Report on the work of the 2021 Affordable Housing Investment Benchmarks Working Group

Timeline of Events 

15 March – First meeting of the full group, with the following papers being provided:

• A proposed Terms of Reference for the group – drafted by the Scottish Government
• A paper from GWSF entitled Subsidy Paper March 2021 – this requested a two stage approach to the review with energy efficiency, new build heat standards, automatic fire suppression systems and inflation to be considered first; and space standards, wheelchair housing, the interaction between subsidy and built form/ density and revisiting the three-person equivalent to be considered as part of a second stage.  The paper requested that land acquisition and remediation costs be treated separately from mainstream benchmark grant rates, and stressed the importance of retaining the existing flexibility in the benchmark system.
• A paper from the SFHA entitled The Cost of Compliance Final Report 11 March 2021 – this illustrated the cumulative impact of changing regulations and standards, as well as planning obligations and other factors.  The paper provided details of increased costs associated with new build, alongside additional costs associated with proposed new design standards and features (fire suppression systems, energy efficiency and increased space standards).

23 March – Meeting of the full group, with the following papers being provided:

• An information paper from the Scottish Government – this contained information on the current set of grant subsidy benchmark assumptions, and provided an analysis of (a) new build unit approvals from April 2016 to September 2020 and (b) construction costs based on Housing Tender Returns.  It also outlined the additional quality measures that will be phased in from 2021-22, and provided thoughts on measures to maximise the delivery of more social and affordable homes.
• A paper from GWSF entitled Subsidy Paper Final March 2021 – this updated the paper which had been submitted for the meeting on 15 March following the publication of ‘Housing to 2040’.
• A paper from the SFHA entitled The Cost of Compliance Final Report 18 March 2021 – this updated the paper which had been submitted for the meeting on 15 March, again following the publication of ‘Housing to 2040’.
• A paper from COSLA entitled Community Wellbeing Board AHSP position – this outlined COSLA’s position that decisions on investment should be taken locally and that it would be more appropriate to have one programme of investment for both local authorities and RSLs rather than two separate approaches.
• A paper from ALACHO entitled Affordable Housing Supply Programme ALACHO submission March 2021 – this set out the current position on investment, capacity and rents, and noted other investment and regulatory pressures (including the requirement to improve existing stock and maintain rent affordability).  The paper called for a second stage comprehensive review of current arrangements for supporting investment in new social homes, incorporating Housing to 2040 ambitions.  It asked that the current review should consider standardised grant rates for local authorities and RSLs, and increasing investment to cover (a) the full additional costs of inflation over the past five years and (b) the full cost of all proposed additional quality measures.  And, it called for local flexibilities to remain in place.

6 April – Sub-group meeting (comprising representatives from all sectors), with the following papers being provided:

• A paper from the Scottish Government entitled Discussion paper for the sub-group meeting on 6 April 2021 – this contained information on the future quality standards that the Scottish Government intended to phase into the Programme, and acknowledged that adjustments were required to the current set of benchmark assumptions.  It proposed uplifts to (a) better reflect the costs of rural development (b) reduce the differential between RSL and local authority benchmarks and (c) account for inflation (for both social rent and mid-market rent housing).  It also included a proposal to adjust benchmarks annually in line with the Scottish Social Housing Tender Price Index, and set out a proposal to introduce an evidence-based system of continuous improvement for housing development.
• A paper from ALACHO and Local Authority Directors of Finance entitled Differential grant rates – unpicking the rationale April 2021 – this set out the background to historic differences in Affordable Housing Investment Benchmarks between local authorities and RSLs, focussing specifically on borrowing and land costs.
• A paper from GWSF entitled Inflation paper GWSF 29 March – this highlighted uncertainties caused by COVID and Brexit, and concluded that tender price increases have exceeded the inflationary assumptions built into the current set of assumptions. 

15 April – Meeting of the full group, with the following papers being provided:

• A paper from the Scottish Government entitled Evidence gathered paper April 2021 (including comments from ALACHO) – this provided a summary of the information gathered by members of the group at that time on inflationary assumptions and the cost of delivering additional quality measures. 
• A paper from GWSF entitled GWSF response to the SG paper April 2021 – this noted that GWSF was broadly happy with the principle of annual uprating, but set out the reasons why GWSF did not consider the Scottish Social Housing Tender Price Index to be an appropriate proxy.  The paper also noted that GWSF was (a) content with the proposal to reduce the differential between RSL and council benchmarks and (b) committed to continuous improvement.
• A paper from the SFHA entitled SFHA Response 13 April 2021 – this paper set out the SFHA’s response to the proposed set of benchmarks which were contained in the Scottish Government’s paper for the sub-group meeting on 6 April.  As well as highlighting certain concerns, the SFHA noted that it was (a) content with the proposal to reduce the differential between RSL and council benchmarks and (b) committed to continuous improvement.

