Author: Rose Grayston

Rose is editor of Red Brick. She is an independent consultant working on housing policy, research and campaigns.

Over the last decade, Rose has worked to develop and win support for solutions to the UK’s housing crisis - as a Labour activist and founding member of Open Labour, through roles at Shelter, the New Economics Foundation and Generation Rent, and most recently as Expert Adviser to Matthew Pennycook, Minister for Housing and Planning.

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Can England afford (not) to build council homes?

Before the 2024 General Election, I had the privilege to work with England’s largest council landlords on Securing the Future of Council Housing. The report set out five key recommendations to allow councils to once again play a major role in housing supply, and to refurbish and improve existing homes and neighbourhoods after decades of under-investment.

It is an ambitious vision for a new, better relationship between central government and council landlords. Over 100 councils led by different parties across the country backed the report, laying the ground for a powerful coalition which has successfully influenced Government policy since. Every council involved has been essential in raising the volume of council housing’s voice, but particular credit should go to the London Borough of Southwark under Kieron Williams’ leadership for kickstarting the campaign, and to Sheffield City Council and Leeds City Council for helping it spread.

On Monday, Andy Burnham pledged the ‘biggest council housebuilding programme since the post-war period’ – a period when councils delivered over 4 million homes in 36 years. Since that time, more council homes have been sold than new ones delivered. It’s been a long wait, but it may finally be time for a renaissance in council housing.

But can we afford it?

Yet serious questions are being asked about whether we can afford it. This is not just because it costs money to build low-cost social homes. It is because councils are public bodies, and their borrowing is ‘on balance sheet’. Most social homes in England today are owned and delivered by non-profit Housing Associations, whose borrowing is ‘off balance sheet’. It doesn’t count towards public debt. That difference has shaped housing policy for decades.

In this blog, I’m going to try to demystify the impact of council housing on public debt, and how the UK’s fiscal rules change things.

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How council housing came under financial attack

Council housing is treated differently from all other council-owned assets in accounting terms. Council landlords keep rental income in a Housing Revenue Account (HRA), which is kept separate from other council income. This is to protect social tenants’ money, so it doesn’t get used to fund general council services.

In 2012, the Government and councils agreed a ‘self-financing settlement’ aiming to make HRAs more independent and more sustainable. The settlement was supposed to give councils the financial certainty to invest in their homes, but it was quickly ripped up. Social rents were cut and capped with little notice, borrowing rates for councils were increased overnight, and councils had to sell more homes with bigger discounts following Right to Buy reforms. Top it all off with a pandemic, geopolitical turmoil and rising inflation and interest rates, and the unsurprising result is that most HRAs are in poor financial health. A 2024 report from Savills and the Chartered Institute for Housing suggested that debt cancellation of £17bn would be needed to make HRA borrowing sustainable across the board. This means many council landlords cannot invest in homes in the ways communities need.

Accounting for council housing

In the UK’s national accounts, all HRAs are consolidated and treated as a single ‘non-financial public corporation’. This means they count towards public debt for the purposes of the UK’s fiscal rules. Fiscal rules are the Government’s self-imposed limits on how much it can borrow, spend and accumulate debt. They are designed to reassure financial markets that the public finances will remain sustainable and so keep the Government’s borrowing costs lower.

Before the 2024 autumn budget, the UK used Public Sector Net Debt (PSND) for our fiscal rules. Council housing performed particularly poorly under this measure. Borrowing to finance public investment – including in council housing – increased the headline debt figure, even if the Government acquired valuable assets in return.

The current Government switched from PSND to Public Sector Net Financial Liabilities (PSNFL). The new rules still count debt the Government owns, but they also count financial assets the Government owns – though not physical assets like homes.

This is where things get interesting for council housing.

By far the largest source of borrowing for council housing is from the Public Works Loan Board (PWLB): effectively, councils borrow money from the Treasury, which raises the money by selling gilts on the international markets. When the Treasury lends to council landlords in this way, under PSNFL it actually creates an asset for the public sector: the money councils owe to HMT.

The result is that investing in council housing is a lot easier than it used to be. Let’s say the Treasury agrees to ‘forgive’ £100 million of unsustainable HRA debt to give councils some breathing room, and councils then take out £100 million of new PWLB loans.

Under the old debt rules, this would have looked like the Government simply taking on more debt. Under the new PSNFL rules, it is treated more like cancelling an old loan and then making a new one. The council owes the Treasury £100 million, but the Treasury also owns a £100 million loan. That new loan is recognised as a public financial asset and is largely netted off public debt.

So there’s no reason not to invest in council housing?

Not quite.

