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Fine Margins – When ambition meets viability

Fine Margins – When ambition meets viability

James Robertson 05 Jun 2026
The Government has made clear its ambition to deliver 1.5 million homes over the course of this Parliament. This commitment sits at the heart of its wider planning reform programme which includes revisions to the NPPF, housing targets, and accelerated decision-making processes.
 Latest statistics published by MHCLG indicate that housing delivery has fallen some distance from this required trajectory. Housing supply in England amounted to 208,600 net additional dwellings in 2024/25, down 6% on 2023/24 delivery. Provisional estimates published alongside those figures indicate that 275,600 net additional homes were delivered between the start of Parliament in July 2024 and 9 November 2025, implying that delivery to date is running well behind the level needed and highlighting that it would need to rise very considerably above recent output if this target is to be achieved.
This weaker delivery is reinforced by Office for Budget Responsibility’s (OBR) November 2025 Economic and Fiscal Outlook, which revised down its housing forecast. Whilst the OBR projects housing delivery to rebound after a period of decline, the revised forecasting implies that that housing delivery will only exceed 300,000 dwellings in one year (2030/31). Indeed, the OBR forecasts imply the Government will deliver c.1.2 million homes over the Parliamentary term – a significant shortfall.
 
Figure 1: OBR Housing Market

Source: OBR Economic and Fiscal Outlook – November 2025 (2025)

 
The Viability Squeeze
The OBR point to shortages of viable sites in parts of the country as a constraint on supply. This view has been supported by 2025 research undertaken by the House Building Federation[1] (HBF) which found that almost two-thirds (64%) of respondents identified viability pressures as a major barrier to housing delivery. The report also suggested that these pressures are no longer confined to particular regions, but are now being felt more widely across England, increasing the risk of development dampening in all parts of the country due to viability constraints.
A similar position was identified by Zoopla[2], which found in September 2025 that viability challenges affect almost two-thirds of local authority areas (64%) in England.
Figure 2 Housing Viability across England

Source: Zoopla Research – new homes viability model (2025)

 
These increasing viability pressures have stemmed from a number of factors, most notably including:
  
  1. Rising construction costs: An analysis of Building Cost Information Service (BCIS) build cost data and ONS sales price data highlights that build cost increases have outpaced sales values.  Over the period Q3 2021 and Q3 2025 build costs increased by 21.8% whilst sales values grew by just 13.1% over the same period.
     
  2. Regulatory costs: recent changes have included more stringent building regulations, the introduction of Biodiversity Net Gain requirements in 2024 and ongoing nutrient neutrality requirements. going forward, additional policy and regulatory requirements, including the Future Homes Standard and Building Safety Levy will further increase the costs associated with the delivery of new housing.
     
  3. Tax increases:  rises to national insurance contributions, corporation tax and landfill tax have all had an impact for housebuilders and add to the cost burden which impacts on the viability of development.
 
Analysis presented within the recently published HBF Viability Crunch report[3] found that the construction of a hypothetical 90sqm low-rise dwelling now costs £76,000 more than in 2020. This is significantly above house price inflation over the same period.

Table 1:  Additional costs for each new home
 
Additional Costs (2025 compared to 2020)
Material and labour
£37,000
Future Homes Standards
£10,200
Building Regulations
£7,770
Nutrient neutrality
£7,000
Biodiversity Net Gain
£5,700
Landfill Tax
£2,000
Taxes
£2,055
S106 Inflation
£985
Building Safety Levy
£2,320
Total
£76,000

 

Source: HBF Viability Crunch (2026)

 

NPPF Consultation 2025: Viability Updates
Policy DM5 of the draft NPPF, which was published in December 2025, relates to development viability and builds on Paragraph 59 of the current NPPF. The accompanying consultation document sets out that the revisions seek to reduce cases of unnecessary site-specific viability assessment. Revisions to the wording appear somewhat at odds with growing issues of viability nationally as highlighted within this blog. Policy DM5 (2) speculates that:
 
“There may be limited circumstances in which it is not possible for development to proceed on a policy-compliant basis.” (Lichfields emphasis).
 
Policy DM5 provides some examples of the circumstances in which viability assessments may be justified to inform decision-making. These include: 
 
  1. The development is significantly different from any typology assumed in the development plan viability assessment;
     
  2. Site characteristics differ substantially from the assumptions used to assess viability when the relevant development plan policies were prepared;
     
  3. The development is demonstrably burdened by costs which were unforeseen when the development plan was prepared; and/or
     
  4. Site or economic circumstances have changed significantly since the development plan was prepared.
It is noted, however, that this list of circumstances echoes that already set out in the Planning Practice Guidance at Reference ID10-008-20190509.
 
