What should we expect from the new Affordable Homes Programme?

The funding decisions made as part of the Spending Review demonstrate that the government has been listening to the sector and is focused on the provision of more affordable homes. In his letter to chief executives of RPs, housing minister Matthew Pennycook confirmed that the majority of the £39bn new AHP package would be earmarked for social rent, marking a definitive policy focus in this area.

The 10-year rent settlement agreement of Consumer Price Index plus 1% (with further consultation about the reintroduction of rent convergence) also brings a layer of long-term certainty for RPs, creating a more stable environment for planning and investment.

“Housing minister Matthew Pennycook confirmed that the majority of the £39bn new AHP package would be earmarked for social rent, marking a definitive policy focus in this area”

While significant grant funding has been confirmed, further investment will be needed to succeed in the delivery of 1.5 million new homes in the current parliament, particularly given the rising costs and regulatory pressures that RPs are facing. It must be hoped that government’s decision to fund the delivery of more housing will act as a catalyst for private investors and developers, whose investment alongside RPs will be essential to close the funding gap.

Recognising that there is no one solution to solving the housing crisis, the government’s decision to back the introduction of low-interest loans for the development of social and affordable housing via the National Housing Bank (NHB) could help to unlock development at scale. The £2.5bn funding package for low-interest loans is on top of the AHP funding and offers an innovative funding solution for RPs. The loans should provide favourable repayment terms, although further information is awaited. The NHB will also offer a range of alternative funding options to private developers, with the aim of triggering wider housing development.

While we don’t yet know the terms and conditions of the low-interest loans, or the practical operation of the new AHP, RPs and developers will be hoping that both could support the purchase and development of Section 106 (S106) units. Under the current AHP, RPs cannot use grant funding to purchase S106 stock unless they can demonstrate ‘additionality’ (which has not been easy to do), and if the same applies to the new AHP, then the alternative funding provided by the NHB could be a major help.

The slow uptake of S106 units by RPs, due to a combination of factors including high costs and design and build specifications not always meeting the requirements of RPs, has been a significant problem, so more funding options could help to make the development of S106 units more viable.

In the next couple of months, the scope of the new AHP and how it will be administered will be released, and there is already a strong indication that it will be delivered through the devolved combined authorities and mayoral authorities. This would align with the government’s broader agenda of local government reorganisation and its aims to empower communities and strengthen devolved decision-making. Local administration of the AHP would also allow funding to be more closely tailored to specific regional housing needs – a welcome shift that could make a big difference to communities. It is important that all RPs, from small to large, have fair access to AHP funding.

“This focus on skills and growing construction capability is key to translating investment and policy reform into homes on the ground”

It would be encouraging to see in the new AHP the removal of the ‘additionality’ requirement, which currently requires RPs to demonstrate additional units and value that the grant provides. In practice this has put the funding beyond the reach of RPs that might want to use it to acquire S106 units.

However, if the additionality requirement remains for S106, RPs may take some solace in the new policy statement on rents for social housing that will be published for April 2026 onwards. While pending final publication, a new proposed paragraph 3.4 of the draft policy statement that was consulted on last year helpfully expands the circumstances of when an ‘affordable rent’ can be charged.

If this is included in the final version, it would allow properties to be let on an affordable rent basis (ie 80% of market rent inclusive of service charges) provided that they have not previously been let on a social rent basis. If this change happens, it would give RPs significantly more flexibility to charge affordable rent for newly acquired S106 homes, subject to the terms of the relevant S106 agreement.

In support of the funding committed to social and affordable housing and the government’s wider housing targets, attention must also be given to physical delivery and the skills required. While further funding and initiatives have been introduced to address the skills shortage, such as the £600m to train up to 60,000 skilled construction workers, attracting a workforce and boosting recruitment will be key to the long-term delivery. Ultimately, this focus on skills and growing construction capability is key to translating investment and policy reform into homes on the ground.

The government’s recent announcements represent a strong step forward in addressing the affordable housing crisis, with significant funding, greater policy clarity, and intent to empower local delivery. Collaboration between RPs, developers and the government will be critical to bridging the current skills and funding gap, and to succeed in building the homes that communities urgently need.

Emma Hardman, partner and head of housing, Anthony Collins