The lack of availability of mortgages, cuts in public sector budgets and the uncertain economic climate have combined to create a perfect storm of demand for affordable homes outstripping supply. This month the Scottish Government announced that it will contribute £710m towards the delivery of affordable housing in Scotland, however, the buzz words in the social housing sector in Scotland at the moment are "creativity" and "innovation" in relation to the funding of affordable homes. The Scottish Government's target of providing 30,000 new affordable homes in the life of the government is a challenging one, and one that has brought a considerable amount of focus to a sector which is seeing some of those creative and innovative initiatives start to deliver.
Innovation and Investment Fund
Take for example, the Innovation and Investment Fund launched last year. £111m of investment from the Scottish Government was matched by £283m from Councils, Registered Social Landlords (RSLs) and private sector developers. The fund represents a fundamental move away from the basis upon which subsidy was previously awarded to RSLs, with many RSLs matching or undercutting the benchmark level of subsidy of £40,000 per unit.
National Housing Trust (NHT)
Another example is the National Housing Trust Initiative, driven forward by Scottish Futures Trust (SFT) and which saw contracts signed for the delivery of almost 600 new homes during the first phase. Private sector developers provide the sites and build the homes which are sold to a joint venture in which they participate with the public sector. The launch of the model by SFT last year was welcomed by the house-building industry, allowing work to re-commence on mothballed sites. The homes will be let for between 5 and 10 years and then sold for market value (with the tenant and local authority getting the right of first refusal), giving the private sector a second bite of the cherry in terms of market uplift. Less than a year from the launch of the first phase of NHT, houses in Stirling and Inverness have been completed, with expressions of interest for new homes like the one delivered by Highland Housing Alliance below vastly outstripping supply.
Recently delivered NHT homes in Westercraigs, Inverness
SFT is now procuring the second phase of NHT, with Councils across 15 local authority areas participating. The Scottish Government has also consulted on variants of this model designed specifically for housing associations.
Click here for SFT's NHT webpage.
How does the Town and Country Planning system help to deliver affordable housing?
The planning system also plays a significant role in the provision of affordable housing. Figures show that both sites and sums of money are being secured for the development of affordable homes:
Keeping Housing Affordable
Whether or not housing with some public subsidy can be retained as "affordable" is a delicate issue, and Councils have used planning agreements to secure 'retention' as 'affordable'. However, recent advice from the Chief Planner in Scotland confirms that this is no longer acceptable. Some of the new funding methods could not be made to work if 'retention' were imposed. The implications are that much of the housing built as affordable will, in years to come, be indistinguishable from other housing. Although new forms of low cost home ownership are being rolled out, a significant proportion of affordable housing will be retained as low cost housing for rent through tenure or ownership controls.
So it looks as if affordable housing contributions through the planning system will be here to stay for the foreseeable future. Or maybe not – Scottish Government are currently seeking new ideas on delivering development and infrastructure such as introducing a "development charge system" or a "roof tax" in Scotland.
Figures show that the planning system is making a significant contribution to securing affordable housing but path-finding sources of funding such as NHT are essential to ensure that affordable homes are actually delivered on the ground.
However, funders are always attracted to projects with a steady revenue stream, such as is available in the housing sector in the form of rental income, and investment here is, after all, in bricks and mortar. So with housebuilders keen to keep their work forces engaged in challenging times and a buoyant market for affordable homes, we expect to see more new funding models in this sector which will go some way to feeding the increasing demand for affordable housing in Scotland.