The government’s 2025 Spending Review lays out a long-term, capital-intensive plan to tackle housing undersupply and break down systemic infrastructure barriers.
The centrepiece is the creation of the National Housing Bank (NHB), a government-backed financial institution housed under the umbrella of Homes England. With £16 billion in new capital capacity, the NHB is tasked with issuing equity investment, guarantees and flexible loans to encourage up to £53 billion in private investment. It is a bold hybrid model, intended to de-risk complex development and create a more investable environment for both mixed-use and affordable housing schemes.
Importantly, the NHB is not solely focused on large institutional partnerships. One of its potentially game-changing functions is its specific support for small and medium-sized enterprise (SME) developers, the backbone of local and regional housing delivery. In the decades following the credit crunch, smaller developers have found it hard to obtain finance from a risk averse banking sector that is bound by stricter regulatory rules and capital requirements. The NHB will introduce new credit lines and lending alliances with private sector partners, a move designed to open up long-term, lower-cost finance for these smaller firms.
This marks a significant departure from traditional models. The government is building on existing large-scale partnerships, such as the Made Partnership between Lloyds Banking Group and Barratt Redrow and the Schroders Real Estate Impact Fund. These frameworks have demonstrated the role that successful public-private collaborations can play in bringing long-term capital into large scale housing schemes. The NHB intends to extend the reach of these types of alliances and focus specifically on improving access to finance for SME housebuilders.
Importantly, the NHB’s loans for SMEs are expected to be structured as revolving credit facilities, rather than one-off loans; this will give SMEs the access they need to rolling credit lines they can draw on as projects progress. This financial model is better suited to the agile, project-based nature of SME construction and will allow developers to scale operations and deliver homes more quickly. It also improves working capital management, often a pain point for smaller developers who face tighter margins and limited borrowing power.
The Spending Review also seeks to address infrastructure delivery more broadly. Upfront infrastructure costs are among the biggest blockers to development, particularly in the case of housing schemes that rely on investment in roads, utilities and community assets before house building can even commence. The NHB’s infrastructure lending capacity is designed to bridge this funding gap and unlock previously stalled or unviable sites.
So far so good, but it is important to recognise that capital and credit alone will not solve the sector’s problems. Planning reform remains critical. Even well-funded projects can be delayed indefinitely by the bottleneck created by our complex, bureaucratic and under-resourced planning system. Foreign investors in particular tend to be surprised by the delays and inefficiencies inherent in the planning system, and turning that juggernaut around is a very real challenge for the present administration – in terms of improving both practical delivery and the perception of UK plc as a country open for business. Without sustained policy and resourcing reform, the risk remains that capital could sit idle while planning consents languish.
In addition to the resourcing and skills shortage in the planning sector, a drive is also needed to invest in the construction industry to address the skills shortage and to focus more on the modern methods of construction that can drive down costs. All of these elements need to combine to ensure that much-needed money achieves what is actually required.
The operational rollout of the NHB will determine how impactful it can be. In other words, the devil will very much be in the detail. While allocation criteria and delivery mechanisms are still being defined, Homes England’s expanded remit is expected to bring more agility in capital deployment, balancing market responsiveness with the rigour of public finance oversight. That’s the theory; the key will be how this all plays out in practice. That is where the battle will be won and lost; public money must always be used wisely, but too much red tape will slow everything down to the point where the victory represented by this injection of funds is no more than pyrrhic.
Taken together, the Spending Review and the NHB represent a credible and ambitious commitment to housing delivery. For the first time in years, the sector has the promise of patient capital, strategic leadership and a delivery infrastructure that recognises the diverse needs of both large and small developers. If effectively implemented, this could mark the beginning of a new era in housing delivery, one where finance, policy and planning are finally aligned to meet the scale of the challenge.
