Rachel Reeves will unveil a landmark £39 billion investment in social and affordable housing as part of her first spending review, marking the single largest commitment to housebuilding in a generation.
The announcement, which comes after weeks of intense negotiations with cabinet ministers, is designed to jump-start Labour’s ambitious pledge to build 1.5 million new homes over the next parliament—a target that had come under growing scrutiny following warnings from Savills that the government risked falling far short.
The new funding, which will be spread across a decade from 2026 to 2036, represents a major uplift on the £11.8 billion that was allocated over five years under the previous government. It will support local authorities, housing associations and private developers to ramp up delivery of affordable homes, with a significant focus on unlocking thousands of units that have already been built but are currently unaffordable for housing providers to acquire.
Reeves is expected to tell MPs on Wednesday: “This government is renewing Britain, but I know too many people in too many parts of the country are yet to feel it. This government’s task – my task – and the purpose of this spending review is to change that.”
The new decade-long Affordable Homes Programme will also be backed by changes to social rent rules. Social landlords will be permitted to increase rents by 1 percentage point above inflation each year—a key demand from housing associations and a mechanism that will improve borrowing power and long-term viability for the sector.
In tandem, Reeves will launch a consultation aimed at addressing rent disparities across the social housing sector, with the goal of gradually aligning the lowest rents with higher ones to ensure fairness and funding certainty.
Angela Rayner, the deputy prime minister and housing secretary, was one of the last cabinet members to reach agreement with the Treasury, reportedly holding out until late in the weekend to ensure her department received the level of funding she believed was necessary to make the 1.5 million homes target achievable.
The deal represents a significant win for Rayner, whose department is now set to be among the biggest beneficiaries of the spending review, alongside transport and energy.
Industry welcomes ‘transformational’ move
The housing announcement was immediately welcomed by key sector voices.
Kate Henderson, chief executive of the National Housing Federation, called it “the most ambitious affordable homes programme in decades,” adding: “This is a transformational package for social housing and will deliver the right conditions for a decade of renewal and growth.”
Shelter’s director of policy and campaigns, Mairi MacRae, described the investment as a “watershed moment in tackling the housing emergency,” saying it had the potential to “reverse decades of neglect.”
The additional capital spending will be financed through revised fiscal rules introduced by Reeves earlier this year, which allow for increased borrowing specifically for long-term investment.
Planning reforms and legislation
The housing boost follows the successful passage of Labour’s planning reform bill through the House of Commons this week—another key step in accelerating housing delivery.
The bill is designed to loosen restrictions on previously protected sites, making it easier for developers to secure planning approval and for local authorities to meet demand. But the move has triggered concerns from environmental groups, who argue that it could endanger vulnerable habitats.
Several Labour MPs reportedly pushed the Treasury to intervene in recent days, fearing the housing department might backtrack on the reforms under pressure from backbenchers calling for tighter environmental protections.
The Treasury, however, has stood firm, reinforcing the government’s determination to push through changes needed to support construction targets.
The housing announcement is one part of a broader £113 billion capital spending uplift, which Reeves will formally unveil on Wednesday. That includes £15.6 billion for local transport projects and a further £14.2 billion earmarked for the construction of the Sizewell C nuclear power station.
Together, the investment package is intended to mark a new chapter in public infrastructure, reversing years of underinvestment and aligning economic priorities with Labour’s agenda for regional renewal.
Rough sleeping law to be scrapped
Rayner will also move to repeal the Vagrancy Act of 1824 within the next year, ending the legal power to arrest individuals for sleeping rough. Campaigners have long called for the archaic law to be scrapped, and its removal has been described as a significant step toward more compassionate homelessness policy.
At a glance: What’s in the £39bn housing package:
• £39bn in grants over 10 years (2026–36)
• Largest single uplift in affordable housing investment in decades
• Social landlords can raise rents 1% above inflation per year
• Consultation on rent equalisation to reduce disparities
• Thousands of unsold affordable homes unlocked from private developers
• Supports Labour’s goal to build 1.5 million homes over the parliament
With this announcement, Reeves not only shores up Labour’s credibility on housing but also attempts to reset the narrative after a challenging few weeks dominated by rising unemployment, a winter fuel U-turn, and disquiet over budget constraints.
Now, with housing, transport, and energy investments locked in, Labour hopes to prove that its plan to “renew Britain” is not just rhetoric—but a visible reality in bricks, mortar, and meaningful change.
