Rural and Islands Housing Fund: Guidance note MHDGN 2021/02

We engaged with a wide range of stakeholders including RIHF applicants, local authorities, Registered Social Landlords, other Rural Stakeholders and Scottish Government colleagues.  

Aim of the Review

The review of the Rural and Island Housing Fund had five key aims:

• Explore with organisations what continuing role there might be for RIHF in the future; 
• Identifying how easy or hard it has been for organisations to secure SG funding under the RIHF
• Costs and Funding
• To find out what impact it has brought to rural and island communities
• How the RIHF might be adapted in the future to expand the range of options to support housing development in remote and island communities.

Stakeholder Feedback 

Continuing role of the RIHF  

There was overwhelming support from respondents for the RIHF to continue past March 2021.  The announcement in November 2020 to do so was therefore welcomed by rural stakeholders including Community Land Scotland who stated “We warmly welcome this announcement.  It will give communities the confidence to move forward with the many projects that are currently at planning stage.”

How easy or hard it has been for organisations to secure SG funding under the RIHF

A majority of respondents said that the RIHF application process was relatively straightforward and that the decision-making process was generally quick.  Respondents said that the support provided by the Scottish Government, local authorities, and Housing Associations/rural housing organisations also played a vital part in providing support to organisations submitting applications. 

Costs and Funding

A number of respondents suggested changes to the costs and thresholds, suggesting that costs are far greater in remote and very remote areas that are not covered by the existing remote rural benchmark used to assess grant applications. A review of Affordable Housing Investment Benchmarks was undertaken between March and June 2021. Following this review it was agreed that adjustments should be made to the current set of benchmark assumptions to account for, among other things, the need to better reflect the differential in costs to deliver in rural and remote rural areas, as opposed to city and urban areas. 

The responses indicate that a large number of projects sought additional funding to supplement the RIHF grant to help progress their project.  We want to continue to encourage organisations submitting future applications to continue to do this and for projects to be more commercial in their approach to potential lending options as some match funding opportunities are no longer available. 

Although a majority of applicants who applied to the Feasibility Fund said that the level of funding was sufficient to help them to progress their project, we are increasing the maximum funding allowed for feasibility costs from £10,000 to £15,000.  The reason for this is that many projects applying to RIHF match fund the feasibility work with the Scottish Land Fund which, although has a £30,000 limit for pre-development work, by sharing contributions it should allow more projects to benefit from each fund. It will also provide additional financial support, where justified, to applicants that are not eligible to access the Scottish Land Fund.  We want to see more projects reach the main Rural and Islands Housing Fund and by increasing the feasibility funding, we hope that this will increase the number of projects that get to tender stage.   

The Impact of the RIHF on Rural Communities

A majority of respondents said that the RIHF is making a positive impact supporting the building of affordable homes in rural and island communities in local communities.   Respondents stated that the RIHF is empowering communities to identify what housing need there is in their local areas and that it is encouraging collaborative working to develop solutions. 

There was a strong call from respondents to further promote the RIHF to community groups, to provide training and to provide case studies to encourage more community groups to participate in the RIHF.  We will therefore explore with local authorities how they can further promote the RIHF within their communities. We will also work with rural stakeholders, such as Community Land Scotland, who have previously produced detailed case studies on successful projects to expand this work. Case studies and research (communitylandscotland.org.uk).

There were suggestions from respondents to publish more case studies for the RIHF.  We therefore propose to introduce a level of conditionality requiring all applicants who have a successful application to prepare and submit a case study which we will use to promote the RIHF more widely. 

Adaptation of the RIHF in the future to expand the range of options to support housing development in remote and island communities

While there were no suggestions from respondents to expand the range of housing options that the RIHF currently provides that have not been previously considered, the feedback on RIHF was helpful in informing relevant sections of Housing to 2040 strategy and policy areas that impact rural and island communities that will be taken forward following publication of Housing to 2040. 

The vast majority of the early RIHF applications were for affordable rent (and in most cases as a social rent equivalent) with projects delivering relatively small developments of one to four homes.  

However, as the fund has become more widely known, we are seeing projects coming forward that are a mixed tenure, and/or in some cases also including a commercial aspect within the wider development. While each project will have its own requirements there could be potential advantages and disadvantages of doing some form of mixed tenure/use. For example exploring an approach that both meets needs and allows a project to be a financially viable, may also bring additional challenges such as applying restrictions through a Rural Housing Burden.

An area within the guidance that has been questioned on occasions is around the requirement for homes to be provided ‘in-perpetuity’. We felt this was an important condition of grant (and consistent with mainstream Affordable Housing Supply Programme). We want to safeguard homes delivered via this fund by ensuring they continue to be affordable in the long term. If there is a valid reason in the longer term to change tenure or use of the homes, grant can be repaid to Scottish Government.

Recent correspondence on allocations policy and on Section 75 Agreements have also been considered and as such we have included some changes to the guidance notes on projects complying with Equalities duty and on approaches to any developments where there is a section 75 Agreement in place, encouraging early discussion as to the terms of any agreement