Chancellor Rachel Reeves has announced in today’s Budget that the government will invest more than £5bn over 2025 and 2026 to deliver on its plans on housing next year.
The investment will add £500m to the Affordable Homes Programme, taking the total budget to £3.1bn and is set to deliver an additional 5,000 affordable homes.
Labour says this will “kickstart the biggest increase to social and affordable house building in a generation, putting us on the path to building 1.5m homes over this Parliament”.
Reeves also committed £3bn of additional support for small and medium-sized enterprises (SMEs) and the build-to-rent sector to support the private housing market.
As part of the investment plans, Labour highlights that the reform of the planning system is “central to any plans to deliver 1.5m new homes”, it will provide more than £50m of new spending to expedite the planning process, including for Nationally Significant Infrastructure Projects.
Funding will support recruitment and training of 300 graduates and apprentices into local planning authorities.
Labour also announced it would accelerate large sites that are “stuck in the system”.
Today’s news was “warmly welcomed” by the housebuilding industry.
ASK Partners chief executive officer and co-founder Daniel Austin says: “Following today’s Budget, there is good news for property developers. The promise of £5bn of investment for new homes contained within today’s announcement will be warmly welcomed.”
“Increased supply should buoy the market and level out values; a plus for first time buyers, who conversely will be hit by the new lower stamp duty thresholds.”
Meanwhile, Quilter Cheviot property research analyst Oli Creasey states: “For housebuilders, and the housing sector more generally, today’s budget includes incrementally positive news, but nothing to materially change the outlook.”
“The £500m boost to the existing Affordable Homes Programme is of interest, but is a relatively small investment that will result in “up to 5,000” new homes – compared to the target of 1.5m new homes over the next five years, this is unlikely to move the needle.”
“Of more interest will be the expected announcement of future grant investment beyond the existing Affordable Homes Programme in phase 2 of the spending review, concluding in Q2 2025.”
“Social housing rent settlement offers more certainty to those building/owning social housing projects, giving them more confidence in the financial outcomes of their plans. Talk of a 10-year settlement will provide further clarity on this.”
“However, the £3bn of additional housing guarantee scheme cash is likely to prove most supportive – inexpensive loans for affordable house builders should help unlock more new projects, and the previous £3bn of funding was expected to support the building of 20,000 new homes, so we would expect a similar impact this time around.”
“Furthermore, given this funding comes in the form of loans, it is possible it can be recycled back into the housing sector upon repayment, making it a relatively inexpensive option for the Government.”
“However, it still feels that the sector is some way short of achieving the stated 300,000 new homes per year target. Other plans, such as making planning permission quicker and easier to achieve are somewhat helpful, but the sector remains stuck between expensive homes (both to build and buy) and expensive financing ie: high mortgage rates. Boosting supply of permissible land will help, but until there are more buyers willing and able to buy, the impact will remain muted.”
“The government is also making the existing mortgage guarantee scheme permanent, but again take-up of new mortgages is largely constrained by relatively expensive mortgage rates vs the preceding period of low inflation, and the guarantee scheme does little to address that.
“Housebuilder shares initially reacted positively this afternoon, but have given back most of their gains. We think this largely reflects changes in bond yields, which compressed initially, but have since widened. Given how important low interest rates (and hence low mortgage rates) are to the sector, we think this remains the biggest concern to housebuilder investors, and perhaps also the hardest one for the Government to address.”
Market Financial Solutions chief executive officer Paresh Raja adds: “The government’s commitment to house building should stimulate activity across all segments of the housing market, creating a wide range of opportunities for buyers and investors.”
“But people can be forgiven for listening to today’s Budget pledges with a degree of scepticism – almost every Budget includes promises to build more homes, but the devil is always in the detail.”
“Reforming the planning system is clearly key, so the government’s focus on this area is welcome, with the rumoured additional planning officers being confirmed by the Chancellor today. It not only needs to be easier for new developments to get the green light, but also for investors and property owners to do more with existing real estate – conversions, renovations and extensions can do a lot to boost the national housing stock.”
“It’s equally important that the Government ensures new homes are delivered where demand is highest. If the location, type and quality of property is not high enough, there will be a struggle to attract buyers and renters, so there has to be a sharp focus on building the right properties in the right places.”
Together chief commercial officer Ryan Etcehlls says: “It will be interesting to see whether this investment will be enough to meet Labour’s ambitious targets, without greater support and incentives for small and medium sized developers. Developers have faced major challenges in terms of planning delays, soaring material costs and a shortage of skilled labour over recent years and these are issues which cannot be solved overnight.
“We need to encourage smaller developers – those building between 50 to 100 units – creating energy efficient and sustainable homes to high standards in the areas where they’re needed most. Targets may be promised but let’s see if they can be kept.”
