell, research director at property portal Zoopla, explains, housing associations are cash-strapped.
The sclerotic planning system also stands in housebuilders’ way. The Government plans to recruit 300 new planning specialists, but they will not replace the 3,000 staff in such departments lost over the past decade. Already only 20pc of planning applications are processed before the 13-week deadline. There’s a lack of personnel too on building sites.
Donnell says: ‘If you’re going to build, you need a workforce, and Britain’s brickies and other skilled workers are ageing.’
Britain has 42,000 bricklayers. However, at least 33,000 more must be trained and hired if Reeves wants to meet her goal of 1.5m homes over the next five years, or 300,000 a year.
THE OPPORTUNITIES
Being wary of the planning revolution’s impact on your location is not a reason to shun the shares that should benefit.
Reeves sees the revolution as a route to ‘unlock our country’s economic growth’ on the basis that construction activity boosts brick makers, furniture retailers and other businesses. The estimate is that for every £1 spent on construction, close to £3 of value is created for the wider economy.
Leading fund managers are taking positions in the companies that could be the winners. Alan Dobbie of Rathbone UK Income holds builder Taylor Wimpey because it has a ‘quality land bank’ – a ready supply of sites on which homes can be delivered. Dobbie also likes the company’s 6.5pc dividend yield.
His other pick is Persimmon that ‘focuses on more affordable homes for first-time buyers’.
Job Curtis of the City of London investment trust is another fan of Taylor Wimpey and Persimmon.
If you own other housebuilders like Barratt, Berkeley, MJ Gleeson or Vistry, prepare for more takeover activity, as companies vie for a slice of the construction boom action.
You could oppose building in your area but still benefit from the economic opportunities
As Dobbie points out, Crest Nicholson is about to be bought by Bellway, while Cala, Legal & General’s housebuilding arm, is also for sale. If the houses go up, people will need to furnish them.
On this basis, if you have shares in the furniture chain Dunelm, they are worth holding. But managers are also diversifying into companies allied to construction. Curtis says: ‘We have stakes in Ibstock, the brick maker, and Marshalls, leader in UK paving stones and roofing products.’
Ben Yearsley of Shore Financial Planning also favours suppliers, citing equipment rental group Ashtead, building materials business Travis Perkins and Forterra which is another brick maker.
Yearsley prefers these because he suspects that although Labour needs the housebuilders for its revolution, it could still legislate to ensure that they do not score supernormal profits.
Succumbing to such a temptation would be counterproductive. But Reeves could come under pressure to fund other projects – for there will be many bumps along that road to 1.5m homes.
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