Pennycook banks on cumulative effect of housing stimuli to boost supply

Housing minister Matthew Pennycook acknowledged the development industry’s travails but is hopeful the Your First Home initiative, coupled with other interventions over the last two years, will begin to move the dial on delivery in spite of factors beyond the government’s control.

On Sunday, secretary of state Angela Rayner announced a new incentive for first time buyers that would allow them to more easily step onto the housing ladder. It involves making equity loans up to 20% of the value of a new-build home available and would allow for a deposit of as little as 2.5% to be put down.

The news, which drew criticism from some commentators who said it would saddle young people with debt, saw share prices of the country’s largest housebuilders rise by more than 10% on Monday.

Pennycook, speaking to Place North West at the Labour Party Conference, said the measure addressed a key issue many of them had raised.

“Effective demand is one of the biggest things that housebuilders will say to you [they need],” he said.

“We’ve got this targeted equity loan intervention, which gives families out there trying to get their first rung on the ladder a bit of hope but will hopefully get the market moving again.”

The government estimates housing completions in 2025/26 were down 4.4% to 199,500, casting further doubt on its ability to hit the ambitious 1.5m homes target Labour set for itself back in 2024.

That target was always aspirational and has been made harder by events out of the government’s control.

Citing the impact of the ongoing war in the Middle East on inflation, Pennycook said ruefully: “At the start of the year, I was looking at two interest rate cuts and first-time buyer numbers really going up.”

The government has also had to do a lot of work around laying new foundations for the housing market after being left with a dubious inheritance, Pennycook said.

He described the former Conservative government’s decision to remove mandatory housing targets for local authorities as an “absolutely catastrophic mistake”.

The recently published revised NPPF takes a bolder approach to development, setting out a clearer path for approvals within settlements and around transport hubs.

Pennycook urged local authorities to push the envelope with regard to density and grasp the nettle when it comes to housing delivery.

“It does require political leadership at a local level,” he said. “[Or] if they’re not brave enough to do that, to allow us, as many do with a nod and a wink, to call in and intervene.

“I’m more than happy to do that in those situations. I will not allow a situation where we have 180,000 children in temporary accommodation, where a local area says no, we just don’t want anything.”

In terms of regulation, the Labour government continues to grapple with a sluggish building safety process, while the Renters Rights Act and new rules on minimum energy efficiency standards are bedding in. Pennycook said the regulation his party had introduced is “absolutely necessary”, adding that he is mindful of its “cumulative impact” on delivery.

“We have tried to boost supply in a really difficult downturn,” he said. “The gripe I have is that all of that was left to us [by the previous government].

“We do have to drive a transformational change in the safety and decency of homes, along with the sector, as well as trying to boost supply. But this is the inheritance that we picked up in terms of everything that was put on the shelf for a rainy day under previous administrations.”

More than two years into the role, Pennycook is hopeful the various steps that the government has taken might now be be stronger than the headwinds the market is facing.

“We are trying to pull every lever to help the sector get going,” he said. “I think we do have a chance now to turn things around in the sense of we have done things in an order which I think might add up to quite a powerful stimulus.”

The 10-year, £39bn settlement for registered providers to build new-build affordable homes is one such stimulus, but Pennycook dampened any hopes of additional funding for the sector at the budget later this month.

“[The] fiscal constraints are what they are,” he said. “If they weren’t in place, I’d love to have a regeneration fund that was separate to the social affordable homes programme.”