190,000 fewer homes in the forecast, and the costs it found outside the planning system.

On 28 October the Chancellor, John Healey, delivered the Budget. At the same moment the Office for Budget Responsibility published its Economic and fiscal outlook. The OBR is the independent body that produces the official forecast for the economy and the public finances, and the government's fiscal rules are judged against it. One of the lines it forecasts is housebuilding, because new homes add to investment and to the stamp duty the government collects.

Its measure is net additions to the housing stock: the homes the stock gains in a year once demolitions are taken off. This forecast cuts it. "In the central forecast, net additions to the housing stock fall from around 230,000 in 2025-26 to 220,000 in 2026-27, before increasing to 260,000 in 2030-31. Compared to March, we expect 190,000 fewer cumulative net additions over the forecast period."

The next sentence of the forecast says why.

The government's main housing reforms since 2024 have been to the planning system, from mandatory housing targets to the framework that took effect in August 2026. The OBR has not changed its view that they will work. What it has changed is its view of the market and the costs around them. It names five of those costs, and the Budget changes one of them.

What the forecaster named.

The fuller explanation, in paragraph 2.61 of the forecast, has two parts.

The first is demand. "Higher interest rates since late 2022, alongside other affordability pressures and weak effective demand, have weighed on the commercial viability of residential development." The OBR says industry evidence points to higher borrowing costs and weaker buyer sentiment weighing on house price growth, "reducing developers' ability to absorb rising costs". In a footnote it cites the RICS sales-to-stock ratio, which compares homes sold with homes for sale and has fallen since late 2022. It adds that residential construction costs "have risen more rapidly than house prices over this period".

That is the market we described in the most homes for sale at this time of year since 2014, published on the day of the Budget. Rightmove reported more homes for sale than at this point in any year since 2014, with sales agreed 8% lower than a year earlier. Housebuilders build at the pace they can sell, so a slower market reaches the number of homes completed.

The second part is regulation. The OBR points to "regulatory and fiscal changes outside the planning system over the last decade, particularly since 2019", which it says have "increased the cost, complexity, and timescales associated with residential development". Its examples are these.

• The Building Safety Levy and the Building Safety Regulator regime. The levy started on 1 October 2026. It is charged per square metre, at twice the rate on land that has never been built on, as we set out in the levy on the field. The regulator approves building work on higher-risk residential buildings.
• Biodiversity net gain, mandatory for most development in England since February 2024. A scheme must leave the natural environment at least 10% better than it found it, on the site or by buying units elsewhere.
• Nutrient mitigation. Since 2019 Natural England has required developments draining into protected habitats to show that they add no extra nutrient load.
• The residential property developer tax, 4% of a developer's residential profits above £25 million a year.
• Higher corporation tax rates. The main rate is 25%.

The OBR does point to one planning figure. Its leading indicator is permissions: "leading indicators, particularly housing permissions, suggest that housing supply will remain substantially weaker than would be consistent with our previous forecasts in the near term". Its Chart 2.19 turns permissions into expected completions by applying the historical average gap between a permission and a finished home, using Glenigan data analysed by the Ministry of Housing, Communities and Local Government.

The OBR uses permissions as a signal of what will be built. It does not say why they fell. We reported in the fewest major housing decisions since 1979 that councils in England decided 1,026 major housing applications in April to June 2026, fewer than in any quarter since the government's quarterly returns begin in 1979. Fewer decisions can mean slower councils or fewer applications, and the forecast does not separate the two. It restates the March 2025 judgement that the National Planning Policy Framework, "on its own, would boost housebuilding significantly".

What the Budget did about the costs.

The Budget changes biodiversity net gain and leaves the other four costs as they were. It also promises not to add to building regulations.

