The Chancellor's first Budget gives councils more money to build and a roadmap to keep more of their business rates. But it leaves the fastest-growing cost in council budgets untouched.
John Healey delivered his first Budget on 28 October. For council housing finance, there is genuine good news in it. There is also a silence that every Section 151 officer will notice.
Here is what matters, and what it means for your budget.
The good news: more money to build
The Budget provides an additional £1.5bn for the Social and Affordable Homes Programme to deliver around 10,000 homes in England. According to the Treasury's regional fact sheet, this takes total investment in the programme to more than £40bn over 10 years.
The Budget document is clear about where it should go: the funding "will be prioritised for Social Rent, especially council homes." It also commits to the largest council housebuilding programme since the post-war era, with details to follow.
Three further measures matter for council finance teams:
- Cheaper borrowing for council homes continues. The government is keeping preferential Public Works Loan Board rates for council housebuilding for a further year.
- More headroom for borrowing. LocalGov reports that the PWLB's statutory lending limit will rise from £135bn to £155bn, with an option to go to £175bn.
- VAT-free land for social housing. Land sales to social housing providers will be zero-rated for VAT, according to Planning Geek's reading of the Budget, from April 2027 subject to legislation.
Rough sleeping funding has also been nearly doubled, with £432m added at this Budget, taking the total commitment to £874m. The Budget document itself estimates the fiscal cost of each person sleeping rough at around £14,000 a year. Prevention pays. The government has now said so in black and white.
The catch: the money starts in 2027/28
The extra social housing funding is allocated from 2027/28 to 2030/31 and rises over time as councils rebuild their capacity to deliver. That is sensible programme design. But it means very few of these homes will be standing before the end of the decade.
In the meantime, the pressure councils face is not a shortage of capital programmes. It is a revenue crisis.
The silence: temporary accommodation
Councils in England spent £2.93bn on temporary accommodation in 2025-26, around £8m a day, according to analysis of MHCLG revenue outturn figures reported by LocalGov. On 31 March 2026, 135,580 households were living in temporary accommodation, including 177,530 children, according to MHCLG.
Most of that cost is driven by two numbers set in Whitehall, and the Budget left both where they were.
First, Local Housing Allowance. The Big Issue reports that LHA rates remain frozen, at the level last set in 2024. Generation Rent's response was blunt: "the government has maintained the freeze of local housing allowance."
Second, temporary accommodation subsidy. For most placements, the housing benefit subsidy councils can reclaim is capped at 90% of January 2011 LHA rates. Neither the Budget document nor the early coverage I have reviewed mentions any change to it. The House of Commons Library shows councils' share of temporary accommodation costs has risen from 7.1% in 2009/10 to 50.6% in 2024/25.
This matters because the two freezes compound each other. When LHA falls further behind rents, more private tenancies fail and more households approach the council as homeless. When they arrive, the subsidy that is meant to pay for their accommodation is calculated on rents from fifteen years ago.
The Prime Minister made the point himself in the Commons in September. Property118 reported him saying that the LHA freeze does not save money, because it "just creates an unfunded pressure in council budgets." He was right. The Budget has kept that pressure in place.
Business rates: a longer game
The Budget also sets out a roadmap to fiscal devolution. The Treasury's fact sheet confirms mayors will receive 20% of business rates from April 2027, with local authorities' share rising to at least 70% in the coming years. The government pledges to move to 100% local retention by the end of the decade.
More locally retained income is welcome. But for councils with high homelessness demand and a narrow business rates base, retention will not solve the temporary accommodation problem. The places with the biggest bills are not always the places with the biggest growth.
What this means for councils
Plan for no change on subsidy and LHA. Your 2027/28 budget and MTFP should assume the 2011 subsidy cap and the LHA freeze both continue. If your plan only balances on a policy change, it does not balance.
Get ready to bid. The extra £1.5bn prioritises social rent and council homes. Councils with a clear pipeline, a viable HRA business plan and the governance to deliver will be best placed. Start that work now, not when the bidding guidance lands.
Use the cheaper PWLB rate while it lasts. The preferential rate for council housebuilding has been extended by only one year. Review your borrowing strategy and capital programme against that window.
Treat temporary accommodation supply as an investment decision. Every household moved from nightly paid accommodation into council-owned or long-leased homes reduces the revenue pressure the Budget left untouched. Long-term, inflation-linked capital is available for well-structured schemes. I have used it at Westminster City Council, including a £50m, 40-year index-linked sale-and-leaseback of 124 temporary accommodation properties with the City of Westminster Pension Fund.
This Budget makes a serious down payment on the homes of the 2030s. It does far less for the families in temporary accommodation today, or for the councils paying for them.
If you would like to talk through what the Budget means for your MTFP, your HRA business plan or your temporary accommodation strategy, please get in touch.
Sources
HM Treasury: Budget 2026; HM Treasury: Budget 2026 fact sheet, Delivering for every region; LocalGov: Healey's first Budget delivers fiscal devo vision (28 October 2026); Planning Geek: Social housing gets £1.5bn Budget boost (28 October 2026); Big Issue: Autumn budget 2026 keeps housing benefit freeze (28 October 2026); LocalGov: Councils spend £8m a day on temporary accommodation (17 September 2026); MHCLG: Statutory homelessness in England, January to March 2026; House of Commons Library: Temporary accommodation in England, issues and government action; Property118: Andy Burnham warns LHA freeze is driving up temporary accommodation costs (3 September 2026).