Private sector funding set to replace grants for affordable housing

The current level of grant funding in Scotland is a fantastic opportunity for Housing Associations to drive up the delivery of new affordable homes. With a target of 50,000 new homes in the current parliamentary period we should be looking back in 4 years with a sense of satisfaction that we have done all we can to deliver more homes for people who need them.  

The current focus is on how to hit that target, which includes 35,000 for social rent and 15,000 across other tenures. Housing land supply, availability of finance, development knowledge and capability within the sector and the cost of land and construction are just some of the thorny issues we are trying to resolve. But as we focus on the here and now, we also need to lift our heads up and think about how we will continue to deliver in the future.  

Housing need analysis indicates that the demand for affordable housing far exceeds the 25% assumption made for new build developments. This is spread across a range of house sizes and income levels and every tenure has a role to play. With the average wage in Scotland at around £28,000 and even with a loosening in the mortgage market, a quick scan of available homes to buy indicates that the rental market is going to have to increase supply. 

Institutional investment in affordable rent is one avenue for future growth that could continue well beyond the current grant regime. In Scotland the Falkirk Pension Fund and Castle Rock Edinvar have been delivering social rent and mid market rent with much lower public subsidy. The advantage of an institutional scale programme is that it is easier to resource with the right development and financial management skills,anditcreates a simpler portal for house builders and developers when they are looking to deliver affordable homes. The upside for Housing Associations is that they can grow their offering to customers, increase the efficiency and productivity of their housing and home repair services and grow their revenue base.

One of the big challenges for Housing Associations will be re-thinking their role and approach to housing management, cost control and delivery of services. If we are to continue to increase the supply of affordable housing well beyond the current programme then everyone is going to have to identify how we drive more value out of our investment and resources.

For now, the opportunity to increase supply is better than many of us could have expected. It wont be long before we have to live with less public subsidy and so now is the time to think ahead and be ready to adapt withoutcomprimisingcompromisingthe need to deliver significantly more affordable housing.

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