Last week, Chancellor Rachel Reeves unveiled the centrepiece for Labour’s first spending review – a landmark £39 bn, ten-year investment in affordable housing, alongside a £10bn injection to enable Homes England to support private housebuilding. This is a strong commitment to restarting stalled developments and restoring long-term confidence in the UK’s strained housing pipeline, with The National Housing Federation heralding it as the most significant government intervention in housing delivery in a generation. But what does this mean in reality? The numbers are stark, with the government reducing day-to-day spending by 1.4 per cent over the next five years, while capital spending will see no increase during this period. However, there is a silver lining: the grants represent a 50 per cent rise in the existing budget for affordable homes, indicating a shift in responsibility for this vital social infrastructure.
Delivering the affordable homes the UK needs, should be a shared responsibility between the private and public sector. However, since the late 1980s and with public subsidies dwindling, the private sector has delivered the vast majority of affordable homes.. Match this with a shrinking economy and increasing regulatory interventions and achieving a rate of 300,000 homes a year by the end of this parliament would be a huge achievement; one that will require significant commitment and alignment between the public and private sector.
At the heart of all this is an urgent need to redefine how we think about viability. Too often the term is associated with greed and profit-chasing, implying a level of distrust. Ultimately, investor capital will only be deployed where the risk-reward equation is acceptable. The “gold standard” 40 per cent affordable housing target has the potential to continue to constrain delivery in the short term, without significant grant funding from public bodies like Homes England or in London, the Greater London Authority (GLA). The current model of cross-subsidy through market sales is fundamentally broken – demand for affordable housing can’t continue to be supported by a fractional percentage of the other homes being delivered.
The big question is, of course, is the government’s £39bn enough? In reality, probably not. But it’s a signal of intent. The truth is that large-scale developments – the sorts of places people want to live, work, and visit – must continue to attract global institutional capital in addition to public subsidy. Yet the UK’s shifting policies, macro-economic factors and persistent delivery uncertainties do not assist in this endeavour.
Ambition alone can’t deliver homes, and last week’s landmark increase in public spending risks being wrongly remembered as a highfalutin political promise if it isn’t underpinned by ongoing structural reform and investment realism.
If Labour wants housing delivery to be a genuine flagship policy, it must go beyond ambition and headlines. While this is a step in the right direction, there is a marathon ahead of us. The UK is in urgent need of a new, dynamic housing model – one that aligns public investment with access to global capital, leveraging and integrating the international appeal of our country with the expertise of local authorities, developers, housing associations and sector experts.
Genuine delivery will require collaborative, multi-sector efforts and a real-world approach to investment and viability. The reclassification of affordable housing as critical infrastructure should be the next step in unlocking further public capital. Above all else, we must continue to bridge the gap between political ambition and delivery realism – both for the sake of the UK’s housing crisis and for the credibility of the government and sector.
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