Affordable Housing Supply Programme (AHSP) - Deliverability Review

Impact of the Affordable Housing Supply Programme

Does the programme deliver effectively across different geographies, types of projects and in meeting the needs of diverse client groups?

Local decision making was seen as critical to addressing housing need as well as enabling investment to support positive local outcomes. There was a recognition that sometimes the positive narrative around the “how, where and what” the programme is supporting is being diluted or even reduced by a more simplistic emphasis on the overall number of new homes delivered. This has been reflected in discussions at the Housing to 2040 Board and is informing considerations on the utilisation of the 2025 to 2026 budget. The central role that the Affordable Housing Supply Programme has in supporting the targeting of acquisitions and improving the quality and condition of existing stock was also acknowledged as an important part of overall delivery and further consideration could therefore be given to demonstrating these wider impacts.

For example, stakeholders underlined the ongoing need to ensure that local authorities are able to consider the housing needs of older people as well as requirements for larger family homes through their Local Housing Strategies and Strategic Housing Investment Plans. Inevitably, while the unit costs of such provision can be significantly higher than other types of housing, they remain important to the overall impact and effectiveness of the programme. It was noted that the Scottish Government guidance in support of Housing Need and Demand Assessments, Local Housing Strategies and Strategic Housing Investment Plans makes clear the expectations that local authorities fully consider and prioritise this type of provision where needed.

Stakeholders also noted the significant challenge and impact of delivering on a small island of, say, four homes compared to delivery of four homes in a more urban area. The benefit to rural and island communities of a small number of homes was recognised as being significant and generational in terms of the long-term sustainability of a community, but yet only account for a very small contribution towards the overall national unit-driven 110,000 affordable homes target. Such qualitative impacts are not well captured in current reporting arrangements.

With reference to the specific commitment to deliver at least 10% of the target in rural and island communities, respondents noted the importance they attached to ensuring that demand led funds – such as the £30 million Rural and Island Housing Fund and the £25 million Rural Affordable Homes for Key Workers Fund – remain key aspects of the Affordable Housing Supply Programme. The delivery of rural homes is routinely and consistently recorded applying the Scottish Government’s 6- fold rural and urban classification, with homes being delivered through the Affordable Housing Supply Programme recorded as either urban or rural at the point of completion.

The Scottish Government intends to maintain the current 6-fold Urban/Rural classification classes 4 (remote small towns), 5 (accessible rural) and 6 (remote rural) to define affordable homes delivered in rural and island areas. The use of the 6-fold urban rural classification provides a consistent way of defining urban and rural areas across Scotland. It is reviewed periodically and provides continuity in terms of reporting. However, to address presentational issues of homes being delivered in accessible rural areas around cities, the Scottish Government will apply an additional layer using the Scottish Government’s Rural and Environment Science and Analytical Services definition of non-rural areas to exclude the local authority areas of Edinburgh, Dundee, Aberdeen and Glasgow from affordable housing rural delivery figures.

While the mainstream grant-funded programme for Registered Social Landlords and local authorities continues to deliver the majority of (e.g. 90% in 2023 to 2024) affordable homes in rural and island communities, the availability of tailored support for rural housing was broadly welcomed. Similarly welcomed was the Scottish Government’s recognition of the need for higher baseline benchmarks to determine the appraisal route for rural projects. Stakeholders were broadly positive about the Rural Housing and Island Fund, highlighting its small but important role in supporting affordable housing and rural sustainability. Respondents also highlighted land challenges, the rising cost of development, as well as shortages of skills and construction capacity and it will be important to keep these aspects under regular review across government to support the continued deliverability of rural projects.

The Affordable Housing Supply Programme annual out-turn report was recognised as a beneficial document. It was suggested that it could be interrogated more deeply – to reflect on what has been achieved by delivery partners to date, to highlight successes, and to consider what more still needs to be done.

Some stakeholders also recommended that ‘outcomes’ rather than ‘outputs’ should be emphasised. They suggested that outcomes, such as how good quality housing impacts child poverty, should be evidenced and prioritised over recording the number of houses delivered. Some stakeholders felt, however, that this can only be achieved through a more nuanced linkage of various data sources.

