Housing Investment Taskforce minutes: November 2024

Paul McLennan MSP, Minister for Housing welcomed members to the fourth meeting of the Housing Investment Taskforce at City Chambers, City of Edinburgh Council.

1. Housing Bill – Minister previously briefed workstream 1 following Parliamentary Statement on 31 October.

2. Professor Gibb’s paper – members asked to share any further feedback on this.

3. Commission for More Homes through Alternative Investment – noted this will have its first meeting on 19 November – discussion to take place following this launch meeting.

4. Summary note of last meeting – agreed for publication.

5. Developments since last HIT meeting – The Minister updated members on:

• Planning and Housing Emergency Delivery Plan – establishing of Planning Hub; plans to work with SME builders; continued support for the National Planning Improvement Champion; increased use of processing agreements and pre-application advice; pause on the introduction of an infrastructure levy; increased fees for planning applications; training for elected members
• Budget (UKG and forthcoming Scottish Budget) - Private Rented Sector Guarantee Scheme reopened for build to rent projects; ENABLE Build expanded fund providing guarantee support for SME housebuilder finance and; confirmed Scottish Budget will be on 4 December
• 13 November SFHA Finance conference and RSL engagement – noted session on Taskforce with good attendance and interest from RSLs.
• New MMR Fund - preparing for formal market testing. HIT members will be included as part of this work.

6. Parliamentary statement on rent control – update and reflections

Timeline had been circulated for information and discussion covered the consultation on exemptions scheduled early Spring 2025. The direction of travel was discussed with increasing optimism within the build to rent sector, but that issues remain to be worked through in detail. Importance of reliable and robust data to underpin decisions noted.

7. Workstream 3 – Long lease finance for affordable homes – Income Strip

The workstream reported on progress and noted that the remit of the group had expanded to cover a wider range of options which could attract institutional investment into housing rather than a sole focus on income strips. View that an increased understanding of the range of options available to RSLs and local authorities, and in what circumstances, would be beneficial and that this will be developed further.

8. Workstream 4 – Affordability and Flexibility of finance and borrowing limitations to fund affordable housing

The workstream reported on progress with work on local authority related actions, including HRA ongoing. Discussion focussed on RSL sector. Presentation was provided on potential model for a revenue funding based model similar to Lloyds model which uses income (rental), a social housing contract and a lower upfront capital grant.  Lloyds model, however, is written with UK government focus. Social housing contract -  cashflow of the savings between housing benefit to cover temporary accommodation/PRS versus housing benefit for affordable rent (could be paid direct from UKG or could be securitised to create upfront payment).

This model provides several opportunities i.e. lower upfront capital contribution; government providing social housing contract directly to RSLs or private sector finance likely to lend against LA/Govt revenue commitment; provides enhanced revenue stream versus traditional funding and; RSLs can provide land as contribution. There are several barriers however including constrained revenue budgets; issue around devolved housing benefit/ universal credit payments; challenges on multi-year revenue commitment; additional gearing for RSLs; higher debt cost as outside core RSL borrowing vehicle and likely to only be feasible for MMR. Further feedback would be sought through the workstream from local authorities.

Discussed use of equity for the provision of affordable homes.  View that this needs to be undertaken by external organisations to RSLs in Scotland and offers opportunities in terms of size and scale; the delivery of mixed tenure sites with private sale to generate returns; lower/no capital grant; and equity provides forward-funding that can unlock early-stage development.  However, this is a higher-risk activity with potential to impact on credit rating.  There is a risk that cross-subsidy doesn’t materialise (sales) and that RSL/LA owned land may not be suitable.

9. Next steps:

• Taskforce members to provide Professor Gibb with any comments on draft report and to consider what, from his findings, should influence workstream actions.
• Role of HIT members in further public engagement on HIT work particularly on Housing Bill to be considered.
• Remaining workstreams scheduled for update to HIT meeting on 28 January.