BLOGS

A widening gap between ambition and approvals

England's housing market is facing an unusual contradiction. The government has set its most ambitious housebuilding target in half a century — 1.5 million new homes by 2029, equivalent to roughly 300,000 net additions a year — while the planning system underpinning that supply has been granting fewer permissions than at almost any point since comparable records began.

Official data for the year to September 2025 shows permission was granted for around 208,000 new homes in England, down 15% on the previous year and the lowest 12-month total since 2013. Quarterly figures are more stark still: just 42,000 homes received permission in Q3 2025, a 31% year-on-year fall and the weakest single quarter in over 15 years. The Home Builders Federation has now recorded eleven consecutive quarters of decline in the number of sites granted permission.

For developers, lenders and investors underwriting UK residential exposure, this is not a peripheral statistic. Planning approvals are the leading indicator for future supply — the pipeline that feeds transaction volumes, rental stock and comparable evidence three to five years out. A sustained fall in approvals today points to constrained completions well into the back half of this decade, regardless of how the policy environment evolves.

What the numbers actually show

The scale of the shortfall becomes clearer against the government's own target arithmetic. Reaching 1.5 million homes over the parliament requires roughly 300,000 net additions annually — a level England has not achieved since the late 1960s. Analysts at the Resolution Foundation estimate that translating into a dwellings-approval rate of around 380,000 per year, once allowance is made for attrition between consent and completion. Current approval volumes sit roughly 160,000 below that requirement.

Net additional dwellings for 2024/25 came in at 208,600, a 6% fall on the previous year and the third consecutive annual decline. Early indicators for 2025/26 suggest a further drop toward the 200,000–205,000 range. London has been especially exposed: units approved in the capital fell 49% quarter-on-quarter and 72% year-on-year in Q3 2025, a sharper deceleration than almost any other English region.

REalyse's own planning pipeline data illustrates why headline approval figures only tell part of the story. Looking at residential (C3) schemes submitted over the past five years, granted applications carrying an "In Progress" construction status account for roughly 24,700 proposed units — a volume comparable to those schemes already recorded as "Project Complete" (around 13,200 units). In other words, a meaningful share of consented capacity is still sitting in the build-out phase rather than converting into completed stock, reinforcing the broader industry finding that over 1.4 million permissioned homes nationally remain unbuilt. For underwriting purposes, this distinction between "consented" and "deliverable" matters more than the headline grant figures suggest.

Policy response: NPPF reform and the Planning and Infrastructure Act

The government's answer has been the most substantial rewrite of English planning policy in a generation. The revised National Planning Policy Framework, published in December 2024, reinstated mandatory local housing targets, strengthened the presumption in favour of sustainable development, and introduced the "grey belt" — a new classification intended to release lower-quality Green Belt land for development where local plans are out of date.

The Planning and Infrastructure Act, which received Royal Assent in December 2025, builds on this with measures to modernise local planning committees, streamline environmental assessment through Environmental Delivery Plans and a Nature Restoration Fund, narrow judicial review windows for nationally significant infrastructure projects, and fund roughly 1,400 additional planning officers to relieve local authority capacity constraints.

Early signals suggest some effect on activity: applications referencing grey belt criteria have risen sharply across the South East, East of England and Home Counties since early 2025, and planning applications outside London rose by around 60% year-on-year in 2025 according to Terraquest data, driven largely by outline applications. Early consents — including schemes of 550 homes in St Albans and 250 near Basildon — suggest sites that would likely have been refused under the previous framework are now progressing. But outline permissions convert to full applications and completed homes at a materially lower rate than direct full applications, and the Office for Budget Responsibility's own central case implies the government falls meaningfully short of 1.5 million by 2029, even while crediting the NPPF reforms with a measurable uplift.

What this means for developers, lenders and investors

Viability remains the binding constraint behind the approvals slowdown, more than planning process itself. Grey belt releases typically carry a 50% affordable housing requirement, which compresses residual land values and leaves many schemes finely balanced depending on local Community Infrastructure Levy rates, section 106 obligations and achievable sale price per square foot. With roughly £8bn in unspent section 106 and CIL contributions sitting with local authorities, capital is available in the system but not always flowing into deliverable infrastructure at the pace schemes need.

For institutional capital, this points to a bifurcated market. REalyse comparables data across recent transactions suggests schemes with strong existing planning pipelines, supportive local authorities and credible infrastructure commitments are best positioned to convert consent into completions from 2027 onward — precisely the profile investors and lenders should be screening for when assessing development finance or forward-funding opportunities. Build-to-rent has continued to show resilience through the downturn, with investment volumes reaching record levels in 2025, suggesting institutional capital is finding routes to deploy even as speculative for-sale development stalls.

For agents and valuers, thinner permissioned pipelines in high-demand districts imply tighter future stock and support for asking price and rent growth assumptions over the medium term — a dynamic worth reflecting in comparable-based valuations and forward pricing discussions with vendors and landlords.

Outlook

The direction of policy travel is clear and, on balance, constructive: mandatory targets, grey belt release and streamlined consenting processes address real structural blockages in the English planning system. But the current data confirms that approvals, not just policy intent, remain the binding constraint on the 1.5 million homes target, and the lag between consent and completion means today's low approval volumes will constrain supply well past the end of this parliament.

For institutional players, the near-term opportunity lies less in waiting for the target to be hit and more in identifying where planning reform is translating into genuine deliverable pipeline now — using granular local authority, grey belt and scheme-status data to separate credible near-term supply from permissions that will continue to sit dormant.