The new plan-making system underpinned by legislation in the Town and Country Planning (Local Planning) (England) Regulations 2026 sets out a requirement for the preparation of new Local Plans to be developed five-years after the previous plan is adopted. 
 
The NPPF establishes at paragraph 59:
“Where development proposals accord with relevant up-to-date plan policies, they should be assumed to be viable.” 
 
However, almost two-thirds (65%) of the Local Plan and CIL Viability studies assessed as part of Lichfields’ Fine Margins 2 study were more than five-years old (with a median age of 5.83 years). Whilst Local Plan viability assessments provide a helpful framework for understanding broad viability, they provide a point in time view and may therefore fail to reflect current economic and market conditions; they do not consider the costs associated with policy obligations emerging post-implementation. 
 
As presented in the previous sections of this blog, housebuilding is an inherently fluid and dynamic industry which is sensitive to economic and policy changes. The economic, regulatory and tax landscape can change substantially in reasonably short timescales and affect development viability. Policy DM5, it seems, affords some flexibility to reflect this. Whilst the NPPF reiterates that the role for viability assessment remains primarily concerned at the plan-making stage, viability can and should be re-visited in instances where economic circumstances have shifted. It is expected that viability will continue to be subject to review at planning application stage and will inform discussions about potential deviation from policy requirements where viability constraints necessitate this.
 
 
Lichfields’ Fine Margins
The current and draft NPPF (and the PPG) solidify the need for accountability, consistency and transparency in viability assessments, stating that practitioners should clearly and reasonably justify their inputs and assumptions and make all information sources explicit within viability assessment.
 
As part of this, Annex B of the draft NPPF reaffirms that standardised inputs to viability assessments should be used to provide a consistent framework for evaluating development proposals and ensuring both authorities and developers have greater certainty in the viability assessment process.
 
Lichfields’ Fine Margins: Second Edition research[4] draws on an analysis of 144 Local Plan and CIL Viability Studies to present and ascertain a sensible range of input assumptions across key metrics adopted within viability assessments. The study provides a comprehensive overview of the input values that can be utilised in development viability assessments. 
 
The publication of the Fine Margins: Second Edition study provides a timely update in response to the proposed changes to viability as set out within the NPPF and considering the critical challenges of viability in housebuilding. To discuss how Lichfields can support with regard to development viability matters, please get in contact with Simon Coop (Senior Director) or myself.
Footnotes    

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Funding A High Street Comeback in Wales?

Funding A High Street Comeback in Wales?

Mali Meek 04 Jun 2026
This blog explores current funding opportunities and highlights Lichfields’ involvement in many of the key projects being advanced across Wales as a result. It demonstrates how we can support developers and businesses to deliver impactful and meaningful outcomes.
Town centres are central to Welsh life, with just over 2.5 million people in Wales living in towns or cities, yet one in every seven shops on Welsh high streets are vacant.[1] Clearly, this not an issue unique to Wales; town centres across the UK are rapidly changing in response to a major structural shifts in shopping and working patterns, with an ensuing decline in demand for physical retail floor space.
However, it is important to remember that historically town centres have served purposes beyond simply retail and have continuously evolved to meet the changing needs of visitors. Whilst the earliest centres were located for defence or at key locations along routes, towns and town centres quickly evolved as places of trade, and places to live, work and play. It is through this prism that that future role of town centres should be planned. As retail uses contract, town centres are increasingly becoming places to gather, socialise and experience.
In recognition of this, the Welsh Government has introduced a range of measures to reinvigorate town centres. This includes the adoption of a Town Centres First policy, which is reflected in Future Wales: The National Plan 2040, the national development plan for Wales.

Context: Town Centres First for a Mix of Uses

 

The Town Centres First policy highlights the need to rethink the future of town centres as they transition away from traditional retail roles. It actively supports the growth and regeneration of towns and cities, promoting a vibrant mix of uses, including commercial, retail, education, healthcare, leisure and public service facilities.[2]
It also encourages the public sector to take an increased role to support the growth and regeneration of town and city centres. A key facilitator of this is the Transforming Towns Programme which provides funding to local authorities and developers to revitalise town and city centres across Wales. Similar initiatives are also run by the UK Government, which provide long term investment to communities to restore local pride and unlock new opportunities. Our Revitalise Tool Kit has been successfully applied across town centres throughout the UK, helping strengthen the case for investment and in turn delivering meaningful change.

