Two statements, six months apart, describe the machine.
The first came on 12 December 2024, when the Deputy Prime Minister set out the revised planning framework to Parliament. It was about what councils are allowed to decide.
We are clear that these decisions must be about how to meet those needs, not whether to do so at all. We are therefore restoring mandatory housing targets.— Deputy Prime Minister, written ministerial statement HCWS308 · Ground Level, 12 December 2024
The second came on 17 June 2025, when the Treasury and the housing ministry announced a National Housing Bank. It was about what the state is allowed to spend.
Because we reformed our fiscal rules, we can invest through government-backed institutions, like the new National Housing Bank, to attract private investment.— HM Treasury and MHCLG, announcing the National Housing Bank · Ground Level, 17 June 2025
They are two halves of one design. The first makes permission the default. The second lets the state put money into every stage between a field and a mortgage, in forms that barely register against its debt target. This piece follows both halves, and ends with who carries the risk when they meet.
The planning half, from penalty to default.
For a decade the five year housing land supply was the enforcement mechanism. A council that could not show five years of deliverable sites against its target lost the protection of its own plan. Paragraph 11(d) of the framework then tilted its decisions towards approval, and speculative sites won on appeal. Our explainer on the five year supply sets out how it worked, and the Wern at Lechlade shows it working: refused unanimously by councillors, allowed on appeal.
That was a penalty. It applied to councils that failed. Since July 2024 the government has turned it into the starting point for all of them, in four steps.
The target went up and became mandatory. On 30 July 2024 the Deputy Prime Minister told Parliament the new standard method would raise the national total "from around 300,000 to approximately 370,000". The December response settled it at 370,408 homes a year. The statement that month restored mandatory targets and said the presumption in favour of sustainable development would act as "a significant adjustment to the decision-making balance in favour of approving development".
The government knew where the extra permissions would come from. The same statement says: "Rapidly driving up planning consents in the context of a system with woefully inadequate local plan coverage will increase the number of permissions secured outside of local plan allocations in the short-term."
The presumption became permanent. The framework published on 17 August 2026 removed paragraph 11(d). In its place, policy S3 applies a presumption in favour to every decision, not only where a council has failed a test. Inside a settlement, development should be approved unless the benefits of doing so would be substantially outweighed by any adverse effects. Outside one, failing the supply test opens policy S5(1)(j), which puts housing that is well related to a settlement on the list of development that should be approved. We covered the detail in what happened to the tilted balance. The change in kind is this. Under the old framework, approval was what a council risked by failing. Under the new one, approval is where every decision starts.
Decisions moved away from committees. The Planning and Infrastructure Act 2025 received Royal Assent on 18 December 2025. Section 54 lets the Secretary of State require councils to delegate planning decisions to officers. The government's response of 1 June 2026 sets a national scheme of delegation to take effect on 31 October 2026, with applications in its first tier decided by officers as of right.
Environmental duties became payable. Part 3 of the same Act creates environmental delivery plans and a nature restoration levy. Schedule 3 lists the site-level duties a levy payment can discharge, including habitats assessments and protected species licences. The Office for Environmental Protection advised in May 2025 that, as drafted, "the provisions are a regression". After amendment it said in July 2025 that the changes "go a long way", while noting the Bill would still, in some respects, lower protection on the face of the law.
The effect shows in the appeal figures.
The Inspectorate's quarterly statistics put the allowed rate for planning appeals at 31% for April to June 2026.
And yet the number of homes granted permission fell. The government's planning applications statistics, published on 24 September 2026, record 212,000 homes granted permission in the year to June 2026, down 12% on the year before. Over the same period the number of homes in outline applications rose 41%. The rules had been loosened since December 2024, and permissions still fell. Whatever was holding housing back by 2026, it was no longer only the planning system.
The hinge, a change in how the state counts.
The second half starts with an accounting decision.
At the Autumn Budget on 30 October 2024 the Chancellor changed the debt rule. The target moved to public sector net financial liabilities, a measure that counts the loans and equity the state holds as assets against what it has borrowed. The Budget explained why in one sentence: "The UK has historically made less use of government-issued financial instruments (e.g. loans, equity, and guarantees) than many advanced economies."
The consequence is simple to state. A grant of £1 counts in full against the debt target. A loan of £1 creates a matching asset and counts for little on the day it is made. The Office for Budget Responsibility has now said twice, in October 2024 and again in July 2025, what that does to behaviour.
