The first Budget of the Burnham government has drawn a mixed reaction from housing leaders. Alex Funk and Carl Brown report.

John Healey’s first Budget as chancellor has elicited a mixed reaction from housing leaders, developers and sector experts regarding its potential to tackle the UK’s housing challenges.

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While many welcome the extra £1.5 billion for the Social and Affordable Homes Programme and the introduction of the Your First Home equity loan scheme to increase demand and support first-time buyers, significant concerns remain about taxes, burdens and ongoing development viability.

The mood was not helped by the Office for Budget Responsibility lowering its forecast for delivery between now and 2031 by 190,000 homes compared to its March prediction. 

The introduction of VAT relief for land sold for social housing and the scrapping of biodiversity net gain rules for smaller brownfield sites were dubbed a win for development. But there was  frustration that more details of Your First Home were not released as many expected, while some believed the government missed a chance to ease housing affordability by unfreezing Local Housing Allowance rates.

Here are a few of the key themes from the sector’s reaction.

Social housing measures welcomed

The extra SAHP funding, VAT relief on land sold to social landlords and an extra £423m to tackle rough sleeping were all welcomed by sector leaders.

Kate Henderson, chief executive of the National Housing Federation, said: “Today’s Budget takes vital steps towards ending rough sleeping, delivering more social housing, and easing the cost-of-living pressures facing millions of families.

“We share the Prime Minister’s determination to end rough sleeping and housing associations have rallied behind his call, identifying over 2,000 potential homes to support this pledge. The additional funding announced today will help provide the ongoing support people need to stay off the streets and in long-term, secure accommodation.

“Having made the case for additional grant funding for new social homes, the announcement of an additional £1.5bn for the early years of the Social and Affordable Homes Programme is hugely welcome. It will enable housing associations and councils, which are already working in partnership to deliver tens of thousands of new social homes, to go further and build faster for families in need.”

Greg Reed, chief executive of Places for People, said: “The real work starts now. Housing providers already have the land, pipeline and capacity to build, and bringing more SAHP funding into the programme’s early years would help deliver more homes, faster.

The Budget included several measures aimed at cutting household energy costs, including abolishing the gas standing charge, exploring similar reforms for electricity bills, and providing a £100 payment to households in council tax bands A–D. Healey also announced an additional winter payment for vulnerable households, framed as part of efforts to ease cost‑of‑living pressures as bills rise.

Mark Perry, chief executive of Vivid, said: “For our customers, the real test of the Budget is whether it makes everyday life a little more affordable. With energy costs expected to rise, the measures to reduce electricity and gas bills, together with the additional winter payment, are welcome and should help those whose budgets are already stretched.”

Disappointment about lack of action to unfreeze LHA rates

However, Perry, along with several other housing leaders, expressed “disappointment” at the lack of action on LHA rates, which the sector has long called on the government to unfreeze.

Gavin Smart, chief executive of the Chartered Institute of Housing, said: “Today’s Budget delivers welcome news for housing, taking total [SAHP] funding past £40 billion over ten years, alongside over £430 million in additional funding to tackle rough sleeping. This investment will make a real difference in building much needed new social and affordable homes and addressing the homelessness crisis. The introduction of a 0% VAT rate on land sold to registered social housing providers for social housing from next April is also a positive step that will help reduce development costs and support the delivery of more affordable homes.

“However, the freeze on Local Housing Allowance will continue to place pressure on housing services and risks undermining efforts to help people off the streets. The housing sector is ready to deliver, but more work will be needed to reduce the use of temporary accommodation, support those with additional needs and improve the energy efficiency of existing homes.”

Wate Wallace, boss of Scottish homelessness charity Cyrenians, said: “This funding is focused on the crisis end of homelessness. The surest way to end rough sleeping is to stop people reaching that point in the first place.

“We’re disappointed the Chancellor has kept the Local Housing Allowance freeze. If the Chancellor is serious about ending homelessness, he could stop making it harder for Scotland to do its job. Together with the bedroom tax, it costs the Scottish Government tens of millions of pounds to mitigate, funding that could be better spent on funding prevention.”

Housebuilders warn of threat to supply posed by viability as Healey pledges ‘proportionate’ approach to regulation

Although the chancellor has pledged to take a more “proportionate” approach to housebuilding regulation by lowering biodiversity net gain requirements and ruling out major regulatory changes, housebuilders have repeatedly warned that viability continues to deteriorate.

Adam Daniels, chief executive of Vistry, said: “We would caution that the delivery of the government’s wider housing agenda remains at risk unless the housing development viability challenge is urgently addressed. This must include reducing regulatory burdens, bearing down on construction costs, and backing innovation such as advanced modular manufacturing of new homes.”

Craig Carson, regional managing director at Barratt London, said: “Rising costs and regulatory complexity continue to put pressure on viability. The commitment to no further changes to building regulations this Parliament is a welcome step. The industry has been calling for an end to shifting goalposts – now we have an opportunity to turn that certainty into investment and get more homes built.”

Will Your First Home actually make much of a difference?

Carson, along with several others, welcomed the ‘Your First Home’ equity loan scheme as a “positive step”, citing Barratt’s own research indicating that “73% of aspiring buyers feel more optimistic about buying their first home following the scheme’s initial announcement,” but some remain sceptical about the scheme’s effectiveness. 

“The measures confirmed by the chancellor today are unlikely to materially shift the dial in terms of unlocking investment and getting more homes built, with the government’s own estimates predicting that Your First Home will support the delivery of only around 20,000 new homes,” said Jodie Campbell, partner and head of residential development sales at law firm Winckworth Sherwood. 

