UK Government expected to miss 1.5 million homes target, confirms Chancellor Reeves

UK Government expected to miss 1.5 Million homes target, confirms Chancellor Reeves

Chancellor Rachel Reeves has confirmed that the UK Government is unlikely to meet its goal of delivering 1.5 million new homes in five years. Updated forecasts now predict that fewer than 1.3 million net homes will be added to the UK housing stock by March 2030.

This projection, published in the Office for Budget Responsibility’s (OBR) March 2025 Economic and Fiscal Outlook, suggests the UK Government will fall short of its 2024 election pledge for new home construction - despite a renewed focus on planning reform and housing policy. Reeves maintained, however, that the revised estimate remains "within touching distance" of the original goal.

Housing forecast: 1.3 million new homes by 2030

According to the OBR, between 2025 to 2026 and 2029 to 2030, the UK is expected to see approximately 1.3 million net additions to its housing stock. Although this marks significant progress, it falls short of the Labour Party’s commitment to build 1.5 million homes over the same timeframe.

The OBR notes that housebuilding will hit a low point in 2025–26, described as a '12-year low', before recovering to around 305,000 homes annually by the decade’s end - a delivery rate Reeves says would represent a '40-year high'.

Planning reform and the introduction of the ‘grey belt’

Central to the Government’s housebuilding strategy is a major overhaul of planning policy. In December, mandatory local housing targets were reintroduced, alongside a new classification known as the ‘grey belt’ in the UK - allowing previously protected green belt land to be considered for development.

These changes form part of the Planning and Infrastructure Bill, currently in its second reading in the House of Commons. The reforms aim to unlock land supply, streamline approvals, and boost housing delivery nationwide.

The OBR forecasts that these planning changes will deliver a permanent 0.2% uplift to UK GDP by 2029–30 - equating to an estimated £6.8 billion (7.7 Billion USD) economic contribution. Reeves called it the largest growth effect the OBR has ever projected for a non-fiscal policy.

Investment in affordable housing and construction skills

To support the expanded housing program, the government recently announced an additional £2 billion investment in social and affordable housing for 2026. This funding is expected to deliver 18,000 new homes.

In parallel, the Department of Education is investing £600 million to train 60,000 new construction workers. The plan includes the launch of 10 new Technical Excellence Colleges to help address labour shortages across the building sector, maybe Canada needs to invest in training new construction tradespeople also!

Changes to the National Planning Policy Framework (NPPF)

Further revisions to the National Planning Policy Framework in the UK are expected to add 170,000 homes to the forecast, boosting the national housing stock by an additional 0.5% by 2029–30. These gains will be driven by strengthened requirements for local authorities to release land and prioritise sustainable development.

However, the OBR notes these effects will likely take hold from 2027–28, as developers identify sites and local authorities implement updated local plans.

Sector capacity and local resistance remain key risks

Despite the positive outlook, the OBR has flagged several risks that could impact delivery of new homes. Labour shortages in the construction industry and capacity constraints could hinder progress, particularly if demand for skilled workers outpaces training and recruitment efforts.

Moreover, local opposition to planning reforms - especially development on green belt land - could delay or reduce housebuilding output in affected areas.

Prefab home building in UK could help meet its housing targets

Like the UK, Canada has set ambitious homebuilding targets to address its housing shortage, despite the fact that the current method of on-site home construction cannot meet demand. To address those challenges, Canada is gearing up its prefab home building industry. Prefab home building can be done quickly, more efficiently, and produce higher quality homes and produce less waste in the process. 

The UK may be wise to also ramp up its prefab house manufacturing industry as well. It may not bring their 2030 targets into reach, but it would certainly increase the number of house starts, as well as provide ecomomic stimulation in a growing industry at a time where the global economic system is very shaky.

See the largest listing of modular and prefab home builders in the UK here.

Conclusion:

While the projected 1.3 million homes represent a strong step forward, the UK government still faces major challenges in closing the gap to its original 1.5 million homes target with its current production model. With planning reforms underway and investment flowing into affordable housing and skills development, the coming years will determine whether the UK can overcome structural barriers to meet its long-term housing needs.