The Budget watchdog expects 1.14 million homes to be added over this Parliament, and ministers are blaming the Iran war, interest rates and construction costs
Labour is on course to fall well short of its pledge to deliver 1.5 million new homes this Parliament, according to a new forecast from the Office for Budget Responsibility (OBR). The watchdog expects 1.14 million homes to be added to Britain’s housing stock over the five years, and has cut its estimate for the next five years by 190,000. Housing Secretary Angela Rayner admitted in September there was only a “slim chance” of hitting the target, but said she was “definitely not giving up”. She has blamed the Iran war, high construction costs and rising interest rates for weighing on the housing market.
The forecast and the target
The OBR published its housebuilding projections alongside the Budget on 28 October. It said Labour’s planning reforms would “have a positive impact on housebuilding”, but that the downgrade reflected “wider pressures in the construction sector because of weak demand, rising material costs and the impact of other regulatory changes”. It now expects annual net additions of 260,000 by 2030–31, down from just over 305,000 in its March forecast.
The Government’s own tracker estimates 437,900 net additional homes in England between 9 July 2024 and 20 September 2026, about 29% of the 1.5 million target. Only 196,900 were estimated for 2025–26, against 208,600 the year before, and those figures are provisional. Planning permissions in England fell 12% to 212,000 in the year to June 2026, about 30% below the 302,000 of the year to June 2022.
Some reports have compared the OBR figure with 1.89 million homes built under the Conservatives between 2019 and 2024, a period disrupted by Covid and cut short by an early election. That figure does not match official data. A Housing Ministry analysis in May 2024 put net additions in England at about 1,001,000 between December 2019 and May 2024. The OBR figure covers the whole UK and the target is for England, so the two should not be compared directly.
Political reaction
Shadow housing secretary Katie Lam told The Telegraph that Labour had “no excuse”. “They’ve utterly failed to bring their pledge to fruition because they’ve layered taxes and red tape onto the industry, making building less and less viable,” she said. In a GB News article, she said the “biggest blockers to building are the Net Zero building regulations which Healey explicitly promised to maintain”.
Steve Turner, executive director of the Home Builders Federation, said Labour’s reforms since taking office were welcome but did not address “the massive increase over the past 20 years in the level of taxation and policies, all with a cost, levied on to housebuilding by successive governments”. He said demand was held back by “a lack of affordable mortgage lending”.
A spokesman for the Ministry of Housing, Communities and Local Government said: “We’re getting this country building again and with new housing starts up 20 per cent compared to this time last year, and a 298 per cent increase in London alone, our bold planning reforms are working. We’ve always been clear that delivering 1.5 million homes was a stretch target and we recognise the challenges the sector is facing with construction costs and macro-economic headwinds.”
First-time buyers
The Budget confirmed the Your First Home scheme, which lets first-time buyers buy a new-build home with a 2.5% deposit, backed by a 20% government equity loan. It has £4.7bn over five years and is expected to help about 70,000 households and support around 20,000 additional homes. The OBR said the scheme is too small to make a substantial difference to supply and could push prices up slightly. The equity loan is interest-free for five years, then 1.5% in year six and 3% from year seven. Household income limits are £110,000 outside London and £140,000 in London. Applications are expected to open in February 2027 and the first loans in April.
John Healey has asked Bank of England Governor Andrew Bailey to find more ways to help first-time buyers, calling on the Bank to “target improving access to home ownership without prejudicing financial stability” and to examine rules on high loan-to-value mortgages.