She added: “First-time buyers account for a relatively small portion of the new-build market, meaning it’s unlikely to give developers and investors the confidence they need to progress with larger schemes. 

“Wider-reaching demand-side measures such as reforming the two main stamp duty surcharges – those on investment properties and overseas buyers – would offer a more effective market catalyst, as they’ve been a real stumbling block to investment in recent years.”

The OBR also warned the scheme, which will be backed by £4.7bn, will ”only have a marginal impact on housing supply given its limited overall size”

Analyst Anthony Codling, managing director at analysts RBC Capital Markets, said: ”Your First Home provides ‘a’ catalyst, but not ‘the’ catalyst we had hoped for. The funding level of £4.7bn over 5 years equates to volumes of c.14,000 p.a., less than half of the annualised run rate of Help to Buy II.”

Emma Toms, chief executive at the New Homes Quality Board, warned: “It’s important we learn the lessons of Help to Buy.”

She added: “As the government sets the terms for developers taking part, making clear quality standards and access to the New Homes Ombudsman a condition would protect buyers and taxpayers, and it’s something many developers are calling for. For first-time buyers stretching themselves to get onto the ladder, it would mean the reassurance that their new home is built to last, and that they won’t be left on their own if something goes wrong.”

Frustration over lack of detail on Your First Home

Mark White, managing director of SME housebuilder Bargate, said: “With housing and planning reform having been a key focus of Labour’s election campaign, it is frustrating that the chancellor trailed the introduction of Your First Home at the party conference, as we now know it won’t be rolled out until the spring.

”This has in effect created a six month deterrent for vying first time buyers to get a foothold on the market! The prolonged hesitation will impact every rung of the ladder and have a knock-on effect on housebuilders’ bottom lines in a year where new homes completions and transactions are already worryingly low.

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“It is disappointing that the full detail of the initiative wasn’t announced today, as expected. The success of the eventual roll-out of Your First Home will depend on mortgage lenders offering an attractively low interest rate, to reflect the reduced risk profile – compared to a 95% LTV product. We urgently need to know what the developer contribution will be for ‘Help to Buy 2.0’, together with confirmation it’ll be based on a 20% government loan and 2.5% buyer deposit.”

Construction skills challenges

The Budget also said the government is providing £100m of funding across 2027-28 and 2028-29 to expand Mayoral Apprenticeship Brokerage Pilots from 7 to 14 Mayoral Strategic Authorities across England. 

He said this will enable all current mayors to provide tailored support to young people and employers, particularly SMEs, to create more apprenticeship opportunities.

The construction skills permacrisis was also acknowledged by commentators, with  Paul Turner, chief executive of the National House Building Council, warning that “there is still a significant challenge ahead”. 

“Delivering more quality homes requires not only the right policy environment but also a skilled workforce capable of building them to the highest standards. We must skill up if we want to build up. Continued investment in construction skills and apprenticeships will be critical if we are to increase housing supply without compromising quality,” he said.

The government  said Alan Milburn’s report into why so many 18 to 24 year olds are not in education, employment or training will be published next month.

Will new devolved funding for regions make it easier to meet local housing need?

The government  fleshed out its plans to devolve more powers to regional leaders in the Budget with mayors to be handed control of business rates by the end of the decade. In a new funding model for regions, mayors will be given a 20% share of business rates from next year and, in 2028, an assignment of income tax and powers to introduce an overnight visitors’ levy.

The government is also supporting the roll out of “good growth funds” across England, which are intended to enable local leaders to bring together different funds into a single investment approach. It confirmed a bespoke borrowing facility of £1.5bn for mayors to support this.

Amanda Williams, chief investment officer at Aster Group, said: “Giving mayors more say over housing investment could make it easier to meet specific local needs, and success will depend on strong partnerships between councils, housing associations, developers and investors. Housing associations bring expertise in assembling land, securing finance and managing development that can help these partnerships deliver. The new VAT relief on land sales to registered social housing providers could support that work by enabling earlier site acquisitions and easing cashflow pressures on land-led schemes.

“The real measure of success will be whether devolved decision-making delivers the right mix of homes for local people. While the government is right to prioritise social and affordable rent, they’re only part of the picture. The announced changes to shared ownership show that the government recognises this. We now need the same ambition for other ways of delivering homes, such as community-led housing.”

At-a-glance: Budget housing measures

  • Reforms to ‘green book’ used by Treasury to assess business case for investing in projects - new guidance on developing place-based business cases which will mean housing projects can be considered together with other types of development
  • Extra £1.5bn for the Social and Affordable Homes Programme
  • New £4.7bn Your First Home equity loan scheme aimed at supporting 70,000 first-time buyers with up to 20% government equity loans
  • Removal of BNG requirements on brownfield land up to 1.5 hectares
  • Cheaper borrowing for councils for housing by extending the preferential Public Works Loan Board rate for a further year, to 2027-28, at 40 basis points below the PWLB normal rate
  • Zero-rate of VAT for land sold to registered providers of social housing
  • Flexible funding to invest in local authorities, boosted by £1.5bn of devolved loans for mayoral authorities - will back transport and regeneration projects
  • Roadmap for fiscal devolution - 100% of business rates will be retained by end of the decade
  • £100m local apprenticeship service funded from savings in welfare fraud and error
  • White paper and legislation next year on reforming welfare system following Milburn report
  • Further £430m for rough sleeping
  • No changes to building regulations for the rest of parliament, except building safety
  • The government will introduce a new First Time Buyer ISA from April 2029
  • Additional two percentage point increase in property income tax rates, building on a prior two percentage point hike from the 2025 Budget to create a total 4% percentage point rise starting in April

 

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