The Transforming Towns Programme

 

The Transforming Towns Programme was launched by the Welsh Government in March 2020, to support both the development and delivery of regeneration projects, alongside smaller scale place-making initiatives. Since its launch, the programme has awarded more than £484 million in grant and loan funding to support regeneration. In February 2026, it was announced that a further £30.9 million would be provided to local authorities to assist with these efforts.[3]
This fund is available to local authorities who can work with partner organisations to develop projects.
Lichfields has been supporting Thackeray Estates in the repurposing and redevelopment of Howells, a Grade II* former department store. The £100m regeneration project at the heart of the City Centre is seeking to transform the vacant former department store into a vibrant multi-use destination. The project has benefitted from the Transforming Towns Programme - the recently erected hoarding was part funded by the Programme.


Credit: Thackeray Estates

 

Lichfields Insight, Out with the old, in with the new, provides further guidance in relation to successfully repurposing town centre buildings. It is intended to assist others in successfully promoting the repurposing of built assets.

 

Transforming Towns Place-Making Funding

 

The transforming towns and placemaking funding supports the delivery of smaller schemes that require no more than £300,000 grant funding and is designed to be accessible to a number of delivery partners across the private, public and third sectors.[4] 
Transforming Towns Strategic Funding

 

The transforming towns strategic funding is intended to support the delivery of a specific projects led by a local authority where more than £250,000 grant or loan funding is required.[5]
Transforming Town Loan Fund

 

Between 2022 and 2025, £25 million was made available across Wales to support projects which reduce the number vacant sites within town centres. The fund is an interest free loan, administered by the local authority who cannot use it for their own projects.[6]
The interest free loan must be paid back to the local authority, usually within 5 years. Once the loan is repaid, the local authority can use it again to support new projects. The fund is required to be reinvested 2 to 3 times over 15 years.
Those who are eligible for the loan include:
  1. social housing associations

  2. property developers

  3. private landlords; and,

  4. businesses

 

Pride in Place Programme

 

The Pride in Place Programme was launched by the UK Government in September 2025. As part of the programme, the UK Government has committed to investing £5.8 billion over 10 years in order to transform communities across the UK; each neighbourhood can receive up to £20 million over 10 years to improve local communities.[7] Nine Welsh neighbourhoods have been named as recipients of this funding.[8]

UK and Welsh Government funding

 

For large infrastructure and regeneration projects, direct capital funding from the UK and Welsh Government is also available. 
Lichfields has been supporting Urban Splash and Swansea Council with their development proposals to refurbish the Swansea Civic Centre building.  The refurbishment and repurposing of the former Council Civic Centre forms the centre piece of the wider masterplan for Swansea beachfront. A crucial element of the proposal is the development of ‘Ffordd ir Môr’, an active travel route, which will complete the link from the City Centre to the beach and unlock the vision of a ‘City on the Beach’.
Urban Splash, Lichfields and Swansea City Council have been working collaboratively to ensure the project comes forward as part of the wider ‘City on the Beach’ initiative. The project has attracted financial backing, including £20 million of direct UK Government capital funding.

 

Credit: Pexels Turang Photography

 

Conclusion

Plaid Cymru has emerged as the largest party following the Senedd election on 7 May 2026. Supporting small businesses and regenerating high streets is one of Plaid Cymru’s key manifesto objectives. It is anticipated that Town Centres will therefore remain a key priority for the incoming Welsh Government.
The Welsh Labour Government actively put ‘Town Centres First’ into practice, through direct funding aimed at unlocking the regeneration of towns and city centres across Wales. Whilst the revitalisation of town centres is a manifesto objective for Plaid Cymru, time will tell whether the existing streams of funding and support will remain. 
Lichfields has been at the forefront of these regeneration efforts across Wales, helping to revitalise towns and cities, breathing a new lease of life to centres. The Cardiff Office has assisted several clients bring forward a broad mix of diverse uses on underutilised and vacant premises in town centres through repurposing, redevelopment and reuse.  Many of these projects have successfully obtained UK Government and Welsh Government support and funding.

 

Footnotes

CONTINUE READING

Milburn, NEETs and housing: the connection that counts

Milburn, NEETs and housing: the connection that counts

Matthew Spry 02 Jun 2026
Being a well-balanced individual who knows how to enjoy time off work, I spent part of the sweltering half term break reading the interim report - Young People and Work - by The Rt Hon Alan Milburn, looking at those young people not in education, employment or training (NEETs).[1] It presents a sobering analysis.
The report contains many numbers: 314,000 young people aged 18–24 in England in 2023–24 were neither working, nor studying, nor claiming.[2] Out of work and out of sight, with no institution responsible for them. They sit within the larger figure of nearly one million young people not in education, employment or training — sixty per cent of whom have never had a job, up from forty per cent in 2005, at a cumulative cost to the economy of £125bn a year.[3]
The report is unflinching about cause. These young people are not a soft generation — eighty-four per cent of those surveyed said they wanted a job, education or training — but a set of institutions and policies built for a different era have seemingly escalated the problem rather than defused it.
What caught my eye, half term notwithstanding, was a box two-thirds of the way through the report, titled “Transport and housing: the barriers nobody counts.”[4]
It is an arresting phrase but, respectfully to Mr Milburn, not quite correct. As planners, we do count housing; indeed, it has become a trope to say we do it too much.[5] And yet, too often, we lose sight of why the numbers matter. Milburn helps supply some of that meaning, and it is worth taking his analysis back into the planning system to inform the often-difficult debates on housing targets in development plans, on the merits of individual proposals, and - as now seems likely - a reopening of the national policy debate.

