A give-and-take Budget
It has been a long time since I’ve seen a Budget and all its surrounding announcements so strongly committed to council and social housing construction, and the importance of homes to all our lives.
But it’s also been a give-and-take type of Budget where the implications for our public sector clients and local suppliers are not immediately obvious. So here are some thoughts on what struck me most from the news this week.
On newbuild homes…
First, let’s celebrate more funding for council housebuilding. Another £1.5bn was given to top up the SAHP (Social and Affordable Homes Programme) to deliver another 10,000 homes in England. Hopefully, this will help replace the same number of homes lost through Right to Buy last year.
The SAHP is a heavily oversubscribed programme, but the extra money will now take funding for new housing to more than £40bn over the next 10 years. £9.5bn of this is already allocated by Homes England for 73,000 homes outside London, and we will see other waves of development coming through soon.
The Chancellor’s extension of preferential Public Works Loan Board borrowing and the new VAT relief on land sold to registered social housing providers also provided very valuable support. These financial changes reduce risk and give confidence to potential developers. The VAT exemption needs secondary legislation but should take effect from 1 April 2027.
Two big challenges face our sector though: the capacity to deliver, and the basic viability of new development in the first place.
On the former, the government is working on a 10 Year Plan to deliver “the largest council housebuilding programme since the post-war era”. But there has been little information on how local authorities are expected to rebuild their specialist development teams, recruit experienced project managers and surveyors, or strengthen procurement and commercial expertise.
From our perspective, working in partnership is the only pragmatic solution right now, and this means bringing together public sector clients and procurement teams with a trusted local supply chain of private sector organisations that can help deliver on the ground. So this might end up being where we can help most. Councils seeking to restart or expand their development programmes may particularly value our support with procurement strategy, market engagement and supplier selection.
On viability, the Budget statement acknowledged that the cost of building a home is at a record high, citing material and labour inflation alongside regulatory and policy costs.
To try and mitigate this, the Chancellor promised no major changes to building regulations for the remainder of this Parliament, except those needed to improve building safety, including implementation of the Grenfell Inquiry recommendations. He also proposed an exemption from biodiversity net gain requirements for residential brownfield developments on sites of up to 1.5 hectares.
This is useful, but unlikely to be enough to significantly speed up delivery of new social housing, particularly in London and the South East. Again, the focus on cost and productivity strengthens the commercial case for good procurement.
On existing homes…
On retrofit and refurbishment issues, the Budget was much more muted, other than to announce a worrying £1 billion cut from Warm Homes Plan capital grants as part of the Department for Energy Security and Net Zero's spending reprioritisation.
The irony for is, it will take time to gear up for a big newbuild programme, but in contrast, social landlords have the planning, procurement and project management skills and experience to unlock significant refurbishment and retrofit programmes right now.
Thankfully, the government says the majority of the Warm Homes Plan funding for low-income households and social housing, delivered through mayors and councils, is protected. It is also maintaining the Boiler Upgrade Scheme at £400 million in 2027/28, rising broadly with inflation thereafter.
But the retrofit market is very fragile at the moment. The Budget did nothing to remove uncertainty about which schemes will proceed and the timing of investment.
Our focus will need to remain firmly on helping clients deliver viable, high-quality retrofit projects, particularly those addressing fuel poverty and poor housing conditions, and ensuring access to the best possible local supply chain with sufficient resilience to ride out these uncertain times.
…And on those with no homes at all
Just before the Budget statement, the Prime Minister restated his commitment to address homelessness and get rough sleepers off the streets by Christmas.
The Chancellor literally doubled-down on this, announcing an additional £432 million for the next two years on top of the £442 million of funding provided since July 2026. Money to be spent on accommodation, support for people with complex needs and longer-term settled housing intended to prevent people returning to the streets.
The funding recognises this should not be just about providing extra bedspaces. There are thousands of empty properties that could be brought back into use with the right types of retrofit and refurbishment, and a quick turnaround to bring void properties up to a good standard could really help provide more much-needed temporary accommodation instead of relying on putting people into B&Bs and hotels.
And while hope starts with a home, it also needs nurturing. Once in these properties, residents need sustained support to overcome complex problems, rebuild trust, help them into work and offer a real route out of poverty. This will need all of us in housing – including procurement, health and social services – to work in partnership, and this should be our priority next year, and in the years to come.
Devolved fiscal freedoms
Finally, a thought about the Budget's Fiscal Devolution Roadmap which proposes increased financial powers for mayoral strategic authorities. This also includes a new £1.5bn borrowing facility for those authorities from 2028 for ‘good growth’ projects like housing, high streets and transport.
In my view, the Chancellor’s vision of full fiscal devolution is a huge ambition, and could positively transform the delivery of social housing across the country. It provides the promise of significant power to mayors, and eventually to the procurement teams in many local authorities, driving local economic growth and meeting local housing need.
For framework specialists like us, a priority must also be to maximise social value from every pound of public spending, so that the benefits of this fiscal reform can be felt within every local community. Not every part of the country has yet got a devolution deal, so we also need to ensure that no one’s left behind.
Social value was also reinforced in the Budget by the announcement of another new National Procurement Policy Statement for March 2027, prioritising high-quality jobs, fair pay and skills. The government wants to set a target of at least 3% apprentices within the workforce on large government construction and infrastructure projects.
At the same time, the government published guidance on the Social Value Model, which applies to central government procurements worth £1 million or more. Its requirements are certainly not extended to local authorities or housing associations now – but its ambitions may trickle down in due course.
The fundamental importance of procurement expertise
All of these developments support a clear direction of policy: government wants public expenditure to contribute more directly to employment and economic development.
And I recognise it’s a tough ask for the public sector. The government is directing more money towards new social housing, but reducing capital grant funding for the Warm Homes Plan. It wants construction to become faster and more affordable, yet acknowledges that building costs have reached record levels.
Overall, I feel our clients will need greater help turning government funding into deliverable, affordable projects with measurable benefits for communities. LHCPG's combination of Gold Standard procurement expertise, regional relationships and social value support is likely to be in high demand.
