Industry broadly welcomes Labour's Spending Review, with some reservations
The Chancellor, Rachel Reeves (pictured), has announced £39 bn for social and affordable housing in her keenly anticipated Spending Review. Accusing the last Tory government of mismanaging the economy and causing mortgage costs to soar, she also revealed that Labour would invest in training and apprenticeships, to upskill over a million young people - including builders, welders and electricians. This, in part, is aimed at answering critics who suggest that the UK doesn’t have the skilled workforce to achieve the Government’s plan to build 1.5 million homes during this Parliament.
“At the budget last October and again in the spring, I made the choices necessary to fix the foundations of our economy,” Reeves told a packed House of Commons. “And we wasted no time in removing the barriers to growth - the biggest overhaul of our planning system in a generation, launching Britain’s first national wealth fund, and reforming our pension system to unlock billions of pounds of investment into our economy. We’re starting to see the results – the stability that we have provided has helped support four cuts in interest rates, saving hundreds of pounds a year for families with a mortgage.”
Real wages have grown by more in the first ten months of this Labour government than they did in the first ten years of the Conservatives’ term in office, Reeves said. “The latest figures show that we are the fastest economy growing in the G7, with countries around the world lining up to do business with Britain again,” she added, “with new trade deals with India, the United States and with the European Union too. We are renewing Britain.”
Labour’s planning reforms have opened up the opportunity to build in the UK, the Chancellor noted. “Now we must act to make the most of those opportunities and a plan to match the scale of the housing crisis must include social housing, neglected for too many decades, but not by this Labour government,” she said. “We are taking action. I am proud to announce the biggest cash injection into social and affordable housing in 50 years – a new affordable homes programme, in which I am investing £39 bn over the next decade; direct government funding to support house building, especially for social rent.”
Reeves said she was pleased to report that towns and cities, including Blackpool, Preston and Swindon already had plans to bring forward bids to build those homes in their communities. “I have gone further,” she continued. “Last autumn, I enabled greater use of financial transactions to support investments in our infrastructure, alongside strict guard rails that ensures money is spent wisely through our public, financial institutions.”
In line with this commitment, the Chancellor said, she is providing an additional £10 bn for financial investments, to be delivered through Homes England, to crowd and private investments, which will “unlock hundreds of thousands more homes – homes built by a Labour government, homes built for working people.”
Addressing her political opponents, Reeves said: “I have made my choices - tough decisions, yes, for stability; changing Britain’s fiscal rules, yes, for investment, and today delivering that investment for the renewal of Britain. Now it is time for the parties opposite to make their choices. The spending plans that I am setting out today are only possible because of the decisions that I took in the autumn, to raise taxes, and the changes to our fiscal rules. Every one of those changes was opposed by the parties opposite. So today they can make an honest choice and they can oppose these spending plans as they opposed every penny I raised to fund them, or they can make the same choice as Liz Truss, spend more, borrow more, with no regard for the consequences. And in their clamour to cut taxes for the richest, the Conservatives crashed our economy. They sent mortgage rates spiraling and they put our pensions in peril. I will never take those risks.”
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Apprenticeships could help Government achieve its home building goal
Turning to the apprenticeships which – in theory at least – would support Labour’s house building plans, Reeves said: “As we invest, if we are to thrive in the industries of the future, we must give our young people the skills that they need to contribute to our national success, as scientists, engineers, and designers; as builders, welders and electricians. I am providing record investment for training and upskilling .”
Industry reaction to the Chancellor’s statement to the House of Commons has been swift.
Chris Bagueley, managing director – corporate, at Together, commented: “The Chancellor’s £39bn cash injection over the next ten years is a significant boost to social and affordable housing in this ‘age of insecurity’. This could be a pivotal moment in the Government’s race to build 1.5 million new homes. With at least 350,000 homeless people in England right now, direct action like this is critical to help those at risk – and quickly.
“Reeves’ signposts to a new affordable homes programme as part of the planning reforms already underway are also welcome, albeit light on detail as to the actual scale and location of these properties. While upfront investment at this scale is promising, it is only part of the solution. More support for social housing developers and their trusted lenders is vital for ongoing projects, providing more affordable housing and community spaces where they are needed most. The opportunity and demand we’re seeing for even more support is undeniable.”
Paresh Raja, CEO of Market Financial Solutions, said: "The £39 billion investment in affordable and social housing is hugely positive news. If more homes are to be built across the UK, funding and policy must go hand in hand. For all the talk of planning reform, and the use of AI in improving the planning process, there's no escaping the fact that significant investment is required.