New PWLB borrowing for council housing still increases the size of the Government’s balance sheet and the amount of money the Treasury has to raise from investors to finance the new PWLB loans: HMT has to borrow to on-lend to councils. It is unclear how markets would react to a large-scale increase in investment for council housing using the current model. That depends partly on the scale of new PWLB lending, but above all on investor expectations of the UK’s wider fiscal position.

There’s another problem for council housing. While PSNFL makes investing in council homes easier, it also makes other models of delivering social housing even more fiscally attractive. In February 2026, the Government announced a £2.5 billion scheme to provide loans to Housing Associations at 0.1% for 25 years. Incidentally, that’s a much better deal than councils are getting from the Public Works Loan Board at the moment!

Under PSNFL, these loans to HAs are ‘financial transactions’ because the Government acquires a financial asset (a loan) in exchange for cash. But unlike councils, when HAs take out loans from the Government it does not create a liability for the public sector, because their borrowing is ‘off balance sheet’.

If you can deliver the same kinds of homes using private borrowing via HAs, you may get the same policy results with less public sector borrowing and less gross balance sheet expansion. That should make it easier to maintain investor confidence and help keep the Government’s borrowing costs lower. And that may actually be key to increasing investment in social housing: if the UK can borrow more cheaply, we have more space to increase the size of funds like the Social and Affordable Homes Programme. That’s essential to unlocking more social housing supply.

Can we afford not to invest in council housing?

It’s complicated and there are no easy answers. But alongside asking if we can afford to build council homes, we also need to ask if we can afford not to. The clearest fiscal argument here concerns the high costs managing homelessness.

Councils in England now spend £7.7 million every day to put people up in expensive – often sub-standard – Temporary Accommodation. HAs play a vital role in tackling homelessness, but the buck for homelessness ultimately stops with councils. No one else is incentivised to act the way councils are. Getting councils off the bench and delivering homes may be the only way England stops managing homelessness and starts preventing it.

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How to increase housing supply: Use every tool in the box

Norwich city by pam fray, CC BY-SA 2.0

Britain needs more homes. We should use policy to get empty homes back into use and to encourage people with extra space to downsize – but that won’t change the fact that the UK has been under-delivering homes for decades compared to other Western countries.

Yet our housing crisis is not just a crisis of low supply. It is a crisis of overdependence on a single model of supply. For decades, we have relied overwhelmingly on speculative private development. Developers buy land assuming they will build market sale homes for the highest prices possible in a given local market. They then wait as long as necessary to sell at the prices they assumed when buying land. When prices fall or build costs increase, as they have done recently, supply slows. That is not a moral failing: it is how the speculative development model is designed to work.

The planning system bakes in this housing model, taking for granted that this is how the majority of homes will be delivered, and seeking to cream off some of its profits to build social housing and infrastructure (via Section 106 agreements in England and Wales, and Section 75 agreements in Scotland). No resilient country should rely so heavily on one delivery model for something as fundamental as housing.

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There are two basic theories at play in the debate about how to increase housing supply in the UK:

  1. Make this speculative development model as easy, smooth and profitable as possible
  2. Diversify the UK’s housing supply away from this one over-dominant model of housing supply

I would argue it is self-evident that the gains from the first strategy are bound to be too limited to make a difference to most people’s lives. Reforms to planning and regulation matter. Britain does need a faster, more predictable planning system. But planning reform alone cannot solve a housing crisis rooted in overdependence on a single speculative delivery model that relies on maintaining prices where they are. Since current prices are far too high for most people to afford, this supply model will only ever be able to cater to a minority. Increasingly, it sells homes to first time buyers with support from the so-called ‘Bank of mum and dad’. For the rest of us, our only possible hope of buying an average priced home in England is to be in the top 10% of earners in the country.

Now let’s explore the second strategy: free the UK from over-dependence on the speculative model. Healthy housing systems use many delivery models at once: private sale, social housing, community-led housing, Build to Rent, co-operatives and specialist housing for older people.

The most direct way to diversify how we build homes is to use the tried and tested model of mass social housebuilding – as discussed in Labour Housing Group’s 2020 report, The Missing Solution. Policy and funding support must enable councils and housing associations to ramp up supply. To scale up social housebuilding anywhere close to the levels needed, we need two things.

  1. Sources of land protected from speculative housebuilding. If social landlords are competing with speculative housebuilders for the same land, they will either lose or buy land at an extortionate and unsustainable price.
  2. Public grant and affordable finance to cover the costs of building homes, so that rents can be kept low and affordable for social renters and homes can be managed and maintained to decent, safe standards.

