The government’s construction ambitions are key to its plans to stimulate the economy. It’s removing red tape barriers in a bid to fire up the sector, but are these reforms enough to deliver on its targets? Andrew Harbourne of Thackray Williams’ Commercial Real Estate team explores whether supply and demand can be aligned to the government’s ambitions.
The government needs to be seen to be delivering. It aims to build 1.5 million new homes by the end of this parliament and intends to invigorate the economy by investment in projects such as clean energy, data centres, healthcare and education, a third runway for Heathrow, and an extension to the Docklands Light Railway.
The planning system has long been felt to be a drag on new development. The government plans to change that, as well as removing other “red tape” barriers to development. But even with these reforms, can the homes and infrastructure actually be delivered?
Speeding up the planning system
The government has a multi-pronged approach to unblocking the planning system so that projects get the green light quicker, including:
Digitalisation
By December 2024 digital reforms had led to an 85% reduction in planning officer time and savings in the cost of summarising and reporting on planning consultations. AI will surely make further huge contributions to the helpfulness, accessibility and efficiency of the planning system.
An example is a new AI system, called Extract, shortly to be rolled out to all councils. It will enable council officers to digitise planning records, including plans, in only minutes per document, compared with the two or three hours it would take a human. Extract should take a big chunk out of the estimated 250,000 hours currently spent annually by planning officers on this task.
Other processes
The planning process will be streamlined, including a requirement for more planning applications to be dealt with by officers, rather than council committee members. The process for determining nationally significant infrastructure projects will be simplified.
In terms of applications made, the news is already good. Planning applications for 335,000 homes outside London were submitted in 2025. That’s up 60% on 2024.
More planners
The government has promised funding for 350 more planning officers around the country.
Nationally Significant Infrastructure Projects
The government is already seeing success in streamlining the approval process for major schemes such as new power stations, solar and wind farms, roads, railways, reservoirs, runways and waste treatment facilities.
Speeding up delivery
In tandem with unblocking the planning process, the government has also announced measures to speed up delivery.
More investment
In her November 2025 Budget, Rachel Reeves made provision for seven of the most advanced Mayoral Strategic Authorities to receive £13bn to prioritise growth in their regions, with eleven in the North and Midlands receiving a share of £902m to invest in local infrastructure, business and employment support and skills programmes, through the Local Growth Fund.
Additionally, six Mayoral authorities in the North and Midlands with an integrated Settlement will receive the Mayoral Revolving Growth Fund, deploying a total of £500 million to accelerate investment, unlock development and boost growth.
Building out planning permissions
Last year the government consulted on a potential statutory build out framework and this year it hopes to implement it. It might require a build out programme to be submitted with residential planning applications and for updates on progress after the grant of planning. It may also give planning authorities the right to refuse to determine a new planning application where the developer applicant fails to build out, at a reasonable rate, an already consented scheme.
Grey Belt land
We can expect to see more developers taking advantage of the government’s “grey belt guidance”, which is intended to enable development of lower quality green belt land providing it doesn’t undermine the wider green belt.
Development around railway stations
The government is thinking of granting a default “yes” to planning applications for housing on land around “well-connected” railway stations, if they meet certain rules, including minimum housing densities.
National Planning Policy Framework – possible relaxation
The government is consulting on plans to exempt developments of no more than nine dwellings from the 10% biodiversity net gain (BNG) requirement and to reduce or simplify the BNG requirements for schemes of 10 – 49 homes. These proposals have led to opposition from nature bodies but also from academics, business leaders and others who fear long-term damage from short-term acceleration of the development process – not just to the environment and placemaking, but also to the burgeoning nature investment market.
The Building Safety Levy
The government is considering exempting developments of 10 – 49 houses from the Building Safety Levy, when it comes into force this year.
Training
Homebuilding Skills Hubs were launched in 2024 to deliver fast‑track training in areas with acute housing need, followed by a £600m commitment in 2025 for new Technical Excellence Colleges, strengthened apprenticeships and expanded Skills Bootcamps. Of this, £100m plus £32m from the Construction Industry Training Board (CITB) is earmarked to create over 40,000 annual industry placements, supported by a new Construction Skills Mission Board and an expanded NEST programme to help SMEs recruit and retain apprentices.
What’s achievable?
Despite the many announcements designed to breathe new life into construction, there are systemic challenges which mean they may not be enough to stimulate both demand and supply sufficiently to meet the government’s targets, both for housing and infrastructure, but also – by implication – for the economy.
Planning reality
The changes proposed should make a real difference in the short and longer terms, but it won’t be easy or quick to recruit and train 350 new planners. Planning departments and councillors will also have to get a grip on local plan development and understanding and implementing the Grey Belt, railway station and other proposed planning reforms. The Grey Belt reforms are, however, already showing signs of unlocking some development prospects.
Investment
The large new allocations to regional growth and infrastructure should be a big boost to construction, but will the effects be noticeable before the next general election? Will these investments actually take construction resources away from house building?
Skills crisis
In The Construction Workforce Outlook, the CITB and Oxford Economics estimated that an additional 47,860 construction workers would be needed each year from 2025 to 2029 to meet expected demand.
