Six areas shaping the living sector in 2025

Shoosmiths' Living sector co-heads, Judy Fawcett, Kathryn Jump and Lisa Tye examine the outlook for the UK’s residential landscape in 2025.

Last year’s election proved to be a turning point for the Living sector. With a new UK government came an ambitious target: to build 1.5 million new homes over the next five years. 

The plan involves a comprehensive overhaul of the planning system, including re-introducing mandatory housing targets for local councils, the release of lower quality 'grey belt' land and investment in planning officers to expedite decision-making. But achieving the target is also fraught with challenges. Local council and voter opposition to new planning policies, under-resourced planning departments and a shortage of construction workers are all significant hurdles in play. Additionally, environmental considerations, such as nitrate neutrality and biodiversity net gain, will need to be balanced with the need for new housing.

Here, we outline the outlook for the sector this year, including the balancing act the sector faces between the government’s ambitious housing target and its reality.

1. Strategic land

The new National Planning Policy Framework (NPPF) promises a sea change in the granting of consents, and we can expect both speculative and strategically planned applications to seek to deliver on the increased mandatory housebuilding targets the government is seeking. We still need to see planning departments properly staffed to ensure applications can be dealt with promptly. We will still see challenges around nitrate neutrality and biodiversity net gain (BNG) causing delays to development and the sector will appreciate a concerted effort to continue to address these issues. The land and housebuilding sector has reasons for optimism this year.

2. Student accommodation

There is a growing emphasis on sustainability within the purpose-built student accommodation (PBSA) sector. This includes implementing energy-efficient systems, using sustainable construction materials and promoting practices with students that encourage environmentally friendly practices.

Investment continues to be strong, driven by a record high student population and broader demographic trends. Despite economic challenges, the sector remains attractive due to its long-term value proposition and the ongoing shortfall in accommodation supply. Ensuring that student accommodation remains affordable is a significant focus. Rising rents can impact students' academic performance and social mobility, making affordability a critical aspect of PBSA development.

3. Housebuilding

The government's planning reform initiatives will begin to bed in but face significant challenges. These include local council and voter opposition to the new NPPF, building on the "grey belt” and housing targets. Additionally, under-resourced planning departments, a lack of construction workers and a worrying trend of a slowdown in planning applications, which the government is keen to reverse, complicate the situation further. 

Environmental considerations, including nitrate neutrality, ecology concerns and biodiversity net gain (BNG), also pose challenges. The government must address these factors, balancing the need for new homes with environmental protection. The continued fallout from the Competition and Markets Authority (CMA) investigation has led to changes in business practices, with clients becoming more cautious about the terms of any collaboration or joint venture projects. 

There is also a continued push towards more sustainable building practices, with a focus on making them more cost-effective. Overall, the success of these initiatives will depend on effective collaboration between various stakeholders and the ability to navigate the complex landscape of planning, environmental and business challenges.

4. Later living

The Older People’s Housing Taskforce finally issued its delayed report in November last year. This detailed report set out nine core recommendations, plus an overriding request for the government to fully integrate housing health and care at all levels of the system. It is estimated that 30-50,000 new later living homes are required each year to meet the required population growth of people in this category. Currently only 7,000 are built.

Hopefully the government will seriously consider the recommendations of this report and start to implement them. The need for suitable housing for the later living sector can also be helped by later living being considered as part of the government’s housebuilding target. The new NPPF can hopefully help to release suitable land for later living developments. 

There remains a significant undersupply of beds in the care home sector with an additional 14,000 beds per year needed over the next 10 years to meet the population growth. Revisions to the NPPF and planning system, coupled with easing supply costs will hopefully unlock some new developments in the sector, but the key challenge is to ensure that new homes are delivered across the country, not just in the south. The strong supply and demand need continues to make care homes a key growth asset class which should see more funding attracted into the industry.

5. Affordable housing

Affordable housing is experiencing tight finances, with larger registered providers (RP) facing depleted reserves due to zero carbon/retrofitting works and compliance with the Building Safety Act 2022 (BSA) on new developments. Homes England is reviewing the current grant funding round (Affordable Housing Programme 2021-26) and extending funding deadlines for ongoing developments. The new government has pledged additional funding to support housing delivery and maintain affordable housing provision, but more is needed. 

Elsewhere, recent reports highlight many undelivered affordable s106 plots in the existing consented pipeline, presenting potential for affordable housing. However, the suitability of these plots for RP purchasers is questionable. Planning authorities could consider regional/semi-regional approaches to create attractive blocks of affordable housing. HCA could facilitate this by clearing affordable allocations and selling them to RPs. Some RPs are exploring strategic land promotion and value engineering through partnerships/framework agreements with major housebuilders, securing long-term pipeline opportunities.

Regulation will continue to impact the sector, both internally (Consumer Standards) and externally (BSA, net zero). While these regulations create a better environment for end users, they strain reserves and management time, hindering forward-looking development. Sector consolidation is likely to continue, with major RPs amalgamating to achieve economies of scale and drive opportunities through increased covenant strength.

6. Build to rent

The emphasis on sustainability will continue to grow, with developers integrating more eco-friendly practices and materials into their projects, which will not only help in reducing carbon footprints but also attract eco-conscious renters. Smart home technologies will become more prevalent, offering renters greater convenience and security. From energy-efficient systems to advanced home automation, these innovations will enhance the living experience and appeal to tech-savvy tenants. 

Addressing affordability will remain a critical focus, with efforts made to create a balanced mix of rental properties catering to different income levels, ensuring that quality housing is accessible to a broader demographic. There will be a shift towards creating more community-oriented living spaces, with developments increasingly including shared amenities and social spaces, fostering a sense of community among residents and enhancing their overall living experience