It is a moral and economic imperative for governments across the UK to scale up this model as much as humanly possible, as fast as humanly possible. We can and must do more – for example on affordable land supply, front-loading grant, extending low-cost loans, building capacity in councils and community-led housing groups, and supporting acquisitions from the market.

But after 14 years of Conservative misrule of our economy, aggravated by war and international turmoil, it is difficult to see how the UK can scale up social housebuilding as quickly as we need to confront our housing crisis in the way that people deserve. It is going to take time to rebuild social housebuilding after decades of hostile policies.

I don’t want to ask people to wait. I want us to use every tool in the box to get every person in this country in a safe, affordable, decent place to call home. That means using policy to support as much diversification of housing supply as possible:

None of these alternative private development models alone will solve the housing crisis – but done right, they can all help. All have untapped potential to provide more ‘Affordable Housing’ through planning agreements.

I understand why many on the Left are sceptical of new profit-driven development models. But there is no doubt they are playing an important role in diversifying housing supply in other countries with similar housing problems to our own. Britain’s housing crisis is too deep, and too urgent, for ideological purity or single-solution thinking.

We must build far more social housing. We should reform planning. We should support community-led housing. We should use Build to Rent, specialist housing and student housing where they help free up supply elsewhere.

The goal is not to defend one development model against another. The goal is to create space in our housebuilding system for every model that can contribute to ending the housing crisis.

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Blog Post Renters' Rights Act

Renters’ Rights Act lays the foundations of housing justice for private renters

On 26th October 2022, I received a Section 21 ‘no fault’ eviction notice. That meant my partner and I had two months to find a new flat. Three unsuccessful offers, six weeks, a lot of stress and a 40% increase in our monthly costs later, we managed to move into a new place in the same neighbourhood in time for Christmas. It was a grim, expensive experience.

Frankly though, my partner and I could take it. We had some savings, jobs flexible enough to allow us to go to flat viewings at little notice, and enough income to swallow the bitter pill of rapidly escalating rents.

Most private renters are less able to absorb this shock than we were. Almost half have no savings. The private rented sector (PRS) is now home to 1 in 4 of households with children in England, up from 1 in 10 in 2003/04. By 2040, over 2 million pensioners are projected to be renting from a private landlord. Many private renters can’t drop everything to hunt for a new flat because of work, caring responsibilities and health problems. Those with children in school or nursery have less choice over where they can move without disrupting their families. Many people simply want to stay in the community they know and where they feel at home. The need to stabilise life in the PRS is clear and urgent.

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The Renters’ Rights Act 2025 is the biggest win for renters in a generation. It is a reset after decades in which England built one of the least regulated private rented sectors in Western Europe. As of 1st May 2026, Section 21 ‘no fault’ evictions are gone. That will curtail opportunities for rogue landlords to use ‘revenge evictions’, where renters who ask for repairs or complain about poor conditions are simply turfed out. Landlords will need to give a reason before evicting people – for example because they are selling the property or moving into it themselves. In these cases, renters will now get four months rather than two to find a new place to live. Given intense pressures in many local housing markets and a social housing system stretched to breaking point, having to move will continue to be a struggle. But those extra two months will be a lifeline for many. They will give renters more time, more choice, and more power.

Other changes will also help rebalance the scales in renters’ favour. Landlords will only be able to put up rent once a year, cannot demand large upfront payments, and cannot invite or accept bids above the asking rent, to name only a few. The Act is a reset after decades of unusually aggressive deregulation. The Housing Act 1988 made short-term tenancies and ‘no fault’ evictions the norm, helping create one of Western Europe’s least secure private rental markets.

But the single biggest problem for private renters remains: it is really, really expensive. Under new rules coming into force on Friday, renters will have a legal route to challenge rent hikes above market rates. Since the biggest rent increases happen when renters move between tenancies, fewer moves should also provide some protection. But none of this helps with the reality that market rates themselves are already unaffordable for many. Britain still needs far more homes, including social housing. But even a major housebuilding push would take years to ease rental pressures. Millions of renters need relief now – not in a decade or more’s time.

It’s no surprise that think tanks, charities, campaigners and tenants’ unions are now calling for different forms of rent regulation to cool or reduce rents over shorter timescales. These range from caps on how rents can rise within tenancies, to full rent freezes between tenancies, to measures to reduce rents from current highs by linking them to reference rents based on local incomes and housing conditions. Others continue the long-running campaign to increase Local Housing Allowance (housing benefit for the PRS) so that it covers the costs of renting. We need a plan to make life affordable for renters, and I hope that Red Brick can be a space for the left to share different ideas and evidence.

