The renaissance in council housebuilding — and the risks that could derail it

The last decade has witnessed a renaissance in council housebuilding. In 2024/25, local authorities in England completed 10,480 homes – the highest figure since the early 1990s. The removal of the Housing Revenue Account borrowing cap in 2018 allowed councils to borrow against future rental income, and many responded by ramping up the supply of new homes in response to local need. The new Social and Affordable Homes Programme aims to further increase that activity, with an explicit emphasis on supporting council housebuilding.

There is a clear appetite amongst local authority leaders to go further in increasing the number of homes built by councils, either directly or in partnership with registered housing providers. However, at the third annual Securing the Future of Council Housing Summit, held in Leeds earlier this month, housing directors and elected leaders highlighted a range of challenges that threaten to curb these ambitions. In a survey of 66 local authorities conducted by the campaign coalition organising the event, 50% of councils said they are at risk of being unable to balance their housing budgets by 2029/30 – an improvement from the 67% recorded in 2025. The percentage of respondents expecting to scale back development of new homes fell from 68% in 2025 to 42% in 2026, but respondents were clear that the long-term prospects for council housebuilding remain challenging, with 48% saying recent government interventions provided short-term stability but do not address more systemic pressures.

Financial constraints are the most significant barrier to councils increasing their homebuilding programmes. The inflation shock of 2022 continues to impact the viability of projects, with build costs rising due to increases in the cost of labour and materials. Capacity within local authority housing and planning departments remains well below the levels required to deliver on the government’s 1.5 million new homes by the end of this parliament target. While much-needed investment in existing stock – to improve energy efficiency and speed up repairs – is welcome, with the Regulator of Social Housing reporting a record spend on existing social homes, this could squeeze investment in new homes. There are further complications in areas where local government reorganisation is in progress, as councils grapple with the pressing practicalities of asset transfers and put longer-term placemaking and housebuilding plans on hold.

The complexities of these challenges mean there is no one easy fix to ensure the increases we’ve seen in council housebuilding over recent years are maintained. However, the Securing the Future of Council Housing Summit heard from Cllr Tom Hunt, Leader of Sheffield City Council, who argued that local authorities should be able to access the low interest rates available to registered housing providers, to enable councils to borrow more for housebuilding activity. Other speakers emphasised the importance of a variety of models for delivery. With local authority finances still constrained, maintaining a pipeline of homes for social rent through partnerships with housing associations, joint ventures and institutional investors is necessary. There were also positive noises about recent reforms to the Treasury Green Book, which seeks to move beyond orthodox cost-benefit analyses that have previously disadvantaged areas with lower property prices, land values and labour costs.

Looking ahead, regional devolution should play a role in the delivery of new council housing. Combined authorities across England are now preparing spatial development strategies that will guide housing and infrastructure development over the next 20 years. Social housing will play a significant role in meeting housing need, and local leaders have the opportunity to be bold in aligning housing delivery with broader spatial objectives, such as boosting productivity, tackling climate change, and increasing biodiversity.

After decades of decline in council housebuilding in England, local authorities are once again playing a significant role in directly delivering social housing. Ensuring they can continue to do so will be crucial if the government is to meet its ambitious housing targets.