Biodiversity net gain. Residential brownfield developments on sites up to 1.5 hectares in England are to be exempted. Since 6 August 2026 the exemption has covered sites of 0.2 hectares or below, as we set out in what changed for small sites and self-builders. At 35 homes to the hectare, 1.5 hectares holds about 50 homes. The exemption applies to brownfield land only. The government's response to the consultation, its impact assessment and the date the exemption starts will be published "in due course". In the other direction, biodiversity net gain becomes mandatory for nationally significant infrastructure projects from November 2026.

Building regulations. "To provide further certainty for house builders, the government will not make major changes to building regulations for the remainder of this Parliament", except to continue improving building safety, including the recommendations of the Grenfell Inquiry. The Budget does not change the Building Safety Levy.

The Budget does not mention nutrient mitigation. The residential property developer tax stays at 4% above £25 million, and the main rate of corporation tax stays at 25% for each year to 2028-29, according to the Treasury's table of rates.

VAT on land for social housing. From 1 April 2027 land sold to a registered provider of social housing will be zero rated for VAT. HM Treasury and HM Revenue and Customs consulted on it from June to August and received 97 responses. Across all groups, respondents put "minimising irrecoverable VAT" amongst their biggest priorities. "Most structures currently involve what is known as 'golden brick'", the response says, where "the transfer of ownership is delayed until the supply can be zero rated under a different VAT relief". Respondents described delays to land transfers and higher financing costs as a result.

The relief will apply to "any land sold to registered providers", whatever it is used for. Some respondents worried that limiting it to registered providers would leave out "joint ventures, wholly owned development subsidiaries, and certain Section 106 arrangements". The government kept the limit. The Treasury scores the relief at £15 million a year, and the legislation will be laid in early 2027.

Planning machinery. Councils will be required to digitise and publish key planning documents as open data by the end of 2027. The government's AI tool, PlanAssist, is to be available to all councils in England by the end of 2027, subject to testing, "to halve routine planning decision times".

What it did about demand.

The main demand measure is Your First Home, the equity loan announced on 26 September. The Budget confirmed the terms we said in Your First Home were still to come.

• The loan. 20% of the price, interest free for five years, then 1.5% in year 6 and 3% from year 7. The deposit is at least 2.5%.
• Who qualifies. First-time buyers of new-build homes in England, with a household income of £110,000 or less, or £140,000 in London.
• The price caps, set for each council area "based on local authority median prices". The guidance gives Reading £375,000, Manchester £355,000, North Devon £320,000 and Middlesbrough £220,000, with £650,000 in inner London and £500,000 in outer London. "A full list of price caps by local authority area will be published shortly."
• The developers' fee, on the final sale price: 1% on the first 100 homes a developer sells through the scheme each year, 3% on homes 101 to 250 and 4% above that.
• The money. £4.7 billion over five years: £700 million in 2027-28, then £1 billion a year. "Funding will be capped annually."
• The dates. Pre-registration by the end of December, applications from February 2027 and the first sales in April 2027.

The Treasury says the scheme will help around 70,000 households and "support the delivery of an estimated 20,000 new homes". The OBR forecasts the same scheme this way.

It adds that the scheme "could marginally raise house prices by stimulating housing demand". The two figures do not contradict each other. Spread over the scheme's five years of funding, 20,000 homes is 4,000 a year, against the 220,000 net additions the OBR forecasts for each of the next two years.

The £4.7 billion comes from "reprioritisation of departmental Financial Transactions", including money from the Warm Homes Fund and the Woodland Carbon Purchase Fund. Financial transactions are loans and investments the government expects to be repaid. We set out in financing every link why housing policy has moved towards them.

The scheme meets a mortgage market the OBR expects to get dearer. Its forecast assumes Bank Rate, now 3.75%, rises to "just over 4¼ per cent by mid-2027". It expects the average rate paid on all outstanding mortgages to rise from 4% in 2026 to around 5% in 2031, as borrowers come off fixed rates taken out when rates were lower.

