OBR describes many council HRAs as ‘effectively loss-making’

Use of EFS has risen sharply: one authority accessed support in 2017‑18, but 37 councils are expected to receive it in 2026-27, at a total cost of £1.1bn. 

The watchdog has not assumed continued growth in EFS beyond next year, warning that the trend “represents a significant upside risk to our forecast for local authority spending”.

The report also highlighted persistent demand-led pressures in statutory services, including adult social care, children’s services and temporary accommodation.

Taken together, housing services and social care now account for around 30% of local authority service expenditure in England, up from around 20% in 2015-16.

In the light of Labour’s pledge to “get Britain building”, the report also warned that housing supply is likely to dip ahead of a hopeful planning-led rebound. 

The OBR forecasts growth in housing supply will slow from an average of 260,000 homes a year in the early 2020s to a low of 220,000 in 2026-27, due to muted recent housebuilding.

Net additions then will rise sharply to just over 305,000 by 2030-31, reflecting the expected impact of planning reforms.

Cumulative net additions between 2025-26 and 2029-30 are projected at 1.3 million, around 30,000 higher than forecast in November, as the market returns to medium-term equilibrium and housing stock continues to grow under planning reforms.

Average effective mortgage rates are expected to rise from 4.1% to 4.5% over the forecast period, slightly lower than November projections, while house price inflation is expected to average just over 2%, broadly in line with income growth.

On a positive note, housing transactions rose by 11% in 2025 to 1.2 million, the highest level since 2022. However, property transactions in 2025 were branded “volatile” due to fluctuating market interest from homeowners rushing to beat the end of the stamp duty holiday and speculation ahead of October’s Budget. 

Andy Hulme, group chief executive at Hyde Group, said: “We welcome the government’s continued focus on fiscal stability and support for boosting the building of new homes.

“The planning reforms already undertaken are undoubtedly a positive step, and the OBR continues to build their impact into its medium-term forecast.

“However, viability remains the central constraint. The OBR’s own analysis highlights the severe financial stress facing social housing providers, with maintenance costs rising far faster than rental income.

“If the housing sector is to play its full part in the government’s growth ambitions, further attention to the economics of delivery – such as land costs, build costs and supporting private capital to invest in affordable homes delivery – will be essential.

“We’re committed to working in close partnership with government to ensure that its ambition translates into spades in the ground and new affordable homes for people in desperate housing need.”