Artem Apostoli

Rachel Reeves has promised the most significant investment in affordable housing in a generation. But rather than resolving the crisis, her plan risks entrenching the same structural imbalances that have driven home ownership out of reach for millions. At best, it kicks the can down the road. At worst, it may deepen the long-standing dysfunction at the heart of Britain's housing market.

In her June 2025 Spending Review, the Chancellor announced a £39 billion Affordable Homes Programme over ten years, targeted at social housing and first-time buyers. She also unveiled reforms to planning rules, enabling development on brownfield and parts of the green belt. These changes, Reeves argues, will support Labour's ambition to build 1.5 million new homes over the Parliament. However, the £39 billion headline figure amounts to approximately £4 billion per year - enough to support the construction of perhaps 16,000 social homes annually (Centre for Cities, 2024). That falls well short of the 90,000 social rented homes per year that experts estimate are needed to meet demand (Power, 2024). Moreover, a significant proportion of the new funding will subsidise housing projects already in progress, rather than unlocking new supply (Stacey, 2025b). Without proper enforcement of affordable housing quotas, many of these homes will enter the market at prices far beyond the reach of typical households.

Britain's housing market has become structurally decoupled from earnings. In 2024, the average home in England cost 7.7 times the average salary, up from 3.5 times in the mid-1990s (ONS, 2025), and wages have failed to keep pace with price growth, making ownership increasingly elusive. Meanwhile, the private rented sector consumes more than a third of income for many households (ONS, 2025). Social housing, once a core pillar of postwar housing provision, has been hollowed out. Today, 1.3 million people remain on council housing waiting lists (Stacey, 2025b). This is not simply a matter of limited supply. It reflects a deeper dysfunction: housing has been financialised. Rather than being treated as essential infrastructure, homes have become investments, rewarding existing owners, institutional landlords and speculators, while pushing aspiring buyers further from the ladder.

In parallel, the financial system has quietly adjusted to the affordability crisis, not by addressing house prices, but by stretching credit. Longer mortgage terms, smaller deposit requirements and rising loan-to-income ratios have extended what banks will lend, artificially inflating what buyers can "afford". The result is a rising affordability ceiling. As more credit chases limited housing stock, prices continue to rise. This is classic demand-side inflation: expanding access to mortgages without expanding supply simply intensifies competition for the same properties. Reeves's reforms do not address this credit-driven phenomenon - they will amplify it.

The warning signs are not new. The 2008 global financial crisis was fuelled by reckless lending in the US subprime mortgage market. In the UK, the same period saw a surge in cheap credit and speculative investment in property. While Britain did not experience a subprime crisis on the same scale, it mirrored the underlying conditions: homes used as financial instruments, rising household debt and policy reliant on housing market growth. After the crash, house prices briefly dipped but quickly recovered, bolstered by low interest rates and quantitative easing. These interventions protected asset holders but failed to reset affordability. They cemented a model in which housing is treated not as a public good, but as a wealth vehicle. That model still governs Britain's housing market today.

Reeves's reforms amount to a recalibration of a broken system, not a reinvention of it. To make housing genuinely affordable, the UK must go further and tackle the root causes. That means:

A national programme of public housebuilding led by local authorities and housing associations
Comprehensive zoning reform to promote infill and to speed up planning decisions
A land value tax to discourage speculation and encourage productive use of land
And a move away from credit-driven affordability

Other countries offer better models. In Austria, for example, over 40% of homes are in the social housing sector - well-maintained, affordable and often mixed-income. Housing is understood as infrastructure. In Britain, by contrast, it remains a largely privatised and speculative market, propped up by government incentives and vulnerable to credit cycles.

The problem is not just that we build too few homes. It is that the system is rigged in favour of capital, not people. Planning is inconsistent. Land is hoarded. Developers are incentivised to build for profit, not need. And access to housing is increasingly mediated by one's ability to take on debt. Reeves's proposals will likely accelerate some building. But without a fundamental shift in how housing is financed, regulated and planned, prices will continue to outpace incomes and homeownership will remain a distant goal for many. A truly affordable housing system cannot rely on mortgage flexibility, private developer incentives or deregulated planning alone. It requires public purpose, political will and structural reform. In the absence of those, this crisis will endure.

References

Centre for Cities (2024) Restarting housebuilding I: Planning reform and the private sector. Available at: https://www.centreforcities.org/wp-content/uploads/2024/12/Restarting-housebuilding-I-Planning-reform-and-the-private-sector-December-2024.pdf (Accessed 21 Jul. 2025). Office for National Statistics (2025) Housing affordability in England and Wales: 2024. Available at: https://www.ons.gov.uk/peoplepopulationandcommunity/housing (Accessed 21 Jul. 2025). Power, A. (2024) 'Labour's housing plans are flawed', British Politics and Policy at LSE, 25 Sept. Available at: https://blogs.lse.ac.uk/politicsandpolicy/labours-housing-plans-are-flawed/ (Accessed 21 Jul. 2025). Reeves, R. (2025) Spending Review 2025 speech, GOV.UK. Available at: https://www.gov.uk/government/speeches/spending-review-2025-speech (Accessed 21 Jul. 2025). Stacey, K. (2025a) 'Rachel Reeves to unveil £39bn housing boost in spending review', The Guardian, 11 June. Available at: https://www.theguardian.com/politics/2025/jun/10/rachel-reeves-to-unveil-39bn-housing-boost-in-spending-review-shake-up (Accessed 21 Jul. 2025). Stacey, K. (2025b) 'Report casts doubt on Labour's affordable housing target', The Guardian, 2 June. Available at: https://www.theguardian.com/society/2025/jun/02/rachel-reeves-fresh-pressure-spend-billions-more-affordable-housing (Accessed 21 Jul. 2025).