'Make or Break' Spending Review: What it means for landlords
As Chancellor, Rachel Reeves, prepares to unveil her first Spending Review, public affairs manager, Ellie Bateman, highlights some of the difficult decisions being made that will shape public spending over the coming years - and how these could impact you as a landlord.
Why the Spending Review matters
On 11th June, the Chancellor will present her first multi-year Spending Review – and the first under a Labour government in more than twenty years.
Set against the backdrop of tight public finances, rising demand for services and a promise of “hard choices”, the Spending Review is politically and economically significant because it will shape the delivery of public services and reflect the Government’s priorities.
The review will lock in day-to-day departmental spending for the next three years, and investment budgets for the next four.
What are the Government’s spending priorities?
At the Autumn Budget in 2024, the Government set the parameters for overall government spending up to 2028/29.
These indicated that cuts to some departments’ budgets would be necessary, and the ‘zero-based’ budgeting approach means no unprotected department is guaranteed previous levels of funding. Instead, all spending must be justified from scratch.
The Government has already promised real-terms increases for health and defence, which together account for a large and growing portion of public spending.
Other than health and defence, all government departments are likely to see their budgets cut in real terms – though there’s a chance the Ministry for Housing, Communities and Local Government (MHCLG) could get a slight increase.
Where are cuts likely?
With health and defence ring-fenced, other departments, including housing, local government, and energy, face real-terms cuts.
This is despite warnings that further reductions could undermine essential services and prevent the Government from achieving key objectives.
Alongside the Spending Review, a long-term housing strategy is expected to be published, outlining planned investment in social and affordable housing.
A successor to the Affordable Homes Programme (AHP) is also due to be confirmed. But ministers are under pressure – MHCLG’s investment and day-to-day spending budgets are still lower in real terms than in 2006/07, and local councils say funding shortfalls could prevent them from setting balanced budgets next year.
Additionally, a £20 billion pledge to upgrade the energy efficiency of five million homes could be at risk.
In an effort to stave off cuts to MHCLG, the Chair of the Housing, Communities and Local Government Committee has argued that a “generational increase” in investment is needed if the Government is going to meet its 1.5 million new homes target and warned that the Spending Review is “make or break”.
NRLA to give evidence to committee
Spending Reviews allocate planned expenditure, so spending on benefits, which is annually managed, is not included.
The Government has already committed to a rebalancing of Universal Credit – raising the standard allowance above inflation from 2026/27 and increasing the weekly rate for a single adult over 25 from £92 to £106 in 2029-30.
However, with Local Housing Allowance (LHA) rates frozen from April 2025, those receiving the housing element will still feel the pressure.
Our Chief Executive, Ben Beadle, will give evidence to the Work and Pensions Committee on 18th June where he will call on the Government to restore LHA rates to the 30th percentile of market rents and embed LHA within the main benefit uprating mechanism to improve certainty for tenants and landlords.
Ben will also highlight concerns raised in our latest member survey on the impact of the LHA freeze, the need to remove the benefit cap so that households receive the full benefit of LHA uplifts and call for a boost in social housing to reduce pressure on the private rented sector to help prevent homelessness in a time of continued housing insecurity.
What it all means for landlords
Health and defence spending may grab the headlines, but cuts to housing and local government budgets will have serious knock-on effects for the private rented sector.
Reduced support for homelessness prevention, housing enforcement, and tenant advice could mean more vulnerable households turning to the PRS and greater pressure on landlords to fill the gap left by under-resourced councils.
Behind the headline figures lies a simple truth that the Government must recognise – when funding for housing and services is stretched, the private rented sector ‘safety net’ becomes ever more vital.
The Spending Review is an opportunity to acknowledge this and back it up with the funding needed to deliver safe, sustainable homes.
What happens next?
There’s no formal procedure or vote on a Spending Review, but decisions made next week will set the tone for the Autumn Budget as departments consider their own internal spending plans, as well as the next few years of public investment.
Image of Rachel Reeves courtesy of Parliament.uk via Creative Commons. Licencing details: https://creativecommons.org/licenses/by/3.0/
