The government has announced a significant boost to the Affordable Homes Programme, with an additional £2 billion in funding aimed at accelerating the delivery of affordable homes.
Chancellor Rachel Reeves unveiled the funding top-up, which will help construct up to 18,000 new homes across the country.
However, experts say this news could have a serious impact on self builders and smaller developers who are also looking a building a house.
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Expansion of the Affordable Homes Programme
The latest injection of grant funding marks the third major top-up to the Affordable Homes Programme in the past five months, following investments of £350m in February and £500m in October 2024.
The Affordable Homes Programme, originally launched in 2021 with an £11.5 billion budget, was designed to provide up to 180,000 new homes. With this new funding, the government aims to extend the programme further while ensuring housing developers have the financial support needed to continue projects.
According to Reeves, the funding will act as a "down payment" for further investment in affordable housing, with more details expected in the upcoming Spending Review on 11 June.
"We are fixing the housing crisis in this country with the biggest boost in social and affordable housebuilding in a generation," Reeves stated. "Today’s announcement will help drive growth through our Plan for Change by delivering up to 18,000 new homes, as well as jobs and opportunities, getting more money into working people’s pockets."
Regeneration and housing quality improvements
The additional funding aims not only to build new homes but also to support the replacement of outdated and unfit housing with modern, energy-efficient alternatives.
The extension of the Affordable Homes Programme means grant funding can be used for estate regeneration, enabling housing providers to redevelop existing sites and improve living conditions.
Rachel Maclean, Housing Minister, reaffirmed the government's commitment to deliver more affordable homes, stating: "The changes we have introduced will unlock more affordable housing by ensuring we replace old homes with ones that are fit for the future. This is absolutely critical in helping us regenerate communities, speed up housing delivery, and provide high-quality homes for more families."
The government has urged housing providers to submit project proposals as soon as possible to ensure that construction can begin by March 2027, in line with the spending timeline.
The latest investment also follows the recent announcement by Housing Secretary Angela Rayner to delay the implementation of the Building Safety Levy by a year to avoid disrupting housebuilding efforts.
Industry reactions and next steps
The recent £2 billion top-up to the Affordable Homes Programme has elicited varied responses from homebuilders and renovators, particularly concerning its impact on small and medium-sized builders (SMEs) in the construction sector.
Colleen Babcock, property expert at Rightmove comments: “We welcome the government's focus and investment to help build more affordable homes. This first step towards more affordable housing is very much needed to help those struggling to save for a deposit and buy a home.
Rightmove data show how mortgage price rises have meant the typical first-time buyer in Britain now faces average monthly mortgage payments of £940, a 59% increase compared with £590 per month five years ago.
Stephen Teagle, Chair of The Housing Forum, emphasised the role of industry in meeting the government’s ambitious housing targets: "Now, it’s up to the industry to rise to the challenge - accelerating delivery, building momentum towards the government’s target of 1.5 million new homes, and ensuring we provide the housing this country urgently needs."
However, Brian Berry, Chief Executive of the Federation of Master Builders (FMB), expressed reservations about the allocation, stating that despite the additional funding, SME builders are still expected to "take a hit" before conditions improve.
The Home Builders Federation (HBF) highlighted challenges in affordable housing delivery, noting that at least 139 home building sites are currently delayed due to uncontracted Section 106 units.
It seems the government has a fine balancing act to undertake with providing good quality, cheap housing whilst also not preventing SME developments.
