Treasury announces additional £2 Billion Investment in Affordable Housing

Another day, another ‘once in a generation’ announcement, but the latest significant boost to existing grant funding has, for the most part, been welcomed by the affordable housing and wider house-building sectors.

The Chancellor hopes that the injection of £2 billion to the Affordable Homes Programme will deliver up to 18,000 new social and affordable homes.

Rachel Reeves' announcement provides tangible reinforcement of the administration's promise to invest and deliver 1.5 million new homes - the Government hopes that by increasing new homes building this will in turn help to tackle the ongoing housing crisis and act as a driver for its wider economic growth agenda.  The news is therefore part of continued steps being taken to meet these objectives, including Monday’s announcement of a plan for training 60,000 construction workers, and other recent funding announcements.  This is actually the third additional tranche of funding that we have now seen during the last half year, sitting alongside the £350m announced in February and £500m in October 2024.  This is an important PR exercise for the Government as on Wednesday the Chancellor's Spring Statement will include spending cuts aplenty, aimed at restoring the financial headroom (the amount of emergency spending available) within the Government’s balance sheet.  

The new funding has been described, respectively, as a ‘bridge’ between the existing AHP, which expires next year, and a ‘down-payment’ for the new settlement and related funding programme for delivery of affordable housing that is to be announced in the Spending Review in June. Going forward, the AHP is expected to be different in that it will be operated annually, beginning with the 2026-2027 period.   

The Government is encouraging providers to bring forward new projects and this seems likely to be embraced by those on the delivery side.  For those entities looking to develop much needed new social and affordable homes with the benefit of the additional Government subsidy, the Chancellor’s statement includes the following clarifications:

• The majority of the new funding will be allocated in 2026/27, but that a ‘tail’ of funding will cover completions of homes after this date. All projects will need to start by March 2027, and finish by June 2029.
• The funding will be made available on the same terms as AHP 2021-26. 
• Homes England, GLA and bidders are to prioritise homes for social rent. 

The continued use of grant funding to stimulate supply is a reminder that, as well as increasing the delivery of affordable homes, the funding of affordable tenures often unlocks mixed-tenure developments.  It is also a clear sign of the current Government’s view that a well-funded social housebuilding programme can be used as a tool to deal with homelessness. Housing providers and those looking to invest in affordable housing are also always keen to highlight the wider social and economic benefits that arise from social housing.  

To end with a note of caution.  Some have highlighted that the £2bn looks like a reduction in the overall levels of the funding programme, when compared (pro-rata) with previous years' allocations.  It is probably too early to say if, overall, that is the case - matters will likely only become clearer (at the earliest) after the more comprehensive announcements in June.  Perhaps therefore not such a generational moment, as promised, but certainly a step in the right direction.

If you would like to discuss these matters with us in more detail please get in touch with Triya Macha, Jonathan Jarvis, or your usual Devonshires contact.