Housing Valuation Models Must Evolve Beyond Cost

Reflecting on the RICS response to 2025 UK Spring Statement on 26 March 2025.

The 2025 Spring Statement introduces promising initiatives for the housing sector, notably a £2 billion investment to deliver up to 18,000 new social and affordable homes. This move underscores a shift from viewing housing solely through the lens of capital cost or market yield, recognizing the necessity for public investments to yield broader societal returns.

However, without clear frameworks that integrate wider criteria into valuation practices, such as sustainability and social impact, there’s a risk of not fully achieving our climate and policy objectives.

Navigating Macroeconomic Challenges

The current economic landscape, characterized by rising debt servicing costs, downgraded GDP growth, and persistent inflation, amplifies financial risks within the housing sector. This scenario highlights the need to:

Integrate macroeconomic risk indicators into long-term housing valuation;
Account for policy-induced volatility, particularly in fiscal and planning domains;
Reflect the cost of capital and fiscal uncertainty in risk-adjusted valuation models.

Bridging the Implementation Gap

The government’s target of delivering 1.5 million homes is ambitious. Yet, the Office for Budget Responsibility forecasts a drop to just 192,000 net additions in 2025/26, indicating a widening implementation gap citeturn0search1. While planning reforms and the utilization of grey belt land may bolster long-term supply, immediate constraints pose risks to the resilience of housing delivery systems, the availability of affordable and adaptable homes, and investor confidence.

Integrating ESG Metrics into Valuation

The announcement of funding for new social homes and support for stock condition surveys aligns with the growing emphasis on ESG, sustainability, and long-term asset quality. However, there’s a noticeable lack of commitment to embedding ESG metrics into housing assessments and valuations. Social outcomes remain underrepresented in current valuation methodologies.

Enhancing Sector Adaptability Through Skills Development

The allocation of £600 million to construction skills, including proposals for a new GCSE in the Built Environment, contributes to the sector’s adaptive capacity. A skilled workforce is essential for delivering resilient, low-carbon, high-performance housing, linking labour capability directly to housing longevity and adaptability.

Addressing Policy Volatility and Planning Reforms

Recent proposals, such as mandatory housing targets, updates to the National Planning Policy Framework, and the integration of Alternative Dispute Resolution into Section 106 agreements, aim to de-risk planning and delivery. However, policy volatility remains high, and implementation is uneven across local authorities. There’s limited evidence that current planning reforms are aligned with ESG goals or long-term housing outcomes.

Evolving Valuation Models

The Royal Institution of Chartered Surveyors’ continued advocacy for condition surveys at listing, VAT realignment for preservation, and enhanced frameworks for social landlords reflects a growing professional recognition of lifecycle performance, building quality, and maintenance in asset valuation.

Collectively, these developments support the view that valuation models must evolve to reflect changing professional standards and policy expectations. Without such evolution, there’s a risk of continuing to undervalue the long-term potential of the homes we build.

*Bibliography:

Shanika Amaradivakara

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Housing Valuation Models Must Evolve Beyond Cost