But we shouldn’t let this debate distract from what a huge achievement the Renters’ Rights Act is. It lays the foundations of housing justice for private renters. It will allow us to plan our lives, address problems in our homes without fear of eviction, and is likely to mean fewer moves and fewer rent hikes. That is a good place from which to plan our next steps.

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Why the construction sector needs social housing

Two construction workers with a block of flats behind them

With 169,000 children growing up in temporary accommodation – the highest number since records began – the case for the government’s manifesto commitment to ‘deliver the biggest increase in social and affordable housebuilding in a generation’ is overwhelming. This situation damages children’s health and development, and it is costing councils across England £7.7 million every day. It is a national scandal whose social and financial costs are well-understood.

But social housing does more than provide an alternative to poor-quality homes. It is also the foundation of a successful housebuilding system. Building social homes at scale – including during market downturns – can underpin the government’s response to the crisis in construction skills and innovation. Far from being in conflict, social housing and market housing can support each other.

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The inherent limitations of the UK’s development model

In a housebuilding system which relies excessively on speculative market housing, developers compete against each other to pay the most for land. Having taken on a large upfront risk through high land costs, developers then need to recoup their investment, building as slowly as necessary to maintain prices. But when sales prices soften, even moderately, market housing starts plummet. Developers are not incentivised to start new schemes if they will have to sell homes for less than they assumed when buying land.

To make matters worse, in tandem with increasing dependence on this speculative model of market supply, the UK’s social housing supply model has become pro-cyclical. Post-war social housing developments were close to 100% social housing. Most costs were covered by grant, and land was assembled at low cost outside the speculative market. This model was insulated from market cycles, allowing the supply of social homes to continue during downturns in private housebuilding. In other words, social housing supply at this time was counter-cyclical.

From the 1980s, the dominant supply model for social housing flipped: grant rates were cut, borrowing costs rose, social landlords had to start competing with private developers in the land market. As a result, an expanded range of ‘affordable housing’ tenures (with costs pegged to market prices) has become increasingly dependent on cross-subsidy from the profits of building market housing. Far from smoothing out the boom and bust cycle of speculative private housebuilding, this model of building social housing intensifies those peaks and troughs. This doesn’t just affect how many homes are built. It shapes how the construction sector itself operates.

Supporting the UK’s construction sector

Ratcheting down: Private housing completions in England since 1946

Over repeated cycles of the housing market, the total output of speculative development is ratcheting downward. As housing starts plummet, so too does the demand for skills and materials. Many construction workers simply leave the sector, often permanently. It is no coincidence that construction workers are more likely to be self-employed than workers in any other sector. Today, more people are leaving the construction sector than joining it, and productivity has remained stubbornly flat for decades. Why would housebuilders maintain a large permanent workforce, or invest in the skills of that workforce, when they know they will need to retrench supply as the market turns?

Because firms cannot predict demand, materials prices have become more volatile. Official statistics show sharp swings in construction output and brick deliveries, worsening shortages and price spikes in an import-dependent system. As the construction industry has adapted to manage the risks of cyclical demand, construction capacity has atrophied.

The long-heralded shift to modern methods of construction (MMC) has also stalled. The speculative, stop-start nature of the industry makes the expense and risks of investment in innovation unattractive. Investors are reluctant to commit to factories which will be moth-balled at the first signs of the next housing market slowdown.

From stop-start to build, baby, build

A more balanced system would combine market housing with a counter-cyclical social housing programme, alongside new market models based on stable demand such as Build to Rent.

When governments fund and enable social housing at scale, it can be built as fast as need demands and construction capacity allows. As the Farmer Review of the UK Construction Labour Model found in 2016, a major programme of social housing would support predictability of demand for labour, skills and materials, resulting in a less risky operating environment for housebuilders, developers and planners. The booms and busts of cyclical market supply are smoothed out by counter-cyclical social supply, so capacity can be maintained and increased despite housing market cycles.

In countries such as Japan and Sweden, innovations and new technologies have thrived on this certainty, creating new opportunities to expand development capacity. It is no coincidence that the last time that modern methods of construction made a major contribution to overall housing supply in the UK was during the post-war social housing boom.

Of course, the benefits of a more sustainable skills base and of innovation in construction today would be felt far beyond the developments which first enabled them. If social housing schemes keep construction workers in the sector during market downturns, those experienced workers will be available to the private sector when the market recovers. If social housing schemes provide enough stable demand to keep MMC providers in business, market housing will be able to benefit from their services, too. While construction capacity is often seen as a constraint on building more social housing, the reverse is also true. A stable pipeline of social housing would expand capacity, supporting more jobs, stronger skills, and greater innovation across the sector.