What the report sees

 

“I don’t actually ever think about owning a house,” one young woman told the review.[6]
Another: “I feel like 20 years ago, people my age, they’d be like, yeah, in the next five years I’ll own a house. Because everything starts there, right? Like stability.”[7]
The report states:
“That link between housing and stability came up again and again. What has gone is not just the prospect of ownership but the sense that effort will lead somewhere solid. Renting felt insecure, expensive and sometimes unsafe. Young people described family homes with roofs that had fallen in, no windows and landlords who did not respond.” [8]
It is precise about the mechanism:
“The interaction between the housing crisis and youth labour market access is direct. Young people who cannot afford to live independently near employment centres are constrained to their parental home and the local labour market it sits within.” [9]
The share of 18–34-year-olds living with parents has risen from around a quarter in the late 1990s to nearly forty per cent by 2021–22.[10] A young person in a high-NEET area with weak demand cannot relocate to where the work is; housing costs, benefit rules and family ties anchor them in place.[11] The DWP’s system of employment support, however well reformed, cannot fully compensate for that geography.
None of this ought to be news to anyone engaged in planning for housing. Indeed, a very similar argument is made in Chapter 1 of the New Towns Taskforce report a year ago.[12] There the case for building at scale – and much of the Taskforce’s approach to site selection - rested on the proposition that housing shortages limit labour mobility, worsen health, disrupt education and delay family formation.

The evidence on why housing matters

 

The Resolution Foundation’s Moving Matters found that the propensity of young private renters to move home and job simultaneously fell by two-thirds between 1997 and 2018, with housing costs a principal headwind.[13] 
On attainment, the Children’s Commissioner tracked more than 600,000 pupils and found a stark adverse relationship between housing instability and GCSE results.[14] A UCL study published in December 2025 linked the Millennium Cohort Study to the National Pupil Database and put numbers on it: children in poor-quality housing at age seven missed 15.5 more school days across their compulsory education and scored 2–5% lower in standardised tests, with damp and overcrowding the strongest predictors.[15] One in seven English households lives in a home that fails to meet standards.[16]
One of Milburn’s findings is that mental health now drives the NEET numbers: the share reporting a work-limiting condition has risen from 26% in 2015 to 44% in 2025.[17] A 2023 NIHR systematic review of fifty-nine studies found housing insecurity associated with anxiety, depression, self-harm and suicidal ideation among children and young people.[18] The Marmot reviews established housing as a primary social determinant of health more than a decade ago; the 2020 follow-up found little had improved.[19]
Clearly, it’s not just about housing, which can be a symptom of problems as well as a cause. But the aggregation of insecure tenure, cold homes, overcrowding, the anxiety of never being quite settled, is the soil in which the health-related detachment Milburn describes takes root.

Supply is the foundation

 

All of this points to the need for better quality housing, better welfare rules, stronger tenant protections, improved transport and a properly funded social housing programme.
But it remains important to address the underlying arithmetic of too many households chasing too few homes in the parts of the country with the most economic opportunity. The latest household projections for England indicate an average of 242,000 additional households per year 2022-2032, and yet net housing additions over the first three years of that period averaged just 221,500. [20] That compounds historic undersupply, with 1.5 million households in England (6% of all households) containing a concealed household (defined as having at least one additional adult present who would like to buy or rent their own accommodation but could not afford to do so.[21]  We are well short of the 300,000 annualised figure represented by the Government’s 1.5m homes ambition or the 371,000 in the Standard Method, figures which most sensible people believe are the absolute minimum benchmarks for begining to address the housing crsis.[22] 
Effective planning for more housing, unlocking deliverable land to address housing need in line with the Standard Method, will increase the overall supply of homes but also help to moderate house price growth and improve relative affordability over time, so that over the medium term, income growth outpaces the rise in house prices.[23] Owner occupation remains, as the English Housing Survey doggedly records, the tenure the great majority of people still want.[24] The aspiration has not died, but the expectation has.
Work by the OBR assumes a positive supply elasticity in its forecasts, i.e. that sustained increases in housing delivery of all types will help stabilise prices.[25] Greater London Authority research found that new market housing improves affordability both directly and through the chain of moves it enables, with the greatest benefits occurring within the same housing market area.[26] Research by Public First used Land Registry data to test the price effects of building new homes at higher price points and found that the market filtering meant building larger homes allows people to trade up, kicking off a chain of moves that frees up smaller and cheaper homes; a small increase in the proportion of high value homes would make entry-level homes around £2,500 cheaper to buy.[27] 
Further, a substantial proportion of affordable housing is delivered through section 106 agreements,[28] albeit this model is under pressure due to viability difficulties, providing 36% of all affordable homes delivered in 2024-2025, down from the longer term average of 44-47%. 

