At the Spring Spending Review it was announced that the Labour Government’s Social and Affordable Homes Programme, beginning in 2026, would have ten-year funding of £39 billion, though the Financial Times reported that most of it was “back-loaded” after the next General Election. The guidance for the new SAHP has just been published. It was said to be a “game-changer”, “transformational”. In reality it is a flawed programme which keeps in place some Tory policies and the funding is far less than is needed to seriously address the housing crisis. Martin Wicks gives an initial assessment of it.

What is in the SAHP?

• Homes England will receive £27.3 billion of the funding, the Greater London Mayor £11.2 billion. 
• The funding “could deliver” 300,000 “affordable” homes over 10 years, of which 180,000 “could be” social rent. That’s an average of 30,000 and 18,000 a year.
• There is no funding specifically for council housing, and no council housing target. Councils will have to compete with housing associations and even “for profit providers”, house builders and developers. 
• There is no standard grant per property, even as guidance. 
• Bidders “will be expected to minimise the level of grant requested and maximise their own contribution”.
• The much lauded £7 billion for Combined Mayoralties is an “indicative” sum. They will have to bid to Homes England, which will decide which bids to accept; so the Mayors will not have control over the funding.
• No grant can be used for buying section 106 properties.
• Regeneration bids may be accepted where they increase the amount of “affordable” homes. Given the fact that the Government is keeping the Tory definition of “affordable housing”, this may involve a fall in the number of council and/or social rent homes, if they are replaced by “affordable rent” and/or “shared ownership”.
• £2.5 billion of “low interest loans” are being made available to housing associations, but not to councils “because of the fiscal implications”.

 Introduction

At the Labour conference, Angela Rayner’s replacement, Steve Reed, caused consternation, bemusement and derision, in equal measure, in response to his MAGA-style cap with the legend “build, baby, build”, his acolytes chanting enthusiastically in a transparently choreographed meeting. Plagiarising Trump’s “drill, baby, drill” – premised on a rejection of global warming as a scam, and offering the big oil and gas corporations the prospect of making a killing – does not augur well for a policy reputedly designed to resolve the housing crisis.

 Leaving his MAGA cap at home, Steve Reed recently said that the Government is “putting social and affordable housing at the heart of delivery”. This is untrue because the programme provides funding for only 30,000 “affordable” homes a year. This is just 10% of the 300,000 a year target; 18,000 social rent homes constitute just 6% of their annual target.

 The document says that the Government is “committed to invigorating council house building such that councils can once again build at scale, and we have designed the Social and Affordable Homes Programme in a way that reflects that ambition.” Yet the programme has no specific grant for council housing and there is no council housing target. Councils will have to compete for grant, against each other, housing associations, “for profit registered providers”, house builders and developers.

“Minimise the level of grant”

The “bridging fund” announced in March of last year, of £2 billion, was said to be for 18,000 homes. This implied average grant of £111,000 per property. However, the Government has now said there will be no standard grant per property, even as a rough guide. The document says: “…we will not pay any more grant than is necessary to meet the gap between the costs of building and the funds that can be raised by providers.” 

If a council does not know how much grant is available, what grant do they ask for? The Government wants to maximise the numbers built. This rather suggests that lower grants are liable to be accepted. Hence those bidding “will be expected to take all reasonable measures to minimise the level of grant funding requested and maximize their own contribution.” 

The policy does enable councils to combine Right to Buy (RTB) receipts with grant from the SAHP, but, of course, the lower discounts mean the number of homes sold will be much lower than previously, so fewer receipts. So long as RTB remains in place, even with reduced discounts, councils will have to spend money which should be spent on existing homes, to buy replacements. Ending RTB is the only means of ensuring that each home built or bought would increase the number of available homes. 

Section 106 agreements

This is where developers applying for planning permission negotiate with councils over contributions for infrastructure and “affordable housing”. Matthew Pennycook, writing to councils says:

“Alongside bids to the SAHP, we are also calling on all Registered Providers to support the effective delivery of Section 106 homes. Section 106 agreements are, and will remain, an essential mechanism for delivering social and affordable housing and it is essential that all parts of the system work in partnership to ensure it is operating as required.”

 However, SAHP grant cannot be used to “acquire social and affordable homes secured by developer contributions through Section 106.”

 The Government expects partners “who receive SAHP grant funding also to support the delivery of new social and affordable homes through Section 106 by acquiring those homes where there is an opportunity to do so.” But with their recent concessions to developers this is liable to be a problem, facilitating a fall in the number of Section 106 “affordable” homes.

