The letter covers main elements of the government’s social and affordable housing investment strategy…

The Minister of State for Housing and Planning, Matthew Pennycook MP, has written to all registered providers of social housing following the conclusion of the Spending Review 2025.

The letter details grant funding, rent settlement, building safety, warm homes, homelessness and housing quality.

Grant Funding:

The letter confirms £39 billion for a successor to the Affordable Homes Programme over ten years  starts from 2026-27 to 2035-36.

It makes clear that the £39 billion announced is all new money for this Spending Review and beyond, over and above the £12.3 billion budget for the AHP between 2021-2026.

It includes the £2 billion ‘Bridge’ funding in 2026-27 – a downpayment on the investment announced at the spending review.

It does not include the tail of funding already committed to individual social landlords under the previous programme. That will be an additional circa £2 billion for payments from 2026-30, linked to completions of homes under the current 2021-26 AHP.

The programme will prioritise homes for social rent but will also fund a mix of tenures including affordable rent and shared ownership.

The Spending Review also sets out that there will be £2.5 billion in low-interest loans to support new development, to complement commercial lending.

Rent Settlement:

The letter confirms the government will permit social housing rents to increase by CPI+1% each year from April 2026.

It states: “In order to give Registered Providers, lenders, and investors greater long-term certainty, and in light of the responses to the consultation we carried out last Autumn, we are doubling the length of the settlement from five to ten years.

“In response to the consultation carried out last autumn, providers were clear that the level of investment in new and existing social housing that is needed to deliver on the government’s ambitions would not be unlocked, unless a rent convergence mechanism is reinstated.

“Such a mechanism would allow rents on social rent properties that are currently ‘below formula’ (i.e. lower than the usual maximum that may be charged when a property is let to a new tenant) to increase by an additional amount, over and above the CPI+1% limit, up to formula level. This would be far fairer than a higher across the board rent increase, as it would only ask those who currently pay lower rents to pay a bit more.

The government is therefore announcing that it will implement a convergence mechanism as part of the new rent settlement.”

Building Safety:

“We will invest over £1 billion in social housing remediation and make it significantly easier for social landlords to secure upfront capital for remediation through government schemes,” the letter states.

“We have already identified many buildings that would benefit. Social tenants expect and deserve to feel safe in their homes – this investment will mean that remedial works can be completed much sooner, and that at the same time social landlords will be able to supply more of the new affordable homes that the country needs.”

Homelessness:

The government is providing £100 million through the Transformation Fund for early interventions to prevent homelessness. It is also providing £950m capital for the fourth round of the Local Authority Housing Fund (LAHF).

Housing Quality:

“I recognise that alongside confirmation of the funding packages detailed above, providers need certainty on the regulatory environment they are operating in, to manage their finances and increase ambitions on new supply,” writes Matthew Pennycook.

“We will enable long-term investment in the sector with regulatory clarity by consulting soon on the Decent Homes Standard, Minimum Energy Efficiency Standard, and how we will implement convergence and will set out detail on Awaab’s Law.”

Read the letter in full here.