State housing schemes in England have ‘materially underdelivered’ since 2020

State housebuilding schemes in England have “very materially underdelivered” since 2020, according to a review of the government’s housing and regeneration agency, which criticised Whitehall for worsening shortfalls caused by volatile market conditions. 

Independent assessors on Monday said Homes England had unlocked 60 per cent fewer homes than intended in 2022-23, as they blamed overly rigid central funding arrangements for exacerbating a delivery slowdown prompted by the pandemic, high interest rates and the fallout from Liz Truss’s “mini” Budget.

The Public Bodies Review of Homes England found it had “very materially underdelivered and/or underspent against targets” since 2020. The scale of the shortfall in new homes and spending had created “tension” between the agency and the Department for Levelling Up, Housing and Communities (DLUHC), it added.

The conclusions of the review into the arms-length body, whose remit is to stimulate housebuilding nationally and regenerate struggling areas as part of the government’s “levelling up” agenda, come as the UK endures a chronic housing shortage.

Analysis by the Financial Times in February found that England needs as many as 500,000 new homes a year to keep pace with the rising population, well above the official target of 300,000 and the 234,400 homes delivered last year.

Meanwhile a record 109,000 households in England were living in temporary accommodation between July and September last year, according to the latest government data.

The review found that while Homes England provided “vital expertise”, it spent only 77 per cent of its budget in 2022-23 and was 30 per cent below target on planned housing starts. One-third fewer households than intended were helped into home ownership. 

The agency’s underperformance was caused primarily by external factors such as Covid-19, rising interest rates, inflation and “the effects of the 2022 mini-budget”, according to the review, which was conducted in the second half of 2023.

The £45bn of unfunded tax cuts announced by then chancellor Kwasi Kwarteng in September 2022 spooked markets and triggered a jump in UK government borrowing costs.

But assessors found that the “design of some of the major funding programmes and the length of time taken to launch or adjust them” in Whitehall “was a secondary factor” in under-delivery. 

The FT reported in January that more than two-thirds of a government fund, aimed at unlocking housing developments in England by providing grants for utilities and other enabling works, remained unspent.

The review found that Whitehall red tape had slowed both the launch and the deployment of such funds in the face of changing market conditions.

“The evidence is clear,” it said. “The way the government and Homes England work to influence market activity is only effective if funds are designed with flexibility to respond to them. This is not often the case.”

Homes England had also itself failed to properly forecast or communicate its likely under-delivery, the review added. Both the agency and the levelling up department had carried out only “limited formal evaluation” of the value for money or effectiveness of the Whitehall programmes delivered by Homes England, the review said, which it described as “not satisfactory”.

The findings echo a report from an influential cross-party group of MPs last month on the government’s levelling up funds, which are separately intended to regenerate struggling local areas.

The House of Commons public accounts committee said there was no “compelling” evidence of delivery, adding that the funds were yet to be properly evaluated.

The independent review urged ministers to provide Homes England with longer-term funding certainty, more latitude over spending and risk-taking and a clearer direction on the balance of its focus between national housebuilding programmes and local levelling up regeneration schemes.

Peter Freeman, chair of Homes England, said the review overall had given a “positive endorsement of the agency’s efficiency and governance”. “Other recommendations will require changes in partnership with the DLUHC and Treasury, but if progressed could be transformational in how we deliver new homes and create thriving places,” he added.

Levelling up secretary Michael Gove said the review showed Homes England was “the right vehicle to deliver more affordable homes and support our plans to regenerate towns and cities across the country”.

Letter in response to this article:

It’s time parties adopted a shared vision for housing / From The Most Reverend Justin Welby and others