Pennycook outlines strategy to boost housing supply and reshape developers’ business models
UK housing minister Matthew Pennycook (pictured top) has said that house prices could flatten and then decline over the medium to long term if the government succeeds in driving a sustained increase in housing supply, including by expanding the state’s role and promoting alternative development models.
The government is preparing a new housing strategy, expected in the coming weeks, that will seek to shift the market away from reliance on a small group of large private housebuilders and towards a more mixed system, including partnerships and greater public sector involvement.
“The private market as it’s currently constituted will not on its own initiative, even if it’s highly competitive, produce sufficient housing to meet overall housing need,” Pennycook said in comments reported by the Financial Times. “How we get more volume out of the system is one of the fundamental challenges we face.”
The housing minister argued that the existing approach to land and development “locks in an upward ratchet of land and house prices”, and suggested that a higher and more stable level of construction would help to hold down values over time. If the government achieves its goal of delivering 1.5 million homes by the end of this parliament and maintains similar output, Pennycook said, “we will be looking at the levelling out of prices and then over the real medium- to long term perhaps their gradual reduction.”
He also highlighted pressures in the capital, saying there were “people in London that bought land at the top of the market for too high a price and are now sitting on it. And there will probably need to be a market adjustment in London”.
Despite challenges, Pennycook said he still believed the 1.5 million homes target was achievable. He indicated that ministers were close to completing “the bulk of the supply-side measures” and would now put more emphasis on ensuring the industry increased output.
He added that the government had made some helpful changes to planning policy. “But the reality is achieving a consent to start developing a site remains a tortuous process, constrained by lack of resourcing in local planning departments and that is the biggest difficulty I have in getting sites open quicker,” Pennycook pointed out.
Concerns are acute in London, where housebuilding has dropped by more than 80% over the past decade. Only 5,547 new homes started on site last year, raising questions about future supply in a market that remains central to many lenders’ balance sheets.
London’s high house prices need ‘market adjustment’, says minister https://t.co/UZ15VGoQU8
— Financial Times (@FT) January 30, 2026
Pennycook described conditions in the capital as a “perfect storm” and said the government hoped that measures such as easing affordable housing requirements on some schemes and improvements at the Building Safety Regulator – which has been blamed for delays in approving tall buildings – would help unlock stalled projects.
To increase construction volumes, Pennycook said he would shortly publish a strategy to “encourage and support different housebuilding models to take hold in the market.”He criticised what he called an “overly speculative model of development” that was “based on maximising short-term return on capital investment rather than volume” and said his plan would see “the state leaning in to diversify the way housing is delivered.”
“We need that diversification — more SMEs back in the game, producing homes at scale, councils building again at scale, build-to-rent operators and the state doing its part on larger sites in particular.” Pennycook said.
He cited a joint venture agreed in September between Homes England and Vistry to deliver multiple new neighbourhoods as an example of the type of approach he wanted to encourage, describing it as “less geared to short-term margins, more geared to longterm value creation and turnover” and “a good example of a partnership approach where government is leaning in and encouraging a different type of delivery”. Unlike many listed peers, Vistry delivers most of its homes under contract for affordable and rental housing providers.
Ministers are also weighing how to deploy a £39 billion affordable housing fund over the next decade. Pennycook has said he wants the state to take a more active role, both by leading major schemes and by entering into more structured partnerships with private builders. Volume housebuilders will not be compelled to change their models, but he indicated that ministers intend to nudge the sector towards a different mix of tenures and delivery structures.
He said he would be “trying to get them to do things slightly differently”, adding: “If we can encourage them towards that partnership mixed-tenure model approach, then we should.”
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