Central government’s affordable homes funding is to be cut by £104m over the three years from 2015/16.
A total of £3.3bn is being earmarked for affordable homes funding in England over the three-year period, down from £4.5bn over four years under the current Affordable Homes Programme.
Under the AHP, which runs until 2014/15, £1.125bn is made available each year, while the new programme will see £957m invested annually.
However, a £400m Affordable Rent to Buy scheme is also being launched, funding new-build homes to be let to tenants at affordable rents, with tenants then getting the option to buy the home.
This means that, while the level of spending under the AHP will see an equivalent cut of £504m over three years, £400m will be made up in the new scheme.
AHP aims to deliver 170,000 homes over four-years and the government still aims to provide 165,000 new homes in the new three-year scheme from 2015/16.
The government also announced under the spending review that it aims to shed “at least £5bn” of public land and property to support growth and housing.
Communities secretary Eric Pickles said: “We are determined to make the most of every single square inch of previously-used land available and accelerate the rate of housebuilding. Getting stalled sites up and running and speeding up the release of public land is crucial to this, and will ensure we build more homes where people need them.
“Our investment in new housing is the bold action that’s needed, and will go hand-in-hand with extra funding for local enterprise partnerships, so they can build on their success, create thousands of jobs and inject millions of pounds of investment into local economies.”
Overall, the Department for Communities and local government is seeing its capital budget, from which the funding comes, cut from £4.8bn in 2014/15 to £3.1bn in 2015/16.
A total of 84,000 new affordable homes have been built so far in this parliament, with a target of 170,000 by 2014/15.
National Housing Federation chief executive David Orr said the news came as a “further disappointing cut in subsidy” that wouldn’t deliver the housing the UK needs.
“The lack of investment in housing is now acting as a brake to growth in other parts of the economy.”
But Lakehouse executive chairman Stuart Black said: “Today’s announcements are a positive step forward for the sector. It’s clear that the Treasury is now beginning to shift its emphasis and we must welcome any investment that gives affordable housing long-term visibility.
“This country is in the midst of a housing crisis and so far we haven’t acted fast enough. Affordable housing is a crucial investment, not only for communities, but for the broader economy and we hope this is a sign of more widespread measures in future.”
The amounts registered providers will be allowed to charge in social rent was fixed to an annual increase of the CPI rate of inflation plus 1 per cent for the next 10 years.
Housing associations had been hoping the measure would continue to be linked to the RPI measure, which is generally higher.
At present they can increase rents by RPI plus 0.5 per cent, and the change will impact the viability of new-build schemes.
But Mr Orr said: “The government’s confirmation that rents will rise by CPI +1% for 10 years is welcome, but we need to discuss the fine detail of how this will operate in practice if it is to enable housing associations to plan with confidence.”
The new rent formula will run from 2015/16 to 2024/25.