CIH Cymru response to the Finance Committee’s call for information to inform scrutiny of the Welsh government draft budget 2027/28.

Introduction

The Welsh government's 2026/27 budget contains welcome investment in housing, including funding for new social homes, decarbonisation and homelessness services. However, against a backdrop of rising costs, increasing demand and a worsening housing emergency, the key question is not whether more is being spent, but whether enough is being invested to meet Wales' ambitions.

This submission considers the impact of the current budget and explores the extent to which the budget will support the delivery of more social homes, better existing homes and effective homelessness prevention. While there are positive commitments, significant gaps remain between ambition and investment. If Wales is to tackle rising homelessness, meet net zero targets and ensure everyone has access to a safe, affordable home, housing must become a far greater priority across government spending. 

The impact of the Welsh governments 2026/27 budget

Welsh Government has demonstrated its commitment to tackling Wales' housing challenges by allocating £465.9 million for the development of homes at social rent, together with £155 million for the Transitional Accommodation Capital Programme (TACP), alongside £95 million for residential decarbonisation and £108 million through the Major Repairs Allowance in the 2026/27 budget. 

While these investments are welcome and necessary, they are increasingly being eroded by economic realities. Persistent inflation across construction and supply chains, escalating development costs, and continued high interest rates mean that every pound invested delivers significantly less than it did just a few years ago. As 
a result, funding levels that may once have been sufficient are no longer enough to meet the scale of Wales' housing and climate ambitions.

Social housing providers across Wales stand ready to play their full part in ending the housing emergency by delivering the new homes communities need while also improving existing homes to support the transition to a net zero Wales. However, achieving these objectives at the pace and scale required will only be possible with sustained and increased investment in both new social and affordable housing, and the decarbonisation of existing stock. As one respondent to our Winter 2025/26 sector snapshot survey highlighted: 

We cannot afford to build more homes than we do – there isn’t enough capacity. Decarbonisation of all the existing stock without real government input would simply bankrupt the sector.

This stark assessment reflects the scale of the challenge facing the housing sector. Despite the central role that housing plays in improving health outcomes, reducing poverty, supporting economic growth, and preventing homelessness, housing has accounted for an average of just 2.3% of total government spending since 2006. Given the housing emergency Wales is currently facing, alongside the significant investment required to decarbonise existing homes, this level of expenditure does not reflect the importance of housing as a foundational public service. If Wales is to meet its housing, homelessness and net zero ambitions, investment in housing must become a far greater priority within overall government spending. 

Investment to increase the number of social homes in Wales

Welsh Government has committed to delivering an additional 20,000 homes for social rent during this Senedd term, a target that reflects the scale of Wales' housing emergency. While the final budget and supplementary budget for 2026/27 allocated £465.9 million towards the delivery of new social homes, this level of investment falls significantly short of what is required to meet that ambition. Without a substantial increase in funding, there is a real risk that the pace of delivery will not match the scale of need, leaving thousands of households without access to an affordable home.

The #BacktheBill campaign's cost-benefit analysis, undertaken by Alma Economics, estimated that the cost of building a new home in Wales was £200,000 in 2022. When adjusted for inflation, this figure rises to £234,542 as of July 2026. Applying this average cost to the delivery of 20,000 additional social homes, and using the Social Housing Grant's 70% grant rate cap (while recognising that many schemes will receive less than the maximum rate), suggests that total grant investment of approximately £3.28 billion would be required over the course of the Senedd term. This equates to around £820.9 million per year. This is the maximum figure we have estimated, which assumes that each new-build development requires the full 70% grant intervention rate and also doesn’t account for TACP spend or section 106 development. We aim to provide a broad understanding of the funding levels of capital grant needed to meet Welsh government’s ambition. 

By comparison, total Social Housing Grant funding during the Sixth Senedd amounted to £1.7 billion, an average of £340 million per annum. The gap between historic levels of investment and the funding required to meet current ambitions is stark. At £340 million per year, investment falls 82.63% short of the level needed to deliver the Government's own target (if we were to build 20,000 new social homes from scratch). This demonstrates that, while recent funding increases are welcome, they are not yet sufficient to bridge the gap between ambition and delivery. 

If Wales is serious about addressing the housing emergency, investment must match the scale of that challenge. Social housing providers are committed to delivering the affordable homes Wales needs, but they continue to face high development costs, inflationary pressures and elevated borrowing costs. A significantly enhanced, long-term grant settlement is therefore essential, not only to sustain current levels of development but to accelerate delivery and ensure that the target of 20,000 additional social rent homes becomes achievable rather than aspirational. 

Investing in our existing homes

Welsh Government's allocation of £96.9 million in 2026/27 to decarbonise existing social homes is welcome, but current funding levels are unlikely to be enough to deliver the scale of change required. Research by the New Economics Foundation estimated that decarbonising all homes in Wales would require £14.75 billion over the next decade, including £5.5 billion for social housing. This would enable social homes to reach EPC A under the Welsh Housing Quality Standard (WHQS), while bringing other homes up to EPC C. 

The research suggests government investment of £5.3 billion will be needed overall, with the remaining 64% coming from private finance, energy companies and property owners. For social housing alone, Welsh Government investment would need to reach around £2.25 billion over the decade in today's prices, equivalent to £225 million annually. Compared with the current allocation, this represents a substantial funding gap. 