                  

Delivering more of what matters

 

Milburn’s report is interim – providing a diagnosis not a solution. The final report promises a “coherent participation system for early adulthood.”
It remains to be seen whether this will include specific recommendations for measures to tackle the housing crisis; that Milburn’s interim report is prepared under the auspices of DWP and elides more specific analysis of housing supply, suggests its attention will lie elsewhere and understandably so.
But when the young woman in Milburn’s report talks about housing and says “everything starts there, right? Like stability,” she is describing the relationship between a secure home and the capacity to plan, to move, to take a risk on a job — the behaviours on which a well-functioning economy and society depends.
Milburn’s interim report is a cri de coeur for doubling down on the Government’s ambitions to drive up the supply of new housing of all types, and addressing the barriers that stand in the way of its delivery: a timely reminder to MHCLG as it draws together the contents of the new NPPF and turns its attention to removing grit from the planning process.[29]
The recent local election results and political turbulence facing the Government seem likely to make it more challenging to progress some New Towns, Spatial Development Strategies and Local Plans in many areas.[30] The recent utterances from Andy Burnham in the Mackerfield by-election also suggest a possible unwinding of the Government’s chosen agenda for how to boost supply, assuming his political ambitions are realised.[31] For the foreseeable future, it will be incumbent on those bringing forward housing proposals to make clear why new housing matters. The story told by Milburn’s report is a good place to start.
Footnotes


[1] Alan Milburn, Young People and Work: Interim Report, Department for Work and Pensions, 28 May 2026. 217 pages; I regret nothing.
[2] Ibid., Chapter 1. The 314,000 were aged 18–24, NEET, and not in receipt of benefits — out of work, out of sight, and below the threshold of any institution’s responsibility.
[3] Ibid., Foreword and Chapter 1. The £125bn annual cost, the 60% who have never worked (up from 40% in 2005), and the 84% wanting to work are all drawn from these sections.
[4] Ibid., box headed ‘Transport and housing: the barriers nobody counts’, between paras. 281 and 282.
[5] TCPA (2020) Planning 2020 ‘One Year On’ 21st Century Slums? This suggests criticisms of poor design by politicians “fails to understand the impact of the ‘planning by numbers’ approach of the NPPF, which displaces vision and creativity”. Whether that analysis stands up is a topic for another day.
[6] Milburn (2026), para. 100. 
[7] Ibid., para. 101. The same group described renting as insecure, expensive and ‘sometimes unsafe’ — family homes with roofs fallen in, broken windows and unresponsive landlords (para. 102).
[8] Ibid., para 102
[9] Ibid., Green box between paras 281 and 282
[10] Resolution Foundation analysis cited in Milburn (2026), green box. The underlying source is ONS Census 2021 / Resolution Foundation intergenerational work; see Resolution Foundation, Housing Hurdles, December 2024.
[11] Joseph Rowntree Foundation, cited in Milburn (2026), green box, on housing insecurity as a persistent driver of employment instability among young adults. See the JRF report here
[12] New Towns Taskforce, Report to Government, MHCLG, September 2025, Chapter 1 — which, in the interests of full disclosure, Lichfields helped prepare.
[13] Resolution Foundation, Moving Matters: Housing Costs and Labour Market Mobility, September 2019. The two-thirds fall in the joint propensity to move home and job is the headline finding; housing costs are identified as a significant headwind.
[14] Children’s Commissioner for England, The Impact of Housing Instability on Children’s GCSE Grades, April 2025.
[15] Baranyi, G., Harron, K. & Fitzsimons, E., ‘Housing quality and educational outcomes in England’, International Journal of Population Data Science, 10(4), December 2025. Damp, overcrowding and inadequate heating were the strongest predictors.
[17] Milburn (2026), para. 56. The share of NEETs citing mental health as their primary condition has almost doubled since 2011.
[18] Hock, E. et al., ‘Exploring the impact of housing insecurity on the health and well-being of children and young people: a systematic review’, Public Health Research, NIHR, 11(13), 2023. The direction of effect is, in the authors’ words, ‘overwhelmingly negative’.
[19] Marmot, M. et al., Health Equity in England: The Marmot Review 10 Years On, Institute of Health Equity, 2020, building on Fair Society, Healthy Lives (2010).
[20] ONS 2022-based household projections (released October 2025) and MHCLG Net housing additions Live Table 118
[22] Local Housing Need based on the Standard Method as at 21st May 2026.
[23] It is not about expecting nominal house prices to fall, as some people claim.
[24] English Housing Survey, various years; New Towns Taskforce (2025), Chapter 1, para. 21: ‘Owner occupation remains the most prevalent and popular housing tenure and must be part of future supply.’
[25] OBR (2014) Working paper No.6 Forecasting house prices https://obr.uk/docs/dlm_uploads/WP06-final-v2.pdf
[29] Both on the Government’s agenda, as the Minister of State’s speech to UKREiiF on 19th May 2026 made clear: See here 
[30] Planning (2026) Seven key planning and development implications from the local election results https://www.planningresource.co.uk/article/1957896/seven-key-planning-development-implications-local-election-results (£)
[31] In his first campaign update video, posted on 26th May, he says: “I was with residents in Winstanley last night talking about Green Belt issues, and I know we need a change in the borough, shift the burden of development from greenfield to the local centres, and that’s a change nationally”

