The June Spending Review included lots of positive news for the housing sector, with record levels of investment demonstrating that the Government is willing to put money behind its’ ambitious housing targets.

New Social and Affordable Homes Programme 2026-36 announced

This £39bn funding announcement is a major boost for the sector and reflects the Government’s ambitious commitment to build 1.5 million new homes in the current
parliament.

Demand for affordable homes continues to rise across the country and the grant funding confirmed by the Chancellor for the new Social and Affordable Homes Programme (SAHP), spanning the next ten years, will kickstart significant housing development of social and affordable rent properties required across England.

In the run-up to the announcement, there was much discussion about whether housing would be one of the winners. Until quite late in the day, there were reports of strenuous arguments within government. However, the grant funding announced is much more than many registered providers and the sector as a whole were expecting. Perhaps of even more benefit than the raw money is the fact that the long-term nature of the funding commitment and amount will bring greater certainty for financial planning. This is vital for those charged with delivering such a major programme of housebuilding.

Social landlords of all types face substantial financial headwinds (for good reasons): fire safety, net zero and Awaab’s Law’s requirements, while all very important, all require huge investment in current stock, which impacts resources available for delivery of new homes. The greater certainty of funding overall will let all social landlords plan appropriately and deploy their scarce resources more efficiently.

We must wait for the detail to confirm the scope of the funding and how it will be administered. For example, we don’t yet know if S106 agreements will be included in the scope of the SAHP 2026-36, which could stimulate development activity further and with increased costs of building properties, it won’t be sufficient to cover all new builds (the ambition is to fund 300,000 homes) but will make a substantial difference. It is expected that the funding will be administered through local authorities, but this level of detail will be announced later in the year.

Long-term rent settlement

Following last year’s consultation on plans to maintain the cap on annual social rent increases at CPI +1% for the next five years, few Registered Providers (RPs) were expecting this to be improved upon.

However, the Chancellor has now committed to CPI + 1% for the next ten years, which is an excellent outcome for the sector in the circumstances: it provides greater financial certainty moving forward and allows longer-term business planning, which in turn should create longer-term stability across the sector. It should go some way to helping RPs to improve the viability of their business models at a time when costs have risen significantly (and will continue to do so) and regulatory pressures are requiring urgent repair and retrofit programmes for their existing stock.

A further consultation on rent convergence

The decision to consult further on how to implement social rent convergence, which was removed by the Rent Standard 2015, is more good news for the sector. It shows the Government has been listening to the concerns set out in the initial consultation responses.

Reinstating rent convergence will be especially helpful to social landlords with long-term tenants who have been paying a rent that is, in some cases well below the current ‘Formula Rent’ for some time.

The removal of rent convergence has impacted the total income of some RPs significantly, exacerbated by the 1% rent decrease applied in 2016-2020, the rent cap in 2023 and costs increasing higher than inflation. Without the ability to bring rents into line with Formula Rent, this has created challenges for some RPs, which in turn has caused some new development activity to stall. Reinstating the rent convergence is a win for the sector because it will further support the provision of much-needed affordable homes and investment in existing stock.

The second consultation, ‘How to implement social rent convergence’, now published gives opportunity for tenants and others to put forward their views and comments on this proposal. Whilst many landlords and the sector strongly advocated for the re-introduction of rent convergence within their general comments in consultation responses, the idea was not part of the Government’s original rent settlement proposals in 2024 and so not necessarily an issue tenants would have responded on. This further consultation gives them a clear opportunity to do so now, and also landlords an opportunity to give specific feedback about different implementation options, including the amount (£1 or £2) and timing. The consultation is open until today (27 August).

Additional funding streams

We also have had some general details of other streams that will become available. Most interesting is perhaps the establishment of a National Housing Bank as part of Homes England, which will have £16bn to spend, that it will leverage to bring in £53bn of private funding (or so
we are told). It will also be able to issue guarantees, which should also act to support private finance, and will have £2.5bn available to spend on low-interest loans to RPs. We are also told it will be able to make equity investments in sites, again details to be confirmed.

There will also be a National Housing Delivery Fund with £5bn to spend on land and infrastructure, which seems to be aimed at assembling and unlocking difficult sites.