UK spending review: housing funding ‘much needed stimulus’ for government targets

Chancellor Rachel Reeves announced “the biggest cash injection into social and affordable housing in 50 years” as part of the spending review, pledging £39 billion over the next decade through an affordable homes programme. The announcement also includes £10 billion in financial investment via Homes England, aimed at attracting private sector funding and addressing long-standing barriers to housing delivery.

The government has set a target of building 1.5 million new homes by the end of the decade. Its housing strategy is built on three pillars: investment in social and affordable housing; a long term rent settlement to provide financial stability for housing providers; and a £10 billion investment vehicle to unlock private capital through Homes England.

Claire Hughes, housing, living and real estate expert at Pinsent Masons, said: “We have many clients ready to move forwards and this three pillar approach – intended to repair the shaky lower rungs of the housing ladder though not-for-profit affordable and private housebuilders whilst addressing higher long term rent settlement – feels as though there is desire to unblock the hurdles to housebuilding. Surely Rachel Reeves’ sizeable spending review and commitment towards delivery will ensure movement in the right direction.”

Additionally, the new affordable homes programme (AHP) will provide grant funding to support the capital costs of developing affordable housing in England. The government’s £39bn commitment over the next 10 years is a significant increase on previous funding rounds.

William Hall, public policy expert at Pinsent Masons, said: “This government is under pressure to deliver on an ambitious housing target, and its progress will serve as a yardstick for its ability to deliver economic growth. The considerable increase in the AHP funding will be a shot in the arm for affordable housing ambitions. The additional funding announced for infrastructure projects outside London will also likely be welcomed for those pushing for investment in infrastructure as a key part of the required conditions for a significant step change in the delivery of housing.”

Despite the optimism, housebuilders continue to face difficulty in securing partnerships with registered providers (RPs), which is starting to slow down housing delivery.

Natalie Harris, property development expert at Pinsent Masons, said: “Much of this seems to stem from RPs shifting their focus toward maintaining existing stock rather than acquiring new assets. If new funding is directed toward enabling RPs to take on new development, and if they have the capacity to do, so it could be a real catalyst for unlocking both affordable and market housing.”

“However, whilst clearly the funding is welcome, unless we address the broader market challenges – such as skills shortages, local planning authority resource and high construction costs – we risk falling short on supply, regardless of how much funding is available. The £10bn of funding to be made available to Homes England may help bridge the viability gap in some instances and is, again, to be welcomed,” she said.