Housebuilding plans forecast to boost economy by £6.8bn
Getty ImagesHousebuilding is forecast to hit a 40-year high, with reforms to the planning system expected to boost the economy by £6.8bn, according to the independent spending watchdog.
The Office for Budget Responsibility (OBR) said changes including mandatory housing targets for councils and making it easier to build on green belt land could result in 1.3 million new homes across the UK by the end of the decade.
The government said further planned reforms and investment in affordable housing would help to meet its target of 1.5 million new homes in England over the next five years.
But the OBR warned its estimates were uncertain as factors such as the number of construction workers could hinder progress.
Industry leaders have said tens of thousands of new recruits will be needed to deliver the government's target, with the sector facing a skills shortage and ageing workforce.
Earlier this week, the government announced £600m of funding to train up to 60,000 more skilled construction workers.
The OBR said local opposition could also delay or prevent new homes.
Critics have argued the reforms could disregard local concerns, while some councils have warned higher housing targets will be almost impossible to achieve, pointing to strains on local infrastructure and land shortages.
The Home Builders Federation said planning changes were "a very positive step" but the OBR figures showed further "urgent" measures to help homebuyers were needed to meet the government's target.
Chief executive Neil Jefferson said the cost of building new homes had also "rocketed" in recent years, with new taxes and regulatory fees further supressing investment.
The government has made boosting the number of new homes a key priority, promising to back the "builders not blockers".
There had been a question mark over whether the OBR would factor the government's planning reforms into its forecasts for economic growth.
However, in her Spring Statement, Chancellor Rachel Reeves confirmed the watchdog had considered and scored changes to the National Planning Policy Framework published in December.
The OBR said the reforms could boost housebuilding by 170,000 over the next five years, resulting in 1.3 million new homes across the UK by 2029/30, a 16% increase.
It added that the number of new homes annually was projected to reach a 40-year high of 305,000.
The watchdog estimated the boost to housebuilding as a result of the reforms would increase the size of the UK economy by 0.2% by 2029/30, worth around £6.8bn in today's prices.
The government said this was the biggest positive effect on growth from a "zero-cost policy" the OBR had ever forecast.
The boost to economic growth is driven by factors including higher productivity in the construction sector, more people paying rent and making it easier for people to move for work.
The OBR said the increase in supply would lead to a small reduction in average house prices of around 0.9% by 2029/30.
Experts said while the boost from planning reforms was welcome there needed to be more focus on first-time buyers who are struggling to get on the housing ladder.
Felicity Barnett, from the Mortgage Advice Bureau, said many prospective homeowners were "trapped by strict affordability criteria" and needed more accessible options.
Aynsley Lammin, an analyst at Investec, said a good economic backdrop, favourable interest rates and policies to help first-time buyers were needed to boost demand.
He added that the government would also need to invest in affordable homes.
Under the government's new planning framework previously developed land - known as "brownfield" sites - will be prioritised for new homes.
But ministers have acknowledged this will not be enough to meet the government's target.
Councils will also be ordered to review green belt boundaries - which were created to prevent urban sprawl - by identifying lower-quality "grey belt" land that can be built on.
Building will be allowed on higher quality green belt land if developers provide the necessary infrastructure and guarantee affordable housing, as well as access to green spaces.
Additional reporting by Mitchell Labiak
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