A look behind Labour’s £39 billion housing announcement: Worrying details emerge
Yesterday’s spending review on housing spend followed bold headlines about the biggest ever investment in affordable housing with the chancellor announcing £39 billion and it being a “turning point”.
But is it?
Given reports of squabbles over total spend between Angela Raynor and the Treasury beforehand it’s well worth a dive deeper, and it appears Labour will be spending less in the near term than the Tories under the last government. But more on that soon.
The first thing to note is that the £39 billion is over ten years.
So that’s less than £4 billion on average. Certainly more than annual totals since the 2021 Affordable Housing Programme under the Conservatives – though high inflation has eroded a lot of that nominal increase. And of total government spend it’s just a 0.3 per cent rise.
So it’s an average of around £4 bn. a year allocated, but bear in mind the UK currently spends around £30bn on housing benefit a year according to the UK Housing Review in large part due to a lack of affordable housing. Given inflation that could rise to £350 billion over the next decade.
Looking deeper even that £4bn figure a year isn’t happening anytime soon. It’s mostly being shunted into the 2030s. When looking at near term spend during this Parliament Labour could even spend less than the last government.
In fact of the £39bn, only around £10 billion is during this Parliament under the new spending review period. Who knows what will happen after the next election when any new government could rip up subsequent plans.
Year by year
Let’s have a peek at recent and future annual spend on affordable housing.
It presents a rather different picture to the type of adoring headlines the Mirror and Guardian were giving:
Tory government
- 2022/23 = £2.6 bn.
- 2023/24 = £3 bn.
Labour government elected July 2024.
- 2024/25 = £2.4 bn.
- 2025/26 = On track for £2.4bn.
Start of spending review period.
- 2026/27 = £2.6 bn.
Next year will be less than under the Tories in 22/23 and 23/24.
- 2027/28 = £3.1bn. Slightly more than under Tories but less in real terms after inflation.
- 2028/29 = £3.6 bn. In real terms after inflation around the same as Tories.
Election expected 2029
Much of the £39 bn. is only allocated during the next Parliament and the 2030s, when anything can – and probably will – change.
Previous Tory spend levels were insufficient given homeless households grew rapidly and have brought many councils in London (and beyond) to the brink, with £1.4 billion now spent annually in London on temporary accommodation.
Just today figures show public housebuilding is down 8.6 per cent on the same period last year despite spiking homelessness totals. During 2024/25 just 4,708 new affordable builds were started in London with 68,000 households in temporary accommodation.
And now Labour are set to spend less per annum in coming years than recent Tory spend.
Another promise made by Reeves was ending the use of hotels for asylum seekers by 2029. To where? It will mean Home Office contractors such as Serco taking on further private rentals at high cost reducing housing options for councils – who in turn will have to use hotels.
This is already happening and as someone who reads way too regular housing reports from various local authorities, it’s happening regularly. Home Office contractors are taking on private rentals used by councils after offering higher payments to private landlords.
How funding is spent
Funds announced yesterday are spent via the Affordable Housing Programme which in London is administered via the Greater London Authority and Mayor. Outside London it’s through Homes England.
Of course within this total, amounts may be moved from, say, shared ownership to social and council housing to increase numbers.
Other measures will help such as housing associations having access to building safety funds.
Overall though even with such moves it appears extremely unlikely during this Parliament the target goal of charities such as Shelter – who estimate 90,000 social homes per year are needed – will be met. Not close. Some estimate 40-50k at best in some years to come.
Private building
Labour also hope once the planning bill passes private housebuilders will greatly expand building including “affordable” homes. But that won’t happen immediately and expect a few hiccups and legal challenges along the way.
In the near term a substantial increase in funds – even if a short term bump – would support a beleaguered construction industry and employment in advance of a hoped-for private sector boom, which given interest rates, job losses in the struggling sector and the dominance of relatively few large developers in the UK some think is overstated.
The other obvious benefit to increasing spend on truly affordable housing is in time helping to reduce that annual £30 billion housing benefit bill and £1.4 billion temporary housing spend in London.
But no, and beneath those big headlines and £39 billion figure we actually saw pretty meek action once again.
Perhaps Raynor wasn’t happy and a political fudge was agreed. Stick most spending into the next Parliament to make it look better, while in the short term spend little more than before.
For Reeves and the top of the party that may yield positive headlines from favourable press, but for those paying often extortionate private rents, taxpayers paying tens of billions as a result and homeless households it’s another story.
