Spending Review 2025: affordable homes programme and 1.5m target

This new 10-year Affordable Homes Programme (‘AHP’) will therefore be worth £3.9bn a year on average, a not insignificant increase from the £2.5bn allocated annually under the current programme.

Billed as the biggest investment in discounted homes in a generation, the financial firepower Reeves has given to Registered Providers is perhaps the clearest indicator yet that the Government are committed to trying and solve the housing crisis.

Following on from the announcements made by the Treasury at the beginning of June, Deputy Prime Minister Angela Rayner has recently announced that at least 180,000 homes (60%) of the 300,000 affordable homes they are targeting delivery under the £39bn AHP will be available through social rent. Should 300,000 affordable homes actually be built during the term of the AHP, and 180,000 social rent homes be delivered as part of that, it would represent a sixfold increase on the amount of social rent homes delivered in the previous 10 years, up to 2024.

The Government’s focus on social rent housing is not unexpected given that it corresponds with what was pledged in its manifesto; however, this focus on social rent and the fact that social rent homes have a higher grant rate per unit than other types of social housing, are likely to result in a lowering  of the overall number of houses that may delivered through the programme.

Registered Providers have consistently called for an enhanced long-term settlement to help it build new homes and refurbish old ones and it appears that they have been listened to with the new AHP.

As the AHP is to last for 10-years compared to the previous shorter-term programmes this should allow Registered Providers to continuously engage with the market and hopefully negate, as much as is possible, volatile market conditions such as inflationary build cost pressures. This, along with the increased certainty that comes with having a long-term plan, should hopefully give boards more confidence to approve schemes and plan for the future at a time when financial viability is under heavy scrutiny.

As well as the increase in grant funding, the Government has also announced they intend to allow Registered Providers to raise rents one percentage point above inflation. The ability to increase rents should help alleviate the financial pressure faced by Registered Providers and assist them with achieving housing targets whilst also investing in their current stock.  This sentiment has been echoed by Bronwen Rapley, chair of Homes for the North, who said: “With this increase in funding for the Affordable Homes Programme and long-term rent settlement we can support the more and better homes needed in our region while also investing in repairing, improving and decarbonising existing homes.”

Reactions within the sector to the AHP have been largely positive and it will certainly play a large part in delivering the affordable homes needed to have any chance of achieving the Government’s overall 1.5 million target. The Government will also need to successfully tackle planning blockages, ensure that there are sufficient skills and capacity within the workforce and construction sector, and unlock additional private investment.

The AHP and Spending Review follows the Government’s recent planning announcements and changes, of which the Planning and Infrastructure Bill 2024-2025 currently making its way through Parliament is part of. Additionally, the Government have recently announced the Construction Skills Action Plan which aims to train up to 60,000 skilled construction workers,  all of which are aimed at increasing housing delivery.

The AHP is therefore not to be seen in isolation and along with their other planned changes there is now clear evidence demonstrating that the current Government is committed to fixing the housing crisis, these changes having the potential to kickstart the biggest top-up of UK affordable housing stock in decades, taking the Government considerably closer to its target than many would have predicted.