On that path the OBR expects house prices to rise by around 2% in 2026 and 2.5% in 2027, below inflation, and then by 2.75% a year. It expects about 4% fewer property transactions than it did in March. Taxes on property purchases are forecast to raise £17 billion this year, 0.6% less than last year. The OBR says the "recent fall in house prices in areas of London and the South East" partly informs that judgement. The total is also about £3.2 billion less than it forecast in March.

Social rent, and what a home costs the state.

The Budget adds money for homes built for rent by councils and housing associations. The Social and Affordable Homes Programme gets "an additional £1.5 billion to deliver around 10,000 homes in England", prioritised for Social Rent and especially council homes, and allocated from 2027-28 to 2030-31. That takes the programme to "more than £40 billion over 10 years". Councils also keep a cheaper rate on loans from the Public Works Loan Board for council housebuilding, 0.4 percentage points below the normal rate, for another year to 2027-28.

The Budget's table of policy decisions scores the same line at £250 million in 2027-28 and £500 million in each of the three years after, which is £1.75 billion. The text and the table differ, and both are in the Budget document.

The OBR prices the wider ambition. It puts the capital grant needed to build a home for social rent at "between around £150,000 and £200,000 depending on location". On the Budget's £1.5 billion and 10,000 homes, the grant is £150,000 a home. On the table's £1.75 billion it is £175,000.

The government's ambition, as the OBR quotes it, is the biggest council housebuilding programme "since the post-war boom ended in the early 1980s". The OBR assumes that would need at least 22,000 more homes a year on top of the programme, and that if all of them needed grant the extra cost would be "between £3 billion and £4 billion each year". The Budget says its measures "represent progress" towards that commitment, and that next steps will be set out in the government's 10 Year Plan.

How the forecast and the Budget fit together.

The OBR's account runs in a chain. Interest rates set what buyers can borrow, and that sets prices. Prices in turn decide how much cost a builder can carry and still build. The costs it lists were added over the last decade and sit, in its words, "outside the planning system".

On the planning reforms, the OBR and the government agree. The OBR has held its view of the framework since March 2025. The Budget's measures on costs are a pause on major changes to building regulations, the brownfield exemption and the VAT relief for housing associations. Its measure on demand is a scheme the OBR calls marginal and the Treasury sizes at 20,000 homes.

The OBR's forecast takes account of the Budget's policies, and it assessed Your First Home by name. Its forecast document does not mention the brownfield exemption.

What to watch.

• The list of price caps for each council area, which the government says will be published shortly. That decides where Your First Home can be used.
• Developer registrations, which open by the end of December alongside pre-registration for buyers.
• The biodiversity net gain response, with the date the brownfield exemption starts.
• The VAT legislation for land sold to registered providers, due in early 2027.
• The 10 Year Plan, which the Budget says will set out the next steps on housing ahead of the next spending review. No date has been given.
• The Bank of England's next decisions on Bank Rate, on 5 November and 17 December.

Sources: Office for Budget Responsibility, Economic and fiscal outlook, October 2026, paragraphs 1.15, 2.59 to 2.63, 4.37, 4.38 and 5.19, Chart 2.19 and footnote 13; HM Treasury, Budget 2026, 28 October 2026, sections 3.3, 5.4, 6.1 and 7.11 and Table 6.1; HM Treasury, Budget 2026 speech, 28 October 2026; HM Treasury, Budget 2026: overview of tax legislation and rates, Annex A, 28 October 2026; HM Revenue and Customs, VAT treatment of land for social housing: summary of responses, 28 October 2026; Ministry of Housing, Communities and Local Government, Your First Home, 28 October 2026; Ministry of Housing, Communities and Local Government, New first-time buyer scheme to be confirmed at Budget, 26 September 2026; Rightmove, House Price Index, 19 October 2026; Ministry of Housing, Communities and Local Government, Planning applications in England, April to June 2026, live table P120A and open data; Bank of England, upcoming MPC dates. The homes held on 1.5 hectares, the homes a year, and the grant a home are our own arithmetic on these figures.