Chancellor Rachel Reeves is set to unveil a substantial £39 billion investment in affordable housing as part of a sweeping shake-up of the UK government’s spending review.
This move marks a near doubling of government funding in the sector and aims to accelerate housebuilding efforts and bring the UK closer to its national housing targets.
Under the new plans, close to £40 billion in grants will be allocated over a ten-year period from 2026 to 2036, providing significant support for local authorities, housing associations, and private developers. The new funding commitment represents a major increase compared to the previous government’s five-year programme, which stood at £11.8 billion.
In a further measure to support the social housing sector, Reeves will allow social landlords to raise rents by one percentage point above inflation annually for the same ten-year period. This change addresses a key demand from housing providers and is expected to generate additional income to fund new developments and maintain existing housing stock.
The announcement is one of the key components of Reeves’s long-anticipated spending review, which includes a £113 billion rise in capital spending nationwide. This broader investment strategy will be financed through increased government borrowing, made possible by changes to the UK’s fiscal rules introduced earlier this year.
Reeves is expected to emphasise the transformative nature of the plans in Parliament, stating that the government’s mission is to ensure that economic renewal reaches every corner of the country and is felt in the everyday lives of its citizens. The affordable housing package will position the housing department, led by Angela Rayner, as one of the key beneficiaries of the Treasury’s review.
The funding pledge follows extended and sometimes tense negotiations between the Treasury and key cabinet members, including Rayner, Home Secretary Yvette Cooper, and Energy Secretary Ed Miliband. Rayner had insisted on direct talks with Reeves to secure the increase, warning that without a significant boost in funding, the government would fall short of its commitment to build 1.5 million new homes during this Parliament.
A recent report by Savills had already raised concerns that ministers were further behind this target than previously acknowledged. The new funding will allow housing associations to purchase thousands of new affordable homes that have been built but left unoccupied due to lack of funding.
The housing announcement comes alongside other major spending commitments, including £15.6 billion for local transport projects and £14.2 billion to support the construction of a new nuclear power station at Sizewell C. These investments form part of a broader government effort to drive long-term growth, improve infrastructure, and support communities across the UK.
The National Housing Federation described the housing investment as the most ambitious affordable homes programme in decades, while Shelter hailed it as a turning point in addressing the UK’s housing crisis. The measures are seen as a bold step towards reversing years of underinvestment in social and affordable housing.
Coinciding with this announcement is the passage of the government’s planning bill through its third reading in the House of Commons. The bill, which is designed to ease restrictions on building in previously protected areas, has been met with criticism from environmental campaigners who warn it could threaten thousands of natural habitats. However, ministers argue the reforms are essential for meeting housing needs across the country.
In a further move aimed at addressing homelessness, Rayner confirmed plans to repeal the Vagrancy Act of 1824 within the next year. The legislation, which criminalises rough sleeping, will be scrapped in a bid to protect vulnerable individuals from being penalised for being homeless.
With this extensive spending plan, Rachel Reeves aims to usher in a new era of housing policy and public investment, setting the foundation for long-term growth, social renewal, and a fairer housing system across the United Kingdom.
