Building for growth: Budget targets housing, planning and infrastructure constraints

From housing supply and energy costs to the grid capacity needed for data centres, the Chancellor sought today in his Budget to address some of the structural constraints that have become an increasing drag on growth.

In his own words, John Healey said the Budget would deliver ‘fresh hope, good growth and support for those who need it’.

On housing, the Chancellor has opted for intervention at both ends of the development equation: stripping away some of the costs and uncertainty facing housebuilders while injecting public money into affordable housing and using government-backed equity to stimulate demand for new homes.

First up was a moratorium on major changes to building regulations for the remainder of this parliament, with the exception of measures needed to improve building safety. The Treasury’s Red Book (published following the Chancellor’s speech and packed with further detail) explicitly acknowledges that the cost of building a home is at a record high, attributing this both to materials/labour inflation and to the burden of regulation and policy costs. While a welcome move, it is worth noting that the Future Homes and Buildings Standards have already been introduced this year – more a period of stability then, than a wholesale deregulation.

The Chancellor also announced a significant exemption from the Biodiversity Net Gain (BNG) requirements for residential brownfield sites of up to 1.5 hectares. The move is being seen as supportive of the government's ‘brownfield first’ policy, making it cheaper and simpler to deliver both council and private housing. The nature restoration market will still see expansion, with BNG become mandatory for Nationally Significant Infrastructure Projects from November 2026.

Taken together, these are explicit acknowledgements from the government that accumulated regulation and policy requirements are affecting viability.

On the demand side, we got more detail on Your First Home, a £4.7 billion equity loan scheme designed to help around 70,000 first-time buyers and support the delivery of 20,000 new homes. Household incomes will be capped at £110,000 outside London and £140,000 in London, while property price caps will vary by area, including £500,000 in outer London and £650,000 in inner London. The higher inner London ceiling should help assuage concerns from developers that a trailed £500,000 cap would have significantly limited the scheme’s usefulness in the capital. Note: developers will be required to contribute when signing up to the scheme to help cover costs, on a sliding scale intended to protect smaller developments. It will start at a 1% fee rate of the final sale price of a developers first 100 homes sold each year, rising to 4% after 250 homes are sold.

Other housing-related announcements included:

• An additional £1.5 billion into the Social & Affordable Homes Programme, intended to deliver an extra 10,000 homes in England. Social rent tenure will be prioritised when allocating these funds.
• A zero rate of VAT for land sold to registered providers, in an effort to expedite the delivery of affordable homes.
• MHCLG’s PlanAssist AI tool will be made available to all councils in England by the end of 2027, in an effort to halve routine planning decision times and build capacity in the planning system. The government will also mandate the digitisation and publication of key planning documents as open data by the end of 2027, enabling far greater use of AI.

For data centres, the headline offer is the prospect of priority access to grid capacity and planning support for strategically important projects, but that support comes with strings attached through the government’s new Data Centre Covenant. With confidence over power supply fundamental to investment decisions, prioritisation should be welcomed, but the key question for developers will be how it works in practice and whether meeting the Covenant’s criteria (see p82 of the Red Book) accelerates access to the grid or creates an additional hurdle. For example, we know that most projects in the UK already achieve very low levels of water usage through closed loop systems which raises the question as to whether this just recognises current industry practice.

Other key announcements in today’s Budget:

• Energy investment: a new £2bn Energy Wealth Fund, within the National Wealth Fund, to invest in renewable and low-carbon energy infrastructure, alongside a further £15.4bn of capital for the Fund.
• Regeneration: new financing approaches for the Oxford-Cambridge Growth Corridor, including greater capacity for land assembly and infrastructure investment, with the model potentially informing development corporations elsewhere.
• Devolution and growth: a move towards greater local retention of business rates, giving mayors and local authorities a stronger financial incentive to support commercial development and economic growth. A separate Fiscal Devolution Roadmap has also been published.
• High streets: a £125m Derelict Buildings Fund, alongside further funding to bring buildings back into productive use.