While there has been much commentary on what last week’s budget tells us about the government’s general direction of travel and commitment to ending forty years of neoliberal consensus, the impact on housing and the development of communities we all live in has been less discussed. Partly, this due to the fact a number of the measures that most directly impact housing and communities had either been widely trailed or announced before the budget speech, or were sneaked out in technical notes afterwards. But, whilst commentators have suggested this was a ‘steady-as-she-goes’ budget overall, in the case of the housing sector and local communities there were some significant if not exactly dramatic changes which have the potential to impact our region over the coming years.
Of particular interest to the Centre for the New Midlands, of course, is the issue of devolution and on this the Prime Minister had already signalled his intentions to go much further and faster than his predecessor. Firstly, the Chancellor, John Healy, announced that there would be ten new devolution agreements covering areas such as Devon, Lancashire, Surrey, that are not currently subject to one (plus a new agreement for Wessex). This will bring mayoral and strategic devolution coverage to over 90% of England’s population. Despite some reticence on the opposition benches, the devolution bandwagon is now definitely rolling and it is not obvious how it can be stopped let alone turned back.
More than that, it is clear that the government wants devolution to be more than just window-dressing. In response to the frustration of some that mayors lack the strategic levers to make a real difference locally, the government published the Fiscal Devolution Roadmap. This outlines a significant transfer of fiscal control from Whitehall to the regions which the Mr Healy described as the “biggest fiscal devolution in a generation“.
The core of the strategy is shifting Mayors and strategic authorities away from relying on piecemeal central government grants, toward retaining locally raised tax revenues to fund their own regeneration projects. The first element of this is income tax assignment. In a historic structural shift, from April 2028 all elected regional Mayors in England will receive a direct share of revenues from the basic rate of income tax generated within their boundaries. Before we all get too excited, it’s important to point out that the decision on how big that share will be has been deferred to the 2027 Spending Review. It may yet prove to be a disappointing amount. And we should also be clear that mayors will not have the power to set or alter income tax rates themselves (as the Scottish Parliament does) so we shouldn’t expect Richard Parker to be slapping another couple of percent on our income tax bills quite yet. But the Budget did confirm the heavily trailed plan to give all strategic authorities the statutory power to introduce a local tourism tax / overnight visitor levy, with local strategies for investing those revenues due by March 2028. This is likely to be more significant in other regions than it is in the Midlands, but it will be interesting to see the extent to which Richard Parker and others utilise this new tax-raising power and what they choose to spend the money raised on.
The other significant announcement in this regard was an overhaul of the business rates system. From April 2027 mayors will formally enter the business rates retention system. They will receive a 20% share of locally retained business rates and a permanent 20% share of economic growth. This is not additional funding but replaces previous funding streams like local Investment and Capacity Funds. But the Treasury is now formally committed to an ultimate goal of having local and regional governments retain 100% of all business rates income by the end of the decade. Under this structure, local authorities are guaranteed to retain at least 70%.
Over and above this the government is establishing the first wave of twenty-five Business Rates Retention Zones across the nine Mayoral Strategic Authorities. In these specific zones, councils can keep 100% of business rates growth above baseline for 25 years to help fund local infrastructure.
But the budget also sought to give mayors and strategic authorities new powers and additional spending flexibilities. The two most significant announcements in this regard (in addition to the ‘tourist tax’) were:
- The “Good Growth Funds” (£285 Million): Mayors and local leaders will be given £285 million in transitional seed funding for the 2027–28 financial year. This fund allows leaders to pool separate revenue streams into a single pot to back local regeneration, housing, and infrastructure priorities alongside private capital.
- Devolved Borrowing Facility (£1.5 Billion): Beginning in April 2028, Mayoral Strategic Authorities (MSAs) will gain access to a £1.5 billion bespoke borrowing facility. This includes mechanisms for subsidised/concessional lending for major local capital projects.
The West Midlands Combined Authority (WMCA) and Mayor Richard Parker have welcomed the government’s fiscal devolution plans, but they have not yet released detail on what they intend to do with their share of the new devolved borrowing facility.
Moving on to Housing specifically, the Chancellor’s announcements built on previously trailed initiatives, with a few smaller, technical changes that various sector groups had lobbied for. So we got a big announcement around the “Your First Home” Scheme which will officially launch in Spring 2027 (with applications expected to open in February). It will function similarly to the old Help to Buy scheme, providing first-time buyers in England with an interest-free, 20% government-backed equity loan for 5 years and the promise that they can secure a new-build home with a deposit as low as 2.5%. For that reason, people who liked Help to Buy (principally housebuilders) were supportive of the new scheme, whilst those who pointed out that Help to Buy drove up house prices and housebuilders’ profits without really impacting on the underlying causes of housing crisis (e.g. journalists, academics and left-wing MPs) were far less enthusiastic.
