Rural and islands housing: action plan

Making Best Use of Existing Homes and Support for Home Ownership

Alongside the delivery of new homes for remote, rural and island communities, it is also important that local authorities have the tools available to allow them to make the best use of existing housing.

Over the past decade, the growth of online platforms has fuelled the trend for residential homes, particularly in tourist hotspots, to be changed from primary homes to short-term lets or second homes. Making the best use of our existing housing can make a significant contribution to increasing the available supply of permanent homes. This could be by limiting the number of second homes, changing the use of properties used for tourism to private rental tenancies, acquiring properties back into the affordable sector as well as bringing empty homes back into use. It is all about balance and the need to ensure that this balance best serves the needs of communities.

As part of our response to the Temporary Accommodation Task and Finish Group, we committed to investing at least £60 million from the Affordable Housing Supply Programme in 2023-2024 to support a national acquisition programme. This programme will enable local authorities and registered social landlords, including those operating in our remote, rural and island communities, to acquire the right properties in the right places for use as high quality, affordable, permanent homes.

Second Homes

Housing to 2040 committed to providing local authorities with tools and powers to support local areas to make the best use of their existing housing stock. This includes managing the number of long-term empty homes, short-term lets and second homes.

We recognise that geography can often be an important factor, with concentrations of second and or empty homes in specific areas across Scotland including remote, rural and island locations.

As of September 2022, there were 24,287 second homes (classified for council tax purposes), equating to around 1%of all residential accommodation in Scotland¹.

Demand for second homes, especially when concentrated in particular areas, can reduce the supply of permanent homes and inflate house prices, making it more difficult for people, particularly younger people, or those with fewer resources, to access the homes they need.

We recognise that second homes and short-term lets bring benefits to those who own them and the tourism businesses and local economy that they support. While recognising the positive economic impacts that tourism can bring, low occupancy of second homes, even if used partially as short-term lets, can minimise associated economic contribution and the broader support for local public services.

Data from National Records of Scotland Small Area Statistics on Households and Dwellings in September 2022 – published June 2023 – shows that remote rural areas have the highest proportion of empty and second homes across Scotland.

Where communities are reliant on the seasonal tourist economy, there is a balance that needs to be found between local housing needs for residents, housing for seasonal workers and accommodation for tourists.

Action

We will deliver secondary legislation to enable councils to apply up to a 100% premium on council tax rates for second homes from April 2024.

Short-Term Lets

We know that for some communities, the increase in the use of short-term lets has limited the supply of properties available for those seeking permanent homes. While we recognise that short-term lets can bring benefits to communities including through associated jobs and visitor attraction, we also recognise that in some areas, high concentrations can be problematic, which is why we have introduced legislation to regulate the use of short-term lets.

Licensing brings short-term lets in line with regulations of other accommodation such as hotels, caravan sites and houses of multiple occupation, by ensuring that they are of a suitable standard and have appropriate safety measures. We consider licensing is appropriate for the whole of Scotland, including island and rural communities, and offers considerable flexibility to local authorities on how it is implemented.

Powers to designate control areas are available to local authorities to manage high concentrations of short-term lets. In a designated control area, it is a mandatory condition for licence applications to obtain planning permission, each planning application will be determined in accordance with the development plan and relevant material considerations.

Action

We will continue to work with local authorities to monitor the designation of short-term let control areas to understand and share learning about how these have enabled councils in different locations (urban and rural) to better manage the number of short-term lets. A more comprehensive update about the implementation of short-term lets regulation, covering both planning and licensing, for the different types of short-term lets will be carried out in 2025.

Empty Homes

We know that tackling empty homes and returning them back into use as warm, safe and secure housing can make a critical contribution to the delivery of homes across remote, rural and island communities. We recognise that the reasons why homes become and stay empty are often complex and multi-faceted, and that bringing homes back into use takes time and perseverance, with relationship building often the key to success.

We continue to fund the Scottish Empty Homes Partnership to work with local authorities and private owners which has helped to return more than 9,000 homes back into active use since 2010 – including 1,257 in 2022-23. Phase 2 of this project seeks to move beyond the initial phase which looked to establish empty homes services and build a network of officers across Scotland. The aim is to develop a more strategic approach to bringing empty homes back into use and embed this within the Empty Homes Partnership and its delivery partners, supporting the Scottish Government in its aims to bring empty homes back into use as affordable housing for those that need it.

The Empty Homes Partnership recently launched the Empty Homes Framework (which has been co-produced with local authorities) as a step-by-step guide to developing a strategy document that identifies priorities for action, opportunities for partnership working, interventions and resourcing. Our network of empty homes officers operating across urban, rural and island areas will be vital in helping to drive forward this approach and we want to see all local authorities bring the benefits they provide to the communities they serve.

Through the Affordable Housing Supply Programme, the Scottish Government is providing support to local authorities and registered social landlords to purchase empty homes where this is appropriate. Similarly, through the Rural and Islands Housing Fund, communities can access support to bring empty homes back into use.

