Yesterday’s Budget represented yet another decisive step in the dismantling of the traditional buy-to-let sector.
The Government has chosen to tighten the tax screw on private landlords yet again, with higher tax rates on property income, extended freezes to personal tax thresholds and a new national council tax surcharge on high value homes.
These cumulative measures make it increasingly difficult for individual landlords to operate sustainably.
The OBR is clear that these policies will further erode net rental returns and accelerate the withdrawal of small landlords from the market.
RECORD HOUSING COSTS
As supply falls and demand remains strong, rents will continue to climb, placing even greater strain on tenants who are already facing record housing costs.
It is now unmistakable that policy is shifting the rental market away from thousands of small private landlords and towards large, institutionally managed PRS operators.
Yet there is no coherent plan to replace the capacity being forced out of the sector. Without urgent action, the result will be fewer rental homes, higher rents, and a widening gap between housing need and availability.
“We strongly welcome the OBR’s detailed forecast.”
We strongly welcome the OBR’s detailed forecast showing a clear upswing in housing delivery over the years ahead.
Net additions are expected to fall to around 215,000 in 2026 to 27 due to recent subdued starts, before rising sharply as planning reforms take effect, reaching approximately 260,000 in 2027 to 28; around 285,000 in 2028 to 29, and exceeding 300,000 to reach 305,000 by 2029 to 30.
This projected return to high levels of annual delivery is a vital step towards resolving the UK’s long running housing shortage.
There is however a ‘but’ and that is that if planning and regulation is not simplified for SME house builders then we will not see these figures become a reality.”
We are absolutely committed to supporting the SME house builders who will be central to achieving this growth. Smaller developers are key to unlocking local sites, accelerating delivery, and bringing much needed diversity and competition back into the market.
Our lending activity is geared towards helping these builders scale and seize the opportunities that a more effective planning system should unlock.
ALARM BELLS RINGING
However, we must also sound a clear warning.
The optimism in the OBR’s forecast will not be realised unless regulation is drastically simplified.
We hear every day from our SME developer borrowers that excessive and fragmented regulation is clogging up the system, slowing decisions, and delaying project starts. Without meaningful reform to reduce burdens and improve the flow of consents, these housing delivery ambitions will remain out of reach.
We fully support the drive for more homes and stand ready to back the SME builders who can deliver them. But the Government must match the ambition of its housing targets with equally bold action to cut through the regulatory blockages holding the sector back.”
PLANNING REFORMS
The OBR’s latest analysis makes clear that there is still no evidence that recent planning reforms have increased the flow of development land.
Despite this, the forecast assumes that land supply will rise in the near future as reforms begin to bite.
The reforms already baked into the OBR forecast are expected to reshape local plan processes, overhaul national infrastructure consent regimes, strengthen build out expectations, and accelerate decisions through modernised digital planning systems.
“We strongly welcome this direction of travel.”
We strongly welcome this direction of travel. Every SME house builder we speak to is united in saying that regulation, paperwork and procedural inefficiency are throttling the delivery of new homes.
The planning system is slow, inconsistent, and administratively burdensome, and it is holding back growth at precisely the moment when the UK needs more housing delivery, not less.
If the Government is serious about increasing housing supply, the promised benefits of these planning reforms must materialise quickly.
Land must come through the system faster, decisions must be more predictable, and regulatory barriers must be reduced.
SME builders stand ready to build, but the system must be reformed so that development land becomes accessible at the pace the country needs. Without meaningful reform, the UK’s chronic housing shortage will only intensify.”
RISING RENTS
OBR forecasts point to a sustained and significant rise in rents over the medium to long term, driven by a tightening squeeze on landlord viability and a shrinking supply of privately rented homes – things this budget is harming further.
The OBR is explicit that measures announced in this Budget, together with the last decade of tax and regulatory changes, will further erode net returns for private landlords.
As profitability declines, more landlords are expected to exit, weakening rental supply at the very moment when demand remains structurally high. This imbalance creates powerful upward pressure on rents that will persist for years.
“The economics of small scale buy-to-let continue to worsen.”
With property income tax rates rising from 2027, frozen personal thresholds dragging more landlords into higher tax bands, and mortgage costs staying elevated as fixed rate deals refinance, the economics of small scale buy to let continue to worsen.
The OBR warns that this will directly reduce the number of available rental homes, and that rents will rise steadily if demand continues to outstrip supply, which is its central assumption.
The consequence is clear. Renters should expect sustained upward rent reviews, tighter market conditions, and less choice.
Unless policy changes direction to rebuild private rental supply or channel institutional investment at sufficient scale, these OBR projections make it unavoidable that rents will increase substantially through the late 2020s and beyond.
LABOUR SHORTAGES
The OBR highlights a critical but under recognised constraint on future housing supply: the very limited migration of skilled construction workers back into the UK.
According to the OBR’s assessment, labour availability in the construction sector is already tightly stretched, and this shortage will increasingly restrict housing delivery over the coming years unless it is urgently addressed.
The UK lost a significant proportion of its construction workforce in recent years, and the flow of replacement labour has been minimal.
“Inward migration is now a structural constraint.”
The OBR makes clear that this weak inward migration is now a structural constraint that will hinder the expansion of housebuilding, regardless of planning reform or increased investment.
