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

Following detailed consideration, the group accepted that any new set of Affordable Housing Investment Benchmark assumptions should be adjusted to account for inflation on an annual basis.  The Scottish Government is therefore proposing that the Scottish Social Housing Tender Price Index is used for this purpose, with local government representatives also proposing that other material evidence based issues should be taken into account.  (The Scottish Social Housing Tender Price Index is produced by the Building Cost Information Service on behalf of the Scottish Government on a quarterly basis and measures the movement in tender prices paid by councils and RSLs to contractors for the construction of housing delivered through the Affordable Housing Supply Programme (houses and flats).  The Index uses data provided by grant applicants in the Housing Tender Return and therefore reflects actual tendered costs.)

To allow for any adjustment to the benchmarks to take effect from 1 April each financial year, the Scottish Government is proposing to use the differential between the Scottish Social Housing Tender Price Index for the year to the previous December as the method of adjustment.  In order to ensure as robust data as possible, the group agreed that it would be important to reinforce that Housing Tender Returns must be submitted by RSLs and councils with all applicable tender applications – with the Scottish Government advising that formal offers of grant would not now be issued until these are submitted.

Notwithstanding the above, RSL and local authority representatives were clear that they would wish for further discussion to take place should any of the following situations materialise:

• there be any variations to the Scottish Government specified quality standards for homes delivered through the Programme which would have a material impact on development costs – the future update to the Housing for Varying Needs design guide, and further changes through building regulations were referenced as possible examples in this regard, and/ or
• evidence suggests that a disproportionate number of projects with an average unit size of less than three bedspaces are subject to detailed scrutiny.

The Scottish Government confirmed that it would convene discussions with the sector should these situations arise and/ or should evidence demonstrate that there is an increase in the number of applications requiring above benchmark grant funding, which is having a material impact on the speed of Programme delivery.  The Scottish Government therefore agreed to:

• monitor the number of tender approvals which are approved at, above and below benchmark on an annual basis (with the exception of projects in Glasgow given that the City Council (a) has a separate standard that it requires RSLs to deliver to and (b) undertakes detailed appraisals of all projects) – and publish this information in its annual Affordable Housing Supply Programme out-turn report
• analyse, for those projects that are approved above benchmark, the average person size of projects, as well as their geography and tenure (again with the above exception) – and publish this information in the annual Affordable Housing Supply Programme out-turn report, and
• monitor the cost of installing the following two quality features that are being phased into the Programme, particularly given concerns expressed by some group members that the proposed benchmark assumptions for these measures may be too low – automatic fire suppression systems and heating systems which produce zero direct emissions at the point of use. 

The Scottish Government also noted that it would wish for further discussion to take place should evidence suggest that the benchmarks are resulting in a disproportionately high number of projects meeting the benchmark level.