On Monday, October 27, 2025, Communities Minister Gordon Lyons unveiled a sweeping set of changes to the funding model for new social housing developments in Northern Ireland—a move that has sparked both praise and concern across the political and housing sectors. The announcement, which reduces the grant paid to housing associations for constructing new social homes, comes at a time when nearly 50,000 people are on the waiting list for social housing, underscoring the urgency and sensitivity of any policy shift in this area.
The core of the change is straightforward but significant: starting December 1, 2025, the average grant provided to housing associations to finance the building of a new social home will drop from 54% of the total cost to 46%. In certain areas already grappling with acute housing shortages—including parts of Belfast, Lisburn, and Castlereagh—the grant will cover just 42% of the cost. This reduction, Lyons argues, is necessary to stretch the department’s budget of over £177.5 million for the financial year as far as possible, with the goal of maximizing the number of new social homes built.
“Given the challenging financial context, I have made it clear that we must take an innovative approach to the funding of social homes,” Lyons said in his announcement, according to the Department for Communities. “These changes will achieve better value and more social homes for those who need them from the budget that my department provides towards new social housing.” He further emphasized that the changes will govern the Department’s support for social housing new builds from December 1, 2025, until the end of the 2026/27 financial year, providing “certainty and stability to Housing Associations.”
The minister also announced reviews of both the grant and the design standards for new social homes, aiming to ensure that the system remains responsive to economic realities such as construction costs, inflation, rent levels, and interest rates. The calculations behind the new grant rates account for a 13.7 percentage point increase in benchmark costs on average, reflecting these rising pressures, while the grant itself decreases by 7.7 percentage points.
But not everyone is convinced the changes will have the desired effect. The Northern Ireland Federation for Housing Associations has warned that the funding cuts may put some social housing projects in jeopardy, potentially leading to delays or even abandonment. Seamus Leheny, the federation’s chief executive, told BBC News NI, “It’s concerning, certainly for places like Belfast, Lisburn, Castlereagh where the rates have gone down to 42%. I think there’s a serious need for housing associations to do the sums on that, because there could be a lot of schemes in these areas that would be at risk of not proceeding.”
Local developer Agnes Crawford, chief executive of Grove Community Housing, echoed these concerns, describing the change as a “significant threat” to her planned development in north Belfast. “We were hoping to get out to tender this week to try and get spades in the ground before the end of March, so now with the announcement of the reduction in funding this means we’ll have to pause and recalculate the figures,” she explained to BBC News NI. “It makes the ability to get there all that more difficult. It means we’re heavily leaning on private finance and there’s a cost to that.”
Indeed, the new funding model means that housing associations will need to rely more heavily on private finance, which typically comes at a higher cost than the government grants. This shift could have knock-on effects for tenants, as higher construction costs may ultimately be passed on in the form of increased rents. Even where projects do proceed, the financial pressures are likely to be felt throughout the sector.
Political reaction has been swift and, in many quarters, critical. Mark H Durkan, the opposition spokesperson for communities, expressed deep skepticism about the government’s approach. “It’s hard to see how cutting their funding will achieve anything other than fewer homes being built,” he said, as quoted by PA Media. “This cut will also impact the ability of Housing Associations to maintain existing properties and could lead to a situation where homes become inhabitable due to a lack of investment. This is the last thing we want to see with our social housing stock under such pressure.”
Durkan also pointed to the broader context of a housing crisis that, in his view, is “only getting worse,” and criticized the lack of progress in empowering the Housing Executive to build the social homes needed. “Ultimately, the Executive and the communities minister will be judged on their response to this crisis and they have utterly failed so far,” he added.
Yet, some sector leaders have offered a more nuanced perspective. Grainia Long, chief executive of the Northern Ireland Housing Executive, told BBC News NI that she does not believe the funding cuts will necessarily result in fewer homes being built. “Housing associations play a crucial role themselves individually in deciding what scheme should go ahead, what is viable and what is less viable,” she said. Long also described the Department for Communities’ decisions as “a smart set of decisions but it is part of an overall package.”
She acknowledged the importance of ongoing reviews to reduce constraints on housing associations and to provide greater certainty over the level of ambition and the number of homes to be built. “Bringing the grant rate down is in keeping with the ways in which social housing is financed elsewhere in the UK,” Long noted. “This is about creating the conditions for investment in social housing.”
Minister Lyons, for his part, has pointed to several avenues for mitigating the impact of the cuts. He suggested that the use of Financial Transaction Capital (FTC) mechanisms could enable housing associations to access finance at lower cost, and proposals for building on government land are under consideration. Both measures, he argued, could help offset the reduced grant and support the Programme for Government’s target of 5,850 social housing starts within the current mandate—a target he admits is “extremely challenging given the constrained budget.”
Meanwhile, Lyons has voiced frustration over the lack of borrowing powers for the Housing Executive, following unsuccessful discussions with the Treasury. “It was one of my biggest frustrations so far in my time in office,” he remarked, suggesting that without new borrowing arrangements, the pressure on the social housing sector will remain intense.
As the new funding regime takes effect, all eyes will be on Northern Ireland’s housing associations, developers, and policymakers to see whether the promised increase in social home delivery materializes—or whether, as critics fear, the cuts will deepen the housing crisis for the thousands still waiting for a place to call home.
