March 26, 2025 - 7:00am
Amid a climate of fiscal caution, Rachel Reeves has made a rare pledge to increase spending — with an additional £2 billion offered for affordable housing projects. The Chancellor is being pushed in this direction by several economic winds: the private sector is struggling to deliver the numbers she needs to get close to the Government’s much-vaunted target of 1.5 million homes, and affordable housing numbers have dropped sharply due to the investment pressures facing the councils and housing associations which build them.
But while £2 billion is better than a cut, it also isn’t nearly enough to move Labour towards its target or to make a dent in the housing crisis which remains Britain’s most pressing domestic policy challenge.
This is because of choices made over several decades. The last five-year period in which England built 1.5 million homes ended in 1972. In 1970, in the middle of this boom, private-sector builders turned out 153,440 homes — not far off the 144,910 they turned out in 2022. But this 1970 figure was complemented by 130,180 homes built by England’s local authorities, and by 2022 this figure had collapsed to just 2,360 after decades of disinvestment by Government and sell-offs under the Right to Buy.
If Labour is serious about hitting its magic number of 1.5 million, then, it must find a way to turn the taps of public-sector housebuilding back on. Unfortunately, Reeves’s latest announcement will only release a few drips.
The Government’s mistake is its fixation on the idea that there is a huge, pent-up volume of private homes which will be released as soon as it stops local authorities asking for bat surveys and newt counts. The real problem, however, is more fundamental. Most British homes are built by the “Big Six” volume house builders, through a model of “speculative” development — where large sums are paid for land up front, and homes are drip-fed out over a number of years to maintain profitability. As the Competition and Markets Authority (CMA) said last year, this “has seen the gap widen considerably between what the market will deliver and what communities need”.
Labour’s planning reforms won’t change this, as the number of homes built will stay roughly the same. What is needed instead is different housebuilding models and — in particular — social housing, which can be built en masse so long as the necessary funding is in place. Reeves’s latest cash boost, which will fund 18,000 homes, is the third injection of money into affordable housing since Labour took power in July, and shows she is serious about the issue despite her fiscal caution elsewhere.
But the money will not go very far. A combination of vast investment requirements and rising costs means that the councils and housing associations which would typically build the affordable homes are financially crippled at present.
The rate Reeves is offering (roughly £110,000 per home) is considerably more generous than what her Conservative predecessors were willing to offer, but it will still require the providers to put in tens or hundreds of thousands pounds to make the sums stack up. What’s more, 18,000 is a very small percentage of the 150,000 homes needed per year to bridge the gap between the Government’s target and the private market’s output.
The Treasury says this extra money is a taste of what is to come, with longer-term affordable housing funding to be set out in the Spending Review in the summer. If the Government is intent on meeting its target, its ambitions need to grow substantially by then. More social housing is the only way to make a meaningful difference to the way people in Britain experience the housing crisis — and not just for those who need a social home. When social housing is widely available, pressure is taken off private renting, which in turn dampens the appetite of private landlords to buy up existing homes. As a result, it’s easier for first-time buyers to purchase a home.
It is also a better route to growth than fiddling about with quangos and arguing over airport expansions. Last week, 40 economists, including four Nobel Laureates, wrote an open letter to the Chancellor asking her to significantly increase the level of investment in social housing.
There are levers Reeves can pull other than cash. The Treasury could release public land for free to social housing schemes, or set aside longer-term funding. But if she wants to make a difference, she will have to become more ambitious.
Peter Apps is the Deputy Editor of Inside Housing. In 2023, he won the Orwell Prize for his book Show Me the Bodies: How We Let Grenfell Happen
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SubscribeMany, or perhaps even most Western countries, have a housing crisis. The pattern is usually the same. After the 2008 financial crisis prices surged. At the same time housing shortages started to become a problem. Then after the pandemic things got completely out of hand. And now suddenly it is impossible to build houses, especially those that can be afforded by working people.
Each country has their own reasons why building is next to impossible. Zoning laws in the US, environmental laws Europe, NIMBY-terror. But what is the common denominator? The monetary policy, quantitative easing in particular. This drove up asset prices and left the real economy behind. In other words, it gave asset owners a lot of free money and those without assets nothing. Disruption of supply chains and the miss-allocation of workers during the pandemic did not help either. But we also see this underlying phenomenon that, now that we we have this enormous real estate bubble, the market does not really want to build. From land owners, investors and real estate developers; on some level I think many of them understand that shortages and homelessness are not a bug but a feature at this point. So the government and central banks have to pop the bubble.
Yet again – an article with no mention whatsoever of the key demand-side driver in the housing crisis. Until these articles include honest debate about unsustainable levels of immigration – and policy makers refusal to deal with it – then they are frankly not worth reading. The phrase “p***ing into the wind” comes to mind.