The Government, in conjunction with the Mayor of London, has just announced that they are cutting the “affordable housing” target for London from 35% to 20% and proposing to allow developers to sell homes which were designated as “affordable housing”, at market rates, as part of Section 106 agreements.

They refer to a “legacy problem”, which is to say that councils and housing associations are tending not to buy homes which were designated as “affordable”. This was the ostensible reason for the cut in “affordable” homes in London and the suggested permission to sell homes on the market. 

Whether this proves to be “temporary” remains to be seen, as developers/builders will attempt to take advantage of this concession. They are commonly seeking to cut the number of “affordable” homes, on the basis that they will make their scheme financially ‘unviable’. What they really mean is that it will reduce their level of profit.

Another reason why housing associations and councils have not been buying Section 106 “affordable” homes is because they are often not what they want, and the quality has been poor.

Section 106 agreements, with nil grant, have been used as a substitute for Government funding. They have provided more than 40% of “affordable” homes built over recent years. However, that means they are built as part of private developments over which councils have limited control. Moreover, it means that the amount of “affordable” housing is dependent on market conditions rather than Government funding. The Centre for Cities says that “if the Government is to achieve a ‘generational increase’ in affordable house building, in the places where it matters most, there is no alternative to substantially increasing direct public investment.” 

Regeneration and “additionality”

The document says that while the SAHP will focus on new supply, it will also support regeneration schemes that provide “a net increase in affordable homes”. This is very problematic. Regeneration schemes in London and other places such as Manchester have produced ‘gentrification’ which has usually cut the number of council homes and social rent properties. These projects have broken up working class communities. One of the ‘benefits’ of regeneration for councils has been that increased house prices push up income from Council Tax receipts, though it has been to the detriment of tenants (both social and private) who may not only lose their social rent homes but be priced out of the area.

Given the fact that the Government has kept in place the Tories’ definition of “affordable housing”, demolition of social rent council housing, replaced by “affordable rent” or “shared ownership” homes could be deemed to have increased the number of “affordable homes”, when in fact, they have made housing less affordable and changed the social composition of an area. Hence in London working class people are being driven out of the central areas and have to travel a long way to work, at greater expense. 

‘Densification’ has been one of the features of regeneration schemes, that is packing in as many properties as possible to drive up the profit levels. This is one of the reasons why Britain has some of the smallest homes in Europe.

Using SAHP to fund regeneration would make a nonsense of the Government’s professed priority of increasing the number of social rent homes.

 Low interest loans

The Government is providing £2.5 billion of low interest homes to housing associations over four years (2026-30). They will be administered by the English Housing Bank and the Greater London Authority. They will “test the additionality that providers can achieve with loans” (how many extra “affordable” homes they can produce). A substantial part of the loans will be allocated to London, “reflecting the scale of the challenges London-based private registered providers are facing.”

In a letter to councils, Matthew Pennycook writes: “I am also taking this opportunity to confirm that our new low-interest loans scheme will not be available to councils. I appreciate fully that this news will come as a disappointment. However, having carefully considered the fiscal implications of extending the scheme to councils, we reluctantly arrived at the conclusion that it would not be possible. As such, the scheme will only be available to Private Registered Providers.”

So the Government has decided that housing associations take priority over councils with these low interest loans. How low the interest rates will be remains to be seen.

Currently councils are given a paltry 0.6% reduction on interest rates from the Public Works Loans Board. Given that the rate for a 30-year maturity loan (the loan is paid off at the end of the loan period) is 6.2%, it will still cost them 5.6%, a prohibitive rate. Borrow £10 million and it will cost £560,000 interest a year. Because of these high interest rates councils are now generally borrowing short term, but even a one-year loan is 4.71%. 

Pennycook’s letter says: “We will continue to explore other opportunities to improve borrowing conditions for councils, as well as considering further ways we can provide support.” However, if the Government seriously wants to promote council housing it should give councils much lower loans from the PWLB. Two years ago they were 2%.

Mayors

As part of the £39 billion programme, some of the funding will be dedicated to Combined Authority Mayoralties. This is £7 billion of the £27.2 billion for Homes England. However, this is an “indicative level of spend” rather than definite sums. “Homes England will continue to be responsible for taking final funding and contractual decisions.” Homes England will determine what bids are suitable. So the funding available to Mayors will not be under their control. Just in case they get carried away as to the possibilities, they are told: “there is no expectation that the SAHP will be able to support the delivery of all EMSA (Elected Mayor Strategic Authorities) ambitions.”

