Chancellor of the Exchequer Rachel Reeves has put major investment in affordable housing, improved defence security and transport at the centre of the Spending Review, the key document laying out the budget for government departments in the coming years.

In an announcement that has major implications for real estate across a range of areas, the Chancellor said the purpose of the Review was to ensure renewal was felt in ordinary people's everyday lives, jobs and high streets.

Reeves said the review allocated £190 billion more to the day-to-day running of public services over its course than the previous government.

James Roberts, director of market intelligence at Avison Young, said the review was positive in a number of important ways for real estate.

"Today’s Spending Review will boost long-term growth for the UK economy, which in turn is good news for real estate, as property investors typically have a long-term mindset. The encouraging aspect of this review is its £113 billion worth of infrastructure projects, which will boost the economic prospects for the geographies they serve. Property assets located near these infrastructure projects should see improved capital growth further down the line."

Lee Elliott, head of global occupier research at Knight Frank, said the review had fired the starting gun on a new investment cycle with big business poised to benefit from the £113 billion, which includes funding for transport, housing, defence and nuclear.

"The headline commitments – from Sizewell C to urban rail upgrades – send a clear signal on growth and national renewal. Defence contractors, infrastructure firms and clean tech players will see opportunity in the detail. But with day-to-day departmental budgets rising just 1.2% in real terms, tax policy left hanging, and a volatile global environment defined by trade tensions and supply chain fragility, the long game remains uncertain."

Elliott said the government is "betting big, but business knows the balance sheet still bites".

The Chancellor unveiled what she termed the biggest cash injection into social and affordable housing in 50 years including a new affordable homes programme that will see £39 billion invested over the next decade. The announcement was trailed last night and today Reeves said towns and cities including Blackpool, Preston, Sheffield and Swindon had already had bids to bring forward homes. Spending will reach £4 billion per year in 2029-30 and rise in line with inflation subsequently.

The announcement was the standout in a number aimed at helping the government meeting its pledge to build 1.5 million homes in this parliament.

The chancellor is also using the change to her borrowing rules to announce a further £10 billion for Homes England. That will not count towards public debts but help to build “hundreds of thousands of homes”, she said.

The review announced:

• A 10-year social housing rent settlement from 2026 at consumer price index + 1%, alongside a consultation on how to implement social rent convergence;
• Providing £2.5 billion of low-interest loans over the the period of the review for social housing providers to boost their capacity to invest in new development;
• Confirming over £1 billion of new investment between 2026‑27 and 2029- 30 to accelerate the remediation of social housing, by giving providers equal access to government funding as private building owners. This will support providers of social housing to supply more affordable homes, while also improving the living conditions of tenants;
• Confirming £4.8 billion in financial transactions from 2026-27 to 2029-30. This additional capacity will be managed by Homes England;
• Investing in infrastructure and land remediation to deliver housing schemes in partnership with the private sector. The government will shortly set out plans for new towns and Cambridge;
• Providing £950 million of investment for the fourth round of the Local Authority Housing Fund – the largest investment in the fund – to support local authorities in England to increase the supply of good-quality temporary accommodation and drive down the use of costly bed and breakfasts and hotels; and
• The government is protecting spending on tackling homelessness and rough sleeping, and providing £100 million, including from the Transformation Fund, for early interventions to prevent homelessness

The government will also launch a permanent, UK-wide mortgage guarantee scheme in July to ensure the consistent availability of mortgages for buyers with small deposits.
The acid test will be the reaction of the volume housebuilders whose homes remain empty because housing associations have been unable to afford them.

Jason Honeyman, chief executive of one of the biggest housebuilders, Bellway, said it should prove important: “We’ve been caught in a cycle where developers are delivering affordable homes, but due to underfunding, our Housing Associations have limited financial capacity, leading to a reduced appetite to acquire. The government’s decision to confirm a 10-year rent settlement and double its investment brings much-needed certainty for developers and, crucially, unlocks high-quality homes delivered through Section 106 – ensuring they reach the people who need them most.”

