The Government’s “Decade of Renewal for Social and Affordable Housing” announced on 2 July 2025 was a clear statement of its vision and intent for the sector but critical questions remain. Most notably how will the delivery of 180,000 social rent homes over the next 10 years be funded, is focusing on social rented products the correct decision and is delivery on this scale achievable for a construction industry with a chronic skills gap and where the timeline for bringing sites to market is often complex, lengthy and frustrating?
The Government has now set out an agenda for the delivery of 300,000 new affordable homes over the next 10 years between 2026 and 2036, of which 60% (equating to 180,000 new homes) will be social rented products. The remaining 40% will be a mix of affordable rent, intermediate rent and shared ownership. This will be supported by a grant funding package of £39 billion (£3.9 billion for each year of the programme) and an affordable rent settlement of CPI + 1% for the full 10 years, which is a welcome extension from the previous settlements which were limited to 5 years.
Whilst the industry has responded positively to these announcements, a lot of uncertainty remains as to the feasibility of execution and how this will be funded – including what role the new National Housing Bank may play.
For private developers, social rented housing has generally been regarded as the less desirable sibling to affordable rent, intermediate rent and shared ownership products. With social rents set according to a government formula and often significantly below market rents, it invariably equates to lower land values and thus reduces viability margins. If the primary motivation, however, is to enable more lower income families to have access to good quality secure housing then there is a real argument in favour of promoting social rent as a form of affordable tenure. In any event, to rebalance the agenda 60%-40% in favour of social rent will require a significant injection of financial resource and a genuine appetite from developers, local authorities and investors to commit to the vision. Relevant to this conversation may be the removal of “hope” value (being the compensation “uplift” given to reflect the future development potential of land) in Compulsory Purchase Orders. This could provide a mechanism for public bodies to acquire land at much lower values than may otherwise have been the case and thereby facilitate a scheme weighted in favour of social rented products.
The role of section 106 agreements remains a key question. The Government’s own announcements show a clear desire for social rented properties to be delivered through section 106 schemes. Yet, in recent years section 106 agreements have often had the effect of stymying the delivery of housing. There has been a trend for Housing Associations and Registered Providers to regard partnerships with private developers and investors as a more attractive model to bring forward schemes and it is unlikely that this will change overnight. Expecting local authorities and devolved authority housebuilding to be the primary means through which to provide these additional 300,000 new affordable homes over the next 10 years is also a huge expectation and, on this scale, unproven. It may be that the new Social and Affordable Homes Programme to be announced by Homes England in the Autumn will provide further clarity on the role and funding for section 106 agreements but, as ever, the “devil is in the detail” and that is very much awaited. Similarly, the £2.5billion interest-free loans from the new National Housing Bank could potentially bridge this gap but viability will remain a challenge and it’s very likely private-affordable partnerships will continue to play a critical role.
As at March 2024, the 2021-2026 Affordable Homes Programme has delivered over 74,000 grant funded affordable homes but only around 11,000 of these are for social rent with the balance being other tenures such as affordable rent and shared ownership. There are many possible reasons for this, not least the lower land appraisals which derive from a social rented scheme. Another reason may also be a potential lack of appetite on the part of Housing Associations to encourage social rented schemes in the absence of any meaningful “catch up” mechanism for “below formula” social rented properties. Social rents are currently set accordingly to a Government formula but the CPI + 1% per annum settlement does not enable rents for properties that have already been let for many years and have fallen behind the social rent that would be charged on a “new” letting to bridge that gap. Thankfully, the Government do now appear to be addressing this issue with the announcement of new convergence mechanism for social rent to be implemented as part of the Autumn Budget 2025. A Consultation is currently running with the “catch up” mechanisms being suggested at either £1 or £2 per week.
This is hugely significant. Alongside the mandate for a “revolution” in social rented delivery, the Government’s announcements in July set out forthcoming increases in the regulatory and standards requirements that will be imposed on Housing Associations. Awaab’s Law will come into effect in October 2025, electricity safety standards will be brought in line with those that apply to the private rented sector and a new “Decent Homes Standard” will be introduced. If we are going to expect Housing Associations to embrace the delivery of a significantly increased portfolio of social rented packages and at the same time comply with increased regulation, we must ensure they maintain the financial capability to do so.
A discussion of recent developments would be remiss without mention of the recent Right to Buy reforms. For many years now there has been an inherent tension between the notion that long-term tenants should be “entitled” to buy their home and the need to protect affordable housing stock to ensure more homes are built than are lost.
This has now come to a head with the reforms announced by the Government. Eligibility has been increased from 3 years to 10 years (probably more than was expected) and it appears that Right to Buy will be “one bite” only - with tenants only being able to exercise it once (subject to certain exceptions which are still being discussed but appear to be framed around marital break-up and/or family violence). Discounts will now start at 5% increasing by 1% for every year up to a maximum of the lower of 15% or the new cash cap and new social rented and affordable homes will be excluded from Right to Buy for 35 years. The latter is clearly the Government’s attempt to almost ringfence the programme which they are looking to kickstart and accelerate over the next 10 years. Whilst this is admirable and looking to the “long term” is attractive in terms of providing confidence and certainty, housing is invariably a political topic and it would be naïve to think that successive Governments may not change this position – especially over a 35 year period. It, therefore, remains to be seen whether this will be the conclusion of the Right to Buy conversations or just another chapter in the long running story!
One issue which remains unanswered is whether additional protections are needed for rural affordable housing. With only 9% of affordable housing stock currently located in rural areas, it would not be unsurprising if additional protections or even an exemption from Right to Buy was applied to rural areas.
There is clearly a real focus on social rented housing as the Government’s vehicle to accelerate the provision of affordable housing in England over the next 10 years. This has been backed up by associated reforms to Right to Buy and the anticipated social rent convergence. Whilst these measures are to be welcomed in terms of providing better long-term certainty for the sector, if the Government’s aims and numbers are to be achieved this has to be done in conjunction with private developers and investors. Clarity is also needed on the means and mode of funding and the timescales for bringing sites to market needs to be much faster, with the planning process being a critical component to this.
Following Howes Percival’s recent “Social Housing Snapshot” webinar on 15th July, Charlotte Harrison summarises some of the key points and issues arising from the Government’s “Decade of Renewal for Social and Affordable Housing” announced on 2 July 2025. For anyone unable to attend the webinar, a link to the recording (approximately 30 minutes) is included here.
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