Labour’s plan for the housing market might deal a heavy blow to your property’s value

Labour's New Housing Policy: Will It Impact Your Home's Value?

Back in 1964, Harold Wilson’s Labour government launched an ambitious homebuilding campaign, hoping to channel the collective determination seen during World War II to spark a construction boom across Britain.

Wilson believed that, much like the unity experienced during wartime, a major housing initiative could inspire the nation. His government went on to deliver over 400,000 new homes annually by 1968—a record that still stands today.

Nearly six decades later, Labour faces a familiar challenge: a severe housing shortage. The current leadership has committed to constructing 300,000 homes each year while in office.

However, unlike Wilson’s optimistic messaging, today’s ministers are taking a different approach. Their plan to help young people onto the property ladder involves making homes more affordable—even if that means house prices could fall.

Recently, Housing Minister Matthew Pennycook acknowledged that if Labour achieves its goal of building 1.5 million homes during this parliament, property prices are likely to decline. He explained to a Commons committee that a 1% increase in housing supply could lead to a 2% drop in prices.

Pennycook, who previously worked in think tanks, suggested that increased construction would slow the growth of house prices and eventually bring them down gradually. While this may be welcome news for those struggling to buy their first home, it has raised concerns among current homeowners about the value of their properties.

Property ownership is a major part of household wealth in the UK, accounting for around 40% and often serving as a key source of retirement funds.

Paul Cheshire, a professor at the London School of Economics, notes, “People who have paid off their mortgages and built up significant equity are understandably protective of their home values. There’s a growing divide between those who own homes and those who don’t, and the balance is shifting toward the latter.”

To address these worries, Housing Secretary Steve Reed clarified that Labour does not intend to reduce the value of homes owned by individuals. He emphasized the need to build more homes to make it easier for young people to buy their first property.

Despite these reassurances, the debate around Labour’s housing strategy continues to intensify.

Labour’s Ambitious Building Targets

When Labour took office in 2024, they promised a major overhaul of the housing sector, led by Angela Rayner. Their pledge: 1.5 million new homes by 2030, averaging 300,000 per year.

So far, Labour claims to have started construction on 310,000 homes, averaging 17,200 per month. To meet their target, they must now accelerate to 28,000 homes monthly over the next 42 months.

However, Tom Bill, head of UK residential research at Knight Frank, argues that simply increasing supply won’t automatically lower prices, as the housing market is more complex than political promises suggest. He points out that developers build at rates and prices that make business sense, not just to fulfill government targets.

Bill likens the government’s approach to asking a car manufacturer to ramp up production to sell cheaper vehicles, noting that the entire development process needs to be more efficient and that affordability remains a real issue in some regions.

Challenges in the Housing Market

Britain’s housing shortage has persisted for decades. Since 2000, house prices have soared by nearly 250%, making homeownership unattainable for many and forcing people to rent or live with family.

Pennycook attributes much of the problem to developers and property investors, especially in London, who bought land at high prices and are now holding onto it. He suggests that a market correction may be necessary in the capital.

Tim Leunig, a former adviser to Rishi Sunak, describes Pennycook’s goal as “sensible,” but doubts Labour can achieve it. He argues that even a modest annual decline in prices, combined with inflation and wage growth, could significantly improve affordability—but he remains skeptical about Labour’s ability to deliver such results.

Some builders have dismissed Pennycook’s analysis as unrealistic. Graham Prothero, CEO of MJ Gleeson, argues that the idea developers are deliberately holding back homes to drive up prices is misguided. He insists that once land is purchased, developers are motivated to build and sell as quickly as possible to manage risk and generate profit.

Political Implications and Regional Concerns

The mixed messages from Labour’s housing team highlight internal divisions within the party. With figures like Andy Burnham and Ed Miliband pushing for a shift to the left, Pennycook’s position may be seen as an attempt by Sir Keir Starmer to appeal to different factions.

Many voters have adult children struggling to buy homes, but Labour’s approach could alienate property owners who have recently shifted their support from the Conservatives.

In the last General Election, Labour gained a significant lead among mortgage holders and narrowed the Conservative advantage among outright homeowners, according to Ipsos polling.

Labour’s strategy relies heavily on reforming planning regulations to make it easier for developers to build. London remains a particular challenge, as high prices continue to outpace incomes. Construction in the capital has dropped sharply, with only 5,547 private homes started in 2025—a decline of 84% over the past decade, according to Molior.

Sam Dumitriu, policy head at Britain Remade, warns that London is not building nearly enough homes to meet demand, let alone reduce prices.

Risks for Builders and the Market

Potential Pitfalls of Mass Construction

Building large numbers of homes each year could backfire if not managed carefully. Dumitriu notes that releasing too many new properties onto the market at once could result in high vacancy rates and downward pressure on prices. While this might benefit buyers, it poses challenges for builders, who must account for these risks in their plans.

Labour and Pennycook are expected to unveil a new housing strategy soon. To succeed, they may need to recapture the sense of purpose that drove the 1960s building boom.

Government Response and Future Plans

A spokesperson for the Ministry of Housing, Communities and Local Government stated, “We are addressing the housing crisis we inherited by accelerating reforms to boost construction and restore the dream of homeownership.”

The spokesperson added that major planning changes are already underway, with £39 billion being invested in social and affordable housing. Plans for new towns across the country aim to create attractive, well-designed communities where people want to live.