5 things we learned about the Spending Review

Cash secured but awaiting the details

Questions remain around the tenures of the new homes and whether the scale of funding on offer lines up with Labour’s enormous target of 1.5 million homes by 2029. However, this Spending Review was a much-needed shot in the arm for social landlords and proof that in tough times, the government really is prioritising housing.

The consensus across the sector was clear, with the initial response describing the offer now facing the sector as a “historic” turning point.

With the cash secured, several senior leaders pointed out that the next step forward will be in the details.

What will be the level of grant per home? How is the new AHP funding going to be split between social rent, affordable and shared ownership? Will funding for the AHP be front-loaded to kick-start delivery of more homes in this parliament to help meet the government’s ambitious housing targets?

Inside Housing pored over several documents published during the Spending Review’s triumphant aftermath but to no avail.

Labour’s position has long been to go “net positive” on social rent homes. Another clue to where the focus might be came in April when the boss of Homes England revealed around 60% of the government’s pre-Spending Review top-ups to the AHP was being spent on social rented homes.

The Treasury has been asked for clarification on the new AHP.

Assessing projects will shift to ‘place-based’ approach

In her speech to the House of Commons, Ms Reeves was keen to prove that she was investing across the country, reeling off the names of regional towns and cities that were due to benefit from the government’s spending plans.

She also confirmed that the government has reviewed its ‘green book’ rules to allow the Treasury to prioritise projects outside London and South East England. This “should make a real difference”, according to Tracy Harrison, chief executive of the Northern Housing Consortium. 

“Centralised funding models and narrow value-for-money criteria have been a barrier to delivering the solutions Northern communities need,” she added.

However, she also pointed out that the North of England faces a “regeneration crisis”, with over 126,000 social homes reaching the end of their life, and said dedicated funding for regeneration is still “urgently needed”.

The changes were outlined in the government’s review into the ‘green book’ methodology it uses to assess the cost and benefits of projects.

Changes included the introduction of “place-based business cases”, bringing together different projects, such as housing and transport, needed to achieve the objectives of a particular area.

Meanwhile, Scottish housing associations urged the devolved government to “seize the opportunity” of increased support for housing in Westminster.  

Sally Thomas, chief executive of the Scottish Federation of Housing Associations, said the Spending Review “enables the Scottish government to back the country’s housing associations on a long-term basis”, including a multi-year funding package. 

“It’s time to end the uncertainty of budgets which change one year from the next and empower our housing associations to build,” she added.

Northern Ireland’s housing bodies also welcomed the news as a “signal of intent” to tackle the housing crisis, but urged for a “fair share” of the investment and a commitment from the Northern Ireland Executive to ensure it is spent on housing.

Seamus Leheny, chief executive of the Northern Ireland Federation of Housing Associations, said his members “are ready to meet higher housing targets, if the Northern Ireland Executive is prepared to provide the finance”. 

“To meet the needs of our communities, we need a strategic and sustained increase in funding for social and affordable housing here,” he said. “Investment in housing is an investment in people, public health and economic growth – and Northern Ireland must not be left behind.”

Action on homelessness

A total of £950m will be pumped into the fourth round of the Local Authority Housing Fund (LAHF).

Billed as “the largest investment in the fund to date”, the cash boost was confirmed “to support local authorities in England to increase the supply of good-quality temporary accommodation and drive down the use of costly bed and breakfasts and hotels”.

Another measure that will impact temporary accommodation use in the sector was the decision to stop using hotels to house asylum seekers by 2029.

It comes as The i Paper reported that the Home Office is in talks with around 100 councils about moving asylum seekers from hotels into empty tower blocks and old student accommodation.

In 2023, London councils raised the alarm about the block-booking of hotel rooms by the Home Office to house asylum seekers, over its impact on support for rough sleepers.

In addition, the government revealed proposals for “community help partnerships”, backed by £100m, to bring together a range of services, providing better support for adults in crisis and reaching vulnerable individuals earlier, before problems escalate.

Plans will also be revealed for its social impact investment vehicle in the summer. The vehicle will help tackle complex social problems by bringing together socially motivated investors, philanthropy, civil society and other impact investment experts. 

No changes to LHA rates or cash for supported housing

Rates for Local Housing Allowance (LHA) have long been a bone of contention for the sector. The benefit, which is the amount private tenants receive to help with their rent, is meant to be based on the cheapest 30% of properties in a local area. 

A rare glimmer of good news came in the 2023 Autumn Budget, which saw rates raised by the previous government. 

However, according to Crisis, due to years of freezes, only around 3% of properties in Great Britain are now affordable for people relying on LHA. 

Currently there are an estimated 440,000 households with children whose LHA no longer covers the costs of their rent, according to the thinktank the Institute for Public Policy Research.

Last October, the government said it planned to keep current LHA rates frozen until 2026. However, there was some hope a decision would be brought forward sooner to help alleviate the housing crisis as part of the Spending Review.

Another area of the sector that received no attention was supported housing.

National Housing Federation research from earlier this year revealed that patients ready to be discharged collectively spent almost 300 years stuck in mental health hospitals in England last year due to the severe shortage of supported housing.

In the New Labour years, supported housing had decent funding and regulatory supervision. Inside Housing recently looked at whether the Supporting People programme of the past could be brought back to solve today’s homelessness crisis.

With no plans at this juncture, one senior leader has reiterated the need for dedicated funding for this part of the sector.

Paul Dolan, chief executive of Riverside, said: “This is an historic and ground-breaking funding settlement for social landlords, one that was desperately needed and will give Riverside and the wider sector greater certainty over funding throughout the next decade.

“We are pleased to see that the chancellor has agreed a 10-year, index-linked rent settlement. Rent certainty is critical for us to be able to invest in our homes and services, now and into the future. The AHP marks a major step in boosting the amount of social housing which is crucial if we are to cut the record number of homeless families living in temporary accommodation.

“With a record 164,040 children homeless and stuck in damaging temporary accommodation, and rough sleeping doubled since 2021, we had hoped the government would have gone further by announcing more funding for supported housing at this juncture.

“We will continue to press government on the need for dedicated ring-fenced funding for supported housing so we can help get more families out of temporary accommodation and into higher-quality supported housing.”

MHCLG targets efficient savings and reforms

The Treasury has also published a document called Departmental Efficiency Plans. Ahead of yesterday’s announcements were reports of tough negotiations between the Ministry of Housing, Communities and Local Government (MHCLG) and the Treasury on how the department can cut costs.

MHCLG is expected to deliver efficiency gains of £50m per year by 2028-29 through workforce and digital reform, by improving productivity using AI and insourcing services.

This will include digitally enabled processes to support the delivery of remediation, and will bring the full cladding remediation portfolio into the Cladding Safety Scheme. 

It is hoped this will deliver efficiency gains faster, using digitally enabled processes to support cladding remediation delivery, with built-in stronger counter-fraud protections.

Meanwhile, funding for local government will be simplified by reducing the number of onerous competitive bidding processes and streamlining data requests from central government.

Government departments currently give out more than 300 individual grants to councils. MHCLG will consolidate existing local government grant funding schemes, significantly reducing the number of MHCLG-led grants – further detail will be published through the 2026-27 Local Government Finance Settlement.