DLUHC axes infrastructure funding worth £540m intended to unlock 42,000 homes

Ms Healey said that after funding contracts were agreed with local authorities, five of the larger forward-funding projects and 11 smaller marginal-viability projects were withdrawn from the scheme, because “they proved not to be deliverable within the parameters” of the programme or were withdrawn by the local authority.

The biggest allocations withdrawn were £170m that had been given to Medway Council for a project in Hoo St Werburgh that would have unlocked 10,600 homes, and £140m to Lancashire Council for its South Lancaster Growth Catalyst that would have unlocked 9,185 homes.

Other forward-funding deals that were cancelled included £75.1m each to Wiltshire and Thurrock Councils for their respective Chippenham Urban Expansion and Purfleet Centre Regeneration projects.

Smaller marginal-viability allocations were also withdrawn, including £14.1m to Breckland Council for its Thetford Northern Sustainable Urban Extension and £10m to Tyne and Wear Council for its Killingworth Moor Key Strategic Site.

Ms Healey said that, in some cases, “local authorities are finding that their projects can be delivered without public money”. In cases where there are cost overruns the councils cannot meet, the DLUHC was “working with them” to ensure projects can be delivered with an amended scope or increase in funding using “programme headroom released from withdrawn projects”.

Where a project cannot be delivered without the fund, “it is withdrawn”, Ms Healey said, but Homes England will explore other options. For example, following the withdrawal of the Purfleet project, Homes England is working “closely with the council and potential developers to develop realistic proposals that will lead to regeneration”.

Last month, Thurrock Council terminated its development agreement with housing association Sanctuary and developer Urban Catalyst for the Purfleet scheme, which would have delivered 2,850 homes. Just 61 homes will now be completed.

The HIF came under scrutiny in January after a Freedom of Information request revealed that just a third of the fund had been allocated in six years. In addition, the government confirmed that work had begun on fewer than one in 10 of the promised homes and that it had downgraded the fund’s delivery target from 340,000 to 270,000 homes.

In her letter, Ms Healey said the Infrastructure and Projects Authority had upgraded its assessment of the delivery of the fund from red to amber in October 2023.

A spokesperson for Lancashire Council pointed to its announcement that it would suspend further work on the South Lancaster to M6 project in June 2023. The decision was taken because of rising costs driven by construction inflation, the council said at the time. The £140m awarded from the HIF was returned to the government.

Cllr Ben Maney, cabinet member for regeneration and highways at Thurrock Council, said: “Despite efforts by PCRL [Purfleet Centre Regeneration Limited] to secure funding it was clear that this could not be achieved on terms that were satisfactory to PCRL shareholders or Thurrock Council so we have now, with the agreement of the PCRL board, terminated the development agreement.

“The project has not been abandoned, the council remains committed to delivering high quality regeneration in Purfleet on Thames with the supporting infrastructure, town centre and station improvements, and this decision now allows us to move forward and consider alternative delivery options. We are working closely with Homes England and potential funding partners and intend to bring options before cabinet soon.”

A DLUHC spokesperson said: “We are confident that we will provide all £4.2bn of the Housing Infrastructure Fund to local authorities across all regions of England, unlocking up to 265,000 homes. Nearly 25,000 homes have already started construction, and expenditure is on track.

“Major infrastructure projects understandably take time to deliver and we recognise the challenging backdrop that capital programmes have experienced due to cost pressures and other factors. We continue to work very closely with Homes England to make sure all the programme budget is spent and the maximum possible housing capacity is unlocked.”

Cllr Richard Clewer, leader of Wiltshire Council, said: “Back in December 2022, cabinet agreed to a mutually agreed exit from the HIF with Homes England as it was no longer possible for the council to deliver the Future Chippenham programme within the HIF funding period without exposing the council to further significant financial risk.

"Our aspiration is to still deliver infrastructure led quality residential development to the south of Chippenham subject to the local plan review. Since December 2022, we have continued to work with developers to the south of Chippenham to put the council, as landowner and developer, in the best position possible to secure a site allocation in the local plan review to develop land to the south of Chippenham.”  

Medway Council was contacted for comment.

Any council that has been affected by this decision that would like to comment can contact james.riding@oceanmedia.co.uk.