The Social Housing Shortage: A Defining Challenge for 2025

The latest Social Housing New Build Market Report from Barbour ABI explores the challenges of the social housing shortage. 2025 has been a difficult year for the social housing new build sector. In the first three quarters alone, contractor output fell by around 10% compared with the same period last year. This decline is not just a statistic, it reflects the growing strain on housing associations, whose ability to deliver new homes has been hampered by constrained financial capacity, rising finance costs, escalating building expenses, and major repair and maintenance (RMI) commitments.

The result? A widening gap between supply and demand at a time when the housing shortage is already acute. With approximately 1.3 million people on social housing waiting lists in England, the shortfall is no longer a distant policy issue – it is a pressing social crisis. 

Government Investment in Social Housing

There are signs of renewed momentum. The government’s announcement of £39 billion for the 2026 – 36 Social and Affordable Homes Programme is described as one of the most significant interventions in decades. The aim is to deliver 300,000 new social and affordable homes over the next ten years. This commitment highlights the scale of the challenge and the urgency of tackling the shortage.

Local authorities have also been given powers to borrow more to invest in new homes, and many plan to use these powers to increase their housing stock. Mayoral regions have been given targeted support, and this will contribute to growth.

Section 106 Agreement

Alongside grant funding, the government expects providers to increase delivery through Section 106 (S106) agreements. These agreements – where developers commit to building affordable homes as a condition of planning permission – remain a cornerstone of social housing supply. For many housing associations, S106 units represent one of the few reliable pipelines of new homes.

Ongoing Challenges

Yet despite these positive developments, the sector continues to face significant obstacles:

• Skills shortages: A lack of trained construction workers threatens to slow delivery
• Financial constraints: Housing providers remain under pressure from rising costs and limited borrowing capacity.
• Planning bottlenecks: Delays in the planning system continue to frustrate efforts to bring new homes forward.

Government reforms to planning may help, but progress remains painfully slow compared to the urgency of the housing shortage.

Innovative Building Techniques

On a positive note, the growing interest in modular construction and innovative building techniques presents opportunities to enhance efficiency and sustainability, which could help increase both the supply and quality of social housing in the coming years.

“The government’s commitment of £39 billion in funding marks a significant shift towards revitalising the social housing new build sector in England. Much of this funding will be allocated to the construction of approximately 300,000 new social homes. These homes are expected to adhere to modern environmental and accessibility standards, ensuring that they are future-proofed for the next generation.

However, the market landscape presents several challenges, including a skills shortage, financial constraints among housing providers, and planning bottlenecks. Government efforts, including planning system reforms and low-interest loans to social housing providers, should help accelerate the delivery of new social and affordable housing, though progress remains painfully slow.

On a positive note, the increasing interest in modular construction and innovative building techniques offers opportunities to improve efficiency and sustainability, which could help increase the supply and quality of social housing in the coming years.”

– Claudia Preedy, Editor of the report.