Why can’t the UK build homes?
Cramped flats, crowded trains, and cancelled appointments. Development in the United Kingdom is in a terminal downspin, with infrastructure projects being behind schedule and over budget. The UK hasn’t built a new reservoir since 1991, the last approved nuclear power station was in 1988, and the Government hasn’t hit its housing target since its inception in England in 2017 and likely won’t ever.
There is a chronic lack of capacity for the British state to build anything.
The root issue of this is the Town and Country Planning Act 1947. The Act was passed by the Clement Attlee Labour government following a long evolution of legislation regulating the built environment. The Act sought to implement strategic planning post-World War Two, in line with the wider construction of the welfare state.
The Act sought to construct a long-term land management system that balanced social, environmental, and economic objectives. The Act nationalised the development rights of land, allowing existing structures to remain but requiring planning permission for new uses.
The TPA1947 introduced what is known as a ‘discretionary planning system’. It is the subjective, uncertain, discretionary element of the process that acts as a key hurdle to building.
Rather than having a zone-based system with a presumption of approval as long as certain requirements are followed and conform to regulations or local plans. Every application is instead judged on its merits, which invites everyone to participate in the planning process. The problem is that every level has a veto. This invites the ‘Not In My Backyard’ (NIMBY) element of the process.
Even if developments are perfectly in line with published local plans, they can still be blocked by campaigners.
There have been attempts to standardise planning with a National Planning Policy Framework in 2012, significantly consolidating guidance to provide ‘local plans’ for developers to follow. Yet, because of the discretionary, case-by-case element, even if you follow the local plans, you can still be denied planning.
When the TPA1947 was first introduced, it didn’t have as strong an effect on house completions.
However, the picture in 2026 is quite damning. The number of house completions in 2024 was 217,000; this is against the backdrop of 400,000 net migration in 2024 and 600,000 in 2023. All this sits alongside a Government target of 300,000 new homes a year.
We don’t have the full numbers yet for 2025, but the projections on completions are significantly down and the picture doesn’t look to be improving.
Housing is the root of almost everything in society, from education to health to pensions to investment to the number of children — housing has a measurable, significant effect on all of them.
Say you are in your 30s and you finally want to have a family. However, you can’t afford a house in London.
So you have to move out of London. You are now in a small three-bed house probably 90 minutes outside London. You have now doubled your commute; you walk significantly less, so your health is worse; those random moments of meeting people or having a drink are significantly fewer, leading you to be lonelier; you likely don’t live near family. So once you have children, the help offered by your friends and family is significantly less. You have essentially isolated yourself from your entire social network.
Yes, this is the correct decision for an individual, but is this really the economic calculation we want society to make?
Move away from everything and everyone you know so you can have a family and just “suck it up” because we had to do it too — no wonder the replacement rate is significantly down.
The numbers on housing are tragic at best. The average floor space per person in the UK is 38sqm, which is smaller than comparable Western European countries such as France (43sqm) and Germany (46sqm). The number drops to 33sqm for London, which is lower than New York and Tokyo.
The planning system is so restrictive that private developers tend to produce poorer quality houses to recoup costs lost in planning. But because the quantity of new housing is so low, consumers are forced to accept worse housing.
In a more ideal system, the customer could choose developers who produce higher quality housing versus the current cookie-cutter homes. There is demand for higher quality housing; one has only to look at the Poundbury development.
Poundbury is a project started in the 90s by the now King Charles III, with a vision of building beautiful, traditional-looking homes instead of sprawling modern estates, while focusing on creating community and a walkable estate.
The costs were higher and construction took longer, yet the demand for homes on the estate is consistently high, with a premium above market rate. There is demand for better housing; there is just so little supply of it because of artificial constraints built into the planning system.
Now, some would argue that the solution to this is the Government building significant quantities of affordable housing to provide homes to those who really need them. The problem is that the building of those council homes still gets stuck in the same traps as private development: local opposition because of traffic or green space, environmental reviews because of obscure species of newts, and complex legal negotiations between developers and councils. The list just goes on and on.
Another key problem facing councils is the actual lack of developers. Due to planning being a complicated process, it forces consolidation as only large developers can survive the multi-year process of planning. This is because of both the cost of planning and the legal resources required; the effect is significant. In 1988, 40% of the housing market was small-to-medium; in 2020, this number had fallen to 10%. There has been some effort to help smaller developers, but the fundamental issue remains the complexity of planning.
Even disregarding the disruptive effects of the current planning system on housing completion as well as infrastructure — a whole other kettle of fish — is it entirely fair that so many people can object to a person building on their own land?
Of course, there should be some level of oversight and regulation for them to follow, but should every loft conversion, every extension, or every change of windows in a historic building require planning permission? Is that fair?
Thankfully, some in Government do agree, as there have been changes to the law to allow permitted development on some loft extensions, but this highly restrictive system still exists.
In my opinion, the key to the UK unlocking significant gains in productivity, wealth, health, and happiness is root-and-branch reform of planning.
lol