The Government's decision to target PSNFL as its debt rule therefore creates an additional incentive for the acquisition of loan and other financial assets by the public sector.— Office for Budget Responsibility, Fiscal risks and sustainability · Ground Level, July 2025
Housing policy has followed the incentive. The Spending Review of June 2025 allocated "£4.8 billion in financial transactions" to housebuilding, and said this was "enabled by the fiscal framework reforms announced at Autumn Budget 2024". Six days later, the National Housing Bank release said the same thing more directly.
The finance half, link by link.
Take the development process in order, from land to the household that buys the finished home. At every stage there is now a state lender, guarantor, investor or guaranteed income, most of them created or extended since October 2024.
| Stage | Lever | Instrument | Scale |
|---|---|---|---|
| Land | Homes England land funds | Grant and loans | £10.5bn allocated since 2016-17 |
| Land | Compulsory purchase without hope value | Legal power | Planning and Infrastructure Act 2025, s.113 |
| Builders | National Housing Bank | Loans, equity, guarantees | £16bn |
| Builders | ENABLE Build | Guarantees | £750m, £434.6m drawn |
| Rented homes | National Housing Bank build to rent deals | Equity | £200m in its first 4 deals |
| Social housing | Social and Affordable Homes Programme | Grant | £39bn over 10 years |
| Social housing | Rent settlement and landlord loans | Guaranteed income, 0.1% loans | CPI plus 1% for 10 years, £2.5bn |
| Buyers | Mortgage Guarantee Scheme | Guarantee | Permanent from July 2025 |
| Buyers | Your First Home | Equity loan | 20% of the price, detail at Budget |
| Savers | Pension Schemes Act 2026 | Reserve power | Up to 10% of default funds |
Land. Homes England and the housing ministry have allocated £10.5 billion to unlocking land since 2016-17. The National Audit Office reported in February 2026 that the programmes expect 713,000 homes, and that the ministry's data showed over 33,000 built by September 2025, while warning that incomplete tracking means the true figure is likely higher. Section 113 of the 2025 Act extends the schemes for which an acquiring authority can compulsorily purchase land without paying hope value. The new towns programme, published in draft in March 2026, names "land value capture, fiscal tools, guarantees, and institutional investment" among its levers.
Builders. The National Housing Bank opened on 1 April 2026 as a subsidiary of Homes England.
Its investment prospectus states that returns "will only seek to cover the cost of government borrowing". For smaller builders it offers loans of up to 90% of cost, and an accelerator loan for "100% of the land for your next scheme". Homes England's strategic plan for 2025 to 2030 measures its own performance partly by the "total value of private sector funds leveraged" and by its "rate of return".
Rented homes. Two of the bank's first four announced deals were in build to rent: £100 million with Aviva for family rental homes, and £100 million of cornerstone equity in a build to rent fund run by Starlight. The other two were a residential-led regeneration venture with Capital&Centric and Swiss Life, projected at £860 million, and the purchase of 700 acres at Cambridge East for more than 10,000 homes. The institutional side of this market, and who ends up owning the homes, was the subject of our piece on the housing algorithm.
Social housing. The Spending Review committed £39 billion over 10 years from 2026-27. The less visible decision was on rent. Social rents may rise by CPI plus 1% a year from April 2026, and the government doubled the settlement from 5 years to 10. Its July 2025 document gives the reason: "To give Registered Providers, lenders, and investors greater long-term certainty." Rent is described as "an income stream ... against which they can borrow and invest in new homes". Housing associations have already borrowed around £105 billion from private markets, by the same document's count. A further £2.5 billion of government loans is offered at 0.1% over 25 years, unsecured and subordinated, and open to for-profit providers.
