Europe 2020: Scotland's National Reform Programme 2019

Chapter 3: Housing

Housing Supply

The second country‑specific recommendation set by the European Commission for the UK recommends that further steps are taken to boost housing supply, including through reforms to the planning system.

One of the most important factors in any person's quality of life is their housing. Good quality, warm and affordable housing is vital to ensuring a Scotland that is fair for this and future generations. Housing is an area where the Scottish Government and its partners are already taking a range of actions to ensure that all people in Scotland live in high‑quality, sustainable homes that they can afford and that meet their needs.

The Scottish Government's target, over the current Parliamentary term, is to deliver at least 50,000 affordable homes, including 35,000 homes for social rent - a 75% increase on our previous social rent target. This ambitious plan has been backed up with investment of at least £3 billion - the single biggest investment in, and delivery of, affordable housing since devolution. Over £756 million is available over 2018-19 and £826 million will be available in 2019-20 - a £70 million increase. 83% of the Affordable Housing Supply Programme funding in 2019-20 (£685 million) is capital funding, primarily for social housing.

The Scottish Government has given councils and housing associations long‑term certainty by allocating full resource planning assumptions to March 2021. We exceeded our previous 30,000 affordable homes target by more than 10%. Over the last parliamentary term 33,490 affordable homes were delivered, 22,523 of which were for social rent.

Financial Support and Innovation

Scotland has a range of schemes providing support to private sector housing activity, including the £295 million Affordable New Build and Smaller Developers Help to Buy (Scotland) shared equity schemes, which offer support to homebuyers from 2016‑19. These offer equity support of up to 15% on more affordable new build homes, with a threshold price of £200,000, targeting support to those most in need of assistance and adapting to improved market lending conditions.

In addition, the Open Market Shared Equity Scheme (OMSE) continues to assist first time buyers on low to moderate incomes and priority access groups to purchase a property on the open market by offering equity support of between 10‑40%. OMSE is part of the Scottish Government's commitment to deliver 50,000 affordable homes by 2021.

The More Homes Scotland approach is focussed on increasing supply across all tenures, including the expansion of affordable, mid-market rent homes which will contribute towards the current housing target of 50,000 affordable homes.

The innovative use of government guarantees, loans, grant recycling and new sources of private funding is supporting the delivery of approaching 8,500 homes across all tenures and generating over £1 billion of housing investment in addition to our conventional funding routes. Our activity is also having a wider impact by unlocking associated housing delivery in many locations across Scotland.

The National Housing Trust initiative - the first government guarantee-backed housing programme in the UK - was launched to stimulate the economy during a difficult period, and increase the number of high quality new homes with no subsidy. This popular initiative has delivered over 1,600 homes to date.

The Scottish Government remains committed to supporting the expansion of mid-market rent (MMR) across Scotland.

LAR Housing Trust has used an initial £55 million Scottish Government loan to attract £65 million investment from Scottish Widows, arranged through Bank of Scotland to support delivery of their 1,000 affordable MMR homes housing target. And more recently, Scottish Government loan funding of £47.5 million has been provided to the Placemaking and Regeneration Group, Places for People, to set up a residential investment fund to deliver 1,000 affordable MMR homes across Scotland and attract pension fund investors to generate an investment package of around £150 million.

The Scottish Government has encouraged pension funds to invest into affordable housing - with Falkirk Local Government Pension Scheme fund investing £30 million through Hearthstone. The initial funding from Falkirk should finance around 300 affordable homes over the next 10 years.

We are boosting the supply of affordable housing through prudential borrowing, and delivering City Deal commitments on housing. This includes consent to on-lend up to £248 million along with a £16 million capital grant to City of Edinburgh Council to support a new city region housing company to deliver a mix of 1,500 affordable MMR homes and competitive market rent homes.

We are also supporting and enabling investment in the emerging Build-to-Rent housing market, including the introduction of the Rental Income Guarantee Scheme designed to stimulate further institutional investment and delivery of new high-quality, professionally managed, private rented sector homes. This has the potential for delivery of an additional 2,500 new homes for market rent, stimulating up to £500 million private investment.

Added to this, the Scottish Government has introduced the £150 million Building Scotland Fund (£70 million 2018-19 and £80 million over the following two financial years). This fund will offer loan or equity support, and is a precursor to the Scottish National Investment Bank. The cross-portfolio fund is available to non-public sector organisations, to support the development of new housing across all tenures, develop modern industrial and commercial space; and support industry-led research and development. The fund will provide a loan of £26.8 million for the Winchburgh housing development supporting the delivery of around 3,450 new homes in West Lothian - with associated schools, transport and community facilities being delivered as part of the wider development.

Scotland's Planning System

The Scottish Government published the "Places, People and Planning Position Statement" in June 2017, setting out proposed changes to be taken forward following the recommendations of the independent review of the planning system and further consultation. These changes aim to streamline development planning, strengthen community engagement, support the delivery of homes and infrastructure and improve resourcing of the planning system. A Planning Bill was introduced to the Scottish Parliament in December 2017. This includes proposals to strengthen the role of the National Planning Framework and amend the development planning system so that it is better placed to support development delivery. Work on preparing the next National Planning Framework will start in 2019 following the Bill. The timescale and content will depend on the new arrangements for preparing National Planning Framework which are currently being debated as part of the Planning Bill.

Research has been undertaken to identify the variability in approach taken by different planning authorities in using Housing Land Audits to assess compliance with Scottish Planning Policy. The research has now been published and its findings will help inform how a more standardised approach to producing Housing Land Audits can be developed within the context of a new planning system.

The Scottish Government is also supporting alternative housing delivery models. £160,000 has been provided to develop case studies that demonstrate and promote the value of self and custom build housing as an alternative mainstream housing delivery model. Seven pilot projects have included exploring the potential for affordable rural self‑build, creating an online portal to support self-builders and researching the potential for custom build at scale. Planning Delivery Advice on Build to Rent homes was published in September 2017 and sets out the key opportunities of this sector to contribute to housing supply and the challenges which it presents to decision‑makers. Further work to support the sector includes study visits with planning convenors and the creation of online case studies.