Labour spending review – the “biggest cash injection in 50 years” into social and affordable homes

The Labour Government has in its Spending Review made it clear that it is serious about meeting its ambitious 1.5 million homes target, recognising the role social and affordable housing providers play.

In what the Chancellor of the Exchequer called the “biggest cash injection in 50 years”, Rachel Reeves announced a new £39 billion Affordable Homes Programme, a 10-year rent settlement for social rents and a consultation on rent convergence that could, according to the G15 largest social housing providers, unlock more than £800 million in additional revenues.

It will provide certainty for social housing providers, funders investing into the sector and private developers delivering units under their affordable homes obligations.

Social housing providers have long called for a longer rent settlement to allow them to plan and invest in new housing over a longer time frame. The settlement of inflation plus 1% is therefore welcomed, although they may, however, be a little disappointed that the Spending Review remained silent on shared ownership tenures.

However, for this rent settlement to have the long-lasting impact the Government hopes, it will have to survive the next General Election, and that is not guaranteed.

The consultation on rent convergence will also be welcomed by social housing providers and local authorities. Social housing rents often reflect when a home was built, different rent policies and changes in subsidies, meaning rents can vary enormously for homes of the same size and in similar locations.

In addressing this, it will provide social housing providers with significant additional revenues to develop new homes and buy up thousands of new units already built by private developers as part of their affordable housing commitments. The G15, the largest social housing providers, estimate it would provide an additional £800 million to reinvest in new homes.

The increase in social housing development is also interesting from a VAT perspective as it is generally an exempt activity which does not allow for VAT recovery. VAT planning is needed, including considering the use of design and build structures and ‘golden brick’ planning.  Stamp Duty Land Tax could also be a consideration too. Residential developers and social housing providers will need to seek specialist VAT and SDLT advice when considering additional new developments.

Together with the £39 billion Affordable Homes Programme, the Government has made clear that is serious about new and affordable homes across the UK.

For more information contact our real estate team today.