This afternoon, the Chancellor Rachel Reeves outlined the Government’s spending plans in the 2025 spending review. Below, we’ve summarised some of the key issues that will impact private renters.
Social Housing
The Chancellor made clear the Government’s aim to create more social homes, saying building social housing had been “neglected for too many decades.”
She announced a new Affordable Homes Programme, investing £39bn over the next decade, including direct Government funding to support housebuilding. The government will also invest £4.8bn over four years in private sector housebuilding.
The Chancellor described this funding as “the biggest cash injection into social and affordable housing in 50 years, while the National Housing Federation described it as a “transformational package.” The number of social homes this could fund has been estimated at up to 40,000 per year, though we need a lot more detail, including how many will be genuinely affordable and how many at just 20% lower than market rents.
But, some other organisations weren’t so positive. The think tank the New Economics Foundation, for example, said the funding falls short of the £11.8bn per year needed to build enough social housing to meet needs across England.
While the investment in social housing won’t deliver the 90k social homes a year we and many other organisations in the housing world think is needed, it is a significant boost to previous levels of funding and should be seen as a positive step.
But, even with this investment, it will take years for private renters to feel the benefits. That’s why the Government must act to slam the brakes on soaring rents through introducing limits on how much landlords can raise the rent.
Warm Homes
In the lead up to the spending review, speculation was rife that the Chancellor was considering cutting funding to implement the Government’s Warm Homes Plan, which aims to improve the energy efficiency of homes and lower energy bills.
Whitehall officials said ministers had been assessing whether they could trim the scheme as part of the review of all departmental expenditure. But, following strong campaigning from Generation Rent, the Chancellor announced the Government will uphold it manifesto commitment to invest £13.2bn in the Warm Homes Plan this parliament.
The investment will be allocated across schemes that support the roll-out of heat pumps, alongside energy efficiency measures and other low-carbon technologies, such as solar panels and battery storage. With private renters most likely to live in fuel poverty, this is very welcome. But the Government must protect renters from rent hikes and eviction in the wake of energy efficiency improvements.
Mortgage Guarantee
The Chancellor has also made the Mortgage Guarantee Scheme introduced in 2021 by the previous government permanent. This makes it easier for renters with little saved for a deposit to buy a home – typically providing mortgages for people with a 5% deposit.
Reviving home ownership has been a priority of successive governments since the financial crisis, but there are limitations to policies, like the Mortgage Guarantee Scheme, that involve lending more money to pay high house prices – rather than making those prices more affordable. Either you do too much and stoke house price inflation, making it harder for renters to buy, or you do too little and few households actually benefit.
Judging by its record, the current guarantee scheme falls into the latter camp, with just 53,000 households benefiting from it, and just 28% of those were able to buy a home worth more than £250,000, roughly the average house price.
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