Now we know. If the government understands the broken housing market and how to mend it. They do not. Since last year’s general election and the government’s high profile commitment to build 1.5 million new homes by summer 2029 I have wondered and have entertained hopes. Their flurry of planning initiatives have attracted a lot of enthusiastic support amongst many in the planning community. But it is now plain the government will fail to meet their housing target. It is very sad. They do not understand market psychology. They need to. Here is why.
Angela Rayner, Deputy Prime Minister and housing minister announced over the weekend the imposition of a significant financial penalty on developers who fail to build all their new homes within a fixed timeframe. Naturally there are already reactions: some for and some against. The Home Builders Federation denies its members sit on land. With justification they point out that last year the Competition and Markets Authority report into the housing market did not conclude that housebuilders sit on land. Instead they want the government to focus on actual reasons for subdued housing supply. For a change I agree with the HBF, not the government.
On the other hand the Local Government Association spokesman Adam Hug is reported (Housing Today, 24 May 2025) by Carl Brown as saying ‘The ability to apply a ‘fixed homes penalty ‘ is a power that councils have been asking for and means local taxpayers are not missing out on lost income due to slow developers, but it must be set at a level that incentives build out.’
Clearly neither Angela Rayner nor Adam Rug has experienced personal financial risk; the risk that means your guaranteed income up to Friday as an employee stops. And on Monday all your new fixed overheads taxi meters start to run. You have no idea whether in three years whether the house will sell promptly, for how much, nor whether the building cost estimates you have obtained are reliable or not. Put bluntly, most people think they understand risk, but do not. Are you going to book that very expensive holiday to celebrate your anniversary in three years from now? Are you? Remember with no means of cancelling if things go pear-shaped. Are you? Remember the deal with the bank means your home is forfeit if you miss the repayment date. Suddenly your wriggle room for the unexpected (which is a sure fire cert in the property business ) is gone. The government has changed the rules. Just like that. What next you will say. Remember business decisions are not based on the truth, and certainly not on your view of the truth. They are based on perceptions, often ignorant of the truth, regardless of the reality. Developers perceptions matter. And there is not much trust around. Come on Angela. . Please think much harder about the mind-sets of those carrying the risk if you want them to do as you say. And then do a policy U-turn. That way you undermine the local activists determined to sow political divide in an area of domestic policy where political differences are irrelevant until the debate about spatial issues stops and the debate about social and market tenure issues begins.
Nor, based on experience do I absolve all members of the HBF. Neither as a land buyer at Wates in the sixties, or as an adviser to developers in the seventies, eighties, nineties, naughties and teens (2010 to 2014) did I ever identify one developer who intentionally sat on land. They always had plenty of good reasons for delay. But not landowners, land speculators, option holders. They are an entirely different group operating to very different market disciplines.
So it may be possible to absolve housebuilders of the Angela Rayner’s sins, But they are not free of guilt if they play the land game. Judging by their declared profits, many do play as land speculators. Playing the land lottery game can be a winning bonanza. So the present broken building system suits them and is why the HBF has no solution of its own. Chaos in the building land supply economy in an era of inflation is highly profitable.
The question the government must ask, then answer and then deliver will need a far more thoughtful reply. In order to deliver the homes the nation needs, with local support will take time; will need grown clear messaging; cross-party grown-ups in the council chamber and spatial foresight to be financially self-funding. Put simply, the answer is nationalisation of development land, delayed ten or more years. The win is your residents get what they want. The win is the government gets what it wants. The win is our children and grandchildren get the homes they want where they work without excessive debt. The win is the nation rejoins the nations who work with change, not re-act after the event. The win is growing accommodation poverty is stopped. Prosperity will start again.
The price of these dividends! Cross-party cooperation. No more political posturing. Patience before the new game starts, in say 2035+. And a reduction in local controversies. And there is one more big win, which is always missed. When housebuilders and land speculators know there is a cross-party consensus to return decisions about local land use change to local councils there will be surge in new home building as they realise the bonanza will be ending. Once sentiment shifts, shovels will emerge double quick. No need then for more sanctions. Just competition for building land within a spatial framework set by, and directed by the council or their area development corporation partners.
Ian Campbell
27 May 2025
