By Richard Cook, Senior Director of Economics, Pegasus Group
The Chancellor’s Autumn Budget was never likely going to be the moment that singularly solved the UK housing crisis. In many respects, it delivered exactly what the Government intended, which was to reaffirm its growth agenda commitment and to push many of the harder decisions around defence and welfare spending into next year.
Some of the measures announced by the Chancellor will hopefully be positive for sectors like housing and energy. However, viability for housing development is still the elephant in the room. Nothing was mentioned about how the government is going to address this, especially in London where many developments are grinding to a halt because of the issue. It therefore remains to be seen whether the Government will ultimately get to grips with fixing the core ingredients of a thriving economy: namely, getting the housing market back on track and delivering the infrastructure the country needs.
What the Autumn Budget represents is more of a promise from the Government to support the economy where it matters and to increase the role that mayors will play in delivering growth in their respective areas. It remains to be seen whether the measures announced will make any material difference to how the UK economy performs and the Government is going to have to do far more in 2027 to ensure growth does not stagnate.
The Government doubles down on Devolution
From a development perspective, one of the most significant positives in the Budget is a clear willingness from the Government to shift power away from Westminster into the hands of regional leaders. Combined Authorities have argued for years that local areas are better placed to identify where investment is needed.
It is therefore welcome that the Government is planning for Mayoral authorities to retain a larger share of business rate revenues, alongside a new growth fund and a £1.5 billion boost in loans to support local investment and infrastructure.
Whether every region makes optimal use of these new powers and funding is open to debate. However, the Budget demonstrates good follow-through on Labour’s Devolution Bill from earlier in 2026, especially since Combined Authorities like Greater Manchester and Liverpool City Region have already started to show the difference that a well-developed growth strategy can make. That said, other Mayoral authorities may still be finding their feet, and the Government’s next challenge will be to make sure that its devolution agenda delivers consistent growth across the sub-regions.
The Chancellor announced several measures that support housing delivery
There were various other welcome measures aimed at supporting housing delivery. These included:
- A £1.5 billion top-up in Government-backed funding for social and affordable housing
- Greater borrowing flexibility for councils
- VAT cut on social housing land
- Reduced biodiversity requirements on more brownfield sites – specifically residential brownfield developments on sites up to 1.5 hectares in England are exempt from BNG.
Taken individually, these are sensible if not exactly revolutionary interventions. But when combined with the updated National Planning Policy Framework (NPPF), it is clear that despite an unforgiving economic environment, the UK Government is serious about making pragmatic changes to unblock housing development.
Viability receives no mention and remains the most glaring challenge for housebuilders
Viability disappointingly received no mention in the Chancellor’s speech. While that is not entirely surprising, it is a problem that will not go away, and which sits at the heart of the UK’s housebuilding challenge.
Across the country, viability is a roadblock to progress. With costs continuing to rise, unless developers see clear action and visible support from the Government, we could see housebuilding stall even further, particularly in London, where viability is an acute problem. London is a key piece for solving the UK’s productivity puzzle, considering the capital generates almost a quarter of the UK’s GDP. This makes boosting delivery of housing schemes in London paramount to the wider economy and employment market’s success.
The draft London Plan published over the summer has in fact reduced housebuilding targets by over 300,000 fewer homes than the Government’s original target. As our previous analysis shows, this shortfall will have widespread impacts on the capital, including London missing out on £41 billion of annual economic output as a result of the reduced targets.
As a priority, the Government must therefore address the disconnect between planning policy objectives and the commercial realities of delivering development. Without addressing that imbalance, it is hard to see how policymakers will achieve the step change in housing delivery that they want to see.
This matters far beyond the boundaries of the capital. If London’s housing market isn’t firing on all cylinders, then the national push for investment, labour mobility, and economic growth starts on the backfoot – when really, it needs all the help it can get.
The UK continues to be resilient
The government’s positive rhetoric around the future path for development has been helpful, but we now need this to translate to concrete action. Once the government fully takes the regulatory handbrake off, and actively champions development across all regions, Britain can get building again and we will be able to see real tangible progress. Visible outcomes, such as planning approvals and construction starts, will go a long way to bolster the housing market in the final quarter of the year and into 2027.
If you would like to discuss how this autumn budget may affect your development, please contact our team.
