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Chancellor Rachel Reeves has drawn up plans for a “housing bank”, to be announced as early as Wednesday’s spending review, alongside a potential long-term funding settlement for affordable homes of up to £25bn.
The plans would enable Homes England, the government’s housing agency, to more easily deliver cheaper financing to housebuilders by redesignating it as a ‘public financial institution’, according to two people familiar with the matter.
One of the people said the plan was akin to a “British housing bank”.
The planned change comes as Reeves has also considered a funding settlement for social housing worth up to £25bn to be disbursed over 10 years, they added.
The twin-track strategy means that deputy prime minister Angela Rayner’s housing department would win a slight increase in annual funding for the “Affordable Homes Programme”.
The current AHP settlement provided £11.5bn over five years to March 2026, roughly £2.3bn a year.
The AHP helps fund the construction of housing for people who cannot afford to buy or rent at market prices. Local authorities, private developers and housing associations can bid for funding from the scheme.
The potential redesignation of Homes England is connected to a decision Reeves made at the Budget in October to change the UK’s public debt target by allowing the Treasury to offset some liabilities with government financial assets.
The change to the fiscal rules allowed Reeves to bolster borrowing for investment while keeping to her aim of have debt falling in five years’ time.
Under the Treasury’s framework, a small number of ‘public financial institutions’ are trusted to responsibly create financial assets through big investments or large-scale lending.
Homes England would be one of just a handful of government bodies with that label, alongside entities such as the British Business Bank, the National Wealth Fund and the Student Loans Company.
The move would allow Homes England to deliver more finance to the housing industry, unlocking larger homebuilding projects and attracting more private investment.
“The idea is to help lower the cost of capital for developers,” said a second person familiar with the plans.
They added that Homes England would be able to drive low-interest loans for development and attract investment into homes owned by house associations that cannot be rented out because they are in disrepair.
The additional powers are not expected to produce an immediate increase in cash, but rather gather impetus over time and deliver a greater impact in the next parliament.
Tackling a lack of affordable housing is one of the most pressing issues facing the Labour government, which has promised to unlock housebuilding through planning reforms.
Around 1.3mn households are on waiting lists for social housing in England, the highest number since 2014, according to local authority data.
Housing Associations have been lobbying the government hard for more financial support and flexibility ahead of the Spending Review, with the chief executives of 20 of England’s largest associations writing to the Treasury to call for more assistance.
“Support would not just be through affordable grants but infrastructure funding, project loans, equity and joint ventures, land (especially public sector land) and guarantees,” they wrote in a letter seen by the Financial Times.
The Ministry of Housing, Communities and Local Government said it was taking steps to meet its “stretching target” of 1.5mn new homes in the parliament, with full details on funding plans to be announced on Wednesday.
“This government inherited an unprecedented housing crisis, but we will get Britain building again and deliver the biggest boost to social and affordable housing in a generation,” a spokesperson added.
The Treasury declined to comment.
