Labour shortages and planning reform cloud government’s housing investment

Kelly Boorman is a partner and head of construction at RSM UK

Announcements in the Spending Review demonstrated the government’s ongoing focus on housebuilding as a driver of economic growth, outlining investment of £39bn in affordable and social housing over the next 10 years. Further financial commitments included £10bn financial investment in Homes England to help unlock hundreds of thousands more homes. In addition, the government aims to allocate £1.2bn a year by 2029 to support more than one million young people in training and apprenticeships.

“It’s a chicken-and-egg scenario. Do businesses invest in people with the right skills first, or the technology to then attract the right people with the right skills?”

Although this investment is intended to support the 1.5 million homes target by 2030, we know that less than a third (31 per cent) of businesses think this target is achievable, according to RSM UK’s latest Real Estate 360° report. Affordable housing targets are seen as the biggest barrier to meeting housing targets (31 per cent), so while the additional funding for Homes England will be a welcome boost, funding for private residential housing remains unclear. A quarter of businesses also cited workforce shortages as a key barrier to building new homes.

This is creating tension in the supply chain, as affordable housing is needed and government funding will drive this activity, but there’s industry-wide concern that housebuilders are being left to fund the working capital needed to increase volumes in private residential building themselves, without accessible and affordable debt products, while managing economic uncertainty and labour shortages. The introduction of Skills England has been acknowledged as a positive step, with our survey finding that 50 per cent of businesses think it will help to address labour challenges in construction, bolstered by the Plan for Change and further investment of £1.2bn per year in training and apprenticeships by 2029.

However, there’s a 250,000-person labour gap to fill, so £1.29bn is going to be a drop in the ocean to train and upskill the next generation of construction workers and meet the 2030 target. We’re also going to see resource tightening outside of housebuilding, with skilled workers spread thinly across infrastructure projects, especially in transport, defence and net zero.

Plans to tighten immigration rules spell further trouble for the sector, which is still heavily reliant on manual labour and has an ageing workforce. If the government is serious about ramping up infrastructure and housing projects, it must maintain access to overseas talent and there needs to be greater consideration of future labour constraints. Rather than plugging the existing skills gap with investment, the government needs to map out adoption of affordable green technologies and provide funding for design and implementation of digital construction roles to improve efficiencies and modern methods of construction. But, as construction is behind other industries in embedding new technology, it’s a chicken-and-egg scenario. Do businesses invest in people with the right skills first, or the technology to then attract the right people with the right skills?

Planning and infrastructure

For housebuilders, they need to see the planning reforms take effect and new buyer incentives to mitigate the impact of rising costs and improve their inability to forecast demand in the short to mid-term. The added risk of building more homes without the ability to forecast demand or incentives means that many housebuilders must decide whether to lock up cash, stockpile units in anticipation of increasing housing demand or lose market share if they are not ready for the upturn in volumes. Introducing a scheme to replace Help to Buy would be beneficial for forecasting and will support first-time buyers wanting to get on the ladder, especially as the share of high loan-to-value mortgages rose to the highest level since 2008 in Q1 2025.

We’re waiting on the Infrastructure Strategy later this month, which needs to prioritise delivering on planning reform promises, mobilisation timelines and commit to resolve labour challenges. Although the industry will be relieved to get more clarity on the timings of projects, the main concern will be understanding how quickly it should expect projects to be up and running, enabling some long-term planning, supply chain due diligence and allocation of resources.