The number of planning permissions being granted across England for new build houses continued to fall sharply during the second quarter of the year, continuing the downward trend of the past two years, the latest HBF Housing Pipeline report, based on data supplied by Glenigan, shows.

Planning permissions are obviously a lead indicator of future supply levels and the report is the latest data set to confirm industry warnings that in the midst of an increasingly anti-development policy environment and worsening economy, the number of homes built in the coming years could fall to record low levels.

At 2,456, the number of projects granted planning permission during Q2 of 2023 was the lowest since the Housing Pipeline Report began recording in 2006. This number is 10% lower than the previous quarter and 20% lower than a year ago. The continued decline follows an 9% decline in Q1 and a 9% decline throughout 2022. This is clear evidence of a far reduced appetite for investment among house builders amidst a riskier planning environment, hostile political actions from ministers and wider economic circumstances.

Approval was granted for 62,681 homes during the second quarter, dropping 16% on the previous quarter and 13% as compared to the same period a year ago. Other than the quarter affected by Covid-19, Q2 2020, this is the fewest permissioned homes in a quarter since 2015.

New homes and new sites permissioned during the first half of 2023 were 19% down on the equivalent period in 2022. If this translates directly to completions, it will lead to a reduction in housing delivery of 44,000 homes per year which would see Net Housing Supply for England fall to levels not seen for a decade.

HBF warned earlier this year that if unaddressed, the government’s anti-development approach to planning and nutrient neutrality could see housing supply halve to around 120,000 homes a year. The latest figures in its Housing Pipeline report prove this scenario to be increasingly likely.

The HBF says the government’s capitulation to the NIMBY wing of the Conservative party and weakening of the requirements on local authorities to plan for the homes their communities need has to date seen 60 Local Authorities pause or withdraw their housing plan preparation; and whilst the Government has announced proposals to unblock the 150,000 homes on hold as a result of the EU Court of Justice ‘Dutch N’ case relating to river pollution, the moratorium on development still remains in place across 74 local authority areas.

Meanwhile first-time buyers are struggling to access the mortgage market, a situation made worse by the fact it is the first time in decades there is no government support scheme in place for new build first-time buyers.

Stewart Baseley, executive chairman of the HBF, said: “Over recent years the policy environment has become increasingly anti-development and anti-business and as a direct result we are seeing a sharp fall in the number of homes being built.

“The government’s capitulation to the NIMBY lobby on planning, its mishandling of water legislation and amidst a lack of mortgage availability the lack of support for first time buyers could see housing supply drop markedly in the coming years. Fewer homes being built amidst an acute housing crisis has clear social implications, in particular for young people, and will reduce economic activity and cost jobs.”

Looking regionally, the sharpest decline was seen in Yorkshire and the Humber, down 54% on the previous quarter. The East Midlands, London and the South West followed, with falls of 38%, 25% and 20% respectively. Four parts of the country bucked the overall downward trend in approvals during the second quarter. The North East, East of England, West Midlands and Wales all saw a double digit increase in approvals against the previous quarter, rising by 26%, 31%, 19% and 26% respectively.

Housing supply

In 2012/13, England saw the lowest peacetime level of housing supply ever recorded. A series of policies introduced by a Coalition Government with a desire to build more homes to address decades of undersupply and boost the economy, led to a rapid increase in output such that by 2019, net supply in England had doubled, surpassing the highs seen during the housing booms of the 1950s and 1960s.

The increases in housing supply can be attributed to a range of factors, including the introduction of the National Planning Policy Framework (NPPF) in 2012, the Help to Buy Equity Loan Scheme, as well as a general positive attitude towards development that positioned the UK as an attractive location for investment in future supply, which allowed homebuilding to flourish.

However, in the recent period, a hostile political attitude towards building has driven a policy agenda that has on the whole, sought to restrict housing delivery.

The proposed changes to the planning system, and the free rein afforded to Natural England to impose new requirements on development are risking the progress in tackling the housing crisis made over the past decade. The combination of these factors has the potential to see net housing supply drop as low as 111,000 per year, around 10% lower than the previous the lowest ever annual net supply during peacetime.