As the social housing sector digests the Chancellor Rachel Reeves’ first Budget, we offer our at-a-glance take on the key changes and their implications. In the coming days, we’ll delve deeper into these announcements to be better understand the impacts. Our aim is to equip clients with actionable strategies to navigate the evolving landscape of social housing effectively. Look out for in-depth assessments and recommendations as we analyse how these measures will shape the sector moving forward.
What does it mean for new social homes?
The Treasury has announced a £500 million top up to the current £11.5 billion 2021-26 Affordable Homes Programme (‘AHP’) to support the delivery of up to 5,000 additional new social homes.
The DTP view: Whilst positive news and the additional funding is very welcome, the sector will have to wait until the government publishes its new housing strategy and the Spring spending review for clarity on the grant support available after 2026.
The initial £500m boost and the promise that the new programme will have a “particular focus” on social rent does, however, bode well for a Spring spending review that will enable Angela Rayner to follow through on her promise “to deliver the biggest increase in social and affordable housebuilding in a generation”.
Despite the details of the post 2021-26 AHP programme still being unknown, Registered Providers for the first time in many year are able start gearing up with some confidence to deliver increased levels of development.
What does it mean for rent?
The Budget introduces a provision allowing social landlords to fix rent increases for a five-year period. This measure provides much-needed financial security, enabling landlords to plan and invest in their housing stock without the threat of unpredictable rent fluctuations. By stabilising rent levels, the government aims to ensure that tenants can afford their homes, supporting the overall health of the social housing market.
The DTP view: The announcement of the much anticipated social rent settlement and confirmation that rents will be set at CPI +1% for 5 years after the current arrangement expires in 2026 is extremely good news. It will enable to sector to plan income with a greater degree of certainty than is has had in recent years. The timing of the announcement will enable the impact of the announcement to be built into business planning for 2025/26 and onwards and DTP’s next iteration of detailed business planning assumptions to be issued following the meeting of the Monetary Policy Committee on November 11th will incorporate DTP’s latest guidance on rent increase, forecast inflation and interest rates.
The rent settlement will be subject to a consultation which will include the question of a 10 year settlement. The 10 year settlement would give the sector an increased level of certainty that will enable it to make the genuine long-term investments required to significantly increase the number of affordable homes its builds. DTP therefore encourages everyone to take the opportunity the consultation will afford to lobby for a longer term settlement.
What does it mean for right to buy?
Discounts under the Right to Buy (‘RTB’) scheme will be reduced, a move designed to limit the loss of social homes to the private sector. This adjustment addresses the ongoing depletion of social housing stock caused by the scheme and seeks to protect existing homes. Furthermore, councils will be empowered to retain 100% of the receipts from Right to Buy sales, allowing for reinvestment into new social housing projects.
The DTP view: The move, which will help stem the loss of social housing assets, is welcome. The cut in discounts available leading to a reduction in RTBs may cause some housing associations difficulties as the short term boost a business plan tends to receive from a RTB sale is removed. Over the longer term, an association would however be expected to benefited from the continuing contribution provided by the retention of properties.
Again the timing works well for the 2025/26 business planning process allowing RPs time to make an assessment of the effect the change of policy will have on their tenants and assess the impact of a reduced level of RTBs on the surplus/deficit arising on the disposal of properties, future rental income, operating costs and long term investment requirements.
What does it mean for individuals in lower paying jobs and/or in receipt of benefits?
In addition to the confirmation that there would be no increase to income tax, employee’s national insurance and VAT this afternoon’s budget announcement included a number of measures support the low paid and those in receipt of benefits including a 6.7% increase in National Minimum Wage to £12.21/hour, changes to the carers allowance enabling carers to earn more and not lose the allowance, and a reduction in deductions from Universal Benefit.
The DTP view: The proposed measures will benefit those on lower incomes and/or in receipt of benefits many of whom are social housing tenants. RPs will hope to see an indirect benefit though improved rent collection, reduced arrears and sustainable tenancies. The kicker however, comes in how it will be funded….
What does it mean for Employer National Insurance?
Employer National Insurance contribution rates will increase from April 2025 by 1.2% to 15% and the secondary threshold above which employers have to start paying Employer National Insurance contributions will reduce from the current £9,100 to £5,000.
The DTP view: The increase in Employer National Insurance contributions was widely expected, but the size of the fall in threshold drew an audible gasp from MP’s when the announcement was made in the House of Common’s this afternoon. There will be allowances to protect smaller employers from the full impact of the changes but for the majority of employers this will represent a significant increase in employment costs.
As part of the forthcoming planning cycle, DTP recommends that a detailed assessment of the impact on staffing costs of both the change in the level of contributions and the reduction in the threshold is undertaken. The forecast cost will need to be reflected in business plans and the expected increase compared to previous estimates may well require mitigating action to be taken. The combination of a rent increase limited to 2.7% for Financial Year 2025/26 and an increase in staffing costs along with other overheads is expected to see operating surpluses next year placed under particular pressure.
If you would like to learn more about how DTP can support you in navigating the changes outlined in the Budget, whether through strategic advice, policy analysis or practical support, please get in touch with us – contact DTP MD Andy Roskell – a.roskell@dtp.uk.com or DTP Director A.gladwin@dtp.uk.com
