Matthew Warburton, Policy Advisor at the Association of Retained Council Housing (ARCH), discusses the Government’s new homes target, the Spending Review and the potential to reinvigorate council housebuilding.
In its 2024 Manifesto, Labour set a target of 1.5 million new homes over the current Parliament. Shelter and others estimated that, to meet housing need, around 30% of these would need to be social rent, or 90,000 homes a year. In a 2023 interview with Inside Housing, Matthew Pennycook, then Labour’s Housing lead, now Minister of State for Housing and Planning, said he was ‘supportive’ of the 90,000 a year ambition, although it would not be realistic for the first year of a new Government. Chancellor Rachel Reeves, at Autumn Budget 2024 promised steps ‘to kickstart the biggest increase to social and affordable housing in a generation’.
The Spending Review allocated £39bn over 10 years for a new Affordable Housing Programme — nearly double the annual amount available since 2021 under the current AHP. The new AHP, says the Government, “will prioritise social rent but will also fund a mix of tenures including affordable rent and shared ownership”.
Eamon Boylan, interim CEO of Homes England, told the Housing 2025 Conference, that social rent homes would be “front and centre” in the new AHP. But is this all enough to deliver the 90,000 homes a year that are needed?
So far, the Government has been uncharacteristically reluctant to state how many affordable homes can be built with the money it has provided. This may be a good sign. A lot has changed since Labour set out its 1.5 million homes target in 2023. Construction costs have risen faster than general inflation, reflecting shortages in both materials and key construction skills. Interest rates have jumped in response to Trump tariffs and rising global tensions.
To commit to a specific target for affordable homes could lead to money being switched from social rent to shared ownership to meet the target if the economy does not improve. Matters will be clearer when Homes England publishes its prospectus for the new AHP.
There is little doubt that, provided the land is found and planning permission obtained, housing associations will have little difficulty in expanding their AHP-funded contribution to supply, although the future of s106-funded homes is less certain. But Labour’s rhetoric has consistently emphasised the revitalisation of council housebuilding, and Ministers are taking a close interest in the commitment and capacity of councils to take advantage of the new funding, now that the threat that new stock will be lost through Right to Buy has been substantially reduced.
Financial priorities
Are councils ready to respond? In many cases, yes, but the overall position is likely to be uneven. Over the last three years, financial priorities and managerial attention have shifted from building new homes to investing in the existing housing stock, unavoidably in many councils given the need to demonstrate compliance with the Decent Homes Standard, meet new building and fire safety standards, and prepare for the introduction of Awaab’s Law in October.
This has put some HRAs under much more pressure than others and will continue to do so despite the Spending Review decision on a 10-year rent settlement at CPI + 1%, plus a yet-to-be-determined allowance for convergence. These income increases will take several years to ease HRA deficits, in the meantime councils must make do.
Faced with the choice between complying with new laws and responding to a low grading from the Regulator or planning new council homes on potentially unpopular sites, it is understandable if council leaderships decide that the first task is more urgent. Even more so in those districts which are about to undergo reorganisation. The Government needs to consider a campaign to motivate councils to build new council homes, backed with a package of support to help those that might struggle to respond.
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