UK - The coalition government in the UK has revealed it will cut funding for social housing projects by £4.4bn (€4.95bn), effectively a 50% drop on the previous government's commitment to spend £8bn between 2008 and 2011.

Chancellor George Osborne announced his spending review on Wednesday, which included plans to offer new social housing tenants intermediate rents of approximately 80% of market value, enabling the building of as many as 150,000 new homes.

The National Association of Pension Funds (NAPF) said this might help encourage more UK pension funds to invest in the sector, especially considering that social housing has the potential to offer long-term, inflation-linked income streams.

Joanne Segars, chief executive at the NAPF, said: "Many pension funds are already looking into social housing as an option for long-term investment.

"By raising some social housing rents, the government may encourage more pension funds to invest in new affordable housing projects."

Richard Ashdown, director of affordable housing at Jones Lang LaSalle (JLL), said: "The slashing of capital grants to UK housing was entirely predicted.

The ability to charge rents at 80% of market value is a welcome encouragement to new development, but we await the detail and timing of this move."

James Thomas, head of residential investment and development at JLL, said the market would be "compelled to establish new models" that incorporated both public and private sector involvement.

"The government has shown a willingness to support 'intermediate housing' models, and this might partially circumvent the problem of mortgage availability constraining buyers in high-demand locations," he said.

Liz Peace, chief executive of the British Property Federation (BPF), said: "The government's keenness to encourage intermediate rent provision provides interesting opportunities for greater collaboration between councils, housing associations and private investors.

"If the government really wants its ideas to fly, it needs to consider amendments to planning policy so there is greater flexibility over affordable housing requirements, and restore direct payment to private sector landlords.

"Delivering 150,000 new units in the current climate will be challenging, but might be possible with these sorts of reforms."

Osborne also said he was prioritising investment infrastructure, and announced that London's Crossrail project would go ahead and that a national infrastructure plan would be published next week.

Charles Pinchbeck, director in central London development at JLL, said: "The news that Crossrail will be funded and go ahead confirms industry expectations.

"Removing the final element of uncertainty should allow related real estate projects to proceed, which is great news for the property industry."

The government also announced it would overhaul the Carbon Reduction Commitment (CRC) energy efficiency scheme, which includes retaining for the Treasury £3.5bn initially earmarked for the most eco-friendly companies.

"The coalition said they wanted to simplify the complexities of the CRC, and they have certainly found a novel way to do that," said Peace.

"This will not, however, 'remove the burden on businesses', as they claim, but ensure the CRC will cost the wider business community almost £3.5bn more than it would have."