Labour’s going to build 1.5 million homes? In their dreams…

Construction has fallen for 12 consecutive months, so housing secretary Steve Reed has a lot of heavy lifting to do if he is to come anywhere close to his government’s target, says James Moore

Mortgage lender Halifax may have recorded a surprising fall in house prices in December, but they’ll likely be heading up again in the New Year, taxing buyers’ ability to pay.

I’ve discussed the primary reason for the affordability crisis before: there is a profound shortage of new homes, greatly outstripped by underlying demand. And the situation is only getting worse.

But wait, I hear you say, didn’t Labour tell us it was going to build – and build – and build some more, with a target of 1.5 million new homes by the end of the Parliament?

That number was described as “ambitious” in some quarters, but the way things are going, the government stands about as much chance of hitting the target as debutant Cape Verde does of winning the next World Cup.

The latest Purchasing Managers Index (PMI) for construction is out, and it’s deep in the red, where it has languished for an astonishing 12 months.

The PMIs are a series of authoritative surveys conducted among, well, purchasing managers in three sectors: Manufacturing, Services, and Construction. For a sector to be growing, it requires a score above 50. Construction managed 40.1 in December.

The poor run it has been on is its worst since the financial crisis, when the banking sector nearly collapsed, jobs were being lost left, right and centre, and mortgages put on a vanishing act. It is deeply concerning. Or at least, it should be.

If you strip out the housebuilding subindex, it was even worse. The latter’s score of 33.5 had it looking like an overweight jogger trying to run a marathon with a torn ACL.

Commentators desperately looking for something positive to say noted that the picture had been worse in November, when the headline construction score was 39.4.

But the (slight) improvement in December was still well short of the City’s already low expectations. They called for a score of 42. Dismal is as dismal does.

Compare this with the wider economy, which has shown some improvement post-budget. The composite PMI, covering all three sectors, rose to 50.4 from 50.1, with both services and manufacturing making positive contributions. This suggests that UK plc is set to grow (a bit) in the New Year, despite the woes of Britain’s builders.

Housing Secretary Steve Reed admitted last month that the nation needed a “sharp surge” in housebuilding if Labour is even to come close to hitting its target. He spoke after yet more poor figures showed housing starts had fallen from 207,000 to 139,000 after his party took office. That is yet another big, fat F on the government’s end-of-year report card.

The resignation of Reed’s predecessor, Angela Rayner – ironically sparked by her troubles managing her personal housing interests (she had failed to pay sufficient stamp duty on an £800,000 flat in Brighton) – clearly hasn’t helped matters. It takes time for a new minister to get to grips with a new portfolio, and this one is more complex than most.

It is also worth pointing out that the “landmark” Planning and Infrastructure Reform Act, designed to reduce bottlenecks and speed approvals, has only just become law.

Reed has trumpeted his “ambition and resolve” to go further, adding to the Act’s reforms mandatory housing targets and the modernisation of green‑belt policies.

But a turnaround could easily be hampered by structural problems in the sector – not least the shortage of workers with the necessary skills it has had to grapple with.

One means of addressing this – importing workers – is clearly off the agenda. The government is instead planning to push NEETs – young people not in education, employment or training – into the sector to fill the gap. It might just be me, but I’m not sure how builders are going to feel about having to deal with a large influx of unhappy conscripts.

Both Halifax and rival Nationwide think first‑time buyers, encouraged by lower interest rates and better mortgage deals, will give the housing market a shot in the arm. Halifax forecasts that prices could rise by 1 - 3 per cent this year; Nationwide calls for growth of 2 - 4 per cent. It’s hard to feel good about higher prices, given how stretched affordability is, but housebuilders will see it as encouraging and are likely to respond positively. So perhaps those seeing “tentative” signs of a recovery are on to something.

Reed had better hope they’re right. The government in which he serves has had a truly dreadful first year in office. The Housing Secretary can help change that narrative if he can get Britain building again. But that’s a big “if”, and he also has Chancellor Rachel Reeves’ apparent addiction to playing the role of party pooper to contend with. I fear he has his work cut out for him.