Affordable Housing Supply Programme (AHSP) - Deliverability Review

Affordable Housing Supply Programme

How responsive is the programme to delivering policy objectives and responding to risks and emerging needs?

In broad terms, stakeholders expressed confidence in the Affordable Housing Supply Programme’s well-established housing planning and delivery mechanisms and clear and effective guidance to support the operation of the programme. A number of stakeholders also remarked on the value they placed on their positive relationships with Scottish Government officials.

The Affordable Housing Supply Programme was considered to be responsive in delivering housing objectives locally and supporting national objectives. The flexibility within the programme to support a range of affordable tenures, house types and sizes across urban, rural and island communities was also valued. Stakeholders appreciated the degree to which the programme is able to respond to identified priorities.

Stakeholders did acknowledge that the extent to which the programme can respond to, or is expected to respond to, different types of risks and emerging needs will vary. For example, in recent years the programme has responded effectively to accommodate additional requirements in relation to local authority wheelchair accessible housing targets, with the majority of local authorities now having a percentage or numerical wheelchair housing target. A £40 million fund targeted the issue of social voids (unoccupied social rented properties), and sought to step up the scale of acquisitions in order to accelerate the number of available social rented homes in 2024 to 2025 helping bring around 1,000 affordable homes into use. A further £40 million for acquisitions has been committed in 2025 to 2026.

By contrast, while rising construction costs have been capable of being absorbed at a project level, at a strategic level in terms of meeting the target, the programme was seen as less able to respond to cost increases without an associated negative impact on budgets and/or delivery.

The inherent long-term nature of capital programmes such as the Affordable Housing Supply Programme, and the lead in times for delivery of housing projects, were viewed as further complexities that should be acknowledged in reporting, budgeting and projections. It was acknowledged that to manage potential slippage, local authorities are expected to ‘over programme’ by up to 25% per annum as part of the Strategic Housing Investment Plan (SHIP) process and this acts as a useful risk management approach in a complex development context where, despite best efforts, slippage can still occur.

Stakeholders noted the lead in times for the delivery of capital programmes such as the Affordable Housing Supply Programme recognising that it takes time to respond to acute, unexpected and emerging needs like those associated with the housing emergency. Recognising these issues will continue to require time, energy and resource to resolve.

While certainty of budgets, where possible over multi years, was seen as a critical factor to support delivery, the recent reduction in budgets was also similarly perceived as a blocker. Since then an increased Affordable Housing Supply Programme budget of £768 million for financial year 2025 to 2026 has been confirmed. A significant number of respondents noted broader concerns around the lack of certainty and associated impacts that annual budgets or in-year changes to budgets can have upon confidence. We will continue to engage with the UK Government on the advantages and efficiencies that certainty of funding, and over multiple years, will deliver.

These concerns become more pronounced when coupled with other concerns or challenges to delivery perceived by the sector, such as additional quality standards. Other external factors noted by stakeholders related to significant change in the construction sector over the last five years, including advances in employee rights, concerns about labour supply chains and potential skills shortages. There was a clear view that the Affordable Housing Supply Programme needed to respond positively to challenges where they arise and should reflect the level of importance that stakeholders place on greater funding certainty.

A linked point was also noted in relation to the allocation of Resource Planning Assumptions and the indicators used as part of the Strategic Housing Investment Framework (SHIF) to provide Resource Planning Assumptions (RPAs) to Local Authorities. The Programme seeks to optimise the positive impact of spend and delivery and does so by supporting local authorities to deliver fully against its RPAs; however, where local authorities are unable to deliver against its RPA the programme will seek to move funding to other areas that are able to deliver. This process is taken forward as part of normal in year programme management, in discussion with local authorities and reported on through annual outturn reports. A number of respondents reflected however that perhaps a re-weighting of the indicators may reduce the requirement for in year movement thereby supporting a more responsive programme.

A summary of general observations is set out below:

• the Affordable Housing Supply Programme was considered to be both flexible and responsive in meeting requirements across a range of tenures, types and sizes
• funding certainty has a key role in providing the level of assurance and confidence required
• capital programmes are better geared to anticipating rather than reacting – effective planning and longer-term funding certainty were seen to be key
• at a strategic level, sound governance structures are key to identifying and managing emerging risks
• funding should continue to be managed to optimise delivery through in year movement of funding between local authorities and the indicators used to determine local budget allocations may benefit from re-weighting to reflect changes to investment priorities

Scottish Government Response to Feedback

• all local authorities have a statutory responsibility to prepare a Local Housing Strategy (LHS) which sets out their strategic vision for the delivery of housing and housing related services in their areas as well as demonstrating how statutory requirements placed on the local authority are being fulfilled. The LHS should be based on the delivery of outcomes, informed by national and local priorities, targets and aspirations and through collaboration with stakeholders. In developing a LHS, local authorities should consider the resources required to deliver priorities and identified outcomes should be set out in the Outcomes Action Plan
• it is also a statutory requirement for a LHS to be kept under review, and many local authorities already undertake a review annually as part of an annual report. The Scottish Government expects all local authorities to review and report on progress annually (providing a copy of this to Scottish Government More Homes Division Area Teams). The Scottish Government is supportive of local level actions being taken to address the Housing Emergency – and we would expect planning for locally declared housing emergencies to be built into the LHS process in terms of impact and delivery
• the Housing Emergency response has been clear on the need to ensure robust governance, oversight and leadership of the programme. There is a need for increased transparency on risks to, and issues from, the programme with a focus on delivery towards solutions from all partners
• more recently, the programme has pivoted to focus further on acquisitions to support a reduction in the use of temporary accommodation – more than £83 million was invested through the 2023 to 2024 National Acquisition Programme, delivering almost 1,500 affordable homes. A further targeted investment of £80 million over two years (financial years 2024 to 2025 and 2025 to 2026) is now being provided - in the first year, this funding helped bring around 1,000 affordable homes into use. This targeted approach to funding acquisitions helps to ensure maximum impact on delivery against outcomes including tackling homelessness and child poverty
• given the importance placed on future year budget certainty through this review, and that the Scottish Government is keenly aware of the benefits of providing multi-year spending plans for the wider public sector, third sector, businesses and other organisations we will consider the budgetary options available in providing a baseline of funding over multiple years for the programme to increase certainty further. The conclusion of the UK Government’s 2025 spending review will provide key funding information to underpin our own multi-year spending review
• The importance that multi-year funding certainty brings to the programme is acknowledged. In the absence of multi-year Resource Planning Assumptions, local authorities are able to forward commit to projects in future years on the basis of assuming 80%-60%-40% of their current single year Resource Planning Assumption in the 1-3 years following the current single-year budget. This ensures that an element of forward commitments can be made whilst minimising the risk of exceeding anticipated future year allocations. Scottish Government officials have worked across ministerial portfolios to confirm the continuation of these arrangements for the 2025 to 2026 programme.

Housing Emergency Actions

• continue to call for action from the UK Government (UKG) on a range of measures necessary to support the alleviation of budget pressures, including:
  • engage with UKG to reverse the impact of budget cuts imposed on Scotland
  • set out additional levers/funding mechanisms necessary to deliver the scale of homes needed
  • explore potential to reduce VAT on refurbishment
  • encourage the essential continuation of the uprating of Local Housing Allowance (LHA) rates
• Scottish Government officials will continue to engage with local authorities, communicating that planning should be aligned with LHS process and annual reviews and to understand the required actions to support alleviation of emergency pressures
• Scottish Government officials have established a temporary housing emergency response unit to drive forward workstreams and report to the Housing to 2040 Strategic Board