20 April – Sub-group meeting comprising representatives from the Scottish Government and the housing association sector, with the following papers provided:

• Two papers produced by the Scottish Government – one containing information on the Scottish Social Housing Tender Price Index, and the other providing an update to the ‘evidence gathered’ paper which was considered at the meeting on 15 April.

21 April – Sub-group meeting comprising representations from the Scottish Government and local government.  The papers produced for the sub-group meeting on 20 April were provided for this meeting too.

23 April – the following paper was issued to the SFHA, ALACHO and COSLA following the sub-group meetings on 20 April and 21 April:

• A short paper from the Scottish Government entitled Rural Benchmarks Info Paper – this provided information on the definition and application of rural benchmarks.

27 April – Meeting of the full group, with the following papers being provided:

• A paper from the Scottish Government entitled Proposed structure of report – this provided a draft outline structure of the group’s final report.
• A paper entitled BCIS SSHTPI benchmarks paper and covering note – this paper was prepared by BCIS (on behalf of the Scottish Government) and sought to address concerns regarding the Index which had been raised by members of the group.
• A paper from ALACHO entitled Response to discussion document – this outlined the principles that ALACHO would wish to see addressed through the review: the same benchmark assumptions for councils and RSLs; benchmarks to take into account inflation and the additional quality measures that are being phased into the Programme; a consistent approach to be applied to second-hand purchases and mid-market rent; flexibilities to be greater aligned with local strategic housing priorities; a commitment to an annual review of benchmark levels; and a commitment to a second stage review (including consideration of minimum sustainability standards for new build), and a review of the use of geographic benchmarks (with a proposal to use the six-fold classification across Scotland).

27 April – the following paper was submitted to COSLA:

• A paper from the Scottish Government entitled: Summary of main points regarding Scottish Government proposed council/ RSL subsidy benchmarks – this provided more information regarding the Scottish Government’s proposals to bring the subsidy benchmarks for councils and RSLs into greater alignment.

4 May – Sub-group meeting comprising representatives from the Scottish Government, ALACHO, GWSF and SFHA to consider additional specifications and costs stemming from the 2015 building regulations, with the following papers being provided:

• Two papers produced by the SFHA (Wheatley Group) – one containing information from Reid Associates on additional specifications and costs stemming from the 2015 building regulations, and the other containing information from NBM Construction Cost Consultants on the cost of installing automatic fire suppression systems.

5 May – Sub-group meeting comprising representatives from the Scottish Government, ALACHO and the SFHA to consider the process for determining a project’s geographic classification.

11 May – Meeting of the full group, with the following papers being provided:

• A paper drafted by the Scottish Government entitled The Affordable Housing Investment Benchmarks Working Group’s draft final report – within this, the Scottish Government proposed a further increase to the benchmark assumptions that it had presented at the beginning of April to account for additional specifications and costs stemming from the 2015 building regulations (beyond those assumed at the time of setting the current benchmarks).
• A paper from ALACHO, informed by Local Authority Directors of Finance, entitled ALACHO Proposal Paper 6 May – this proposed a set of baseline benchmark assumptions (excluding consideration of additional specifications and costs stemming from the 2015 building regulations).  It noted that local government did not accept the logic of a continuing differential between council and RSL benchmark assumptions, and asked for the six-fold classification to be applied across Scotland for geographic benchmarks.  It also asked for the review of the Housing for Varying Needs design guide to be accelerated, and requested a second stage review which would look at the introduction of minimum sustainability standards for new build.

14 May – the following paper was submitted to the Scottish Government:

• A paper from ALACHO, the SFHA and GWSF entitled Joint response to draft report – this recorded that the Scottish Government’s latest set of proposed benchmark assumptions were inadequate and put forward an alternative set of proposals.  It also noted that the Scottish Government’s proposals for a programme of continuous improvement could not be accepted, and advised that a different proposal would be put forward by the sector.  It also requested a commitment to using a later review stage to examine a number of medium/ long term adjustments.

11 June – Sub-group meeting comprising representatives from the Scottish Government and local government representatives to discuss the proposed differential between baseline benchmark assumptions for RSLs and councils.

17 June – Sub-group meeting comprising representatives from all sectors, with the following paper being provided:

• A paper from the Scottish Government entitled Benchmark proposal – this paper outlined increases to the Scottish Government’s previous proposal, and set out the reasons for these.

21 June – the following paper was submitted to the Scottish Government:

A paper from the SFHA and GWSF entitled Continuous Improvement proposal – this contained a ‘counteroffer’ to the Scottish Government’s proposals on continuous improvement, and reiterated the housing association sector’s opposition to the introduction of a mandatory programme of continuous improvement.