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Beyond housing: the economic case for New Towns

Beyond housing: the economic case for New Towns

Dan Evans & Richard Coburn 28 May 2026
The UK Government’s revival of a national New Towns programme represents one of the most ambitious spatial and economic policy shifts in decades. Following the recommendations of the New Towns Taskforce Final Report: Report to Government[1] (published in September 2025), the Government has now shortlisted seven locations[2] for further consultation, marking a shift from strategy to delivery. In addition, a wider pipeline of New Town proposals is already emerging beyond the Taskforce process.
Acknowledged by Chair Sir Michael Lyons in his Foreword to the Report to Government, Lichfields was pleased to support the Taskforce in its preparation of the report including evidence to underpin the strategic and economic case for the programme.
When many people think about New Towns, they think primarily of housing delivery at scale, which is hardly surprising given the prominent role the New Town’s programme has been given in the Government’s response to the housing emergency. But New Towns are also creating jobs, raising productivity and stimulating economic growth – both in the delivery of successful places in their own right, but also their ability to unlock constrained economic potential and addressing deep-rooted spatial inequalities. This framing is reinforced in the Taskforce’s wider report to government, which emphasises that New Towns can make a ‘telling contribution’ to both the pressing need for more homes and to national ambitions for economic growth, especially in locations where housing shortages currently limit the availability of skilled labour and restrict business expansion.
These conclusions highlight a simple reality: if the Government wants New Towns (both the seven shortlisted locations and other New Towns and significant urban extensions that arise outside of the programme) to succeed, they must be built not merely as places to live, but as strategic economic assets integrated into wider labour markets, regional strategies, and national productivity ambitions.
This blog considers the rationale for New Towns as an economic intervention, and the critical factors that must be addressed to ensure they make the fullest contribution to their regions as well as the national economy. This is also in the context of the recent updates to HM Treasury’s Green Book (which we have covered in more detail in a previous blog), which place greater emphasis on the purpose of interventions and the distributional and place-based outcomes they are intended to achieve, rather than relying solely on headline value-for-money metrics. In this context, New Towns should be understood not simply as housing delivery mechanisms, but as targeted, place-based interventions to address specific economic constraints.

 

The economic rationale for New Towns

 

The Taskforce identified the economic consequences of ongoing housing shortages as one of the central justifications for a New Towns programme. In many fast-growing urban areas, demand for labour significantly outstrips the available supply of housing, driving up prices and reducing access to the workforce that firms need to grow. These shortages dampen productivity growth, and reduce the competitiveness of city-region economies that form the backbone of the national economy.
Where housing is scarce and expensive, labour mobility is constrained. People cannot move into areas with abundant job opportunities, and firms cannot expand or diversify because they cannot attract essential workers. Many of England’s most productive cities and regions – including Greater London, the Oxford–Cambridge Arc, Greater Manchester, Bristol, and Leeds – face spatial constraints to various degrees, caused by a combination of limited developable land, high land values, bottlenecks in infrastructure capacity, and insufficient housing supply.
The Taskforce report identifies how such constraints limit the ability of these city regions to generate growth. New Towns, when strategically located within the functional economic area of a strong city, can expand the labour catchment, relieve land pressures, and provide space for new commercial activity, innovation, technology  and industrial clusters. It concluded that New Towns are likely to be most effective when they directly support labour movement into economically successful areas, rather than artificially trying to create demand in uncompetitive places.
The Taskforce’s site selection criteria were explicitly economic: they prioritised two essential criteria, of which one was the supporting or unlocking of economic growth. The recommended locations were also selected to:
 
  1. ‘Relieve growth constraints in ‘overheating’ areas – where there is already high productivity, but housing shortages are restricting labour mobility and therefore preventing the UK from capitalising on existing areas of economic strength;

  2. Attract investment and talent to places which are already growing, but not yet overheating (for example, places with high potential industrial clusters, or high existing trend growth in employment and/or productivity), creating virtuous cycles of growth;

  3. Support agglomeration in England’s major cities, when combined with strategic transport investment – helping to create bigger, more fluid labour markets which are more productive, narrowing the gap between the UK’s major cities and their international counterparts.’
 