Buyers. Here the levers sit with the regulators as well as the Treasury. On 24 December 2024 the Prime Minister wrote to the regulators asking them to support growth. The Financial Conduct Authority replied on 16 January 2025 with a promise to "begin simplifying responsible lending and advice rules for mortgages, supporting home ownership". The Bank of England cut Bank Rate six times between August 2024 and December 2025, from 5.25% to 3.75%. That was a decision of an independent committee about inflation, not housing policy, but it is the ground everything else stands on. In March 2025 the Financial Conduct Authority told lenders that current stress testing "may be unduly restricting access to otherwise affordable mortgages", and the Chancellor welcomed it the same day. By December the regulator reported that "85% of the market responded to our flexibility on stress testing with home buyers able to borrow £30,000 more, on average". The Bank's own limit on lending at 4.5 times income or more was relaxed for individual lenders. Its Financial Stability Report of July 2026 records the share of such lending rising to 13.2% in the first quarter of 2026, and calls that "the updated Recommendation working as intended". The Mortgage Guarantee Scheme became permanent in July 2025. On 26 September 2026 came Your First Home, a state equity loan of 20% of the price of a new home.
Savers. The Mansion House Accord of May 2025, signed by 17 pension providers, commits 10% of default funds to private markets by 2030, with 5% in the UK. It is an industry pledge and names no housing target. The Pension Schemes Act 2026 adds a reserve power, usable from 2028, to direct default funds towards qualifying assets that include "interests in land".
Why both halves at once.
The government's reason is the target. The National Audit Office put it plainly in February 2026: 1.5 million homes by July 2029 "will require building more than 300,000 homes per annum on average, a level of housebuilding that was last achieved in the 1960s". England added 208,600 homes in 2024/25.
Planning reform answers the question of whether a site may be built. It cannot answer whether it will be. As our piece on Your First Home set out, a private builder builds at the rate it can sell, and sales depend on what buyers can borrow. The finance half is aimed at that gap: builders' funding, landlords' funding, and the buyer's deposit.
Noble Francis, economics director of the Construction Products Association, set out the timing on 28 September 2026. The government, he wrote, hopes the new equity loan will "stop house building completions falling in 2027", and "give it time for its policies to boost house building, which are long-term structural changes". On that reading the demand measures are a bridge, carrying the market until the planning changes, the new towns and the affordable homes programme produce homes. He expects them to take longer than the government thought.
That is the pattern. A system once organised around a council's right to refuse is being rebuilt around a presumption to permit. The finance that follows permission now has a state loan, guarantee or equity stake available at almost every stage. At the National Housing Bank it is priced to cover no more than the government's own cost of borrowing.
Who carries the risk.
The government's case deserves to be stated first, because the need it answers is real. On 31 March 2026 a record 135,580 households were in temporary accommodation in England, with 177,530 children among them. The Office for Budget Responsibility judged in March 2026 that the December 2024 reforms would add 170,000 homes over its forecast and lower average prices by around 0.8% by 2029. Median house prices in England fell to 7.6 times median full-time earnings in 2025, the lowest ratio since 2015, according to the Office for National Statistics. Most of the state's money in this design is lent, and most loans are repaid. Help to Buy cost a net £3.6 billion in present value terms against £30.9 billion paid out.
The risk still has to land somewhere, and it lands in four places.
Households. Mortgage debt reached £1,726.8 billion in July 2026, according to the Bank of England.
Household debt stands at around 130% of income, below its post-2000 average of 155%, so this is not yet a stretched system by historical standards. It is a system being encouraged to lend more against each pound of income. The Bank's July 2026 report projects that "a little over 5 million households" will see their repayments rise by the end of 2028.
The public balance sheet. Under the debt rule, loans and equity look almost free on the day they are made. Their cost arrives later, as write-offs. The OBR's November 2025 forecast assumes £1.2 billion of the state lenders' loans are written off by 2030-31. The National Audit Office found Homes England forecasting losses of 13% to 18% on its loan funds, within a loss appetite of 25%, and £198 million already written off. It still expects the funds to return an overall surplus. Homes England still holds £15.9 billion of Help to Buy loans, and its annual report warns that large falls in house prices "could lead to a disproportionately large reduction in the market value" of that book. The OBR's fiscal risks report of July 2026 does not address housing guarantees, equity loans or the National Housing Bank.
Land. Most of the levers above raise what a builder can pay for a site. The OBR's own analysis of the planning reforms says who keeps most of that.
External estimates point to landowners likely getting the majority of land value uplift, with figures ranging from around half to over three-quarters.— Office for Budget Responsibility, The supply-side impact of planning reforms · Ground Level, 14 August 2025
The Commons housing committee reported in October 2025 that such increases "occur independent of any productive activity or investment by landowners or developers, yet still yield substantial profits to them". The 2025 Act extends the compulsory purchase schemes that can exclude hope value. For land bought by private negotiation, nothing in the design changes the split.
