Spending Review: what is on the horizon for housing?

The Treasury will set all departments’ budgets for the coming years, including that of the Ministry of Housing, Communities and Local Government (MHCLG), which oversees councils and affordable housebuilding. Resource budgets – covering spending on day-to-day running costs – will be set for three years, while capital budgets, which fund investment in infrastructure and public services, will be set for the next five years.

“The government has, in a really good way, gone big on housing. Lots of good policy stuff has happened, but ultimately you need money to really move the dial,” explains Rachael Williamson, interim director of policy, communications and external affairs at the Chartered Institute of Housing (CIH).

“The sector will be very disappointed if the Spending Review doesn’t reflect the level of political ambition that we’ve seen,” she says.

An ‘ambitious’ AHP

Top of the list is the renewal of the Affordable Homes Programme (AHP), which runs out in March 2026. The sector is looking for ambition from the programme – but also long-term certainty and a focus on social rent. Housing providers have been asking for a 10-year rent policy of annual increases, set at the Consumer Price Index plus 1%, and for the reintroduction of rent convergence.

The NHF says a 10-year AHP with an average of £4.6bn per year over its first five years could see the delivery of 320,000 homes. This would be double the total value of the current five-year programme. Under this model, 320,000 homes could be delivered over five years.

But if the government is to meet its target of 1.5 million homes in this parliament, the NHF says the contribution from affordable housing providers would need to increase to around 140,000 per year – a 125% increase on delivery in 2023-24.

If the AHP totalled £39bn, plus “a larger uptick in Section 106”, the sector could deliver 500,000 homes over five years – reaching 140,000 by year five, it says.

But housing providers are already concerned about delays. The Spending Review was meant to be in the spring, but has been put back to June – so there will be a gap between the end of the financial year and the announcement. The government announced a £500m boost in the Autumn Budget and a £300m top-up in February, but the NHF says the sector is set to run out of money for new schemes before March 2026.

“If we don’t see some action soon in the Spending Review, there’s a risk that there is a hiatus in development,” says Duncan Brown, chief finance officer at Vivid.

Strategic partnerships, for example, take time to “gear up”, he says. “There is a bit of a danger that 2027 will see a slowdown if the new funding doesn’t come on-stream quickly enough and the old funding starts to dry up. I think that’s a threat to the 1.5 million homes target.”

To get around this, the Northern Housing Consortium (NHC) is calling for a “more ambitious AHP” that is expected to be announced on 26 March as part of chancellor Rachel Reeves’ Spring Statement. 

If a 10-year AHP is not possible, one option put forward by the NHC is to extend strategic partnerships that providers enter with Homes England to 10 years.

The NHC also suggests allowing mayoral combined authorities to set up “bespoke funding rounds for local authority landlords who have not recently been developing at scale”, with higher grant rates and extra capacity funding to boost local authority housebuilding.

For the CIH, the “new AHP must set a much more ambitious target, focused on social rented homes, with adequate funding” for transitions and regeneration.

It calculates that £39bn over five years is needed to deliver 330,000 homes, with another 180,000 delivered through Section 106. Funding would increase from £3.2bn in year one to £12.6bn in year five.

But there are many departments competing for funds. The government recently announced plans to increase defence spending, while the NHS is asking for an extra £3.3bn a year. “There are a lot of moving parts and decisions to be made after recent announcements around cutting budgets and putting more money into defence, for example,” Ms Williamson says.

“The government has, in a really good way, gone big on housing. Lots of good policy stuff has happened, but ultimately you need money to really move the dial”

Yorkshire Housing is one of seven regional landlords that have made a joint submission to the government, calling for housing investment to be reclassified as infrastructure spending. This would see Homes England continue to manage housing investment, but with co-ordination with the National Infrastructure and Service Transformation Authority.

“Reclassification is the only way we can deliver the pipeline of new homes needed, alongside the decarbonisation of existing homes and the renewal of our towns and cities,” the submission says.

The group of landlords – which owns or manages more than 1.7 million homes and includes partnerships from Greater Manchester, Liverpool, Yorkshire and the South West – has also called for funding to be streamlined so that landlords receive funds for either housebuilding or investing in existing stock.

Funding for existing stock

Housing providers also hope the Spending Review will deliver more money for building safety, decarbonisation, and repairs and maintenance. Many submissions call on the government to give providers equal access to the Building Safety Fund and the Cladding Safety Scheme.

The CIH has called for the government to commit £5bn over the next five years “to close the cladding remediation funding gap”.

Another issue is underwriting buildings insurance risk for buildings with safety defects, with providers finding that insurers are requiring higher – and therefore more expensive – standards of remediation before they agree on cover. The NHF says that social landlords need access to an underwriting scheme to provide affordable cover to buildings that have been or will be remediated.

Most submissions urge the government to increase the size of the bids to the Warm Homes: Local Grant fund and the Warm Homes: Social Housing Fund (Wave 3), by awarding funds to all bids received.

The NHC estimates that “£500m per year is needed in the North” until 2030 for green homes, pointing out the disparity with the South: “More homes across all tenures in the North do not meet the Decent Homes Standard,” it says, while more areas are in need of regeneration.

Zero rating VAT on building safety works, repairs, maintenance, refurbishment and retrofit work has also been suggested by bodies including the CIH and the NHF. Overall, the NHF forecasts that “grant funding of around £2bn per year – covering safety, quality and decarbonisation works” – would be enough.