This approach should help ensure that productivity benefits are built into the programme from the outset. A Centre for Cities blog[3] from the time that the Taskforce’s recommendations were published highlighted that the selected locations all sit within easy travelling distance of major conurbations, which is critical for ensuring that New Towns amplify existing economic strengths rather than try to invent new ones from scratch.
Of course, there is an argument that New Towns could be used to drive investment in underperforming areas, acting as catalysts for growth in weaker regional economies by attracting new residents, employers, and infrastructure investment. However, this isn’t an approach the Taskforce embraced, with their conclusion that, for areas that are not currently fast‑growing or with untapped potential from increased densification, New Towns are unlikely to be answer. This stance also appears to have been doubled down on by the Government, with many of the seven shortlisted locations being subject to further consultation being major extensions to existing high-performing cities. This could be seen as slightly at odds with the rationale of the updated Green Book which does allow for place-based effects to be given more prominence in decision-making, although in reality other interventions are likely to be more successful in lower performing regions.

 

Getting the strategy right

 

The role of economic vision in New Town development

 

Place-based economic development is most effective when built on a long-term vision around local strengths, sectoral opportunities, and the role of anchor institutions. The Taskforce’s ‘Placemaking Principles’ dedicate an entire section to Business Creation and Employment Opportunities, recommending that New Towns ‘must be places that provide jobs for residents and enable businesses to grow, supporting the government’s economic growth mission’. Beyond this, it identifies that a thriving business community is part of the wider social infrastructure that residents will need to meet their day-to-day needs.

Major employers: Learning from the past

The Taskforce highlights the opportunity to use New Towns to complement existing economic clusters and establishing new hubs, with potential to focus on particular industries.
The UK has a history of ‘company towns’ (including Bournville, Port Sunlight and Saltaire), and some of the post-war New Towns included major employers or specific sectors anchoring early growth. For example:
  • Ford Motors in Basildon
  • Steel in Corby
  • Electronics manufacturing in Glenrothes
Major employers bring the benefit of providing an additional reason for existence, as well as providing jobs close to the new residents. The risk, however, is that as economies change and businesses come and go, it can leave local economies at risk of stress. Company towns are a thing of the past, and the next wave of New Towns need more diversified strategies: a combination of anchor employers, sector clusters, research assets, and a mix of start-ups and established firms. In this regard, Milton Keynes is a more instructive example of a New Town which has developed (and retained) a diversified local economy with strengths in digital and technology, professional services, and logistics sectors[4]. This has provided a certain level of resilience as well as well as strong economic performance – the city has one of the highest productivity levels in the UK, with output per job around 25% above the national average, and a total economy worth over £16 billion[5].
 
Among the Government’s shortlisted locations, economic rationales for some locations are already evident – for example, Leeds South Bank aligns with a growing urban innovation district, and the West Innovation Arc near Bristol reflects an established cluster in advanced engineering and aerospace. These examples reinforce the importance of aligning New Towns with existing economic strengths rather than attempting to create entirely new markets from scratch.
The Taskforce recommended that each location should generate an early economic vision alongside any town-wide masterplan. We believe this should be underpinned and informed by its specific context and strengths, and should provide:
 
  • A clear economic identity – for example, positioning the New Town as a hub for advanced manufacturing linked to a nearby city-region cluster, a centre for logistics and distribution capitalising on strategic transport connections, or a knowledge-based location anchored by existing university or R&D assets.

  • Early identification of growth sectors and economic functions reflecting local and regional strengths.

  • Development plans for these sectors and economic clusters, aligned with regional industrial strategies and combined authority priorities.

  • Partnerships with universities, further education colleges, employers, and R&D institutions, with a focus on skills.

  • A plan for cultivating SMEs, start-ups, and innovation networks.

  • Distributional effects – who is likely to benefit from the economic vision for the New Town, and what interventions might be required to share the benefits more widely. 
 