The government’s new Social and Affordable Homes Programme 2026-36 represents the most significant policy shift back towards a counter-cyclical social housing supply model in decades. A future blog will explore how this could work in practice, and what further changes are needed.

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Making land deliver

Last week saw the launch of ‘Making land deliver’, a new report from Network Homes proposing three big ideas to reduce land costs for providers of social and affordable housing. I took part in a panel discussion along with the report’s co-author, Reuben Young, Rico Wojtulewicz from the House Builders Association and Cllr Shama Tatler from Brent.

There is no doubting the importance and timeliness of the land reform agenda, and on this our panel was unanimous. Since 1995, the value of land owned by UK households has grown by an astounding 583%, while the combined value of the assets overlying land (i.e. buildings) has risen at less than half this rate. We are effectively channelling ever more of our national wealth into the hands of those who own a fixed supply of land. This represents a significant challenge for any government hoping to build, build, build its way out of a Covid recession.

 ‘Making land deliver’ suggests a three-pronged attack on the land value problem:

  1. Allow local councils, Homes England, and the Greater London Authority to compulsorily purchase land at existing use value.
  2. Consider social value and market value when selling public land.
  3. Reform the system of developer contributions to affordable housing.

Network Homes are right to look to the rules on Compulsory Purchase Order compensation for a mechanism to moderate the land market – an issue discussed in detail elsewhere on this blog. Removing ‘hope value’ from CPO compensation awards would tackle a critical barrier to solving the housing crisis in England and Wales.

However, I would caution that Network Homes’ specific call for compensation to be reduced to ‘existing use value’ is likely to conflict with Protocol 1 of the European Convention on Human Rights, which rightly requires compensation at market value. Instead, the UK should simply align itself with other ECHR signatories including Germany, France and Netherlands, by excluding potential development value from definitions of ‘market value’ for CPO compensation purposes. Removing ‘hope value’ would have the effect of reducing awards to levels closer to ‘existing use values’, while still fairly compensating landowners.

Secondly, public bodies considering land disposals should consider social value as well as market value. The government’s Public Land for Housing Programme so far boasts a build out rate of just 15% over the decade that it has been running, and just 6% of the homes planned for these sites will be for social rent. Reviewing and clarifying ‘best consideration’ rules to ensure social value is paramount in decisions about how to use public land is an obvious win.

But the really fresh thinking comes in the third proposal: to replace the Section 106 system for delivering affordable housing on market-led schemes in England with a new, ‘un-gameable’ and non-negotiable system of developer contributions. It works like this:

  • Councils set an affordable housing tax rate for all development in their area.
  • Developers submit a Gross Development Value, on which they will pay the local tax rate.
  • That GDV is used to set the price at which the council can buy homes on the scheme on completion for use as social and affordable housing.

A developer could submit a ‘pessimistic’ GDV to pay less tax, but would then be required to sell homes to the council at ‘pessimistic’ values. This balancing of incentives is the beauty of the proposal. However, there are some thorny issues to work through.

Firstly, this system appears to leave developers in control of the type, size and design of the homes they will build, with councils having only the right to purchase those homes at a pre-set price at the end of the process. There is no guarantee that developers will build the right homes for meeting local housing need, or even that they will meet minimum space standards for social housing. True, councils could spend their tax revenues on delivering the right homes elsewhere – but this relies on Network Homes’ first two recommendations to provide an alternative source of land right-priced for social and affordable housing.

Secondly, the intention to balance power between developers and councils through this proposal may be undermined by the broader planning system. Could a council find itself under pressure to purchase homes of the wrong type or at the wrong price to prevent sites stalling in this system? If that council was worried about how to satisfy its Housing Delivery Test and so avoid losing its planning powers, perhaps. This could be resolved by capping the price which can be paid for affordable housing, for example using plan-stage viability assessments when allocating land.

Despite my quibbles, new thinking from social housing providers is extremely welcome here. Network’s ‘Making land deliver’ follows on the heels of its 2019 report into barriers to social rent delivery for HAs. Both reports provide valuable insights from the front-line of housing delivery, and crucial back up for non-practitioners like me who are campaigning on these issues. I would absolutely encourage other social housing providers to share their experiences and ideas.

<strong><span class="has-inline-color has-accent-color">Rose Grayston</span></strong>
Rose Grayston

Rose has 10 years of experience in providing policy, research and strategic communications support to progressive campaigns and their leaders. 

She has managed and led successful campaigns to reform English planning rules to incentivise the delivery of affordable homes, to reduce borrowing rates for local authority house-building, and to build political and public support for reform of England’s broken land and house-building systems. 

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