Labour could build 500,000 social homes 'at a stretch' with £39bn affordable housing pledge

The £39 billion affordable homes programme Labour announced at last week’s spending review could deliver 500,000 new social homes over the next decade “at a stretch”, according to new analysis.

The government’s housing windfall sparked renewed optimism that it was taking the housing crisis seriously with chancellor Rachel Reeves calling the investment “the biggest cash injection into social and affordable housing in 50 years”.

With plenty of skepticism about Labour’s ability to deliver on a manifesto promise to build 1.5 million homes in five years in Number 10, new analysis from JLL suggests they could get closer than originally thought if they can squeeze 500,000 homes out of the cash injection.

Nick Whitten, EMEA head of living research at JLL, said: “A £39bn pledge for new affordable housing over the next decade is the largest government commitment we’ve seen in half a century – and one that has to be commended at a time when the public purse is more than a little stretched. But while the ambition is clear, the reality is complex. 

“If used as part of a typical grant funding model and spread appropriately across tenures, this sum could support delivery of up to 500,000 affordable homes over the next decade, or around 50,000 a year at a stretch. However, that still leaves a significant shortfall against the national target.

“Fully closing the gap to 1.5 million new homes this parliament now depends on unlocking additional private investment, streamlining the planning system, and addressing the shrinking construction workforce. If the stars align, this could kickstart the biggest top-up of UK affordable housing stock in decades, taking the government closer to its target than many would have predicted. The opportunity is huge – but so is the challenge.”

Ever since Reeves’ announcement last week, housing campaigners have urged her and senior Labour figures to set a target of how many social homes they intend to build.

Shelter, housing select-committee chair Florence Eshalomi and Big Issue ambassador Kwajo Tweneboa have all called for the government to commit to a figure.

Tweneboa said: “The longer the government avoids giving us a social housing target, the longer 1.3 million households are stuck on waiting lists across the country with no end in sight.”

JLL said the complexity of building new affordable housing is the likely reason why Labour has shied away from setting a concrete target.

If it was just a case of taking into account land, build costs and other expenses, the £39bn funding would be able to fund around 130,000 new three-bedroom homes, JLL said.

This is unlikely to be how things will work, analysts said, describing the approach as inefficient and failing to contribute to the 400,000 home shortfall the Office for Budget Responsibility has forecasted against the 1.5 million homes target.

Affordable homes do not receive 100% grant funding so, taking that into account, JLL suggestd the cash could be a “starting tranche” for building 500,000 new homes over the next decade.

This would see roughly one-third of the government’s 1.5 million new homes considered as affordable, albeit through affordable rent and shared ownership as well as the most affordable social rent homes ministers have pledged to prioritise.

Read more:

• How Labour’s housebuilding target of 1.5 million new homes hinges on just six private companies
• Can Labour really build 1.5m new homes? Not without ‘bold’ and urgent planning reform, experts say
• More than 1.4 million homes with planning permission left unbuilt, report finds

But even with the heavy investment, the government will still face a funding gap of £100bn that will need to be plugged through private finance if it is to build 500,000 new affordable homes.

That will most likely be in the form of borrowing for social housing landlords and perhaps why Reeves also announced a form of ‘housing bank’ at the spending review.

Social housing landlords also got certainty through a 10-year rent settlement at the financial statement while a government consultation will be held on rent convergence that could see them raise more from rents.

Other hurdles remain. The government will have to complete its plans to streamline the planning system and boost construction capacity – the UK has more than 200,000 fewer construction workers than before Covid – to make the most of the £39bn.

But the potential is there to bring down the waiting list for social homes from its current 1.3 million households to below one million for the first time this decade, analysts added.

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