Investing in social housing

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Housing affordability and housing need are in an acute state of crisis in England. The number of households waiting to move into a social home has grown every year since the pandemic, peaking at 1.34 million households in 2025, an 18% increase in just five years. The chronic shortage of social housing, combined with a growing unregulated private rented sector (PRS) and a freeze on local housing allowance (LHA) has pushed more than 135,000 households into temporary accommodation. This has an immense social cost for families and forces councils into unsustainable economic positions.

In June 2026, shortly after securing his seat in parliament, Andy Burnham pledged to oversee ​“the biggest council housebuilding programme since the post-war period”, a commitment he has reiterated since becoming prime minister. To deliver council homes at the scale promised, the government must build on promising progress made over the past few years. At the centre of its recent efforts to recentre non-market housing is the 10-year £39 billion Social and Affordable Homes Programme (SAHP). While the SAHP provides much-needed longer-term funding certainty, it is not designed to deliver the level of council housing that the prime minister has committed to.

If the government is serious about delivering record post-war levels of council and social housing, the SAHP must be scaled up. Funding must be front-loaded within the 10-year programme and paired with reforms to increase access to low-cost land and financing. Further investment is also needed in rebuilding hollowed-out council delivery capacity. Meeting the scale of the prime minister’s ambition will need additional grant funding to be committed immediately and at future spending reviews. Within the current spending review 2025 period (2026‒27 to 2029‒30), a top-up to the SAHP of £7.9bn that is ringfenced for council and social housing could support the delivery of 104,000 council and social homes, a 64% increase on current delivery targets. That rate of growth would put England on track to deliver 90,000 council and social homes per year by 2032‒33, the minimum level of social housing supply that organisations such as Shelter and NEF assess as required to meet current need.

To ensure that an increase in the total funding package and pace of disbursement has the greatest social and economic impact, further reforms are needed to bring more existing dwellings into public and community control, and rebuild councils’ capacity as drivers of delivery. Acquisitions of existing housing stock can play a valuable role in rapidly boosting social housing supply and mitigating the fiscal cost of the temporary accommodation crisis. The government also recognises the importance of diversity in the non-market housing system; a new Cooperative and Community Housing Fund can provide seed funding to this segment of the sector. Devolving further powers to mayors will give regions the autonomy to respond to local need. This, paired with further investment in local government delivery capacity, will help re-establish councils – in their capacity as publicly controlled and democratically accountable institutions – as the primary vehicle for housing delivery. Rebuilding council capacity will take more than just time; it will depend on structural reforms to the fiscal rules to ensure that council borrowing is not treated unfavourably compared to lending to housing associations.

In this paper, we argue that social housebuilding since 1980 has lost its ability to act as a counterweight to cycles of low demand in the private housing construction sector, which it very effectively fulfilled earlier in the 20th century. The post-war model – whereby the financial risks and rewards of public housebuilding sat with the public sector – separated the resources for building council homes from demand for market housing, creating a countercyclical source of housing supply that could continue to deliver during periods of weak market demand. It supported a scale and tenure mix – often close to 100% social housing – that is rarely achievable under today’s delivery model, which is structurally geared towards much lower levels of delivery. With less public subsidy, social housing supply is dependent on recycling profits from private development, either through Section 106 (s106) agreements with private developers or through councils and housing associations ​“cross-subsidising” social housing by building market homes. The result is a fundamental reversal of the post-war delivery model to one that is primarily pro-cyclical.

Boosting the SAHP and bringing allocations forward in the programme timeline implies finding significant additional capital in a fiscally constrained environment. Unlike most other categories of capital spending, however, housing acts like a financial investment as well as a public asset. Capital spending on council housing gives the state a stake in any rises in the value of land it acquires. It also builds a lasting public asset, which reduces long-run spending on housing benefits compared to today: at present public spending subsidises the private rental market via social security and nightly fees for emergency accommodation, whereas appropriate spending on housing should reduce this bill in future. This is the ​“bricks” versus ​“benefits” trade-off, where capital investment builds a lasting public asset while revenue spending covers the cost of not having built it. More broadly, the fiscal framework must support, not discourage, investment in productive public assets.

This paper’s overall view is that achieving the government’s laudable ambitions for record council and social housing will only be possible if it brings together a bold mix of monetary, financial, and fiscal instruments, not to mention tackling other non-financial constraints on housebuilding. Depending on its priorities, the government might seek to fund this programme with new revenue-raising policies; while not the focus of this paper, it points to viable options to offset additional spending on housing, like structural reforms to capital gains tax and levying national insurance contributions on investment income. Recent programmes such as the £39bn SAHP are landmark steps in restoring an adequate level of social housing provision in England, but delivering ​“the biggest council housebuilding programme since the post-war period” demands another level of policy action entirely.