Does the spending review live up to the hype?

Posted: June 12, 2025 | Author: julesbirch | Filed under: Affordable housing, Fire safety, Homelessness, Housebuilding, Rents, Social housing | Tags: spending review |Leave a comment

Originally written as a column for Inside Housing.

This spending review represents a good start on housing – but it must only be a start. 

Highlights of the package delivered by chancellor Rachael Reeves on Wednesday included £39 billion over 10 years for the Affordable Homes Programme (AHP) and a 10-year rent settlement of CPI plus 1 per cent for social landlords.

Then add a consultation on the return of rent convergence, £1 billon extra for cladding remediation and equal access to government funds, £2.5 billon in low-interest loans plus for social landlords. 

Stir and combine with £950 million for councils to increase the supply of temporary accommodation, £10 billion in financial transactions to boost private investment and more to come for infrastructure and land remediation in Cambridge and the new towns, and this looks like great work by deputy prime minister Angela Rayner and the Ministry for Housing, Communities and Local Government (MHCLG).

But does the spending review really justify the headlines and is it really as ‘transformative’ as some in the sector are making out?

Take first the repeated claim that this is ‘the biggest boost to investment in social and affordable housing in a generation’.

Rachael Reeves hyped that up still further in her speech to say that ‘I am proud to announce the biggest cash injection into social and affordable housing in 50 years’.

That’s not as outlandish as it first appears since there have only been three periods in which investment has increased since 1975 (the early 1990s, mid and late 2000s and recently)  and all three of those were preceded by cuts. 

As I’ve noted before, there are many different ways of assessing what constitutes that ‘biggest boost’. This spending review meets some of them but by no means all.

That £39 billion over 10 years compares favourably to the £11.5 billion over five years in the current AHP (which also got an £800 million top-up for this year) even if it does not live up to government claims that it is ‘almost double’.

The spending review background document says that annual investment in the AHP will increase to £4 billion by 2029/30 and then rise in line with inflation. That implies smaller annual investment over the rest of this parliament. 

It’s important to recognise that £39 billion is only the plan: there could still be top-ups to come under this government or cuts to come under a different one.

However, the more boastful claims take no account of inflation since the start of the last AHP in 2021: in real terms, annual investment will be around 40 per cent higher but it will still be 20 per cent lower than at the end of the last Labour government.

Calculations by the Resolution Foundation based on 2025/26 prices show that £3.5 billion a year between 2026 and 2036 for the next AHP compares with £4.2 billion under the National Affordable Homes Programme (NAHP) between 2008 and 2011. 

And even these figures do not take account of the rising construction costs that mean the current AHP will deliver far fewer homes than originally planned.

The new investment also pales by comparison with the scale of housing need estimated at 140,000 affordable homes a year including 90,000 for social rent. 

In its submission to the spending review, the Chartered Institute of Housing did call for a programme costing £39 billion to get there (once Section 106 contributions are included) but over five years rather than 10.

That was probably too much to hope for all at once and perhaps getting half of what you ask for is still good news but it’s an important piece of context. 

Another is the government’s target of 1.5 million new homes by the end of the parliament: analysis by Savillsthis week confirms that private housebuilding will come nowhere near that. Even this ‘biggest boost’ to affordable housing will not plug the gap.

The spending review also raises questions about where the new AHP money is coming from. The background document shows that MHCLG’s overall capital budget will rise from £8.8 billion in 2025/26 to £9.5 billion in 2029/30, with no real terms increase between 2025/26 and 2029/30.

So has something else being cut? Aides to the chancellor briefed some of the papers this morning that some of it will come from spending less on housing asylum seekers in temporary accommodation as the asylum backlog is cut.

But another candidate might be programmes supporting infrastructure, brownfield remediation and land for private housebuilders that totalled around £10.9 billion in grant between 2021 and 2026.

So, even if the government is getting its priorities right by shuffling its budgets, there is a danger that private output could fall further behind the 1.5 million target. Unless there is an announcement still to come, developers appear to have failed in their lobbying for a new version of Help to Buy. 

What matters now is not so much a target that nobody thinks will be met as whether the government can establish a structure to deliver a longer-term and sustainable increase in housebuilding. Emerging plans for new towns will play a key role here. 

Another big question, which will not be answered until we get more details about the new AHP, is what the balance will be between affordable and social. 

Under austerity, overall output was maintained by a shift from social rent to affordable rent and shared ownership but the government has been clear that it wants the balance to shift back to genuinely affordable homes.

‘Direct government funding to support housebuilding, especially for social rent,’ was how the chancellor put it in her speech. 

With fewer than 10,000 social rent homes delivered last year, that is the right move but shifting the emphasis will mean that the extra investment will not translate into as many affordable homes overall. 

It’s a similarly mixed picture on existing homes. A 10-year rent formula and the potential return of rent convergence will repair much of the damage caused by rent cuts, while the extra money for remediation and confirmation of the Warm Homes Fund will plug some of the holes in building safety and decarbonisation budgets. 

But will it give social landlords also facing up to a new decent homes programme the confidence to start investing in new homes again as well? We shall see.  

There is much to like about this spending review but much that is still unclear. 

We will have to wait for future budgets to find out what the government intends to do about issues such as the benefit cap and local housing allowance. 

The spending review had nothing to say about supported housing.

That £950 million for temporary accommodation in a fourth round of the Local Authority Housing Fund is also welcome news but it covers the four years to 2029/30 and the annual spend is little more than in the third round.

The financial pressures caused by homelessness are not going away anytime soon and there is no sign yet of the resources to back up the homelessness strategy that is imminent. 

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