In September 2023, the Scottish Government published independent research titled ‘Bringing empty homes back into use: an audit of privately owned empty homes in Scotland’. The report makes clear that tackling empty homes remains a priority for the Scottish Government and is a key part of the solution to meeting housing demand. The audit considered: the current picture of empty homes in Scotland; the key barriers and opportunities for bringing homes back into use; existing approaches and interventions; and ideas for improvement.

The report offers a number of recommendations on further actions that could be taken forward by Scottish Government, local authorities and others to support more empty homes being brought back into effective use. The Scottish Government has published its response to the recommendations highlighting the priority actions it will take forward.

Action

We will work with the Scottish Empty Homes Partnership, local authorities and owners to bring more empty homes in rural and island areas back into use, promoting available funding options, sharing best practice and identify opportunities for stronger collaboration.

Empty School House – Achiltibuie, Highland

A former schoolhouse that had lain empty for over five years in the small community of Achiltibuie in Wester Ross was transformed into two affordable dwellings by Coigach Community Development Company, working in partnership with Communities Housing Trust. The project received funding of £74,472 from the Rural and Islands Housing Fund and was also funded jointly by the Nationwide Foundation, The Highland Council and Highlands and Islands Enterprise.

Community ownership of the disused schoolhouse has given the building a new lease of life via an asset transfer from The Highland Council. Rural and Islands Housing Fund was instrumental in funding this renovation, which was the first project to be completed through this mechanism.

Affordable Home ownership

We recognise that each local housing market in rural and island areas faces varying pressures and different challenges. A number of factors can impact on people being able to access affordable home ownership and a lack of new private housebuilding is a common feature across most rural and island housing markets. A constraint on the supply of homes can increase the pressure on existing homes, which can lead to house prices increasing and homes selling for significantly above the valuation, meaning there are less affordable homes for buyers. While this is also a feature in many urban housing markets, housing pressures are often more pronounced in rural and island areas as there can be fewer homes available for sale on the open market.

There are a range of existing mechanisms available under the Affordable Housing Supply Programme to support people to access affordable home ownership across remote, rural and island areas. In addition to the Open Market Shared Equity Scheme which mainly supports people to buy an existing home, other schemes are increasing the supply of new homes including the New Supply Shared Equity Scheme, Self-Build Loan Fund, Rural and Islands Housing Fund and Partnership Support for Regeneration Scheme.

New Supply Shared Equity Scheme

We are delivering affordable new build homes through the New Supply Shared Equity Scheme where local authorities have identified this as a priority. These homes are sold to eligible applicants on a shared equity basis. While targeted at increasing the supply of affordable housing in and around pressured housing markets, the scheme includes flexibility to respond to local housing market circumstances and can also be an option in other areas where there is an identifiable local need.

Dunbeg, Oban – Argyll & Bute

Link Group, working with West Highland Housing Association, are leading on delivering affordable housing in Dunbeg over a number of phases. Phase 3 is nearing completion and will provide 300 homes, supported by more than £35 million from the Affordable Housing Supply Programme. 40 of the homes are being made available for low-cost home ownership through New Supply Shared Equity Scheme.

The Argyll and Bute Housing Need and Demand Assessment identifies Oban as one of two areas of high housing pressure and an area of continued population growth in Argyll. Dunbeg, on the outskirts of Oban, was located to address this need.

Self-Build Loan Fund

We are supporting self-provided housing through continued funding of the Self-Build Loan Fund. The Self-Build Loan Fund Pilot was launched in Highland Council area in 2016, and following its success, the national fund was established in September 2018. The fund has been extended for up to five years from November 2022 with a further £6 million recyclable loan funding available.

While the Self-Build Loan Fund is available across urban and rural Scotland, most projects to date have been undertaken in rural areas. The fund is available to individuals who already have access to a plot of land. The short-term nature of the funding means that it is similar to a bridging loan and in most cases the owner either obtains a mortgage or sells their existing property to repay the loan.

The Planning (Scotland) Act 2019 introduced a requirement for planning authorities to prepare and maintain a list of persons who have registered interest with the authority with the intention of acquiring land in the authority’s area for self-build housing. Each planning authority is required to publish the list and have regard to it in preparing their Local Development Plan, this can also inform Local Housing Strategies including the identification of relevant sites.

We are also continuing to support self-provided housing through planning policy. National Planning Framework 4 supports new homes that improve affordability and choice, and address gaps in provision, including self-provided homes.

Rural and Islands Housing Fund

The Rural and Islands Housing Fund is increasing the delivery of more affordable homes across all tenures in remote, rural and island areas including homes for affordable rent, mid-market rent and affordable homes for sale. This includes home ownership projects in Abriachan, Highland, Staffin, Isle of Skye and Tomintoul, Moray.

Castle Crescent – Closeburn, Dumfries & Galloway

Nith Valley LEAF Trust identified a housing need in Closeburn, Dumfries & Galloway. The lack of suitable housing, particularly for families, was causing people to move away from the village, and impacting on the sustainability of the primary school. In addition, fuel poverty was identified as a major issue prevalent in local housing stock.

The project was supported by South of Scotland Community Housing. Nith Valley LEAF Trust purchased the land from the council, through an asset transfer. Work started on site in summer 2019 and three new houses were completed in August 2020.