Even if you stopped immigration tomorrow, Britain still needs huge numbers of new homes to be built, and without immigration pushing up the prices the big 6 developers would constrain supply even more in order to keep prices high. Therefore the state needs to build the houses either way, whether immigration is stopped or not
All true – but the “huge numbers” would be much smaller had we not had 20 years of abysmal immigration policy. Unless that changes this same article will be re-published in ten years , but the numbers will be an order of magnitude higher.
Yes, a truism. Arguably, houses need to be built where there is space – in the north and west of Britain. But these are the areas where public transport is non-existent. So, more roads? No money.
Houses will be built in the south-east of England, adding to the congestion. There is already a London versus The Rest problem and that will get worse. Perhaps Greater London should secede from the UK and that would help everybody.
Was there not some initiative to turn London into a city state after Brexit?
The Shadow Home Secretary, Chris Philips has asserted that 48% of social housing in London is rented by persons born abroad. In contrast it is asserted that only 25% of social housing renters are not UK citizens. A significant proportion of these houses are occupied by persons that are unemployed and on social benefits. All such social housing is rent at below market rent meaning that it is subsidised by those working taxpayers already facing high market rents.
Does this not suggest that subsidising and encouraging immigration is not one of the significant factors driving up demand and hence rents?
You refer to the big six as constraining supply to keep prices high as if it was some conspiracy. House building is a very low margin business. If easy profits were available there would be a lot more competition. Of course house builders are only going to build if they can make a profit. Planning restrictions constrain the supply of land to build on and hence price and in addition builders are usually required to build a certain number of houses that essentially subsidise the buyers because they are less profitable than the builders would otherwise chose to build. High prices are the result of high demand coupled with both a naturally restricted supply (we are not building new land) and government mandated artificially restricted supply.
The answer is to stop importing demand and stop interfering with the supply end of the equation if housing costs are to come down. Instead the government does the opposite.
Excessive immigration and excessive scrounging are probably similarly problematic.
I see no justification for giving a taxpayer-subsidised property in London to someone who is not working, whether they were born here or not. If they are not working and have no intention of starting they can be housed anywhere in the country where housing is half the price of London. Let the social housing in London go to people working in necessary jobs like nurses, council workers, firemen, etc. whose wages do no allow them to get on the private housing market.
Immigration needs to be zero for 5 years so we can catch our breath and see how to proceed.
I don’t disagree. My point was that either with or without immigration leaving the entirety of a nations house building to the whims of the private sector is a fools game. It’s not in developers interests to see prices drop, so if they don’t have the new arrivals pushing up demand then they’ll simply throttle supply instead
But state does not need to build all these houses if mass immigration is curtailed.
You are right that other measures on supply side are required.
All this land banking should stop.
You either build houses or you loose plots.
In other countries, many houses are build either by peoples directly (basically being project managers and contracting trades) or by small independent builders.
Obviously, planning system needs to change to do that.
Perhaps it is inevitable that journalists specialising in a particular field get captured and become advocates for organisations in that field. Even so Mr Apps should read and inwardly digest the article on wishful thinking in defence policy.
The notion that social housing providers have the capacity to manage investment programs to spend £30-40 billion a year on building new social housing is absurd. They are unable to manage their existing assets, let alone build new ones. Further, they don’t have the resources to cover the costs of maintenance and capital repayments. After all, social landlords have large amounts of neglected and deteriorating housing which they can’t or won’t fix.
On top of this there are the huge liabilities created by Net Zero policies to replace heating systems, upgrade energy efficiency, … It isn’t just a question of money but where do the people come from? Mr Apps looks back to the 1960s and early 1970s with very rose-tinted glasses. A lot of the social housing built then was of terrible quality with system building methods adopted to get round the shortage of labour, skills and other resources.
There is a fundamental choice which no journalist or politician will admit. Within the resources available, do we upgrade the quality and maintenance of our existing house stock or do we let quality (& energy efficiency, etc) slide and focus on providing more rooms? Trying to do both isn’t possible and probably results in the worst outcome.
Finally, privatisation of social housing wasn’t just dogma, though it is convenient to remember it that way. The underlying issue was that many local authorities and other social housing providers are truly awful landlords – incompetent and hidebound who were unable to finance the expenditures on maintenance that poor quality rented housing requires. Like many who refuse to learn lessons Like many of his ilk Mr Apps wants to take us back to a mythical past.
Tiny homes offer great potential. You can get them ready to “live in readiness” for under.£50k with a 10 year guarantee in my geography (imcludong lease of land). Targeting them as social housing for under 30s to allow stability and family formation and that invaluable thing, hope. Yes, quasi-prefab, but turning round a park of 20 in 12 months. Can also be stacked offering density.for more space-constrained geographies. We have to get.more lateral and we need speed.
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We need to build more social housing as well but, that said, the housing situation is another reason why both Britain and Ireland need an immigration policy.