A number of respondents flagged the additional standards that individual local authorities may be applying on top of Scottish Government requirements. For example, local authorities such as Glasgow City Council, West Dunbartonshire Council and the Highland Council all set specific requirements which exceed those required by the Scottish Government. Stakeholders questioned whether any additional requirements/costs should continue to be funded through the programme. Furthermore, the differing standards between construction supported by the Affordable Housing Supply Programme versus the private sector was seen as creating an ‘uneven playing field’.

Stakeholders were broadly supportive of the Scottish Government’s approach to improving housing standards and decarbonising homes, although some noted concerns in terms of the costs (and pace) associated with the transition, both in terms of new developments and the need to retrofit existing stock to align with net-zero standards. There was also desire for more clarity on what the asks of industry might be in terms of transitioning to net zero, specifically the timing of new expectations around introduction and application. Programme for Government sets out a commitment to publish an action and implementation plan based on an assessment of the regulatory controls which exist in key growth sectors, starting with housing, public infrastructure, and green industries, by the end of 2025 – designed to make it easier to do business. The sequencing of regulatory change has also been taken forward and considered at the external Housing to 2040 Board in October 2024 and January 2025, with members being invited to inform government’s approach to sequencing.

A summary of general observations is set out below:

• the social value of the Affordable Housing Supply Programme in delivering required affordable housing is recognised as impacting positively at an individual, household and community level both now and over the longer term
• the commitment to the delivery of 70% of the target as social rented homes was seen as critical in ensuring homes are truly affordable, provide security of tenure and will continue to be available over the long term
• the economic impact of the investment should also be recognised and the significant positive benefit that this level of capital investment has across the building and construction sector
• the programme is continuing to have a positive impact across all 32 local authority areas, while the 10% target is ensuring the continued reach of the programme to support much needed projects in rural and island communities
• local decision making remains key to ensuring optimum impact and ensuring the alignment of the Affordable Housing Supply Programme alongside other investment and activity to support a range of outcomes and support complementarity
• similarly, the ability of the Affordable Housing Supply Programme to support local identified priorities, including specialist provision such as housing for older people, wheelchair accessible homes or larger homes for families, was recognised as being both impactful and important
• recognition that a focus on the numbers of homes delivered as part of the target failed to wholly demonstrate the full impact of delivery in terms of the broader outcomes it is supporting
• recognition and broad support for quality standards to ensure capital investment supports both quality of life and longer-term outcomes; however, recognition also of the challenge of balancing the demands of retrofit alongside a delivery programme
• recognition of additional quality requirements that some local authorities are seeking and the potential impact that this may have on the scale and pace of affordable housing delivery in these areas

Scottish Government Response to Feedback

• Scotland has a strong track record in the delivery of affordable housing. To the end of December 2024 to 2025 we have supported the delivery of more than 136,000 affordable homes since 2007, with 71% for social rent. The importance of the social rent element which is directly helping support household income and addressing poverty, particularly for families with children, is a key programme ambition. An estimated 2,669 households with children have been helped into affordable housing in the year to December 2024 while more broadly keeping rents lower than market rents benefits approximately 140,000 children in poverty each year
• of the 26,039 homes delivered to end December 2024 towards the 110,000 affordable homes target, 77% are homes for social rent. Completion data shows that the Affordable Housing Supply Programme continues to deliver effectively across all geographies of the 6-fold classification

The quality of homes supported through the Affordable Housing Supply Programme is also a key area to consider in relation to impact. Housing quality and accessibility standards not only ensure a positive living environment, they can also ensure that the property is able to meet the needs of residents over the longer term, providing more flexible living standards to support them through all stages of life. Ensuring our capital investment supports high quality homes also has benefits in terms of the anticipated life of affordable housing, providing more certainty that the homes we are delivering now will remain fit for purpose for decades to come. New build homes delivered directly by local authorities and Registered Social Landlords with grant support through the programme require to meet, as a minimum, the design criteria indicated as a ‘basic’ requirement in the Housing for Varying Needs design guide.

Housing Emergency Actions

The right home in the right places

• explore risk/benefits of slowing introduction of quality standards in light of the Housing Emergency
• explore implications of partners’ additional quality standards on Affordable Housing Supply Programme budget/delivery in light of the Housing Emergency
• assess the viability of greater recognition of the differing dimensions of the Affordable Housing Supply Programme target components – this could involve more nuanced reporting on the different challenges of rural and urban delivery