Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The Labour government’s planning reforms will boost housebuilding in the UK to more than 305,000 homes a year by 2029, the highest rate in decades, but still fall short of targets, according to new official forecasts.

The independent Office for Budget Responsibility said on Wednesday the government’s changes to national planning policies last year would have “a material, additional and durable impact on housebuilding, property transactions and potential output, and a modest impact on house prices”.

The OBR has forecast 1.3mn net additional homes across the UK over the parliament.

Sir Keir Starmer has previously said Labour’s pledge to build 1.5mn new homes by 2029 applied to England, meaning there is a greater gap between the OBR’s UK-wide forecast and the government’s goal.

In her Spring Statement on Wednesday, chancellor Rachel Reeves predicted the highest annual rate of housebuilding in 40 years and put the government “‘within touching distance of delivering our manifesto commitment”.

Without these planning changes, the OBR said it would have revised its housing supply forecast down to 238,000 a year in 2029-30.

But it said the planning reform boost more than outweighed the impact of higher building costs and interest rates. The boost from planning reform totals 170,000 homes over the five-year forecast.

The new planning framework reintroduced mandatory housing targets for local authorities, totalling 370,000 homes a year in England. Ministers believe they need to set this higher target since not all homes granted planning permission are built.

The policy is designed to increase the pressure on local leaders to approve more building and to release poor quality greenbelt land for housing.

“Most of this increase takes place from 2027-28 as it takes time for developers to identify sites, local authorities to bring forward local plans, capacity constraints in the sector to be overcome and additional houses to be built,” the OBR said.

Reforms in the planning and infrastructure bill currently before parliament, as well as additional funding for affordable housing, could increase supply further. The changes will include increasing the number of decisions made by professional planning officers rather than committees composed of local politicians.

Lucian Cook, head of residential research on Savills, said that the OBR housebuilding forecast assumes total annual homes sales, including second-hand sales, reaching 1.48mn a year, “a long way above the post [global financial crisis] norm of 1.2mn” — despite the OBR increasing its forecast for mortgage rates.

The OBR said the increased housing supply would result in the average house price being about 0.8 per cent lower in 2029, but slightly increased its overall house price forecast despite this impact.