February Market Update

Developments regarding the reform of local councils continued apace and the contentious move by the UK Government towards the creation of mayoral combined and unitary authorities remained at the forefront of minds within the planning and development world. Whilst some councils, such as Essex, have shown enthusiasm towards the new reformed system, others have been greatly opposed, such as Rochford in Essex. Indeed, Devon’s eight district councils have joined forces to oppose the creation of a single unitary authority for the county and argue that it would ‘diminish local representation’. The creation of new unitary authorities would also mean that a lot of the smaller parties will lose their power when councils are merged. Of the 18 councils which volunteered to be part of the first tranche of devolution, Angela Rayner MP, the secretary of state, announced in early February the 10 which would take the next steps of the reforms: Cheshire East, Cumberland, Essex, East Sussex, Hampshire, Norfolk, Suffolk, West Sussex, and Westmorland and Furness, and Surrey. A surprise omission was Kent.

With the UK economy still suffering from the aftershocks of the autumn budget last year, the prospects for the housing market are mixed. The 0.1% growth of the economy in November reversed the 0.1% drop in the previous month. This rise in activity from November will be welcomed by the Chancellor as it illustrated a pickup in activity after the October budget. Important to note however is that despite the increased growth, the rate of growth is still well below predictions. The Prime Minister, Sir Kier Starmer, defended the rate of growth and stated that the 0.1% increase demonstrated progress. In a statement, he stated he had full confidence in his Chancellor and that she would be in the position for ‘many years to come’.

Economy

• Inflation Rates – In December, inflation rose to 2.9%, which is above the Bank of England target of 2.5%. The Consumer Price Index (CPI) rose by 2.8% in the last twelve months to December 2024 , down from 2.6% in the last twelve months to November.
• Interest Rates – The Bank of England decided to keep interest rates at 4.75% in December. On Thursday 6^th February, the BoE reduced interest rates by 0.25%.
• GDP Growth – According to the CBI’s December report GDP growth for 2024 is now projected to be 0.9%, slightly down from the previous June forecast of 1.0%. For 2025, the growth forecast is downgraded to 1.6% from 1.9%, with growth expected to slow to 1.5% in 2026.
• Pound against the Euro – The Pound Sterling held steady against the Euro and US Dollar in January, as markets reacted to the latest UK inflation data. Lower inflation has temporarily eased concerns about rising UK borrowing costs, calming and encouraging investors.
• House Market prices- Average UK house markets saw a new year bounce. This brings the average asking price in the UK to £366,189. The number of new properties listed , buyer enquiries and sales agreed are all higher than this time last year. UK home asking prices show biggest early year rise since 2020, Rightmove says
• Unemployment rates – The UK employment rate continues to dwindle into the start of 2025. Perhaps not surprising as the Christmas lull and hiring tends to slow dramatically in December and into the following January. Two factors above all are likely to affect hiring plans and unemployment in 2025: businesses that employ minimum wage employees are set to face a steep increase in national insurance tax. Employers’ contributions will go up to £2,583 from £1,617. This will of course discourage hiring. This combined with the second factor of the expected increase to the National Minimum Wage, the total cost of employing a full-time worker on minimum wage will have risen by £2,367 compared to the previous year.

Bills in Parliament:

• New Homes (Solar Generation Programme) – This bill proposed that it would be a requirement for new homes to be installed with solar photovoltaic generation equipment. However, at its second reading on the 17^th of January, the ‘Sunshine Bill’ as it got dubbed was rejected. The main reasons for oppositions were over fears that this bill would slow down housebuilding. Mathew Pennycook MP stated that whilst the government was ‘sympathetic’ to the bills aims , they have to prioritise the ambitious house targets.
• Renters Reform Bill – MPs are continuing to debate the details of the Renters Reform Bill and it is ever close to being passed. If given Royal Ascent, changes include landlords no longer being able to ask for months of rent paid in advance to secure a home, Section 21 shall be abolished no fault and rent price increases will be regulated. The 2^nd reading in the House of Lords is on the 4^th of February, for more information on this look take a look at our newsletter article.
• Water (Special Measures) Bill – The Water (Special Measures) Bill was further debated on the 16^th of January and will now move at ‘report stage’ in the House of Commons. This bill aims to transform the UK Water sector with measures including blocking executive bonuses, enabling severe automatic fines for wrongdoing and ensure regular monitoring of sewage outlets.