Moreover, it’s a workforce that will have to embrace AI, Building Information Modelling, modern methods of construction (MMC) and so on, while still retaining and expanding expertise in more traditional skills. The government’s training commitments are designed to generate entry-level workers; they are unlikely to be equipped to offer the broad range of emerging skills required by the sector.
Additionally, training does not necessarily translate into a career, as noted by The Construction Workforce Outlook:
“…the fact that the construction industry continually struggles to fill vacancies points towards a training system that isn’t making a good enough link to jobs. For construction to have the workforce it needs in the future, investment in training that supports people into jobs is crucial.”
All this at a time when the sector’s baby boomers are retiring in large numbers and we can no longer rely on a ready supply of foreign construction workers.
Modern Methods of Construction (MMC) – the answer to the skills crisis?
One solution could be for the government mandate or at least promote off-site and 3D construction on public projects which lend themselves to a level of mass production. In practise, to meet the huge impending demands for infrastructure and new buildings, there may be little choice but for the construction sector to adopt MMC and lenders to fund it.
However, to date things have not been easy for MMC. Design limitations, issues with acceptance of MMC by funders and insurers and other teething problems have led to inadequate order books and the closure of some MMC factories
3D printing should lead to greater speed of construction, thus reducing funding costs and bringing forward the time by which a building becomes beneficially occupied. It should also lead to more accuracy, reducing the risk of human error inherent in traditional building and mean more efficient use of materials. It may also give architects greater design freedom.
However, 3D printing machines don’t come cheap and people need to be trained to a high level to operate them. Building Regulations may need to change to cope with 3D printing. And this still begs the question as to whether funders and occupiers will welcome its use, after decades of aversion to prefabrication and other non-traditional construction techniques?
Whatever the future of 3D printing, it is unlikely to have a significant impact on the rate of construction in this country in the short or even medium term, except perhaps on large infrastructure projects.
The build-out dilemma for house builders
If the government does impose build out timetables on consented housing schemes, developers could find themselves completing developments for which there is inadequate demand in a world where they also struggle with materials and labour constraints. In those circumstances, we could even see a reduction in planning applications, so as to avoid punishments for “land banking” or not building out in time.
Biodiversity and Green Belt changes
The proposed reductions in biodiversity net gain obligations are already under fierce attack from countryside bodies and activists and the same is likely to be the case if parts of the Green Belt too easily get redesignated and developed as Grey Belt. Expect stiff opposition also from those living near Grey Belt areas.
Political and commercial reality
How long will it take regional authorities to plan and spend wisely the extra funding they are to receive?
Developers will need to get a thorough understanding of the new reforms and opportunities and their own capacity to help deliver. For example, house builders, Registered Providers and much of the construction industry are focussing on fire safety remediation work, which comes with considerable costs, not only financial but also workers and plant and machinery – leaving less to devote to building new homes.
And on top of this, there are the inescapable economic winds that are squeezing margins ever more, making some investors increasingly cautious. The announcement by John Lewis at the end of February that it was withdrawing from its £500-million Build-to-Rent property business, citing a “fundamental shift” in the economic conditions that underpinned the venture when it launched in 2020, crystalises this.
Demand
There’s no doubt about the need for huge numbers of new housing, but is there the demand at price points that make construction projects commercially viable?
Mortgage approvals in December 2025 were down 8% from the figure for December 2024. Housing starts and completions are still lower than they were in 2007, though house starts have picked up since 2023. Even in the affordable housing sector, there has been a recent drop off in demand from Registered Providers, so that thousands of built or consented affordable homes now have no buyer. That can also delay build out of the private elements of a site and badly affect developers’ cash flow and profitability.
Owners of flats can have great difficulty selling them at all or at least at a price that does not leave them heavily out of pocket and unable to afford to buy a new home.
With income tax thresholds frozen again, more people are paying more tax and have less to spend on a new home. Many may also have repayments of substantial student loans coming off their salaries each month. Some may feel that their jobs are threatened by AI and be less willing to take the plunge into the housing market.
Can demand be stoked sufficiently to encourage supply?
Private rental sector landlords are selling up, rather than cope with stringent safety and environmental legislation, the imminent abolition of s21 no fault evictions and an additional 2% tax on income from property. Second-home owners are also under pressure to sell up – thanks to a doubling of council tax in many places. Additional properties coming onto the market may help contain or even dampen prices in some areas (and the prospect of some second homes being available for full-time occupation could even nibble at the requirement for the government’s target of 1.5 million new homes). But stagnant or even falling property prices make investment even less attractive for developers.
It seems inescapable that the government must stimulate demand to unlock delivery of new housing. There’s less to gain from having the most efficient planning system and huge investment in construction skills if not enough people can afford to buy the new homes at prices that make it attractive for the sector and investors.
The old Help to Buy regime is long gone. Can/should something similar be resurrected? Maybe a reduction in Stamp Duty Land Tax rates or an increase in thresholds would help. Lifetime Individual Savings Accounts have a cap of £450,000 on the price of the new home that can be purchased by the first-time buyers; particularly in the south-east, that makes the choice of homes extremely limited for a couple wanting to buy their first home and start a family.
Demand is the other side of the development equation, and we wait to see the government’s answer.