We recognise that this research provides an estimate and that future reforms to energy efficiency measures and emerging evidence on retrofit costs may affect how investment needs are assessed. However, the scale of work required remains significant, and if Wales is to retrofit homes at pace and achieve its net zero ambitions, investment must match that ambition. 

This is particularly important as housing providers are balancing the need to decarbonise existing homes with the delivery of new affordable homes to tackle Wales' housing emergency. Sustained, long-term investment is essential to achieve both. 

Alongside greater public investment, new financing mechanisms for the private sector will be critical. Expanding access to affordable loans, green mortgages, blended finance and targeted incentives for homeowners and landlords will help unlock the private capital needed to meet Wales' wider decarbonisation ambitions and improve homes across all tenures. 

Funding to help statutory homelessness services

The 2026/27 budget allocated £223.8 million for homelessness support and prevention, with no additional uplift in the first supplementary budget. The final budget for 2026/27 provided £23 million to support implementation of the Homelessness and Social Housing Allocations (Wales) Act, yet homelessness prevention grants effectively received a cash-flat settlement with no further uplift in the first supplementary budget. 

This is concerning because prevention funding enables local authorities to pay rent in advance, clear arrears, and provide housing advice, helping people remain in their homes and reducing demand for homelessness services. 

At the same time, councils are facing severe financial pressures. Spending on temporary accommodation increased by 516% between 2019/20 and 2023/24, rising from £28 million to £172 million annually, with many authorities warning this level of expenditure is unsustainable. 

These pressures are compounded by local government funding settlements that have not kept pace with inflation. The 2026/27 settlement increased by around 2.5%, compared with 3% CPI inflation when the budget was set. The Wales Governance Centre estimated a funding gap of £354 million in 2024/25, rising to £744 million by 2027/28, increasing the likelihood that councils will need to draw on reserves to sustain services. The result is growing pressure on homelessness services and the workforce that delivers them. As one respondent to our Winter 2025/26 sector snapshot noted: 

Although my role sits outside the statutory homelessness duty, I regularly see the pressures it places on my colleagues who are directly involved. The uncertainty around funding can make it difficult to plan and deliver consistent support for clients... which ultimately impacts the people we’re trying to support.

Concerns about insufficient resources have been a consistent theme across our sector snapshots. As one respondent to our 2024 survey stated: 

We have had budgets cut year after year and whilst our workload is increasing, we are not having any additional resources. We need additional resources.

While the Welsh Government's £23 million investment will help support implementation of the new Act, local authority members have told us that workforce capacity remains the key challenge, with our Winter 2025/26 snapshot indicating homelessness teams need around five additional employees each. 

The impact on staff wellbeing is significant. Nearly three quarters (74%) of respondents reported a negative impact on their mental health and wellbeing, while almost a third (29%) of local authority respondents said that impact was major. 

A local government settlement above inflation, combined with increased investment in homelessness prevention, would help reduce reliance on costly temporary accommodation, strengthen workforce capacity, and support the shared ambition of making homelessness in Wales rare, brief and unrepeated. 

A whole-system change, with housing a foundational mission for government

Rising homelessness is not an isolated challenge. It is the most visible consequence of a chronic shortage of affordable homes and a housing system that is failing to meet need. Addressing this crisis requires more than targeted interventions. It requires a whole-system approach and a fundamental reset of housing policy and investment in Wales. 

Despite the scale of the housing emergency, housing has received, on average, just 2.3% of total government spending since 2006. This level of investment is not commensurate with the scale of the challenge or the ambition needed to reverse current trends. 

We welcome the Welsh government's commitment to legislate for the Right to Adequate Housing during this Senedd term. CIH Cymru believes this must be the Welsh Government's foremost housing priority. Embedding the right to adequate housing in Welsh law has the potential to transform outcomes across housing, health, wellbeing and public services, while providing a clear framework to drive the long-term change needed to tackle the housing emergency. 

The economic case is equally compelling. Independent cost-benefit analysis by Alma Economics found that for every £1 invested in the Right to Adequate Housing, Wales would realise £2.30 in benefits. Overall, implementation could:

• Deliver £5.5 billion in wellbeing benefits.
• Save £2 billion for local authorities.
• Save £1 billion for the NHS.
• Save £1 billion for the criminal justice system.
• Generate £1 billion in additional economic activity. 

These benefits represent a significant opportunity not only to reduce homelessness and housing insecurity, but also to ease pressures on public services and strengthen communities across Wales. At a time of constrained public finances, investing in the Right to Adequate Housing is not simply the right thing to do. It is a financially responsible decision that would generate substantial long-term savings, create wider economic benefits, and provide a pathway towards ending poverty and the housing emergency in Wales. 

Conclusion

The challenge facing Wales is not simply one of housing delivery, but of housing system reform. Increasing the supply of social homes, investing in existing stock, strengthening homelessness prevention services and supporting a sustainable workforce are all interconnected priorities that require a long-term, whole-system approach. Housing remains significantly underfunded relative to its importance, receiving an average of just 2.3% of Welsh Government expenditure since 2006, despite its central role in improving health, reducing poverty, supporting economic growth and easing pressure on public services. 

As the Welsh government looks beyond the 2026/27 budget, towards the 2027/28 budget, there is an opportunity to place housing at the heart of its wider policy agenda. Increased investment, coupled with the introduction of the Right to Adequate Housing, would provide a framework for delivering lasting change while generating significant social and economic returns. With evidence showing that every £1 invested in the Right to Adequate Housing