Infrastructure Investment Plan 2015: progress report 2018-2019

Housing

Overview

We want everyone in Scotland to live in affordable, quality homes that meet their needs. This is central to building and sustaining a fairer and more prosperous Scotland.

Scotland has a strong record in housing delivery. Over the last Parliamentary term 2011-16, we exceeded our 30,000 affordable homes target. A total of 33,490 affordable homes were delivered, 22,523 of these homes were for social rent, including 5,992 council homes. Building on this success, we and our partners want more homes delivered across all tenures.

During the current Parliamentary term, 2016-21, our target is to deliver more than 50,000 affordable homes, 35,000 of which will be for social rent backed by investment of over £3 billion. This is the single biggest investment in, and delivery of, affordable housing since devolution.

We have listened to our partners and will continue to work with them closely to deliver More Homes Scotland - our overarching approach to support the increase in the supply of homes across all tenures.

Progress

• In 2018-19, we have made available over £120 million to help up prospective buyers to access homeownership; £70 million has been allocated to the Open Market Shared Equity scheme to help around 1700 first time buyers on low to moderate incomes and £50 million was allocated to the Help to Buy (Scotland) Affordable New Build and Smaller Developers Schemes to help around 2,000 first time buyers and existing homeowners buy a new build home. 
• In 2016, we launched the five year Housing Infrastructure Fund (HIF), linked to the delivery of the 50,000 affordable homes target. The fund provides grant and loan support for housing related infrastructure projects which have stalled or cannot proceed due to the level or cost of infrastructure. Local authorities are invited to submit strategic sites for consideration as part of their Strategic Housing Investment Plans (SHIPs). While HIF can support all tenures, priority is given to those projects, which will deliver affordable housing by 2021.
• We remain committed to the expansion of affordable housing through mid-market rent (MMR) schemes. Most recently, Scottish Government loan funding of £47.5 million has been provided to the Place making and Regeneration Group, Places for People to set up a residential investment fund to deliver 1,000 affordable MMR homes across Scotland and attract pension fund investors to generate an investment package of around £150 million.
• We also continue to support Innovative schemes like the National Housing Trust – the first guarantee based scheme for housing in the UK, as well the LAR Housing Trust that will deliver £120 million of total investment towards delivery of 1,000 MMR homes.
• We have supported local authorities to develop plans to boost the supply of affordable housing through prudential borrowing, and delivering City Deal commitments on housing. This includes consent to on-lend up to £248 million along with a £16 million capital grant to City of Edinburgh Council to support a new city region housing company to deliver a minimum of 1,500 homes at mid-market rent and competitive market rent levels. This company, known as Edinburgh Living, had its first affordable housing development completion of 22 units in January 2019.
• We launched the Rental Income Guarantee Scheme (RIGS) on 12 October 2017 to support Build to Rent in Scotland, with the Scottish Futures Trust working with us as our delivery partner. It is designed as a high-leverage stimulus to attract further institutional investment in the emerging Build to Rent market, delivering new high quality professionally managed PRS (Private Rented Sector) homes. RIGS was developed in consultation with the industry, addressing the uncertainty around rental income streams in this emerging market.
• We have also launched the £150 million Building Scotland Fund - directing it towards the development of housing, modern industrial and commercial property and business-led research and development. As the precursor to the Scottish National Investment Bank, this Fund has a focus on projects and investments that support sustainable economic growth, reduce carbon and sustain and create places. It is designed to stimulate investment and boost the supply of much needed housing - helping to build a Scotland that is innovative, inclusive and attractive as a place to live and work. The Fund has recently approved a loan of £26.8 million for the Winchburgh housing development supporting the delivery of around 3,450 new homes in West Lothian - with associated schools, transport and community facilities being delivered as part of the wider development. We are continuing to progress a range of other applications ranging from large-scale regeneration to support for SME housebuilders.
• We have maintained £30 million funding for the Rural and Island Housing Funds for homes that can be delivered by March 2021. These Funds are open to a wide range of applicants including community bodies, private landlords and landowners and are specifically targeted to increase the supply of affordable housing of all tenures in rural Scotland.

Going Forward

• £756 million was made available during 2018-19, of which £615 million was for social housing. £826 million will be available in 2019-20 of which £685 million will be allocated for social housing.
• We have already given councils and housing associations the long-term certainty needed to deliver our ambitious target by allocating full resource planning assumptions to March 2021.
• Our investment in housing will, on average, leverage economic output in the region of £1.4 billion per year supporting around 10,000 to 12,000 jobs per annum in the construction and related industries in Scotland.
• We have put in place a programme, Achieving Excellence in Housing Development, which is driving value for money and quality in the Affordable Housing Supply Programme. This involves developing a performance improvement system for housing development, working with housing associations to improve their procurement capability, and developing a sector wide approach to modern methods of construction. Further projects are under consideration.

We are maintaining Scotland's leadership in financial innovation and competence, continuing to work creatively with our partners and use innovative ways to deliver more new homes across all tenures for less public investment.

The innovative use of government guarantees, loans, grant recycling and new sources of private funding is supporting the delivery of approaching 8,500 homes across all tenures and generating over £1 billion of housing investment in addition to our conventional funding routes. Our activity is also having a wider impact by unlocking associated housing delivery in many locations across Scotland.

We are also supporting and enabling investment in the emerging Build-to-Rent housing market with the potential for delivery of an additional 2,500 new homes for market rent stimulating up to £500 million private investment.

We are the first, and remain the only, government in the UK and public sector body in Scotland, to invest in Charitable Bonds, a form of ethical investment, which creates loan finance to fund affordable housing, and generates charitable donations. Investment spend for the financial year 2018-19 was £37.9 million, generating charitable donations of around £8.9 million. Total spend on the Charitable Bond programme is expected to be £132.5 million by the end of 2018-19, supporting the delivery of around 1,500 homes.

We have also committed to the reform of the current planning system, with a focus on improving the effectiveness of planning processes that support the delivery of good quality housing developments. The Minister for Local Government, Housing and Planning made a statement to Parliament on 5 December 2018 to outline the intentions for the Planning Bill and its essential contribution to inclusive growth across Scotland. The Planning Bill is currently at Stage 2 with stage 3 expected this year.