 

Addressing market failures in delivering employment land

 

From an economic perspective, investment in New Towns is underpinned by the principle of  addressing market failure. This is normally seen in the context of housing supply (with the current market not delivering enough), but is it also true of employment land or support for specific sectors and economic clusters.
For example, recent reports show severe laboratory space shortages across the UK, particularly in the Golden Triangle (London–Oxford–Cambridge) – in 2023, vacancy rates for fitted lab space were just 1% in Cambridge and London, and 7% in Oxford[6]. (While demand for laboratory space has softened in parts of the market recently, structural shortages remain.) Meanwhile, the UK has suffered a historic undersupply of industrial and logistics space[7]. There are several challenges to delivering these types of land use, including limited appetite among private developers to deliver commercial space with slower returns, sometimes higher upfront infrastructure costs, and a plan-making system that does not put the same onus on planning for employment land as it does for housing.
New Towns could provide an opportunity to deliver modern employment uses that the market and/or the planning system are not fully delivering. In particular, the development corporation model would allow the public sector to assemble land, capture value uplift, co-ordinate long-term delivery, and ensure balanced development that includes employment land rather than defaulting to housing. Advantages would include:
 
  • Co-ordinated masterplanning and land assembly powers, allowing for balance between uses.

  • Guaranteed allocations of serviced commercial land.

  • Delivery of shared facilities such as common utilities, equipment and central services.

  • Forward funding or land value capture models which could be used to fund necessary infrastructure.

  • Incentives for early-phase employers.

  • Long-term stewardship models that maintain employment land supply.

 

The value of the opportunity for a comprehensive masterplan for each New Town is that it allows for a dedicated employment land strategy, protecting space for commercial activity against viability pressures that often push for higher (residential) yields. Land can be safeguarded for uses that are higher value or in demand in the region or a country as a whole.
Recent research conducted by Lichfields resulted in preparation of a framework and associated tools to inform the approach to planning for modern economy uses.  

 

Source: Planning for a Modern Economy, Lichfields.

 
Ensuring New Towns are more than the sum of their parts

 

The most effective New Towns are those conceived as expansions of existing economic systems. As the Centre for Cities blog previously mentioned states, the Taskforce’s chosen locations are ‘in the right places, for the right reasons’, generally adjacent to or within commuting distance of major cities.
This allows New Towns to strengthen agglomeration effects – one of the most powerful drivers of productivity – by enabling:
  • larger integrated labour markets;
  • better matching between skills and jobs;
  • economies of scale in public and private services and facilities; and
  • greater potential for innovation and knowledge spillovers.

 

Economic governance 

 

The role of existing and new Combined Authorities and Metro Mayors, and other strategic-level authorities and groups of authorities aligned with the production of Strategic Development Strategies, will be critical in shaping and sustaining the economic success of New Towns. These bodies are well-positioned to align New Town development with wider regional economic strategies, infrastructure investment, and skills provision.
Effective governance will require long-term co-ordination between development corporations, local authorities and strategic authorities to ensure that New Towns are not delivered in isolation, but as fully integrated components of functioning city-region economies.

 

 

Conclusions

 

The next generation of New Towns will succeed only if they are conceived, designed, and delivered as economic interventions, not simply as large housing developments. Housing delivery is important, but it is not the (only) end goal. An important purpose of New Towns should be to create successful, productive places that reinforce wider regional and national economies.
The New Towns Taskforce made clear that New Towns are at their most effective when they help expand labour markets, relieve constraints in high‑growth areas, support agglomeration, and provide new platforms for business creation and innovation. The Government’s consultation on the seven shortlisted locations marks a critical next step in translating the New Towns vision into reality. However, it is clear that this initial group will not be the end of the story, with further locations and proposals expected to emerge.
What matters now is not just where these New Towns are built and how many homes they deliver, but how they will contribute to local, regional and national economies. Each must be grounded in a clear and realistic understanding of its role within regional and national markets – whether that is supporting high-value innovation clusters, enabling logistics and distribution growth, or expanding labour markets around the UK’s most productive cities.
If these principles are applied consistently, the New Towns programme has the potential to do far more than address housing need – it can help reshape the geography of economic growth across England.
 
 
Footnotes


[1] Available at: New Towns Taskforce: final report
[2] The seven locations shortlisted for further consultation are: Tempsford, Bedfordshire; Crews Hill and Chase Park, Enfield; Leeds South Bank; Manchester Victoria North; Thamesmead; Brabazon and the West Innovation Arc, South Gloucestershire; and Milton Keynes. New Towns Draft Programme - GOV.UK
[3] The New Towns report understands what New Towns are for, now it’s up to Government to deliver | Centre for Cities
[4] Source: UK Data - Analysis Report: Economic and Business Activity in Milton Keynes - UK Data
[5] Source: Milton Keynes City Council - Economic Development | Milton Keynes City Council
[6] Accelerating Innovation: A five-point plan to boost life science real estate | British Land

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