Where next for residential development policy in England?

Boosting housing development was a cornerstone of the Starmer government’s quest to drive economic growth. But new housing completions remain stubbornly low. EPCs for new dwellings show that 400,250 new homes have been completed in England in the two years since the 2024 election, almost 40% the level that would be needed to be on track to hit 1.5 million homes by the end of the Parliament.

Little wonder then that Angela Rayner, now re-appointed as Secretary of State for Housing, Communities and Local Government, has admitted that the 1.5 million target has become “a real challenge”. But what could the new administration do to get housebuilding back on track?

Focus on providing support to housebuilders

The temptation may be to look again at planning policy. Frequently cited as a blocker to development, a round of reforms was introduced by Labour in 2024, notably reintroducing mandatory housing targets. Further changes are still to come through the reorganisation of local government.

But introducing further change into the planning system would likely hinder rather than help increase development volumes. Instead, the government should give the current system time to bed in without risking further disruption.

Planning applications have increased over the last year, with Q1 2026 seeing the highest number of applications submitted for new homes for any first quarter in the last six years, suggesting the 2024 reforms are stimulating activity. And recent history has shown us that the strongest period of housing delivery between 2017-2019 coincided with a prolonged period of policy stability, giving local authorities, developers and investors the confidence to make long-term decisions.

Instead, government should focus on providing the support that would give housebuilders the certainty to progress through the construction process. New build sales rates have come under pressure in the face of continued higher mortgage rates. Combined with rising build costs, development viability is increasingly marginal across much of the country, with smaller developers who are most exposed to fluctuations in the supply chain bearing the brunt of the burden.

Ways to avoid falling further behind targets

There are several routes open to government to support the housebuilding industry through the current market headwinds:

• Expand the National Housing Bank’s lending products for SMEs and provide up-front infrastructure funding to ease the cashflow and viability pressures holding sites back.
• Allow greater flexibility on Section 106 agreements, including cascade mechanisms, wider acceptance of Discounted Market Sale as a tenure, and temporary grant funding to part-fund obligations, to unlock stalled sites and bring affordable homes forward.
• Confirm the first funding allocations under the 2026-36 Social and Affordable Homes Programme as soon as possible, enabling Registered Providers to ramp up development of social and affordable tenures. This counter-cyclical model would maintain construction capacity despite the current weakness in the sales market, and would align with the prime minister’s aspiration to see a boost to social housing delivery.
• Introduce targeted demand support including an equity loan scheme for first-time buyers. This would particularly benefit SME developers that have seen average weekly sales rates fall to below 0.4 per outlet, a level that threatens the commercial viability of housebuilding.

Clearly, some of these interventions would require greater financial commitments from government than others, and housing will be one of many competing priorities to balance in the run-up to October’s Budget. But these changes would have a material impact on the capacity of housebuilders to operate in an increasingly challenging market. Without this support, the government risks seeing housebuilding fall even further behind target.

Further information

Contact Emily Williams

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