The Chancellor will cut back Right to Buy discounts as part of next week’s Budget to boost council housing supply.

Rachel Reeves will announce plans to consult on a new five-year social housing rent settlement and to reduce Right to Buy, which allows tenants renting local authority-owned homes to buy them at a discounted rate, in order to protect existing council stock and keep council homes in the sector.

The moves are part of a housing package that includes £500 million in new funding for up to 5,000 new affordable social homes and £128 million to support delivering 33,000 new homes through projects across the country.

Ms Reeves said: “We need to fix the housing crisis in this country. It’s created a generation locked out of the property market, torn apart communities and put the brakes on economic growth.

“We are rebuilding Britain by ramping up housebuilding and delivering the 1.5 million new homes we so badly need.”

Aerial view of houses
The Chancellor said the housing crisis has locked a generation out of the property market (PA)

The Government will seek to cap what social housing providers can charge tenants in line with Consumer Price Index inflation plus 1%, launching a consultation on a five-year social housing rent settlement.

The consultation will also ask for views on other options, such as providing a 10-year settlement.

The Government is also planning greater protections for newly-built social housing and to allow councils to keep 100% of the money raised from Right to Buy sales so they can build and buy more social housing.

A housing strategy will be set out in the spring and details of new investment to succeed the 2021-26 affordable homes programme will be set out in the next spending review.

The £500 million top-up in funding for the affordable homes programme brings total investment in housing supply to more than £5 billion, the Treasury said.

The £128 million confirms funding in the following projects:

– £56 million investment at Liverpool Central Docks to build 2,000 homes

– £25 million to establish a new fund with Muse Places Limited and Pension Insurance Corporation to deliver 3,000 energy efficient homes, with a target of 100% being affordable

– £47 million to local authorities to tackle river pollution that is preventing houses being built. This could support the delivery of an estimated 28,000 homes.

Deputy Prime Minister Angela Rayner said: “We have inherited a housing system which is broken, with not enough homes being built and even fewer that families can afford.

“This is a further significant step in our plan to get Britain building again, backing the sector, so they can help us deliver a social and affordable housing boom, supporting millions of people up and down the country into a safe, affordable and decent home they can be proud of.”

Kate Henderson, chief executive of the National Housing Federation, said the £500 million top-up to the affordable homes programme was a “vital injection of funding” that will support housing associations and prevent a “collapse in delivery”.

She said the federation supports reviewing Right to Buy discounts and the rent settlement consultation, which will “provide both transparency for residents and long-term certainty and financial stability for social housing providers”.

“To achieve the affordable homes needed across the country, alongside this short-term top-up, we look forward to a new long-term housing strategy announced at the next spending review, including a significant boost in funding for social housing.”

The Local Government Association said councils are ready to work with the Government to increase affordable housing and help those on council housing waiting lists.

LGA chairwoman Louise Gittins said: “It has become increasingly impossible for councils to replace homes as quickly as they’re being sold through the Right to Buy (RTB) scheme.

“The LGA has long called for reform to RTB and these positive measures will support the replacement of sold homes and to stem the continued loss of existing stock.

“A five-year rent settlement is a step in the right direction in providing certainty for councils on rental income, but to really strengthen and provide stability to Housing Revenue Accounts, a minimum 10-year rent settlement is needed, alongside restoration of lost revenue due to the rent cap and a review of the self-financing settlement of 2012.

“This would better support long-term business planning to ensure councils can deliver high-quality homes and associated support for their tenants.

Polly Neate, chief executive of housing charity Shelter, said: “This boost in funding is a welcome step towards tackling the housing emergency. To get a grip on rocketing homelessness the vast majority of this funding needs to be focused on social rent.

“For decades we’ve lost more social homes than we’ve built, causing private rents to soar to record highs and the homeless accommodation bill to hit the billions. Families across the country have paid the price with over 151,000 children homeless, often living out of suitcases in grotty one-bed hostels and spending sleepless nights worried if they will ever find a secure home.

“If the Government is to reach its target of building 1.5 million homes, it must now use the spring spending review to deliver 90,000 social homes per year for 10 years. Not only will these pay for themselves through new jobs and savings for the NHS and benefits bill, they’ll finally end homelessness for good.”