Melanie Leech, chief executive, British Property Federation, added that with really tough choices to be made in the Spending Review, her organisation was delighted that the Government had prioritised the delivery of affordable and social housing and that it is "investing significant additional sums to support a sector that has faced tough headwinds in recent years".

"The government has also delivered the 10-year rent settlement which we and the wider sector have been advocating for a long time. This is a significant step forward to help the sector to plan with more certainty and to help unlock the huge amount of long-term private capital such as pension funds, that wants to invest in genuinely affordable homes.”

RICS chief executive Justin Young said the announcements were significant and welcome.

"For too long, the housing sector has lacked the long-term certainty needed to plan and deliver at scale. RICS has consistently called for an increase in public investment to match the ambition of building 1.5 million homes, and this 10-year programme does just that."

Justin Carty, executive director, residential investment advisory, CBRE, said the announcements should be the catalyst for unlocking and driving forward affordable housing delivery.

"The sector has faced a myriad of challenges, that has seen affordable housing delivery, particularly in London, stall, and there are still significant planning and delivery challenges that developers are facing, which need to be overcome to meet housing needs. This announcement is an excellent boost for the sector and a positive step forward.”

Neil Kelly, head of land and evelopment at national real estate consultancy Bidwells, it was a relief to see the government allocate capital funding towards the delivery of affordable and social housing.

He added that the key question is whether the funding will be available for use on affordable housing delivered through Section 106 agreements. "If not, the impact of the funding will be severely limited, as it won’t actually make any impression on resolving the current delivery issues faced on the ground, primarily in regard to the lack of registered providers' appetite to acquire the S106 units, leaving open market delivery stymied.

Kelly said the government should also look to provide more support across a range of tenure types. "In the market sale sector, for example, housebuilders are struggling to accelerate delivery due to mortgage unaffordability, inflation, and challenges around viability.

"The reintroduction of a policy like Help to Buy, alongside Labour's changes to the National Panning Policy Framework, offers real potential in terms of solving the housing crisis and accelerating delivery, boosting government coffers by tackling the housing shortage at both the demand and supply side."

The Spending Review again said the government was fundamentally changing its own property footprint by relocating from London into regional hubs. While many of the announcements have already been made, the Review confirmed the government will, by 2030, reduce the number of civil servants based in London by 12,000 and have 50% of UK-based senior civil servants in regional offices across the UK. The relocation strategy is "designed to save taxpayers’ money and ensure the government better reflects the country it serves".

To support the relocation of roles out of London, the Spending Review pledged to invest £244 million to complete the development of new government hubs.

This includes the Darlington Economic Campus in Brunswick Street, which will be home to 1,400 civil servants from across a range of government departments, the Manchester First Street Hub, which will accommodate 2,600 civil servants, and the York Central Hub, home to 2,600 civil servants.

In terms of the government estate in London, over the Spending Review period, 11 central London offices will be closed, including 102 Petty France and 39 Victoria Street. This will result in £94 million in annual savings by 2032, it said. The government will dispose of surplus estate, it added, delivering at least £1 billion of receipts by 2030 that will be reinvested in the retained estate to improve its condition and sustainability.

Reeves again made it clear that investment in improving the UK's defence security was a critical part of government policy, both for providing certainty in an increasingly fraught world and for boosting the economy. The initiative create a major opportunity for real estate and infrastructure development.

Defence and security spending will rise to 2.6% of gross domestic product by 2027, via an £11 billion increase. Reeves said Labour will make Britain a "defence industrial superpower".

There will also be an extra £280 million spent a year on improving the integrity of borders and towards the creation of a new border security command.

In an important update for the hotel sector Reeves announced the government will use extra funding to "end the costly use of hotels to house asylum seekers" in this Parliament.

Reeves said this money will "cut the asylum backlog, hear more appeal cases, and return people who have no right to be here" and that this will save "the taxpayer £1 billion per year".

