Reeves’ tax changes add strain to Rayner’s 1.5m homes pledge
Labour’s flagship promise to deliver 1.5 million homes in England this Parliament is already being tested. Deputy Prime Minister Angela Rayner has admitted the goal is “stretching,” while economic forecasts suggest it may fall short.
At the same time, Chancellor Rachel Reeves’ inheritance tax reforms, due to take effect in April 2026, are causing concern among family businesses and landowners. The reforms, which limit tax relief on business and agricultural property, are designed to raise funds fairly but could create knock-on pressures for firms that contribute to housing and development.
This tension between Reeves’ fiscal discipline and Rayner’s housing ambitions highlights one of Labour’s most immediate challenges: delivering on bold promises while managing the UK’s fragile economic landscape.
A Housing Target That Stretches the System
Labour has made housing central to its growth agenda, pledging 1.5 million net new homes in England over the current Parliament. Rayner has called the goal “stretching” but insists it is achievable through reform and investment.
The aim is to tackle the UK’s entrenched housing shortage, particularly for first-time buyers and renters. Yet the scale of delivery required averaging around 300,000 homes a year is higher than any recent government has achieved.
Forecasts Suggest Delivery Gaps
The Office for Budget Responsibility (OBR) projects around 1.3 million net new dwellings across the UK by 2029–30. As Labour’s commitment applies to England alone, this points to a significant gap between projections and the pledge.
Independent analysts, including Savills, suggest the realistic figure could be between 800,000 and 1 million homes in England, far below Labour’s target.
Reeves’ Spending and Planning Reforms
To accelerate delivery, Reeves has committed £39 billion to affordable housing and launched planning reforms aimed at reducing barriers to development. According to the OBR, these changes could drive the highest levels of housebuilding in four decades and add £6.8 billion to GDP by 2029–30.
Angela Rayner has also announced a National Housing Bank, capitalised with £22 billion in low-interest loans, which aims to support the construction of 500,000 affordable and social homes.
Inheritance Tax Reform Raises Concerns
From April 2026, Agricultural Property Relief (APR) and Business Property Relief (BPR) will be capped at £1 million combined. Any assets above this will only qualify for 50% relief, meaning the excess could face an effective 20% inheritance tax.
Critics, particularly in rural and family-owned business sectors, warn this could make succession planning more difficult and limit reinvestment. While not targeted directly at construction, the reforms may still affect businesses involved in housing delivery.
A Political Balancing Act
Rayner has defended Labour’s ambitions, stressing that housing delivery is vital to economic growth and social fairness. Reeves, meanwhile, has emphasised the importance of fiscal credibility and sustainable taxation.
The tension between these two priorities reflects the challenge Labour faces: raising revenue and maintaining market confidence without choking off the very sectors it needs to meet its promises.
Inheritance Tax Reform and Family Business Fallout
- Rachel Reeves’ April 2026 inheritance tax changes (capping APR and BPR reliefs) are set to reshape the landscape for family businesses and farms. What does it mean for succession planning, jobs, and the rural economy?
- Key points to cover:
- The details of the April 2026 reform (£1m cap, 50% relief above).
- Which sectors are most exposed farms, SMEs, rural businesses.
- Reaction from business groups (CBI, Family Business UK).
- Political tension between “fair taxation” and “protecting growth”.
Final Summary
Labour’s housing goal faces pressure from Reeves’ tax reforms.
Labour’s pledge to build 1.5 million homes in England is one of the boldest housing targets in decades. Yet projections already suggest a significant shortfall, and Reeves’ inheritance tax reforms have sparked unease among family-run firms and landowners. Success will depend on whether Labour’s planning reforms, housing bank, and £39 billion investment can overcome these obstacles. Failure to deliver could deepen the housing crisis and damage Labour’s credibility in government.
