Can public development corporations get Britain building again?

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As the government’s housebuilding target slips further out of reach, could reviving an institution that helped rebuild Britain in the post-war era provide a way forward? This week we look at how public development corporations could help get Britain building again, and whether the government's fiscal rules are standing in the way.

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Britain’s housebuilding shortfall

Labour won the 2024 election pledging to build 1.5 million new homes in England throughout the new Parliament. But more than two years on, delivery is falling far short. Between July 2024 and September 2026, an estimated 438,000 homes were added to England's housing stock – just 29% of the target. At the current pace, Full Fact estimates it would take another five years to reach the target of 1.5 million homes, pushing delivery well beyond the government's 2029 deadline. Meanwhile, the Office for Budget Responsibility (OBR) recently downgraded its UK-wide housebuilding forecast by 190,000 homes over five years.

To date the government's housebuilding strategy has prioritised planning reform and increased investment in affordable housing. But with delivery falling far behind, some argue this approach isn’t doing enough to overcome the structural barriers holding back development.

One proposal attracting growing attention is the revival of public development corporations (PDCs). This term refers to publicly owned bodies that are set up to proactively acquire land, deliver infrastructure and coordinate development at scale. Their purpose extends beyond simply building more social housing. Instead, PDCs offer a way to transform the wider system by changing who controls the process, and who captures the economic value created when land is developed.

This would be far from a radical experiment; Britain has a long history of using these institutions to great effect.

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Learning from Britain's new towns

Following the Second World War, Britain embarked on an ambitious programme of housebuilding, including the construction of 32 new towns. From Stevenage and Harlow to Milton Keynes, PDCs played a central role in planning, financing and delivering each of them.

The model was simple but effective. PDCs had the power to acquire land at agricultural values, drew up masterplans, and financed infrastructure through Treasury loans. By purchasing land before it had any development value, they could capture the substantial land value uplift generated by planning permission and infrastructure investment. Revenues generated from public development could then repay loans and fund further investment, creating a virtuous cycle.

However, changes to land compensation rules in the 1960s made it harder for PDCs and other public bodies to acquire land cheaply, while the subsequent shift towards private sector-led housebuilding saw the state's role gradually fade. As a result, today Britain relies heavily on a ‘speculative’ development model, in which private developers acquire land, navigate planning, contribute towards infrastructure, and sell homes to maximise commercial returns.

But many argue this reliance creates a fundamental barrier to increasing housebuilding at the scale and pace needed. As the Conservative government's Letwin Review highlighted in 2018, the pace of housebuilding is determined not by housing need, but by the rate at which new homes can be sold without depressing local prices – known as the ‘market absorption rate’. Developers are incentivised to ‘drip feed’ homes onto the market gradually rather than build as quickly as possible, since increasing supply too rapidly could undermine prices and, consequently, profits.

PDCs could help overcome this bottleneck by taking control of land acquisition, planning and infrastructure provision before making land available for housebuilding. With a mandate to serve the public interest rather than maximise shareholder returns, land can be brought forward more quickly, prioritising a wider range of homes to buy and rent and supporting development in underserved areas.

As authors of the 2019 report to the Labour party Land for the Many argue, the aim is not to replace private builders altogether, but to establish greater public control over development and encourage competition on build quality rather than control over land.

The resulting homes can be retained in public ownership, sold on to private homeowners, or made available to community-led schemes. Public-led development can therefore help promote a wide range of policy goals, from expanding social housing and homeownership opportunities to delivering new infrastructure and amenities.

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The fiscal rules problem

Reviving PDCs raises an important question: how should they be financed, and would this be compatible with the government’s fiscal rules?

The government's debt rule requires public sector net financial liabilities (PSNFL) to fall as a share of GDP. Crucially, it treats financial and physical assets differently. Loans and equity investments, such as those provided by the National Wealth Fund, can offset government borrowing. But physical assets such as land, infrastructure and housing are not recognised in the same way, meaning borrowing to finance them reduces the government's fiscal headroom. As the OBR itself has recognised, this risks encouraging governments to favour loans and equity stakes over direct public investment, because they have a smaller impact on the chosen debt measure.

This bias towards financial investment poses a challenge for PDCs. Unlike the National Wealth Fund, which primarily provides repayable finance to businesses, PDCs directly acquire land and invest in infrastructure. This means their assets tend to be physical rather than financial. As a result, while targeting PSNFL gives institutions like the National Wealth Fund greater room to invest, it does not create any equivalent fiscal space for PDCs or similar public bodies.

This has led some economists to call for further reform. Thomas Aubrey has argued that Britain should learn from countries like the Netherlands, where commercially run public corporations can borrow to invest without being constrained in the same way by government debt targets. This could be achieved by excluding PDCs from the UK's fiscal targets, giving them more freedom to borrow to fund development. Proponents argue this has a strong economic rationale: borrowing to finance commercially viable development is fundamentally different from borrowing to fund day-to-day government spending.

There are signs that the government is considering such changes. In September, Bloomberg reported that it was exploring an exemption for borrowing to finance building projects, but to date no change has been announced.

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What next?

October's Budget suggests the government is beginning to explore these questions. Alongside an additional £15.4 billion for the National Wealth Fund, the Treasury announced a pilot financing model for the proposed Greater Cambridge Development Corporation, supporting land, housing and infrastructure development from April 2027.

Greater Cambridge is far from alone. England already has around a dozen PDCs, most of them established relatively recently. The question is whether they can be given the powers and financial capacity to match the scale and ambition of their post-war predecessors.

One important barrier has already been partially addressed. The Levelling-up and Regeneration Act 2023 now allows public authorities to compulsorily purchase land at lower prices once again in specified circumstances. PDCs could provide a powerful means of putting these powers into practice, capturing more of the uplift in land values and reinvesting it in infrastructure and new homes.

With some of the legal barriers to land acquisition now eased, the biggest unresolved question is whether the government will give PDCs the freedom to borrow and invest on the scale needed. Even with greater financial freedom, the housing crisis cannot be solved overnight. Meeting the 1.5 million homes target remains a formidable challenge. 

But the key lesson from Britain’s history is that the state can do much more than encourage private developers to build: it can proactively acquire land, capture the economic value from development, and reinvest it in new homes and communities. The real prize may therefore not be meeting a single Parliamentary target – but rebuilding institutions that can deliver housing at scale for decades to come.