Welsh Government's £36m development loan scheme: A vital step towards meeting 20,000 home target

The Welsh Government has reopened its Registered Social Landlords (RSLs) Development Loan Scheme for 2025/26, committing £36m in low-interest loans to support the delivery of affordable, energy-efficient homes across Wales.

This announcement represents a crucial intervention as Welsh RSLs work towards the ambitious target of delivering 20,000 new social homes by the end of the current Senedd term in 2026.

Key terms of the scheme

The 2025/26 loan scheme offers flexible financing designed to address the escalating costs of development and commercial borrowing that have challenged the social housing sector. Low-cost loans ranging between £1m and £10m will be available to RSLs, providing an affordable alternative to traditional commercial borrowing whilst maximising value for money.

The funding can be deployed flexibly across two key areas: developing new affordable housing schemes and improving existing homes to meet the Welsh Housing Quality Standard (WHQS 2023). This dual focus ensures that RSLs can both expand housing supply and enhance the quality and energy efficiency of their current stock, addressing fuel poverty whilst building for the future.

Building on previous success

This latest tranche builds upon the success of the £90m loan scheme announced in March 2025, which remains on track to deliver 277 affordable homes and improvements to over 4,000 existing properties. The Welsh Government previously introduced the loan scheme in 2023-24, issuing more than £75m in loans that brought forward over 450 additional homes in the social sector. These figures demonstrate the scheme's proven track record in accelerating housing delivery during challenging economic conditions.

Impact on the 20,000 homes target

Cabinet Secretary for Housing and Local Government, Jayne Bryant, has stated that the Welsh Government is "on track to deliver over 18,500 additional low carbon homes for rent in the social sector by the end of this Senedd term", with the 20,000 target expected to be reached by the end of 2026. This represents the highest sustained delivery of social housing in Wales in nearly two decades.

However, the scale of the challenge remains significant. With 90,000 households currently waiting for social housing and one in every hundred households becoming homeless in 2024/25, the sector requires sustained investment to address Wales' housing emergency. The loan scheme provides vital breathing room for RSLs navigating increased construction costs and higher borrowing rates, enabling them to maintain development pipelines that might otherwise stall.

The £36m investment, whilst welcome, represents just one component of a broader funding landscape. The 2026-27 draft budget allocates £445.9m for social housing grant, including additional financial transactions capital for RSL loans. Yet concerns remain about whether decarbonisation funding, which has only seen inflationary increases, will prove sufficient to meet both building and sustainability targets simultaneously.

Conclusion

The reopened Development Loan Scheme demonstrates the Welsh Government's commitment to innovative financing solutions that support RSLs through challenging economic conditions.

By providing affordable, flexible capital, the scheme enables housing associations to continue building the low-carbon, energy-efficient homes Wales desperately needs. Whilst the 20,000 homes target appears achievable, sustained investment and partnership working will be essential to address the deeper structural housing crisis facing Wales.