England councils urged to build more council homes

If housing policy often feels like a tangle of acronyms and ministerial letters, this one is easier to read than it sounds. On 25 August 2026, the Ministry of Housing, Communities and Local Government published a letter from Angela Rayner and Matthew Pennycook to every council leader in England, with a blunt message: build more council homes, and tell ministers what is stopping you from doing it faster. The letter came with the first allocations from the Social and Affordable Homes Programme, so this was not just a pep talk. It was a funding signal as well. (gov.uk) For readers trying to place this in the bigger picture, the government is treating councils as a bigger part of the answer to England’s housing shortage. In the accompanying policy paper, MHCLG says far too many families remain on waiting lists and almost 180,000 children are living in temporary accommodation, including more than 100,000 in London. That is the urgency behind the letter. (gov.uk)

The programme sitting behind the announcement is the ten-year £39 billion Social and Affordable Homes Programme, usually shortened to SAHP. According to Homes England guidance, it pays part of the capital cost of building affordable housing in England outside London, while the Greater London Authority handles funding in the capital. Ministers say at least 60% of homes funded through SAHP should be for Social Rent, which is the lower-rent model based on a government formula tied to local incomes and property values; Affordable Rent can be set at up to 80% of market rent. (gov.uk) The first big allocation is substantial. Government and Homes England say £9.58 billion has been awarded to 33 Strategic Partners outside London, with an expected 73,600 social and affordable homes delivered over the next decade. Nearly two-thirds of those homes are expected to be for Social Rent. London, meanwhile, is due to receive 30% of the programme’s early funding and up to £11.7 billion across the full ten years, with at least £6 billion intended for providers in the capital. (gov.uk)

So why are ministers talking so much about councils, when housing associations also build large numbers of affordable homes? The government’s answer is that council housebuilding gives local authorities more direct control over what gets built, where it is built and who it is for. In the policy paper, MHCLG argues that council homes can be shaped around local need and kept as public assets, with rental income recycled into local housing over time. (gov.uk) There is also a strong historical argument behind the announcement. MHCLG says the last time England built social housing on the scale now being discussed, councils were leading from the front, before rates dropped sharply from the early 1980s. Ministers also say recent changes have started to lift delivery again, with councils in 2024 to 2025 providing the highest number of social homes since the current reporting series began in 1991 to 1992. That does not mean the problem is solved. It means government believes councils can do more if the rules and funding are lined up properly. (gov.uk)

If you are new to this subject, it helps to picture council housebuilding as a chain rather than a single decision. A council needs a site, finance, planning capacity, people who can manage development, and a route to buy or build homes at the right price. The letter asks councils to look again at all of those moving parts: their plans for new homes, their financial position, their use of Right to Buy receipts, their use of Section 106 developer contributions, and the land or buildings they already own. (assets.publishing.service.gov.uk) **What this means:** ministers are not only asking councils to build from scratch. They are also signalling that councils may be able to move faster by buying homes as well as building them. The policy paper says the government wants to raise the cap on acquisition funding so councils can purchase more homes while they strengthen their own delivery teams, and the SAHP guidance confirms that the programme can support the acquisition of market homes for affordable use in some cases. Government also says councils can now retain 100% of Right to Buy receipts, and in 2025 to 2026 those sales brought in £1.61 billion. (gov.uk)

Money is only part of the story, because councils also need staff time and specialist skills. That is why the letter pairs the housing funding with an extra £46 million over the next three years for the newly renamed Capacity to Build programme. According to MHCLG, this support will run through the Council Housebuilding Support Fund, the Council Housebuilding Support Service and the Pathways to Planning graduate scheme, all intended to help councils turn ideas into deliverable schemes. (assets.publishing.service.gov.uk) There is a useful clue here about what ministers think the main barrier is. They are not saying every council lacks ambition; they are saying many councils need more capability to bid, plan and deliver at scale. The Capacity to Build guidance says the Council Housebuilding Support Fund helped 44 councils in 2025 to 2026, developing and speeding up bids that led to about 11,500 homes. For the first time, three councils, Cambridge City Council, Eastleigh Borough Council and Newcastle City Council, have also been given Strategic Partnership status with Homes England, which shows the government wants direct council delivery to move from the margins to something more routine. (gov.uk)

Another important thread in the announcement is devolution. The government says more housing decisions should move closer to local areas over time, especially in Established Mayoral Strategic Authority areas outside London. In practice, that means mayors are expected to have a bigger say over where social and affordable housing money goes, with Joint Delivery Units planned between mayors and Homes England to build local delivery expertise. (gov.uk) This matters because the current settlement is uneven. London already has a more devolved system, and the policy paper says half of all council homes built in 2024 to 2025 came forward there. The government now expects more than half of delivery in London through this funding to come from councils. At the same time, this is only the opening round of the ten-year programme: ministers say more than £16 billion outside London and around £5 billion in London still remain to be allocated. So the message to councils is clear enough: if you have sites, plans and partners ready, more money is still on the table. (gov.uk)

The immediate next step is practical, not rhetorical. Councils have been asked to return a short form setting out their plans for new council homes, their use of Right to Buy receipts and developer contributions, the land they have available, and the extra flexibilities or support they need. The deadline is 22 September 2026 for most councils and 16 October 2026 for London boroughs. MHCLG says those responses will help shape targeted support ahead of the Autumn Budget. Councils outside London that are not in this first Strategic Partnership round are not shut out either, because Homes England says the Continuous Market Engagement route remains open for funding bids under SAHP. (assets.publishing.service.gov.uk) For you as a reader, the point of this story is simple. A housing programme is never just a line in a Spending Review. It turns into real homes only if councils can assemble land, staff, money and political backing at the same moment. The government has now put fresh cash and a sharper ask on the table. The next question is whether councils can turn that opening into keys in doors for families who have waited far too long. (assets.publishing.service.gov.uk)