The Chancellor has pledged £2bn in grant funding to build up to 18,000 social and affordable homes ahead of the Spring Statement on Wednesday.
Rachel Reeves called the funding the “biggest boost in social and affordable housebuilding in a generation”.
The Government has said thousands of new affordable homes will start construction by March 2027 and be completed by July 2029.
The funding will contribute to Labour’s plans to build 1.5 million new homes by 2029.
However, charities, trade bodies and other experts have warned that the Government faces significant obstacles to deliver its housebuilding plans.
Here, The i Paper takes a look at why the plans might not be effective.
The Government needs to rapidly increase the number of social homes it is building to reach its 1.5 million target, according to the New Economics Foundation think tank.
In a report published last year, it found 90,000 social homes would need to be built as early as 2027/28 to meet the target.
By the final year of this Parliament, ministers would “need to go beyond this and deliver 110,000 new social homes” to reach a total of 365,000 social rent homes needed by 2029. In 2022/23, only 9,500 social homes were built.
Half of the promised homes are not for social rent
The Government said at least half of the promised 18,000 homes would be for social rent, rather than affordable rent, which is more expensive and can be up to 80 per cent of market rent.
Social rent homes have rents set by a formula tied to local incomes. Historically, this has been about 50 per cent of the market rate, according to housing charity Shelter.
Charities argue that building social homes is key if the Government wants to use its housebuilding blitz to fix the housing crisis.
Matt Downie, chief executive of housing and homelessness charity Crisis, said today’s announcement was “hugely welcome” but urged the Government to “ensure that the vast majority of the initial 18,000 homes are for social rent so that people facing homelessness can access them”.
This plea was echoed by Shelter, which said the funding is a “positive step” but that it is “vital that the majority of this funding is directed towards social rent housing, not expensive alternatives that won’t help struggling families”.
The charity’s chief executive, Polly Neate, said: “This is the Government’s moment to prove it is serious about tackling the housing emergency.
“Without a major funding commitment to 90,000 social homes a year for ten years, homelessness will keep spiralling, and millions will remain trapped in unstable, overpriced housing.”
A shortage of skilled workers could make it difficult to build the homes needed. Industry leaders have said plans to train up 5,000 new apprentices are a “drop in the ocean”.
Another 25,000 bricklayers, 3,000 extra plumbers, 4,000 additional plasterers, 10,000 more carpenters, and 3,000 new electricians would be needed, according to figures from the Home Builders Federation and the Construction Industry Training Board.
Despite the Government’s promise to bring down net migration, they said more overseas workers may be needed to meet the target.
Developers also warned that increases to employers’ national insurance contributions, which take effect in April, will make it more difficult for firms to hire more people.
Steven Mulholland, chief executive of the Construction Plant-hire Association, said: “New investment in affordable housing is welcome, but without backing the firms in the supply chain expected to build them, the ambition will not be realised.
“Next month’s national insurance hike will hit family-run construction businesses already struggling with a deepening skills crisis, while changes to inheritance tax risk forcing thousands of firms to sell vital equipment and assets just to cover the tax bill.
“These family firms are the backbone of the construction industry, so if the Government wants homes built, it must support the companies actually doing the work – or the plan simply won’t deliver.”
Developers aren’t building homes after getting planning permission
Affordable and social homes are often built as part of housing projects that include homes being sold or rented at market rates.
Councils are being urged to approve more development proposals but when they do, developers do not always build them.
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Some 1.4 million homes have been left unbuilt by developers since 2007, according to a report published by the Institute for Public Policy Research last month.
The think tank said the Government would have to tackle “unproductive land speculation” if it wants to meet its housebuilding targets. It said developers are slowing their build rates or securing planning permission and then not building.
Common reasons for this include developers wanting to increase the land’s value before selling it on and a desire to limit supply to maintain high house prices.
A failure to join up key infrastructure projects for development is also slowing the delivery of new homes, it found.
High mortgage rates are hurting demand
Planning permissions issued have fallen to a record low of 10,180 sites, according to the Home Builders Federation. In July to September 2024, they reached the lowest point since 2006.
The trade body said changes to the planning system made by the Government were encouraging but warned that a lack of affordable mortgages amid high interest rates was suppressing demand from buyers.
Many people, particularly renters, want to buy a home but cannot afford to take out a mortgage.
Persistently high inflation has made the Bank of England reluctant to cut interest rates, which has kept mortgage rates much higher than they have been in recent years.
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