The public housebuilder plan: what Steve Reed's leaked proposal could change about who builds Britain's homes

Just when the government's housebuilding record looked like its weakest flank, a leaked plan has emerged that could reshape who actually builds Britain's homes. According to details reported in the Guardian, housing secretary Steve Reed has been working up proposals for a state-owned housing developer — a publicly backed body that could borrow at lower rates than private developers and housing associations, and put the government directly into the business of building.

The idea is striking precisely because the government's existing levers have delivered only partial results. Since taking office two years ago, Keir Starmer has liberalised the planning system and committed £39bn to social and affordable homes over the next decade. Those measures have helped: ministers announced last week that affordable homes starts rose 26% in the past 12 months compared with the previous year, and the housing department points out that new housing starts are up nearly a quarter year on year, with council housing completions at their highest since 1992. Yet the overall picture remains sobering. Builders began work on just 130,170 homes in the past 12 months — roughly half the annual rate needed to hit the promised 1.5 million homes this parliament, and well below levels of three years ago.

The economics explain why officials are thinking bigger. Wars in Ukraine and the Gulf have pushed up inflation, raising the cost of materials and debt — the twin pressures that have squeezed builders and left housing associations so cash-strapped they are struggling to buy up the subsidised properties private developers have already built. On top of that, housing associations warn that the affordable housing budget is weighted towards the later years of the scheme, which they say risks making the shortfall worse. Reed and London mayor Sadiq Khan have even agreed to slash affordable housing quotas to coax private builders into action.

So what would the new body actually do? Under the leaked plans, money currently allocated to Homes England would be used to establish an independent organisation that buys land and oversees new developments, contracting private companies to carry out the construction rather than building in-house. It could be granted borrowing powers that would let it grow far larger — though that would likely push up government debt. In one iteration, it would even build commercially available properties, putting it in competition with some of the country's biggest housebuilders, while also taking on part of the affordable housing role currently played by housing associations.

The safeguards matter as much as the ambition. The plan would begin as a pilot in a small area, and those familiar with it insist it would not be allowed to grow so large that it undermines the private sector. That is a sensible political constraint — a state developer that crowds out private builders would defeat the point — but it also raises the question of whether a deliberately modest pilot can move the needle on a national shortfall of this scale.

Timing is the other complication. The cabinet secretary has ordered that no major announcements be made before the new prime minister takes office, so nothing can be enacted before Starmer steps down. The proposals may, however, appeal to Andy Burnham, the likely next prime minister, who has spoken about greater public control over "the essentials of life". Burnham is expected to be named Labour leader on 17 July and take office three days later, with early policy thinking — including on devolution and the economy — set out in a Manchester speech on Monday. Reed, one of Starmer's most loyal allies, has been exploring policies that could appeal to an incoming Burnham administration, though the leak comes amid sensitivity: home office minister Mike Tapp recently drew a furious response from home secretary Shabana Mahmood after pitching ideas in a newspaper article.

For renters and buyers, a state developer that borrows cheaply could eventually mean more affordable homes delivered where the market has failed — though a small pilot will not transform supply quickly. For landlords and private developers, the prospect of a public competitor, even a constrained one, is a signal that the government is losing patience with market-led delivery. The message from the leak is clear: with targets being missed by half, the state is seriously considering building homes itself.