Government is also investing in the biggest roll out of nuclear power in 30 years, Reeves said, and will invest in energy security particularly via the wholly publicly owned Great British Energy to reduce reliance on overseas oil and gas.

Reeves confirmed Heathrow Airport has signed the UK steel charter for a multibillion-pound expansion via a third runway to be built with British steel. Reeves described the government focus as being on "things built to last, built in Britain".

The Ministry of Defence Budget includes at least £7 billion in this Parliament for a "once in a generation renewal" of military accommodation, including over £1.5 billion new investment for rapid work to fix forces' family housing.

The government will publish its 10-year Infrastructure Strategy later this month setting out how infrastructure projects are planned and delivered.

Transport-wise, today Reeves said the government would be providing £15.6 billion in total by 2031-32 for the elected mayors of some of England’s largest city regions via the Transport for City Regions settlements. She said this will more than double city region transport spending per year by 2029-30 in real terms, compared with 2024-25.

That includes investing £2.3 billion in the Local Transport Grant for local transport improvements including bus lanes, cycleways and congestion improvement measures in places outside those receiving TCR settlements.

Reeves said the government was providing the largest multi-year settlement for London in more than a decade, with £2.2 billion of funding between 2026-27 and 2029-30 for Transport for London’s capital renewals programme.

Other projects highlighted are:

• The Transpennine Route upgrade, for which the government will provide £3.5 billion. This will reduce the journey time for commuters travelling between Manchester and Leeds by a quarter, the government estimates;
• Allocating £2.5 billion to progress the delivery of East West Rail, supporting housing developments and unlocking the potential of the Oxford to Cambridge Growth Corridor.

There were commitments to metro extensions in Birmingham, Tyne and Wear and Stockport, as well as backing for Doncaster Airport.
The Chancellor said plans for other connections between towns in the north of England will appear in the coming weeks and "set out this government’s plans to take forward our ambitions on Northern Powerhouse Rail".

Reeves pledged £445 million for railways in Wales over 10 years.

Focusing on the Review's impact North of the border adviser Graham + Sibbald in a joint statement said the spending review had "again produced a mixture of positive and negative outcomes for the devolved administrations and for Scotland in particular".

"The £250 million of funding for the redevelopment of HMNB Clyde is a welcome investment that will bring jobs and economic growth to the West Coast of Scotland. This, alongside the commitment to Great British Energy being headquartered in Scotland and the recently announced relocation of government jobs to Aberdeen is much needed investment to ensure Scotland does not lag behind in economic growth terms.

"However, challenges persist which the spending review has done little to nothing to alleviate. While we have seen announcements to provide further funding for transport connectivity in England and Wales including the Liverpool to Manchester upgrade which will be welcome news for our colleagues in Manchester, further investment to allow Scotland to target more institutional and international capital is required. Scotland accounted for only around 5% of the UK's total investment volume in 2024 at around £2 billion despite having 8% of the UK population, and a large component of this relied on the hotels market fuelled by a recovery in tourism post-covid."

Jennifer Townsend, partner, commercial research at Knight Frank, pointed out that the government’s £86 billion research and development package, infrastructure projects in key science and innovation hubs and additional funding for the British Business Bank had sent a strong signal that science, technology and innovation are central to the UK’s growth ambitions.

“London stands out particularly in AI with major corporate investments announced during London Tech Week reinforcing its leadership in Europe. Plans to bring forward autonomous vehicle trials, invest in digital health and health tech to reform the NHS and create the one of the world’s largest AI-powered drug discovery databases further entrench the UK’s global edge, especially in converging fields like AI and life sciences, data and real-world testing."

Avison Young's James Robert added that Review would ultimately be broadly positive for the property investment market, which has been seeing a gradual return of interested buyers following the price corrections recorded since 2022.

"Values for industrial and retail property have tentatively returned to growth in recent months, and we believe a turning point for office values is close. The boost to the economy from the capital projects announced in the government’s Spending Review have added to the case for UK property as an investment."