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More than two-thirds of a UK government fund aimed at unlocking hundreds of thousands of new homes in England remains unspent more than six years after its launch, despite the chronic shortage of housing.
The £4.2bn Housing Infrastructure Fund was created in 2017 in an attempt to jump-start housebuilding by providing local authorities with grant funding for key infrastructure such as transport and utilities connections.
However, just £1.3bn of the pot — or about 31 per cent — has been spent to date, according to a Freedom of Information request submitted to the government and shared with the Financial Times.
The FOI request, made by local government researcher Jack Shaw, found the bulk of that sum had been spent in 2021 and 2022.
The government also confirmed that work had begun on fewer than one in 10 of the promised homes, and that it had downgraded its delivery target through the fund from 340,000 to 270,000 homes, after a number of schemes withdrew or had funding pulled.
The UK faces a chronic housing shortage and is far behind on a government target to build 300,000 homes a year, with 232,820 new dwellings added last year.
Housing experts said the HIF was aimed at addressing the shortage, but that inflation had caused some projects to stall or become undeliverable since government funding was first agreed.
Ministers launched the fund in the summer of 2017, inviting councils to bid to Whitehall for the grants, which are administered by state housing body Homes England.
However, Marcus Dixon, director of UK residential research at the real estate firm JLL, said that although the fund had been intended to “unlock housing delivery”, since then “rapidly rising build costs and an increased regulatory burden” had led developers to put schemes on hold.
Costs had risen by as much as 40 per cent since the pandemic, he said, so “schemes that had secured funding began to face shortfalls, in some cases in the tens of millions of pounds, which would need to be plugged for development to start as planned”.
In December, the Department for Levelling Up, Housing and Communities pulled HIF funding from a £170mn council-led housing scheme on the Hoo Peninsula in Medway, Kent, owing to concerns that it was no longer deliverable under its original budget.
One former official with close knowledge of the HIF said that, in addition to the impact of inflation, application criteria imposed by Whitehall had made the scheme hard to access.
“It has been killed by the economy and ridiculous business case requirements,” he said.
A second person familiar with the fund said the government’s Infrastructure Projects Authority had issued a “highly critical” internal report on it more than a year ago, warning that some projects due for funding had proved to be unexpectedly complex and were now facing spiralling costs.
The FT requested the IPA’s report under FOI laws this year, but the levelling up department refused to release it on the grounds that ministers needed “a space to develop ideas and reach decisions away from external interference and distraction”.
In its annual report for 2022-23, the IPA downgraded the HIF programme to red, meaning there were “major issues with project definition, schedule, budget, quality and/or benefits delivery, which at this stage do not appear to be manageable or resolvable”. The levelling up department said that since then, it had been re-rated to “amber”, meaning delivery was now considered “feasible”, albeit with “significant issues”.
Shaw said it was now “not clear” how the fund was going to unlock more than 270,000 homes.
“Across England housing investment has not been responsive enough to changing circumstances and in the current inflationary environment the government and Homes England need to find alternative approaches to increasing housebuilding,” he said.
The department said it was “confident” it would “provide all £4.2bn of the HIF to local authorities across all regions of England, unlocking up to 270,000 homes. More than 23,000 homes have already started construction and expenditure is on track.”
“Major infrastructure projects understandably take time to deliver and we recognise the challenging backdrop that capital programmes have experienced . . . We continue to work very closely with Homes England to make sure all the programme budget is spent and the maximum possible housing capacity is unlocked,” it added.