Acquisitions

The Government says that the SAHP will support “a limited number of acquisitions”, without giving any detail. Because of the shortage of funding for new build, the cost of new build and high interest rates, acquisitions have become a greater proportion of councils’ additions to their housing stock. Over the last five years, 43% of additional council homes in England have been acquisitions; often ex-council homes. While having to buy back council homes at market rates is a source of irritation, if they are in reasonable condition, it makes economic sense. It should be left to local authorities to decide how they use their own money, and grant, rather than limits being imposed from Westminster.

Conclusions

Lisa Nandy told us that Labour’s mantra was “council housing, council housing, council housing”. Angela Rayner told us to expect a “council housing revolution”. Yet Steve Reed’s mantra is “Build, baby, build”. The dash for growth takes the form of building, regardless of tenure and regardless of quality. As we have written elsewhere, having denounced Permitted Development Rights for producing “poor quality/slum housing” (the conversion of office or commercial properties to housing, without planning permission), Matthew Pennycook decided to leave this disastrous Tory policy in place. It can only have been to drive the numbers up.

Despite all the fanfare and the comparisons with the Attlee Labour Government, the fact is that the SAHP will, at best, only support 30,000 “affordable homes” a year, of which 18,000 could be social rent. While the target is 60% social rent, that is likely to be an overall target. It seems unlikely the Homes England will demand 60% in all schemes. If they do, the housing associations and any private providers are likely to go on strike, to try to win concessions similar to Section 106 agreements.

These targets constitute just 10% and 6%, respectively, of the Government’s housing target. So the assertion that the Government is “putting social and affordable housing at the heart of delivery” is simply false. The Government is looking to the market, and homes for sale, to solve the housing crisis. Steve Reed said: “Let the developers do what they do best.” What they do best is control their output in order to maximise their returns. A policy based on the hope that the house building oligopoly will build more and quicker defies all experience. It is patently obvious that they will not build on a scale which will cut prices and their profit margins. Demand and supply does not operate in an industry dominated by an oligopoly.

The 1.5 million target was clutched out of thin air. It was not based on any plan. There have been only six years in which 300,000 or more homes have been built in England, all in the 1960s. The lowest council housing output of these years was 38%. 

The number of households in temporary accommodation have increased in each of the four quarters since the election of this government. There are more than 130,000 households and more than 170,000 children, in temporary accommodation, in which, as Steve Reed has admitted, people can be trapped for years. In this context, the ambition to fund 18,000 social rent homes a year is timid in the extreme. Even when the Government is offering lower interest loans, it is giving them to housing associations, not to councils, because of the “fiscal implications”.

News of the £39 billion programme drew responses, such as it was “transformational”, “a game changer”. It is not. There can be no resolution of the housing crisis without social rent housing on the scale of 90-100,000 a year, new build/acquisitions. This would require more than £100 billion over ten years. The Centre for Cities estimates that £16.6 billion a year would be required to match what was built between 1956 and 1976.

As one housing journalist said: “The new investment pales by comparison to housing need.” Even the 1.3 million households on council waiting lists does not reflect the scale of need, since the previous Tory Government enabled councils to cut the numbers on the lists by various means. 

The campaign for 90,000-plus social rent homes a year will have to continue. It will become more obvious as new statistics emerge over time, that the Government’s housing policy will not solve the housing crisis. 

Whatever funding is available should be devoted to social rent homes, the most economic and most affordable for tenants. The charade of “affordable housing” should be ended; no more funding for increasingly unaffordable “affordable rent” or “shared ownership”.

While it may be said that the Government will not listen to us, we should reflect on recent experience. The scale of the extra-Parliamentary movement and the pressure on MPs was sufficient to force the Government to retreat, even if partially, in relation to winter fuel allowance and disability benefit cuts. We need to strive to build the widest, broad-based movement, which builds similar pressure in relation to council housing. 

The obstacle to funding is the Government’s self-imposed straitjacket of ‘fiscal rules’. If the Attlee Government could triple the council housing grant when faced with debt to GDP of 250% as compared to less than 100% today, this Government can find the funding for a large scale council house building/acquisitions programme. It is a question of priorities and political will. Unlike Steve Reed, Bevan understood that “the speculative builder is an unplannable instrument”. 

As Shelter research has shown, not building social rent homes has social costs. Building them will save money in the long run. There is a cost of inaction. 

Martin Wicks is Secretary of the Labour Campaign for Council Housing.