Prime Minister Andy Burnham’s announcement of an initial £10bn affordable housing investment has sent shares in the UK’s biggest housebuilders sharply higher on Tuesday.
Burnham said the funding would be used to build “thousands more quality council, social and affordable homes” across the country.
He added the money would be earmarked for “genuinely affordable homes, most of them for social rent, in the places where families are waiting longest.”
The announcement provided welcome relief to housebuilders that have been struggling amid a sustained slowdown in Britain’s housing market in recent months.
Beleaguered FTSE 250 firm Vistry (VTY) jumped more than 12 per cent to 301p in early trading, while rival housebuilders Barratt Redrow and Persimmon led gains on the FTSE 100.
Vistry told investors the government had handed it £350m to build 3,000 affordable homes as part of the initial £10bn tranche of funding.
Chief executive Adam Daniels welcomed the move, saying: “We are delighted that Homes England has made this significant announcement that will create over 73,000 new homes and provide Vistry, its partners and the wider sector with a much-needed stimulus.”
Vistry, which mostly works in partnership with housing providers like local councils, has said it hopes to play a large role in Burnham’s vision for “the biggest council housebuilding programme since the postwar period.”
The £10bn in funding will be spent on building 70,000 homes outside London, with about 60 per cent of the money earmarked for social rented housing, while a further £6bn will be allocated for housebuilding in the capital at a later date.
Today’s announcement represents a watering-down of Burnham’s earlier position, having previously called for all of Labour’s £39bn social and affordable homes programme to be “dedicated to council homes.”
The money will instead be spent on a mix of subsidised housing types, in line with previous commitments made by Burnham’s predecessor Sir Keir Starmer.
Vistry, which has become the UK’s most-shorted stock in recent months, spooked investors last month by posting a £30bn first-half loss in an unscheduled trading update.
The positive market reaction comes despite a series of warnings that falling demand and rising costs caused by the Iran war are hammering housebuilders’ finances.
Shares in FTSE 250-listed Berkeley (BKG) jumped two per cent in early trading to 3,594p, after the firm had previously halted land-buying completely in response to an “unprecedented increase in cost and regulation.”
Barratt Redrow, which gained nearly one per cent on Tuesday, has said it is cutting back on land-buying in response to “heightened macroeconomic uncertainty.”
Housebuilders including Bellway and Barratt Redrow have urged Burnham to cut stamp duty for first-time buyers in a further bid to boost demand for new homes.