Current Affairs Related to Housing:

• Deloitte Regional Crane Survey show construction activity to be down from the year before – Construction activity has significantly declined in Britain’s largest regional cities, highlighting the challenges Labour faces in spurring a building boom. According to Deloitte’s regional crane survey, only 47 new projects were initiated last year in key cities outside London, including Leeds, Belfast, Manchester, and Birmingham. Last week, Chancellor Rachel Reeves expressed being “genuinely shocked” by the sluggishness of the planning system and promised to reduce red tape to encourage growth. She was quick to express however that reducing red tape would not be at the detriment of residents that have been historically let down by poor safety standards, like those in Grenfell.
• Right to Buy Reforms Consultation closed– The government has recently closed its open consultation on the Right to Buy Reforms. The reforms seek to ensure long-term council tenants can still have the opportunity to own their homes, while reforming the scheme to protect social housing stock, increase council capacity, and support the government’s significant housebuilding goal. The Local Government Association (LGA) recently called for further reforms of Right to Buy. The LGA called for more powers to be given to local authorities to make the decisions that will best suit their local housing market as not all local housing markets will have the same needs. LGA calls for further reforms of Right to Buy to ensure sustainability of social housing stock | Public Sector News

• The Environment Agency launches new website showing the risks of flooding and coastal erosion – The new National Coastal Erosion Risk Map (NCERM) indicates that by 2055, approximately 3,500 properties will be located in areas at risk of coastal erosion, a figure expected to rise to around 10,100 properties by the end of the century. This highlights the growing threat posed by coastal erosion.  A BBC report on flood risk reveals that one in four properties could be at risk of flooding by 2050, due to factors like rising sea levels, climate change, and extreme weather events. Flood risk is a key consideration in urban planning and involves multiple sources of flooding, including river, sea, and surface water flooding, which occurs when heavy rainfall overwhelms drainage systems.

• DCN proposes three new reforms to deliver 100,000 affordable homes – The District Councils Network (DCN) published a new report this month , which proposes three reforms that the organisations claims could help provide 100,000 affordable homes. The first proposal is to change the law so that councils would only be allowed to establish a Housing Revenue Account once they have 1,000 social homes. The next reform is to give local authorities more power to take action over empty houses in their authority then this could free 8,688 houses at only 10% of the cost of building a new build.  Thirdly the DCN called for planning loopholes to be tighter so that developers cannot sidestep quotas including affordable housing. DCN proposes three reforms to deliver 100,000 affordable homes | LocalGov

• UK backs Heathrow Airport Expansion in push for growth – Labour has given the green light to the third runway at Heathrow despite vocal opponents including London Mayor Sadiq Khan. Mrs Reeves stated on the 29^th that the runway was ‘badly’ needed and was a critical expansion to connect the UK with the rest of the world. Labour’s new government has branded itself almost entirely on a pursuit of growth, so it is perhaps not a surprise. The news of expansion hasn’t been entirely welcomed, however. Alongside Sadiq Khan, Green Party Sian Berry called the decision the most ‘irresponsible announcement from a Government since Liz Truss.’ The obvious opposition to the expansion is due to environmental impact and impact on the residents that live in proximity to the proposed expansion. The Chancellor also announced in her speech on the 29^th the measures that the Government were putting into place to foster a greener aviation industry, including a £63 million pound investment into the Advanced Fuel Fund grant programme. When asked when this runway may be built Reeves responded saying she would like ‘spades in the ground’ during this parliament.

• Reeves works to unlock the potential of the Oxford-Cambridge growth corridor – Reeves has vowed to raise for funding transport routes including East West Rail and various other new routes. She adds that the growth corridor, dubbed “Europe’s Silicon Valley”, would drive “investment, innovation and economic growth”.
• The government has also agreed to new water resources management plans – This will include unlocking £7.9bn worth of investment in the next five years, including the new Thames reservoir. This is the first time since 1992 that a new reservoirs will be built. It is set to be nearly as big as Gatwick Airport and has been met with strong local opposition. The new reservoir will provide 15 million people with water and will support ambitious housebuilding targets.
• Sadiq Khan won’t rule out building on parks – While the Mayor of London has expressed that he is wary of developers buying up green belt land to meet the Government’s ambitious housing targets, he also won’t denounce it entirely.  When asked about a hypothetical development on Hyde Park, the Mayor responded stating that sometimes it does ‘make sense’ to build on parks. This has raised many concerns for some members of the public who say a lot of residents and families in London rely on parks as their outdoor space. Mayor Khan stated he understands that parks are a lot of peoples ‘lungs’ in the city and that would be considered in every development.

• Government backs nine billion into Lower Thames Crossing Chancellor Rachel Reeves also announced nine billion has been granted to the Lower Thames Crossing, in line with Labour’s growth agenda. Mrs Reeves said Ministers would work with the private sector to deliver the infrastructure that the country needs. The planning decision for the Lower Thames Crossing has been ongoing since 2009. The crossing would allow for greater connectivity in the region, unlock new housing and build new reservoirs. The Treasury projects it could contribute £78bn to the UK Economy by 2035.
• National Devolution Bill – Non-inquiry session – Whilst this wasn’t a full committee inquiry, the Leaders of Surrey County Council, South District Cambridgeshire, Chester West and Cheshire Council and the Mayor of West Yorkshire Combined Authority gave evidence on the implications of the new proposed devolution plans. It is clear that people are trying to get to grips with what the reforms mean practically and for their constituents.