Suffolk Home Builders Federation warn of slump in 2023

Market forces and government policies are leading to a slowdown in housebuilding across the region - and the UK as a whole - which could lead to acute shortages of homes, the industry has warned.

The Home Builders Federation (HBF) said the situation was "extremely challenging" and predicted that as a result of policy, housing supply could be halved - leading to low levels of home building not seen since World War 2.

Its report, entitled Planning for Economic Failure, predicts an acute shortage of new homes - despite a government target to build 300k a year. Instead the supply could fall from 233k last year to below 120k a year, it claimed.

HBF blamed government appeasement of its backbenchers on planning issues and "free rein" given to quangos such as Natural England for the problems as it sets out how many homes it thinks each measure is costing.

Proposed reform of the planning system so local authorities would no longer have to plan for the housing needs of its communities could mean the loss of 77,000 homes a year, it said.

Nutrient neutrality requirements - an anti-pollution measure from Natural England - could lose around 37,000 to 41,000 homes a year while water neutrality could stop a further 1,500 to 1,900 homes a year being built, it claimed.

Recreational Impact Zones could also cost a further 1,200 to 2,100 homes a year, it said.

The net result would be nearly 400k fewer jobs, more than £20 less economic activity and £3bn less invested in affordable homes, it claimed.

Stewart Baseley, executive chairman of HBF said the industry was facing an "increasingly anti-development and anti-business policy environment".

This posed "a real threat" to house building when investment decisions are being made, he said.

"The government’s capitulation to the NIMBY lobby and its mishandling of water and drainage legislation could see fewer homes built than ever before," he said.

"As we try to tackle the housing crisis during a recession, with tighter mortgage availability and no government scheme to assist buyers purchase new builds for the first time in decades, short-term political decisions to appease backbenchers seriously threaten confidence."

Abel Homes - a £30m turnover housebuilder based at Watton, near Thetford, with a 50-strong workforce - said in Norfolk, the Nutrient Neutrality situation had "inevitably" had an effect on the supply of new homes over the past year. 

Managing director Paul LeGrice said there was "no doubt" blockages in the planning system were the major reason  the UK is building far fewer homes than needed to solve the nation’s housing crisis. 

"The proposed changes to the National Planning Policy Framework (NPPF) will have the immediate result of further reducing the number of new developments being brought forward," he predicted.

The UK was falling behind European neighbours in terms of affordability and supply, he added.

However, the Norfolk market was holding up well with prices relatively stable, he added.

"I don’t believe we will see significant price falls in Norfolk, as there is still a mismatch between supply and demand," he said.

"As we move into 2023, we are cautiously optimistic that progress is being made towards a workable solution which will enable the new homes which the county needs, to be built, but the impact of the legislation is already being felt with delays on new site starts.

Costs were stabilising, he added.

Simon Girling, director of Ipswich-based SEH French, said as well as policy issues, market forces were making conditions hard for housebuilders.

His own company hedges its bets by building for diverse sectors including commercial builds, he said, but the housebuilding side was facing a host of market pressures which were making it tough.

Costs have been rising while house prices are falling as a result of the cost-of-living crisis. This has finally caught up with the housing market - which until recently was booming as a result of strong demand and short supply. Mortgages are difficult to secure, and interest rates are rising.

According to the Nationwide Building Society, the average price of a house in the UK fell month-on-month by 0.6% in January, taking it to £258,297. It followed a 0.3% month-on-month fall in December.

Housebuilding was a long game, and the planning phase was very time-consuming, explained Mr Girling.

Over the past year, prices of materials had been more volatile than he had ever known, he said. Some had jumped in price by up to 50%, he said, while overall costs went up by around a fifth year-on-year.

"I have been in the industry 33 years and certainly have never seen price increases like that," he said. "We work on a margin of one or two per cent. If we get that wrong it can cost us a lot of money."

As a result, his company - which employs 50 workers but also indirectly hundreds of sub-contractors - took a very risk-averse view last year, he said, and was very careful and considered in its choices.

"I would say it's very fragile at the moment and it could go either way," he said. "There's talk of recession, talk of things slowing across all of construction."

Meanwhile planning was "extremely difficult and extremely costly" in terms of the hurdles developers had to overcome, he said.

He is hoping with energy prices coming down and sunnier weather on the way, things will improve. On the plus side, stock levels are rising at builders' merchants and specialist merchants, he said.

But the industry was "still teetering", he said. "People are putting the brakes on."