"Amidst concerns that Labour's promises of tackling the housing crisis would amount to little, this announcement could signal a notable step forward. Government investment will encourage activity from the private sector, injecting fresh life into the housebuilding industry. As ever, lenders must be ready to respond in turn; ensuring different types of borrower, from first-time buyers to seasoned investors, are supported with the right products, and fair, diligent ways of assessing applications is going to be absolutely vital in creating a more equitable future for the UK property market."
Meanwhile, Nick Jones, the mortgage sales and marketing director for Access FS, said: “It’s tempting to focus on the big-ticket announcements around housing – and there was certainly some good stuff in there on Homes England and social housing. But while everyone’s dazzled by the sexy stuff, Angela Rayner’s been very publicly battling to protect a day-to-day funding settlement for her department, the Ministry for Housing, Communities and Local Government. She has been right to. While that funding is not in the spotlight, cuts there could have a major knock-on effect for levels of resourcing in local government planning support. So, while it might not grab the headlines, I’m worried reductions in local government budgets could hobble planning functions.” He added: “Planning delays and under-resourced local authorities have been holding back the UK’s property market for too long – and this could make the situation worse.”
Tony Hall, head of business development at Saffron for Intermediaries acknowledges that the level of the Chancellor’s investment in affordable housing is ‘really positive’, nearly a year into the Labour Government’s term, and with its homes pledge looking increasingly hard to deliver. “That said, funding is only part of the equation,” Hall added. “The planning system remains one of the biggest blockers to delivery and, without proper reform, too many projects risk being left in limbo. If we’re serious about hitting the 1.5 million homes target, we need to look at all options on the table. Self- and custom-builds are just one example of where change could unlock real progress, but only if we make it quicker and easier to get viable developments off the ground.”
Sarah Thompson, managing director of Mortgage Scout, notes that the Spending Review quietly confirms that the Mortgage Guarantee Scheme will be made permanent. “The scheme allows lenders to offer 95% loan-to-value mortgages by providing a government guarantee on the portion between 80 and 95%,” Thompson said. “In practical terms, that gives buyers the chance to purchase with just a 5% deposit. With high rents and rising living costs making it harder to save, this kind of support is critical for those trying to move from renting to owning. However, the current scheme excludes new-build homes, which is a key issue for many first-time buyers. If the government wants to improve access, it should look at widening the scope of the scheme and making it more inclusive.”
Maria Harris, chair of the Open Property Data Association, emphasises that to make its investment count, the Government must modernise the digital infrastructure that underpins our housing market. “The current property transaction process remains fragmented, slow and prone to failure,” Harris said. “Digitisation is not a ‘nice to have’ but an essential pillar of a fit-for-purpose, functioning housing market. By embedding open standards, smart data and seamless digital handovers between buyers, sellers, agents and conveyancers, we can cut fall-throughs, speed up transactions and build trust. The £39bn must be matched by bold reform. Investing in supply without fixing infrastructure is like building homes on sand."
John Bigwood, chief financial officer at Black & White Bridging, views the Chancellor’s statement as a major boost for housebuilding in a sector that has been neglected for too long. “Demand for social housing has been increasing year on year, with waiting lists exceeding 1.3 million households at the end of March 2024, marking a 10 % rise in just two years,” he said, “while the sector actually experienced a net loss of 650 homes in 2023–24 due to sales and demolitions.
Not all industry professionals are quite so delighted with the measures Reeves announced.
Ben Beadle, chief executive of the National Residential Landlords Association, believes the Spending Review fails to tackle the immediate pressures in the private rented market. “It does nothing to support the delivery of the one million new private rented homes needed by 2031 to meet growing demand,” Beadle commented. “It does nothing to support and encourage investments in energy efficiency works to rental properties, and it does nothing to support all those renters struggling to find a home as a result of the Government’s freeze on housing benefit rates.”
Finally, Jeremy Leaf, north London estate agent and a former RICS residential chairman, summed up: "The additional funding of £39 billion for social and affordable housing and easing of borrowing rules is of course very welcome but what we want to see is more ‘boots on the ground’ – and asap. Progress is being made with house building but we would also want to hear that planning and delivery numbers are being checked regularly to see if they’re meeting aspirations and, if not, taking further action as necessary.” He concluded: “A 7/10 for content today which will definitely rise to 8/10 at least if we see more progress on the ground in reaching as close as possible to that ambitions 350,000 a year target.”
