The new National Housing Bank aims to accelerate affordable housing as Registered Providers face rising costs, borrowing limits and stalled delivery across England.

Published: 10 February 2026
Author: Jennifer Eng

Registered Providers (“RPs”) in England finance affordable housing through a mix of regulated rental income, government capital grant, debt financing and cross‑subsidy from sales.

Recent years have seen a dramatic downfall in Affordable Housing delivery with budgets strained by rent caps, rising retrofit and safety costs, and lender covenants that limit further borrowing. The RSH has also announced a 1.8% increase in fees from 2026.

The Labour government announced the National Housing Bank (“NHB”) as a publicly owned financial institution. Created as a subsidiary of Homes England, its purpose is to offer affordable, flexible loans and financing options aimed at accelerating the delivery of affordable housing.  It aims to support SME developers, de-risk complex or large sites, and fill funding gaps that currently arise due to perceived risks or low financial returns.

This initiative will operate in conjunction with existing schemes designed to increase funding for stalled elements of affordable housing delivery. It will also support the emergency temporary measures implemented for London and contribute to recalibrating the Section 106 market.

Emergency measures in London

On 23 October 2025, the Government also launched a consultation on a new suite of emergency measures in London. These include offering CIL relief for development committed to delivering more than 20% Affordable Housing.

A further £322 million is also setting aside for a City Hall Developer Investment Fund on top of the £11.7 billion out of the SAHP funding to be allocated to London. The Fund is intended to be deployed in a flexible manner to unlock stalled housing projects in Greater London.

Unlocking Section 106 Units

One of the market issues has been the decline in uptake of Section 106 units the Government estimates there are thousands of constructed Section 106 homes that sit empty.

The Government has issued a policy statement to set out the expectations of the Council when considering flexible Affordable Housing provisions. Section 106 Units that are due for completion on or before the 01 December 2027 can take advantage of the opportunities to renegotiate tenures where they have been advertised for 6 weeks on the Homes England Clearing Service and have received any viable interest from an RP. Councils have no more than 12 weeks from the end of the 6 week period to consider the renegotiation of the affordable housing provision.

Units that are eligible for this time limited measure will not need a formal deed of variation to effect the change to the tenure mix, on the basis that is the homes are not completed by that time, the tenure mix will revert back.

In streamlining and supporting the Section 106 process, the Government, in conjunction with PAS will be preparing and agreeing a standard Section 106 template for medium sites.

Affordable Homes Guarantee Scheme

The £6 billion scheme has been confirmed to support proposals for Affordable/Social Rented or affordable home ownership units including those via Section 106 agreement that have not started on site. RPs can also apply for loans to support the decarbonisation or housing decency works for existing stock

The loans are funded by a capital markets bond programme which will be secured against existing assets and guaranteed by MHCLG. The loan will need to be a first ranking legal mortgage for a maximum of 30 years

National Housing Delivery Fund

Alongside the NHB, the government has also announced the National Housing Delivery Fund. This is made up of £5 billion capital grant fund for infrastructure and land intended to be fully operational from 01 April 2026.

It is anticipated that through innovative and flexible investment vehicles, the NHB aims to bring forward mixed‑use and social housing projects that may currently be unviable. Larger-scale developments may progress through a combination of Homes England grant, private investment, and NHB funding, collectively reducing borrowing costs and improving viability and deliverability.

The NHB/NHF is not intended to replace the existing Social Affordable Homes Programme for which the government has committed to £39 billion over the next 10 years. The SAHP will continue to be administered by Homes England for delivery of Affordable Housing Units with priorities for 60% delivered as Social Rent. Most grant funding applications are approved for schemes that are demonstrably deliverable. RPs can also apply to be strategic partners where they have a long term history of larger scale delivery.

The 2025 Spending Review also introduced additional funding for building‑safety retrofitting, a major financial constraint for many RPs particularly in London. Reducing this burden could free up capacity for providers to invest in new affordable housing supply.

Housing associations are also expected to be able to access the Warm Homes Fund and obtain a loan of equity financing for large scale upgrade to solar panels, batteries, head pumps and insulation.

Rent convergence

These initiatives are supported by the rent convergence confirmed by the Written Ministerial Statement on 28 January 2026. This confirms that all RPs with Social Rented units below the formula rent will be able to increase their rents an additional £1 per week from 01 April 2027 and an additional £2 from 01 April 2028. The stability is expected to improve investment security and give RPs more confidence to committee to new and more ambitious development.

Operation of the NHB

The NHB will be established as a Public Financial Institution acting as the government’s investment arm in housing. All investments will be made in line with HM Treasury’s Financial Transaction Control Framework ensuring responsible use of public funds

The funding package includes £10.5 billion of capital which includes £2.5 billion allocated to low cost loans for housing associations.  This is on top of the £6 billion of existing funding allocated and separate to the £39 billion SAHP 2025-2035 capital grant programme

The expectation is that the NHB-backed investments will yield long-term returns and ultimately become self-sustaining over time.

• Financial products

  • the NHB intends to offer a flexible suite of products that both inject capital into developments and stimulate private investment, particularly for complex, large or early‑stage projects where market appetite is currently limited

• Equity investment

  • focus on equity investments at scale, primarily through delivery vehicles rather than on a scheme‑by‑scheme basis
  • ability to invest through public or private partnerships, with flexibility in where NHB capital sits within the capital stack
  • targeted at early‑stage activity such as site assembly, pre‑planning work, and design — points where commercial lenders often retreat

• Guarantee

  • a £5.5 billion allocation will be used to offer guarantees that help attract private finance into housing and regeneration projects
  • an affordable housing guarantee is being considered to support the acquisition of existing Section 106 units. The Government has issued a separate policy statement in respect of an emergency time limited measure to allow flexibility in the delivery of Social and Affordable Housing units by varying the required tenures

• Developer loans

  • loan products blending public and private capital
  • designed to be more accessible to SME developers, who often struggle to obtain affordable borrowing from traditional lenders

• Low interest Housing association loans

  • NHB intends to offer low‑cost loans to housing associations to tackle one of the major barriers to affordable housing delivery: high financing costs
  • 10% of the £2.5 billion will be allocated to Private Registered Providers to deliver S106 units
  • interest rates will be set at a nominal 0.1% with loan periods for 25 years

• Infrastructure loans

  • loans specifically to fund critical enabling infrastructure needed for housing delivery, particularly where early returns are insufficient to attract private investment.

• Institutional investment

  • scaling up institutional investment, following models such as Homes England’s collaboration with Schroders Capital’s Real Estate Impact Fund, which balances social impact with financial return
  • intended to support affordable housing delivery and town‑centre regeneration

Conclusion

The launch of the National Housing Bank represents a significant shift in how affordable housing will be funded and enabled over the coming decade. By combining flexible loan and equity products, targeted guarantees, and a focus on early‑stage risk, the NHB is intended to complement existing capital grant programmes while unlocking stalled or unviable developments. An Investment Prospectus is expected to be published in the coming months.

Alongside this, wider government reforms including rent convergence measures and the reset of the Section 106 system are designed to provide greater certainty, improve viability and remove key structural blockages in the delivery pipeline. Collectively, these initiatives signal a more interventionist but supportive policy framework aimed at accelerating affordable housing supply, strengthening the sector’s financial capacity and improving outcomes for communities.