UK Housing Secretary Steve Reed is working on plans for a state-owned housing developer that could borrow at lower rates than private developers, according to leaked details obtained by the Guardian. The proposal aims to stimulate persistently low housebuilding rates, as the government struggles to meet Prime Minister Keir Starmer's target of 1.5 million new homes over this parliament.
Statistics show that builders started work on just 130,170 homes in the past 12 months, less than half the average annual pace needed to hit the target. The government's stimulus measures have boosted starts by 26% for affordable homes compared to the previous year, but overall building figures remain well below levels seen three years ago.
Plans Cannot Be Enacted Before Starmer Steps Down
The plans, which are not yet finalised, cannot be enacted before Starmer resigns as prime minister. The cabinet secretary has ordered that no major announcements be made until the new government takes office. However, the proposal could appeal to the most likely next prime minister, Andy Burnham, who has advocated for greater public control over essential services.
Starmer took office two years ago promising a major uptick in housebuilding. He has liberalised the planning system and allocated £39 billion to social and affordable homes over the next decade. Despite these efforts, high costs of materials and debt, exacerbated by wars in Ukraine and the Gulf, have hindered progress.
Housing Associations Warn of Budget Allocation Risks
Housing associations warn that the government's affordable housing budget allocation, with much of the funding scheduled for later years, risks worsening the problem. Meanwhile, Reed and London Mayor Sadiq Khan have agreed to slash affordable housing quotas to encourage private developers to build more.
Under Reed's proposal for a state-owned developer, the government would use money currently allocated to Homes England to set up a new independent body to oversee housebuilding. The organisation would buy land and develop projects, but use private companies for construction. It could also be granted borrowing powers, which would enable it to become a far larger entity but likely increase government debt.
State-Owned Developer Could Compete with Major Housebuilders
The state-owned developer would build all kinds of houses, including commercially available properties, potentially competing with the country's biggest housebuilders. It would also build affordable homes, taking over some of the role currently played by cash-strapped housing associations that struggle to buy subsidised properties built by private developers.
The plan would initially be piloted in a small area, and those familiar with it say it would not be allowed to become so large as to undermine the private sector. Reed's exploration of radical policy comes as many ministers consider policies that may appeal to an incoming Burnham administration.
Burnham Likely to Become Labour Leader in July
Burnham is likely to be named Labour leader on 17 July and take office as prime minister three days later. He will set out some early policy thinking, including ideas on devolution and the economy, in a speech in Manchester on Monday. Ministers are currently barred from announcing new policy, but some have faced trouble for pitching ideas recently.
In an article for the Times, Home Office Minister Mike Tapp suggested exempting foreign care workers from plans to make it harder for migrants to achieve settled status. This prompted a government row, with Home Secretary Shabana Mahmood accusing him of leaking internal plans and demanding his sacking. No 10 responded by saying Tapp would be reminded of his duty to collective responsibility, but that ministerial appointments remain in Starmer's hands.
A spokesperson for the housing department said: "New housing starts have increased by nearly a quarter compared to the same time last year, while last year also saw council housing completions at their highest since 1992. We are always looking at ways that we can go further and build the homes we need."