Linked to this the Chancellor announced that there would be a New First Time Buyer ISA offering a 25% government bonus. This is intended to replace the Lifetime ISA (LISA) for new savers down the line, but for those who already have a LISA there will be an important rule change: the penalty withdrawal charge has been reduced from 25% to 20%. This ensures that first-time buyers purchasing a home above the £450,000 threshold are not penalised on their personal contributions. It is difficult to see this helping many first-time buyers beyond the wealthiest and those with additional family support, but the hope is clearly that it will help to stimulate a sagging a housing market.
In the world of social housing there was the announcement of an additional £1.5bn for the Social and Affordable Homes Programme (SAHP) taking total spending up to £40.5bn for the ten years up to 2036 (although this top-up will be distributed progressively over a four-year window between 2027 and 2031). But before housing associations start licking their lips in anticipation, it should be pointed out that this new money is designed specifically to help local authorities build up their developmental capacity. It would seem that the Prime Minister is serious in his commitment to building more council houses. And as if to further emphasise this, preferential borrowing rates for council housebuilding through the Public Works Loan Board (PWLB) have also been extended for an additional year.
Housing associations were successful though, in their lobbying to have VAT removed from their land purchases. This is a largely technical change, but it does mean that housing associations won’t have to go through convoluted ‘golden brick’ payment arrangements to avoid VAT.
Of potentially greater significance to their building plans was one announcement that, on the face of it, doesn’t really belong in a budget statement at all – the news that any smaller housing development built on brownfield land will be exempt from the requirement to show a 10% Biodiversity Net Gain (BNG). This new exemption will apply strictly to residential developments on brownfield land up to 1.5 hectares (approx. 15,000 sq metres or roughly two football pitches) in England. It won’t cover commercial or mixed-use developments or development on greenfield sites and is completely separate from the recently announced “small sites” exemption introduced in August 2026, which applies to any development under 0.2 hectares, regardless of whether it is greenfield or brownfield.
Reaction to the announcement split on predictable lines: Housebuilders welcomed the news, pointing out that on constrained urban brownfield plots, it is often physically impossible to deliver a 10% BNG uplift on-site and that forcing small developers to buy expensive statutory off-site credits frequently killed the financial viability of the entire project. The move was harshly criticised though by charities like The Wildlife Trusts and the RSPB, who argue that urban brownfield plots often contain highly unique priority habitats. Before they get too animated however, it should be pointed out that a date for the introduction of this measure has not yet been announced. The Treasury has merely said that an implementation timetable will be published “in due course” (which is only slightly quicker than “in the fullness of time”). It seems that badgers and buddleia of the West Midlands will be safe for a little while yet.
Equally unexpected in a Budget statement was the Chancellor’s guarantee that no new housebuilding regulations would be introduced in the lifetime of this parliament. After the introduction of a raft of building safety regulations and the new Future Homes Standard stability in the sector has been broadly welcomed – although given that rumours of an election in May 2027 persist and any measures which are deemed ‘critical to building safety’ are specifically excluded from this guarantee, it’s not clear how much it is actually worth.
Overall, though there seems to be a clear commitment to try and get housebuilding moving, particularly in the affordable and social sector. Private landlords however, have pointed out that plans to increase taxes on them will inevitably impact on investment and drive-up rents for tenants.
One significant announcement that did not attract as much attention as perhaps it might have is the news that the government has doubled its funding for the Rough Sleeping Programme by allocating an additional £432 million over the next two years. This is part of a wider commitment to end street homelessness. [1, 2] and means that the total investment behind Prime Minister Andy Burnham’s pledge is £874 million.
The funding is split into two primary operational pipelines managed by local and mayoral strategic authorities.
- “Routes off the Street” (£255.5 Million)
This is the immediate frontline crisis response aimed at achieving the government’s target of giving every rough sleeper a pathway off the street before Christmas. It will directly fund specialist outreach teams, immediate-access bedspaces and wraparound services. Emergency operations have already begun rolling out in Coventry amongst other places.
- Settled Accommodation & Moving On (£178 Million)
This capital and long-term revenue pot is intended to fund the acquisition and retrofitting of empty or disused properties to turn them into stable, self-contained long-term homes (The 2,000 Homes Pledge). It will also fund dedicated “move-on” housing for long-term rough sleepers with highly complex histories, and early intervention frameworks with prisons, care facilities, and hospitals to stop vulnerable individuals from being discharged straight onto the streets.
Overall, therefore there were some significant changes that over time might come to have an impact on our region. The question remains whether, given the febrile political climate, whether the government will remain in power long enough to see them through.
This is a personal blog post. Any opinions, findings, and conclusion or recommendations expressed in this article are those of the authors and do not necessarily reflect the view of the Centre for the New Midlands or any of our associated organisations/individuals.
ABOUT OUR AUTHOR:
Alan Fraser is a social housing developer and former housing association chief executive working who sits on the Centre for the New Midlands’ Housing & Communities panel.
