Office for Budget Responsibility predicts net additions to housing stock to fall to 220,000 next year

The Office for Budget Responsibility (OBR) is forecasting net additions to the UK’s housing stock will fall to 220,000 in 2026/27 before increasing sharply towards the end of the decade.

The body said recent “subdued housing starts” will feed through into figures next year, pushing net additions down from the average of 260,000 a year in the early 2020s. Net additions include new build homes as well as conversions and changes of use minus demolitions.

It said however net additions will increase to just over 305,000 by 2030/31 due to the impact of the Labour government’s planning reforms.

The OBR predicts there will be 1.3 million net additions from 2025/26 to 2029/30. This is just 30,000 higher than the figure forecast by the OBR at the Budget in November.

It said: “Outturn and near-term indicators boost the forecast slightly in the short term, but it is broadly unchanged in the medium term.”

The figures will cast fresh doubt about the government’s likely performance against its 1.5 million homes target which applies to England only and covers 2024-29.

The OBR said house price inflation is forecast to average around 2.5% over the forecast period, broadly in line with income growth, while residential investment is expected to grow from 4.75% of Gross Domestic Product to 5.5%.

The OBR also highlighted the constrained finances in local authorities’ Housing Revenue Accounts (HRAs), saying the situation is a risk to its local authority net borrowing forecasts.

It said councils’ HRA expenditure on repairs and maintenance rose by 56% between 2019 and 2026, while rental income only increased 29% over the same time period.

It said: “Many HRAs are effectively loss‑making and many councils have been required to sell housing stock, borrow, or seek exceptional financial support to remain compliant with the legal requirement not to run a long-run deficit on the HRA.”

Responding to the figures, Andy Hulme, group chief executive of Hyde Group, said: “We welcome the government’s continued focus on fiscal stability and support for boosting the building of new homes. The planning reforms already undertaken are undoubtedly a positive step, and the OBR continues to build their impact into its medium-term forecast.

“However, viability remains the central constraint. The OBR’s own analysis highlights the severe financial stress facing social housing providers, with maintenance costs rising far faster than rental income. If the housing sector is to play its full part in the government’s growth ambitions, further attention to the economics of delivery – such as land costs, build costs, and supporting private capital to invest in affordable homes delivery – will be essential.”