With the launch of the Housing to 2040 strategy we have set out a vision for housing in Scotland to 2040 and a route map to get there. The strategy aims to deliver our ambition for everyone to have a safe, good quality and affordable home that meets their needs in the place they want to be.
Housing to 2040 makes the case for co-ordinated infrastructure investment to support long-term housing development though a range of infrastructure funding interventions, focussed on strong place-based investment approaches.
To support these aims, Scottish Ministers have approved the continuation of HIF in the current Parliamentary period. HIF was originally launched in 2016 with the first round ending in March 2021 and has invested nearly £50 million loan and grant across urban and rural areas to fund infrastructure that will help unlock delivery of over 12,600 homes, of which approximately 3,600 will be affordable.
The continuation of HIF provides an opportunity to build on the successes and lessons learned to date and ensure there remains infrastructure support to unlock affordable housing and deliver on the core aims of Housing to 2040.
The focus of the new HIF programme will include:
- Providing registered social landlords (RSLs) and local authorities (LAs) with grant support for the unlocking of sites that will deliver affordable homes in support of the AHSP and as in line with LA strategic priorities.
- Prioritising funding applications that will help deliver completed affordable housing as part of the delivery targets set out in the Housing to 2040 strategy;
- Ensuring that grant support is targeting projects which have been blocked or not able to proceed due to the extent and costs of infrastructure works being exceptional and above the level which could be approved using the grant threshold flexibility available through the Affordable Housing Supply Programme (AHSP) – this is the key test of eligibility for HIF Funding;
- Prioritising applications where grant support is less than 100% of infrastructure costs and approved grant will reflect, where appropriate, any funding contributions which applicants can bring to the project which will result in lower levels of grant. 100% funding applications can still be made, but will require strong evidence to secure grant support;
- That applications contribute to strong place-based investment, and where applicable this could include supporting town centre regeneration, sustainable communities and the creation of 20 minute neighbourhoods. More information on the Place Principle.
- Any HIF grant awarded (full or in part) will count towards the total development costs of the resultant affordable housing development to reflect true development costs and the assessed VFM of the project; and
- Ensuring that Value for Money (VFM) is secured for all applications by the use of appropriate tendering processes and evidenced in the application process.
HIF loan funding paused
One change under the new HIF programme is the pausing of loan funding during 2021-22. This will mean that loans to deliver housing infrastructure (at commercial rates) will not be available to private sector developers.
The current Scottish Budget will protect investment in housing, with more than £3.5 billion being invested into housing over the next five years, and £3.4 billion of that delivering more affordable homes in communities across Scotland.
However, we have also seen a significant cut to the total Scottish Government Financial Transactions budget in 2021-22 arising from the UK Government’s Spending Review and this has had an impact on the Affordable Housing Supply Programme overall budget.
Financial Transactions were the source of loan finance in the previous round of the HIF programme which ended in March 2021.
Loan funding options through HIF will be kept under review as the new round begins to deliver funding to support infrastructure investment.
In the meantime developers or landowners can contact the Scottish National Investment Bank to discuss whether commercial finance might be available from the Bank to support their infrastructure investment requirements. The Bank invests in pursuit of its missions in accordance with its published investment strategy. More information is available at https://www.thebank.scot/
Project eligibility for HIF support
We want to ensure that projects are a strategic priority for delivery in a local area and that there is clear evidence that without infrastructure funding being supported by HIF that homes will not be delivered.
This means that applications will need to evidence key principles for support:
- That grant support is targeting projects which have been blocked or not able to proceed due to the extent of infrastructure works being exceptional and above the level which could be approved using the grant threshold flexibility available through the Affordable Housing Supply Programme (AHSP)
- The development has the support of the LA and is in the SHIP for the local area or will be in the forthcoming SHIP as a local priority.
- Costs are related to infrastructure works outwith the curtilage of the development, are necessary to the development and can be demonstrated as representing Value for Money for any public support; and
- Costs cannot be met by either the applicant organisation or another funding source (for instance, AHSP grant threshold flexibility) and there is strong evidence that the funding being requested is the minimum amount required to ensure a project is viable.
- There is clear alignment with the Housing to 2040 strategy core aims which is referenced in the application process (in particular that projects are able to demonstrate strong place-based investment principles and that they are supporting the transition to net zero).
- The grant will be used to provide new affordable housing which aligns with Housing to 2040 timescales.
To help applicants understand the type of projects that have been previously funded, we have included a list of examples – please note that new HIF applications will be assessed on their own merit and this information is provided as a reference guide only.
For clarity, as a rule, HIF should not be used for the funding of:
- On-site infrastructure works required to develop affordable housing (e.g. roads, streetlights, sewers/drainage, ground remediation etc.) which should be accommodated within normal works costs.
- High cost schemes solely to keep the housing element within grant funding benchmarks.
- Section 75 contributions which are not directly related to housing enabling infrastructure costs.
- Section 75 contributions which are to be met by Developer contributions towards affordable housing provision in a timely manner.
- Replacing other public sector contributions (e.g. Scottish Water/Transport Scotland) for major infrastructure which these bodies would be expected to fund directly.
- Works or other items which local authorities/RSLs would normally fund from their own resources including for example, general land acquisitions or acquisitions of property and land made under Compulsory Purchase Orders (CPOs).
- Major roadworks such as upgrading /realignment of trunk roads which will not directly support housing delivery.
- Demolition costs associated with site development.
- Costs associated with land remediation as a consequence of demolition.
The above list is not exhaustive and applications will be assessed for compliance with the key principle of HIF support on a case by case basis.
We will assess the impact of infrastructure grant funding on the overall viability of a proposal, including aid impacts associated with the new UK subsidy control system, which is the replacement for the EU’s state aid regime.
Applicants may be asked to provide additional information to clarify funding impacts in terms of any increase in land value or betterment of a development site due to infrastructure works out-with the curtilage of the site. This may also consider ownership of land and funding structures to ensure there is no aid leakage.
Successful applications will also have their award details publicised through the SG website, and entered into a UK subsidy control system register.
Freedom of Information
Information provided through the application process will be held as commercial in confidence, however applications will be subject to requirements of the Freedom Of Information (Scotland) Act 2002 and the Environmental Information (Scotland) Regulations 2004 and subsequent amendments.
Applicants should initially discuss funding requirements with SG More Homes Division Area Teams prior to submitting an application and where necessary, potential enquiries will be discussed with the HIF Programme Team to confirm eligibility.
We have removed the need for an Expression of Interest to be completed as long as there is written confirmation that an application is a strategic priority for the LA and will be in the SHIP. Instead, applicants following discussion with Area Teams can complete the new HIF application form on this page and return this with supporting evidence to the HIF Programme Team.
All applications should be submitted to the email address: Infrastructurefund@gov.scot
On receipt of a completed application, proposals will be subject to a prioritisation and eligibility check against HIF funding criteria, as well as technical assessment of works costs.
An indicative process is noted below for guidance only and may vary depending on the complexity of an application:-
Applicant reviews project against HIF criteria, including confirming that the site is supported by the LA as a priority and it is in the SHIP or it will be included in forthcoming SHIP.
Applicant completes application and provides any additional information requested to support SG due-diligence.
Due diligence (including technical appraisal) completed and if application successful, project moves to Grant Offer based on tendered costs.
Delivery of project and grant drawdown based on grant offer
Project delivery and monitoring
All successful applications will be required to use the Housing and Regeneration Programme System (HARP).
Successful applicants may be required to provide information to support Scottish Ministers to respond to Parliamentary Scrutiny, Audit requirements and Freedom of Information Requests. These requirements are set out within the application and standard grant offer.
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