Budget reaction round-up: AHP top-up ‘welcome’ but ‘nowhere near enough’ to meet demand

Senior figures from across the housing sector have welcomed the boost in cash for affordable housing announced in today’s budget, while noting that even more money is needed to address the housing crisis.

Moves by the chancellor to support small housebuilders and create certainty for social housing providers with a long-term rent settlement were also welcomed across the sector.

In her first Budget statement in government, Rachel Reeves announced the government would invest £5bn in housebuilding next year as she announced a number of measures to boost delivery towards the Labour administration’s target of 1.5 million new homes over the next five years.

She confirmed the government will increase the Affordable Homes Programme’s budget by £500m next year to £3.1bn and pledged to provide £3bn of support to SME housebuilders and the build-to-rent sector in the form of housing guarantee schemes.

However, there were also increases in capital gains tax, the stamp duty land tax surcharge on second homes, and employer contributions to national insurance. 

“It was encouraging to see the Chancellor using her first Budget to acknowledge the importance of housing as part of the government’s drive to ‘fix the foundations’, with financial support and revision of fiscal rules to underpin it,” said Gavin Smart, chief executive of the Chartered Institute of Housing.

“Following the welcome housing package announced at the weekend, we were pleased to see confirmation of a £500 million boost to the current Affordable Homes Programme, a confirmation of initial investment in the Warm Homes Plan (£3.4 billion over three years), and £128 million for new housing projects, ahead of further investment in the spring.”

Smart also welcomed the introduction of a 5-year rent settlement, set at CPI+1%, but said that “to fully support effective planning and sustainable investment”, a 10-year settlement was needed.

RIBA president Muyiwa Oki said the Affordable Homes Programme top-up was “desperately needed” but a “pocket-sized sum” compared with housing need.

“Alongside calling for next year’s Spending Review to boost the social housing pot, we urge the Government to consider its overall approach to funding social homes,” he said. 

“This includes exploring different models that reduce the net cost of delivery, such as that outlined in our report, Foundations for the Future.”

Jonathan Cox, partner and head of social housing at law firm, Anthony Collins, agreed that 5,000 additional affordable homes was “nowhere near enough to meet demand for affordable and social housing after years of shrinking supply”.

“All eyes will be on what the AHP will be for 2026 onwards,” he said, adding that fundamental changes were needed to make the section 106 process effective for affordable housing delivery.

Lee Bloomfield, Manningham Housing Association chief executive, said the AHP funding was “certainly a positive” but that it was “merely a drop in the metaphorical ocean” compared with the government’s ambition to build 1.5 million homes in the parliament.

“The promised five-year social housing rent settlement will offer a degree of much-needed financial stability for housing associations, with the possibility of a 10-year settlement after a consultation process,” he said.

“However, the rise in employers’ National Insurance contributions will not only add to the costs faced by housing associations, it will also impact on all other elements of the supply chain which will be expected to deliver the many new homes so desperately required.”

Bjorn Howard, group chief executive at Aster, said the settlement “means we can better plan for the long-term for vital things like our investment programmes in our existing homes” and that it was “encouraging” to see funding for 300 new planning officers.

Matt Vincent, operations director at SME builder Spitfire Homes, welcomed the £3bn pledged in guarantees to increase the supply of home and said the AHP boost was “further positive news”.

“We are hopeful that this investment will filter through to S106 homes that have experienced a lack of funding over the past 12 months and therefore suppressed delivery,” he said.

Paul Rickard, managing director at Pocket Living, also welcomed the guarantees, noting the long-term decline in the number of SME housebuilders.

“Today’s measures are a welcome step forward as we await a comprehensive plan for SME housebuilding as a key part of the Government’s housing strategy in the Spring,” he said.

Daniel Austin, chief executive and co-founder at ASK Partners, a specialist property lender, said it was “encouraging to hear specific reference of help being offered to SME housebuilders” in the Budget, saying they could help unlock smaller projects.

“The decision to not include buy-to-let properties in the Capital Gains Tax increase will also be well received,” he added.

Tina Paillet, president of RICS, also welcomed the investment in affordable homes but said there was a “potential issue” around stamp duty on second homes.

“The changes to stamp duty on second homes will inevitably further discourage investment in the private rental sector, exacerbating the existing imbalance between demand and supply, and consequently exerting upward pressure on rents in the near term,” she said.

She added that she hoped the policy would increase property available for first-time buyers.

Steve Turner, executive director at the Home Builders Federation, said the allocation of £47m to help unlock homes blocked by nutrient neutrality rules was “welcome”.

However he said if prospective buyers could not access suitable mortgage finance then investment would be constrained. 

“It is the first time in 60 years there is no effective government support for home ownership and with younger households continuing to struggle to get on the housing ladder, the absence of assistance will hold back housing supply,” he said.

Stevan Tennant, managing director for development at Ballymore, said it was “encouraging to see investment ringfenced for affordable housing” but that the government needed to reconsider taxation measures to ensure the residential sector was incentivised.

“The cost of building affordable housing in London excluding land is significantly higher than the value Registered Housing Providers are willing (or able) to pay for these homes. This effectively means affordable housing becomes a tax on development, and there is no financial incentive for a developer to build affordable housing,” he said. 

“We are in danger of being distracted by conversations about a myriad of other factors that may impact on housing delivery, but at the core of the issue is viability, the costs of home ownership and funding and how it can be used.”