Without sufficient skilled workers, sites cannot be opened, build out rates slow, and the Government’s ambitions for sharply higher housing delivery simply cannot be met.
This is a major risk to the Government’s housing strategy. If the UK is serious about delivering over 300,000 homes a year later this decade, it must urgently open the doors to construction workers and rebuild workforce capacity.
SME house builders, in particular, rely on a diverse and flexible labour pool to deliver at pace. Without action to restore migration flows into construction trades, the country will fall short of its housing objectives, no matter how much land is allocated or how fast planning approvals improve.
THE BANK OF ENGLAND
The Bank of England now has a clear responsibility to act in line with its remit. The OBR’s latest forecast shows that medium term inflation will return to 2%, with the temporary hump in 2025 having no lasting consequence and no relevance to medium term monetary policy decisions.
The Bank’s duty is to target future inflation, not react to short lived noise, and the data now clearly support rate cuts.
“The MPC must now meet its secondary duty.”
Given that inflation is forecast to achieve the 2% target sustainably, the MPC must now meet its secondary duty as well, which is to support growth and employment when this is compatible with price stability.
The UK urgently needs lower interest rates to stabilise households, revitalise the housing market, and support productive economic activity.
SME house builders are currently selling at a slower rate than they should be because artificially high interest rates are holding back buyers, and if the Government’s housing targets are to be met, affordability must improve through lower rates, even though the Bank operates independently and is rightly unconcerned with political targets.
The MPC has sat on its hands for too long. Each member is on that committee to exercise informed judgement, not to avoid taking a position.
With the medium term inflation outlook now anchored and the OBR confirming the path back to target, the Bank must finally act. Interest rates should be reduced in December and continue to fall through 2026. Anything else would be a failure to meet both the letter and the spirit of the Bank’s mandate.”
STAMP DUTY CERTAINTY
Leaving stamp duty untouched gives home buyers the certainty they desperately need. After years of sudden holidays and cliff edges that distorted the market overnight, stability is exactly what will help buyers plan with confidence.
And it gives SME house builders a steadier, more predictable market in a year when they need it most.
PLANNING WOES
A deeper collapse in new build delivery exposes a broken planning system.
The OBR’s latest figures confirm a far bigger dip in new build completions than previously expected, and the cause could not be clearer.
The UK’s planning system has become so dysfunctional that it is actively destroying the pipeline of housing.
“A toxic combination of under-resourced planning departments.”
A toxic combination of under-resourced planning departments, layers of overlapping regulation, and local councillors blocking developments for NIMBY reasons has brought delivery to its knees.
The official numbers now show net additions falling to just 215,000 in 2026 to 27, a much deeper drop than forecast earlier this year. This is not a market blip or a temporary slowdown.
It is the direct result of a planning process that is slow, inconsistent, risk averse, and heavily politicised.
Developers cannot get permissions, planning officers are overwhelmed, committees delay or refuse schemes on flimsy grounds, and the regulatory burden has become unmanageable for SME house builders who form the backbone of UK delivery.
YEARS IN THE MAKING
This collapse in the housing pipeline has been years in the making, but the OBR’s data now exposes it plainly in black and white. The system is blocking homes on a massive scale. It is failing young families, frustrating SME builders, and undermining the Government’s own housing ambitions.
If the UK is serious about increasing housing supply, reform can no longer be optional. Planning departments need proper staffing, regulations must be simplified, and councillors must be prevented from blocking needed development for political convenience.
Without urgent action, the housing crisis will only deepen and the pipeline will remain broken.
HOUSE PRICE BUST
The OBR has now delivered the clearest official confirmation yet that the great British house price boom is finished.
For the first time, an official forecast states plainly that house prices will only rise in line with wages for the rest of the decade, with annual growth of under 3% in 2025 and around 2.5% thereafter.
“This means no real house price growth at all.”
This means no real house price growth at all. The era where past generations saw their homes make them wealthy is over, and it will not return for a generation or more.
According to the OBR, this shift is not temporary. It is structural. The Government’s planning reforms are expected to increase land supply, speed up permissions, and boost housing delivery sharply from 2027 onwards.
With more land and more homes coming through the system, the long standing imbalance between demand and supply begins to unwind. That is why prices flatten.
HOUSE PARTY: CLOSED
This marks the end of the house price party, but there is a genuine upside for the country.
With more homes being built in the places they are actually needed, housing finally becomes more affordable for ordinary families. For decades, supply failure locked people out. If these reforms deliver as the OBR assumes, that grip is broken.
The message could not be clearer. The boom is over.
The market is shifting to a new normal where house prices track earnings, not outpace them. And for the first time in many years, there is a credible prospect that people will once again be able to buy decent homes in the communities where they live and work.
MINIMAL MANSIONS
The new mansion tax will have only minimal impact on SME house builders. The vast majority of smaller developers do not operate in the £2 million plus market, which is a tiny fraction of overall housing demand.
Their work is focused on the real front line of the housing crisis, delivering normal homes for normal families in the price ranges where supply is chronically short.
Any revenue raised from taxing the very top end of the market should be channelled into fixing the parts of the system that actually matter: speeding up permissions, properly resourcing planning departments, and supporting SME builders to unlock stalled sites.
The surcharge targets the luxury segment but the country’s real housing needs sit well below that level.
Every pound should be used to boost delivery where it counts.