Places. The costs that do not appear on a balance sheet fall locally. Decisions move from elected committees to officers on 31 October. Site-level environmental assessments can be replaced by a levy. And under the new framework a council's own plan carries less weight where it conflicts with national policy, as our piece on the plans racing the December deadline showed.
What to watch.
The design will be tested over the next 3 months.
- 28 October. The Budget sets the price caps, income cap and cost of Your First Home, and the fiscal headroom that every financial transaction draws on.
- 31 October. The national scheme of delegation for planning committees takes effect.
- By 31 December. Every council finishing a plan under the old system must have submitted it. The Prudential Regulation Authority expects its change to the income limit for individual lenders to take effect in the second half of 2026, with interim measures running to 31 December.
- Later in 2026. The Financial Conduct Authority's policy statement on first-time buyer and interest-only lending, consulted on in June.
- November. The final count of homes added in 2025/26. The ministry's estimate from energy certificates is 196,900.
Each of these moves one half of the machine. The test of the design is whether they move completions, or only the price of the land they are built on.
Sources: Financial Conduct Authority, letter to the Prime Minister, Chancellor and Secretary of State, 16 January 2025; Deputy Prime Minister, written ministerial statements HCWS48, 30 July 2024, and HCWS308, 12 December 2024; MHCLG, government response to the proposed reforms to the National Planning Policy Framework, December 2024; National Planning Policy Framework, August 2026, policies S3 to S5; Planning and Infrastructure Act 2025, sections 54, 59, 65, 113 and Schedule 3; MHCLG, planning committee reform: government response, 1 June 2026; Office for Environmental Protection, advice on the Planning and Infrastructure Bill, 2 May 2025 and 17 July 2025; Planning Inspectorate, Annual Report and Accounts 2025/26, 25 June 2026, and statistical release, 30 July 2026; MHCLG, Planning applications in England: April to June 2026, 24 September 2026; HM Treasury, Autumn Budget 2024, 30 October 2024; Office for Budget Responsibility, Economic and fiscal outlook, October 2024, and Fiscal risks and sustainability, July 2025 and July 2026; HM Treasury, Spending Review 2025, 11 June 2025; HM Treasury and MHCLG, "Over 500,000 homes to be built through new National Housing Bank", 17 June 2025; National Audit Office, Unlocking land for housing, HC 1645, February 2026; MHCLG, New towns draft programme, March 2026; Homes England, Strategic Plan 2025 to 2030, December 2025; Homes England and National Housing Bank investment prospectus, 31 March 2026; National Housing Bank, investment announcements, March to July 2026; HM Treasury, report under section 231 of the Banking Act 2009, 7 July 2026; MHCLG, Delivering a decade of renewal for social and affordable housing, 2 July 2025, and January 2026 progress update; Bank of England, Bank Rate history; Financial Conduct Authority, statement of 7 March 2025 and letter to the Prime Minister, 9 December 2025; Bank of England, Financial Stability Report, July 2026; Bank of England, mortgage lending series LPMVTXK; HM Treasury, 2025 Mortgage Guarantee Scheme, 15 July 2025; MHCLG, "New first-time buyer scheme to be confirmed at Budget", 26 September 2026; Mansion House Accord, 13 May 2025; Pension Schemes Act 2026, section 40; Noble Francis, posts on X, 28 September 2026; MHCLG, Statutory homelessness in England: January to March 2026; Office for Budget Responsibility, Economic and fiscal outlook, March 2026, housing market, and "The supply-side impact of planning reforms: land value uplift and construction sector productivity", 14 August 2025; Office for National Statistics, Housing affordability in England and Wales: 2025; Office for Budget Responsibility, Economic and fiscal outlook, November 2025, paragraphs 6.30 and 6.31; Homes England, Annual Report and Accounts 2024-25; MHCLG, Evaluation of the Help to Buy scheme, 15 September 2026; House of Commons Housing, Communities and Local Government Committee, land value capture, HC 672, 28 October 2025; MHCLG, Housing supply: indicators of new supply, England, April to June 2026, 24 September 2026; Financial Conduct Authority, CP26/18, June 2026; Prudential Regulation Authority and Financial Conduct Authority, CP6/26, 1 April 2026.