The government has announced plans for a new five-year rent settlement in social housing along with a £500m top-up for the 2021-26 Affordable Homes Programme.

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Rachel Reeves, chancellor of the exchequer, has announced a package of social housing measures ahead of the Budget on Wednesday

Ahead of the Labour government’s first Budget on Wednesday, the Treasury over the weekend announced more details of its plan to “unlock housing”.

It said the government will consult on a new five-year social housing rent settlement, with the intention to increase rents in line with the consumer price index measure of inflation plus 1%, as is the case under the existing settlement that expires in April 2026.

A spokesperson said: “The stock of social housing will be increased through a new five-year social housing rent settlement that will give the sector more long-term certainty on funding and allow them to invest in tens of thousands of new homes.”

The government will also through its consultation also seek views on alternative options such as a 10-year rent settlement, which has been called for by social housing sector bodies including the G15, the National Housing Federation, the Local Government Association and the Chartered Institute of Housing.

The package also includes an extra £500m in grant funding to top-up the current £11.5bn AHP and deliver around 5,000 additional affordable homes.

The sector will however have to wait until the Spring for details of grant funding following the end of the current AHP in 2026.

The government says it will publish a new housing strategy next year and set out details of “new investment” to follow the AHP in the Spring spending review.

It said the new programme will deliver a mix of home for sub-market rent and home ownership, with a “particular focus” on social rent. Angela Rayner, in a statement said this will “lay the foundations for the manifesto commitment to deliver the biggest increase in social and affordable housebuilding in a generation, and to support councils and housing associations to build their capacity and make a greater contribution to affordable housing supply.”

The government has also confirmed it will implement changes to the Right to Buy scheme in line with Labour’s manifesto pledges. Discounts will be reduced and there will be greater protections for newly-built council housing, while local authorities “will be able to keep 100% of the receipts generated” from Right to Buy sales.

It said: “This will enable councils to scale-up delivery of much needed social housing whilst still enabling longstanding tenants to buy their own homes.”

The government has also confirmed £128m of funding to deliver projects at “complex” brownfield sites, including a £56m investment to deliver 2,000 homes at Liverpool Central Docks, £25m to establish a new fund with Muse Places and Pension Insurance Corporation to deliver 3,000 homes and £47m to tackle nutrient neutrality issues which have seen an estimated 28,000 homes held up due to river pollution rules.

Rachael Williamson, head of policy and external affairs at the Chartered Institute of Housing, said the funding announcements, alongside the Right to Buy changes, represent “a positive step towards tackling our broken housing system”

She also said a five-year rent settlement is welcome but re-iterated a preference for a 10-year agreement.

She said: “Long-term certainty is essential for the social housing sector to effectively plan and invest so the introduction of a 5-year rent settlement is welcome. However, to fully support effective planning and sustainable investment, a 10-year settlement is needed. This level of certainty would empower housing providers to make the long-term commitments required to deliver the affordable homes that our communities urgently need and provide greater transparency for residents.”

Kate Henderson, chief executive of the National Housing Federation, said she “strongly” welcomes the £500m top-up to the AHP.

She said: “This vital injection of funding, which we’ve been urgently calling for, will support housing associations to continue to deliver much needed affordable homes in the immediate term and prevent a collapse in delivery.

She said the NHF welcomes the consultation on the new rent settlement saying it will “provide both transparency for residents and long term certainty and financial stability for social housing providers.”

Henderson said: “To achieve the affordable homes needed across the country, alongside this short term top-up, we look forward to a new long term housing strategy announced at the next spending review, including a significant boost in funding for social housing.”

Louise Gittins, chair of the Local Government said the Right to Buy measures will “support the replacement of sold homes and to stem the continued loss of existing stock.”

She said: “A five-year rent settlement is a step in the right direction in providing certainty for councils on rental income, but to really strengthen and provide stability to Housing Revenue Accounts, a minimum 10-year rent settlement is needed, alongside restoration of lost revenue due to the rent cap and a review of the self-financing settlement of 2012.

“This would better support long-term business planning to ensure councils can deliver high quality homes and associated support for their tenants.”