A grant of £68,400 from the Scottish Land Fund enabled the purchase of the land and funding of £302,570 for the build was secured from the Rural and Islands Housing Fund.

Partnership Support for Regeneration

The Partnership Support for Regeneration Scheme is available to private developers, housing trusts and non-registered social landlords and can help increase the stock of owner occupied or private rented housing, in areas of limited or no supply. The funding provided helps bridge the gap between the cost of the development and the sales value of the units, providing the minimum level of grant funding needed to make the project financially viable. We have recently approved two projects in Orkney and Skye that will provide homes for sale.

Open Market Shared Equity Scheme

The scheme continues to support first-time buyers on low to moderate incomes and priority groups to buy a home for sale on the open market. It includes maximum threshold prices which are updated annually so that they continue to reflect the overall movement in average house prices over the latest year in each area, based on the median prices for rural areas.

Affordable Home ownership – Next Steps

We know that some people would like to become homeowners and remain living in their local communities. We will take steps to promote greater awareness and use of the existing Scottish Government home ownership mechanisms by encouraging local authorities to take a pro-active approach to the use of these mechanisms, where appropriate, to address local housing need in their communities.

We recognise that accessing home ownership in some rural and island areas can be particularly difficult due to the impacts of limited supply, high demand, as well as market conditions such as rising interest rates and inflation. We want to better understand the nature of some of these complex issues and market interactions to enable us to consider how current home ownership mechanisms are operating, any intended and unintended impacts on the market and what, if any, additional actions are required. As part of this work, we will consider the applicability of previous Scottish Government home ownership initiatives.

Action

In Summer 2024, we will commission independent research to support a review of affordable home ownership in remote, rural and island areas. We will consider the findings of this research and any recommendations to inform our next steps.

Rural Housing Burdens

During our engagement, stakeholders expressed support for the use and promotion of rural housing burdens in the delivery of affordable housing projects in rural areas. Rural housing burdens are already used in some areas in Scotland, particularly in the Highlands and can be generally added into the title of a property or house plot, when a property is first sold by section 43 of the Title Conditions (Scotland) Act 2003. The burden gives a rural housing body the right of pre-emption and control of future sales to enable the property to be retained as an affordable and permanent home.

There can be distinct advantages to using rural housing burdens, in that the property must be occupied as a primary residence, which helps to ensure that properties continue to be used as homes in perpetuity. In the event of a sale, the rural housing body has the first opportunity to purchase the property. If that opportunity is not utilised and the property is sold on the open market, the burden remains on the title.

The property on which a burden has been placed may have been purchased at below market value, in which case the burden will remain on the title of the property in perpetuity.

Action

We will support and promote the wider use of rural housing burdens in the delivery of affordable housing. This will include working with lenders to explore their support for the use of rural housing burdens through Scottish Government funded affordable housing projects.

Compulsory Purchase Orders

Local authorities have broad compulsory purchase powers, which can be used to bring vacant and derelict land or buildings and empty properties back into use – including for housing purposes. In some cases, it is possible for bodies with compulsory purchase powers to acquire land for projects which are being carried out and or financed by a third party – these are sometimes referred to as “back-to-back” agreements.

Action

We have committed to reform and modernise compulsory purchase legislation in Scotland to make the system fairer, clearer and faster for all parties. As a first step we will appoint an expert advisory panel in 2023-24 to help inform the development of options for reform.

In 2024 we will take forward work to consider the justification for and practical operation of Compulsory Sales Orders, particularly in light of our commitment to reforming Compulsory Purchase Orders.

Crofting

Crofting plays a vital role in maintaining the population of our rural and island areas, including the retention of young people and families. Unlike other forms of land tenure, crofters are subject to a number of statutory duties, including the requirement to be resident on, or within 32 kilometres of, their croft and to cultivate and maintain their croft. Failure to comply with these duties can result in a crofter losing their croft. In return for compliance with these duties crofters can apply for the Croft House Grant.

The Scottish Government has a track record of investing to improve croft housing. Since January 2007, the Scottish Government has approved Croft House Grant payments of over £24.4 million helping to build and improve over 1,100 croft homes.

Our National Islands Plan recognises that crofting plays a vital role in maintaining the population in remote rural areas including islands. The Croft House Grant enables crofters to live and work on or near their land, encouraging investment in crofts and enabling crofters to maximise the economic activity of their croft. In almost every case the croft house must be provided by the crofter themselves. The Croft House Grant assists crofters in improving or building their main residence.

The Scottish Government is committed to enabling more people to live on or near their croft, and to work their land and encourage investment in crofts and croft houses as this contributes to the economy in crofting areas. It also helps to halt population decline and contributes to the sustainability of rural communities.

The Scottish Government’s National Development Plan for Crofting was published in March 2021, and highlights the core elements necessary to ensure that crofting remains at the heart of our rural and island communities.

Action

With further investment of £1.9 million in 2023–2024, we will continue to provide financial assistance to those crofters who wish to build or improve their croft house and will prioritise those who are most in need. We will also continue to review the scheme annually to assess its impact and effectiveness and ensure that it continues to provide much-needed support to active crofters.