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Ministers welcomed the announcement of a £2 billion government funded “landmark” to build new social and affordable housing in the 2026-27 fiscal year.
Prime Minister Rachel Reeves said the announcement will deliver up to 18,000 new homes.
£2 billion is an extension of the existing scheme, providing grants to social landlords such as councils and housing associations to build new properties.
The current Affordable Housing Program (AHP), launched in 2020 by the then conservative government, is worth £12 billion for five fiscal years from 2025 to 2026.
This figure means an average annual spend of £2.4 billion over five years. Reeves announced £2 billion in the first year of its scheme over the next five years.
“This looks like a cut. Let’s see what they say in the spending review,” one industry figure said.
Finance officials said £2 billion is equivalent to total government investments between 2026 and 27, and other unspecified funds could come from the state.
In June, the Treasury will set out the details of the next AHP as part of a broader spending review covering the entire Whitehall spending towards the end of the decade.
“An increase in investments of £2 billion ahead of the longer-term investments in social and affordable housing planned later this year will come as a das extension from the Treasury.”
One source said that by three months, moving forward with some of the announcements, they will be invited to move forward as quickly as possible with new bids by giving industry investors “certainty.”
Kate Henderson, CEO of the National Housing Union, said “top-up” funds were welcomed. “The additional £2 billion will hinder the edge of the cliffs in new home delivery before the next funding program is announced,” she said.
The Treasury said the announcement is a “significant milestone” on the government’s commitment to build 1.5 million new homes in the current five-year parliament.
Housing Associations, which build and operate the majority of UK affordable homes, are facing financial crunch as they need to spend money on maintenance and fire safety work, which forces them to reduce new construction.
Government grants cover only a small portion of the building’s costs, so the sector relies on private sector funding, which has become more expensive.
Compared to 75% in 1990, the G15 Large Housing Association’s G15 Group covers on average about 12% of the costs of new affordable housing in London.
The amount of affordable homes built by private-sector home builders as part of the planning agreement has been struggling with industry-wide contractions in new home construction since 2022.
Meanwhile, Reeves will announce other infrastructure decisions this week to demonstrate the government’s growth agenda.
The Prime Minister confirms £400 million for an upgrade to the Transpennine Railway route between Manchester and York – she announced in her October budget, but the work is not expected to be completed for more than a decade.
