ACE15H New houses and flats being built on Nightingale Estate in Hackney during 2007. Image shot 2007. Exact date unknown.
Social housing providers will be able to apply for funding as far ahead as the 2028-29 financial year © Shangara Singh/Alamy

Social housing providers have welcomed a commitment by the prime minister to allow financing deals lasting up to a decade, saying it represents a “total step change” in how the sector is funded.

Theresa May told a conference of housing associations on Wednesday that she would commit an extra £2bn to social housing and would enable associations to apply for funding as far ahead as the 2028-29 financial year.

“Doing so will give you the stability you need to get tens of thousands of affordable and social homes built where they are needed most, and make it easier for you to leverage the private finance you need to build many more,” she said.

Mrs May added that she wanted to address the “stigma [that] still clings to social housing”, urging: “I want to see social housing that is so good, people are proud to call it their home . . . Our friends and neighbours who live in social housing are not second-rate citizens.”

The £2bn for long-term partnerships with housing associations comes in addition to the existing £9bn affordable housing budget, which lasts until 2021.

The Affordable Homes Programme, the key mechanism by which central government funds the construction of homes offered at discounted rents, typically commits money over five-year periods.

But housing associations say the process of getting homes built, from finding sites to securing planning permission and carrying out construction, takes closer to seven, while the programme’s length also limits their broader planning and private borrowing.

The new scheme will build on £600m of longer term commitments already made to eight associations, Mrs May said.

David Orr, chief executive of the National Housing Federation — which represents housing associations — said: “The really big news here is the prime minister’s long-term commitment to funding new affordable homes. This represents a total step change.”

The sector had been calling for long-term strategic funding commitments “for some time”, said Paul Hackett, chief executive of the housing association Optivo.

Gavin Smart, deputy chief executive of the Chartered Institute of Housing, a professional body, said the new deals would reduce social housing providers’ reliance on commercial developers building homes for discounted rents as part of planning conditions.

“Long-term partnerships will enable more housing associations to take the lead in developing their own land and reduce their reliance on private developers, helping to boost the numbers of new homes we build as a nation,” he said.

Mr Smart cautioned that government investment should aid construction of homes “at the lowest social rents — which is often the only truly affordable option for people on lower incomes”.

Mrs May’s approach to social housing contrasts with that of her predecessor David Cameron, who slashed funding for socially rented homes by more than half from £3bn a year before 2010, while urging demolition and replacement of “sink estates”.

However, Mrs May’s government has remained committed to his flagship Help to Buy equity loan programme focused on home ownership, which received an extra £10bn of funding a year ago.

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