Planning Advice Note 2/2010: Affordable Housing and Housing Land Audits

Advice on affordable housing and housing land audits.



1. Section 1 of this Planning Advice Note ( PAN) provides advice and information on how the planning system can support the Government's commitment to increase the supply of affordable housing. Local authorities, housing associations, developers and the Scottish Government are involved in the delivery of affordable housing and this document explains the variety of approaches and types of affordable housing which are available. It focuses on how the planning system can facilitate the development of affordable homes by house builders and other developers, either through the transfer of land or other methods of delivery. Strategic planning for housing is important in ensuring housing need and demand is met and that the right housing choice is delivered in the right places. This PAN considers the role of Housing Need and Demand Assessment ( HNDA), the Local Housing Strategy ( LHS) and development plans in delivering affordable housing. Advice is provided on the design of affordable homes and the wider community and lastly a range of information sources is provided to encourage the sharing of best practice in the delivery of affordable housing.

2. The advice in this PAN has to be applied constructively and with flexibility in response to financial and market conditions. The key matters where flexibility may be exercised are described in the PAN and include: a range of tenures; the percentage of affordable units identified in the development plan policy and on a specific site; provision on another site; and in some cases the use of a commuted sum. In particular, and taking into account the availability of public funding, the wide range of affordable housing tenures means that the inability of a Registered Social Landlord ( RSL) or council to commit to development within a similar timescale to the market housing should not unnecessarily inhibit the timeous delivery of affordable housing. On the basis of the HNDA, the full range of affordable housing tenures will normally be an acceptable means of delivering the development plan policy.


3. A range of housing types, at different prices, tenures and locations are needed to cater for the increasing number and variety of households, maintain the viability of communities, and support the operation of local labour markets and the wider economy. The Government's ambitions are:

  • to increase housing supply across all tenures over the long term;
  • to increase the choice of housing available to those on low incomes;
  • to create housing developments of high environmental and design standards that contribute to the creation of sustainable, mixed communities; and
  • to ensure that social housing provides better value for public expenditure.

4. Scottish Planning Policy ( SPP) states that the planning system should contribute to raising the rate of new house building by identifying a generous supply of land for the provision of a range of housing, including affordable housing, in the right places. Affordable housing is defined in the SPP as housing of a reasonable quality that is affordable to people on modest incomes. In some places the market provides some or all of the affordable housing needed, while in other places it will be necessary to make housing available at a cost below market value to meet an identified need.

Types of Tenure

5. A range of tenure types can contribute to affordable housing and these are set out below. It is important that local authorities, developers and RSLs consider the full range of options and apply them as appropriate. Given the impact of tenure type on the valuation of land, local authorities should provide as much clarity as they can in LHSs and development plans. Authorities should engage and reach agreement with housing developers in early discussions to make clear what mix of affordable housing provision is sought on particular sites, taking into account provision in the wider community. Homes delivered without subsidy may be considered to fulfil part of the overall affordable housing requirement where it can be clearly demonstrated that they will meet the needs of, and are affordable to, groups of households identified through the HNDA.

Social rented

  • Housing provided at an affordable rent and usually managed locally by a RSL such as a Housing Association, Housing Co-operative, local authority or other housing body regulated by the Scottish Housing Regulator.

Subsidised low cost housing for sale

  • Subsidised low cost sale - a subsidised dwelling sold at an affordable level 1 . Discounted serviced plots for self build can contribute. A legal agreement can be used to ensure that subsequent buyers are also eligible buyers. In rural areas this may be achieved through a rural housing burden 2 .
  • Shared ownership - the owner purchases part of the dwelling and pays an occupancy payment to a RSL on the remainder.
  • Shared equity - the owner pays for the majority share in the property with the RSL, local authority or Scottish Government holding the remaining share under a shared equity agreement. Unlike shared ownership, the owner pays no rent and owns the property outright.

Unsubsidised low cost housing for sale

  • Entry level housing for sale - a dwelling without public subsidy sold at an affordable level 3 . Conditions may be attached to the missives in order to maintain the house as an affordable unit to subsequent purchasers.
  • Shared equity - the owner purchases part of the dwelling, with the remaining stake held by a developer 4 .

Mid-market or intermediate rented

  • Private rented accommodation available at rents below market rent levels in the area and which may be provided either over the medium or long term 5 .

6. Local authorities, RSLs, developers and the Scottish Government are all involved in the delivery of affordable housing. Local authorities have key roles: determining the nature and extent of housing need and demand; developing a locally-based affordable housing policy framework; securing contributions from developers to affordable housing provision; bringing forward their own resources to provide new affordable houses and supporting affordable housing provision by RSLs. Close working between the planning and housing interests within the authority will be essential, in particular to ensure close alignment between the LHS and the development plan (see paragraphs 12 and 13 and Box 1).

7. The development industry has an important contribution to make to the delivery of affordable housing where a requirement for affordable housing is set out in a development plan. This contribution is likely to be made in a variety of ways, depending on the nature of the affordable housing required. To deliver the policy for more diverse, attractive and mixed communities, a choice of residential environments and a range of housing tenures will be required. The development industry can contribute to the overall requirement for affordable housing by delivering, as appropriate, a mix of house types and, sizes, and including the provision of market housing sold at a reduced price. This in itself may deliver affordable housing. Developers will expect certainty from the development plan and the development management process. This climate of certainty and confidence in the requirement for affordable housing will reduce the need for negotiation on each site and will be beneficial for both developers and local authorities. Where a requirement for affordable housing is set out in the development plan (see paragraphs 13-18), developers should take this into account in their financial appraisal of the site.

8. The Scottish Government provides funding to support the provision and improvement of affordable housing for rent and low cost home ownership. The Affordable Housing Investment Programme is administered by the Scottish Government except in Glasgow and Edinburgh where it has been devolved to the city councils. Where public subsidy is involved, the affordable housing provided is required to meet the minimum development standards laid down by the Scottish Government and/or the local authority (see also paragraphs 34 and 38). The Scottish Government monitors the implementation of policy on affordable housing through a statistical return on Affordable Housing Securing Planning Consent, which collects information on the range and types of affordable housing granted planning permission across Scotland (see paragraph 35).

9. Local authorities, RSLs, developers and other providers can work together in a variety of ways to deliver affordable housing. Where local authorities are developing an affordable housing policy, they should work with RSLs and developers in order to ensure a common and shared understanding of the policy and its implications. RSLs and developers can contribute information such as an understanding of market conditions and the financial viability of different approaches. Collaboration will also help to speed up the development process and assist in securing subsidy and developer contributions.


10. SPP states that where the HNDA and LHS identify a shortage of affordable housing, it should be addressed in the development plan as part of the housing land allocation. The HNDA provides the evidence base for defining housing supply targets in LHSs and allocating land for housing in development plans. Where an authority believes that the planning system has a role to play in the provision of affordable housing, the development plan should also be clear on its scale and distribution including an outline of what is expected from prospective developers.

Housing Need and Demand Assessment

11. The Scottish Government's HNDA Guidance provides a step-by-step approach to assessing housing need and demand across all tenures. It encourages local authorities to undertake this analysis at a housing market area level and provide a clear understanding of the operation of the housing system as a whole. The HNDA will provide evidence to inform policies about the level of affordable housing required, including the need for different types and sizes of affordable housing. The HNDA guidance is available at

Local Housing Strategy

12. The Housing (Scotland) Act 2001 places a statutory requirement on local authorities to prepare a LHS supported by a HNDA. The LHS provides the strategic direction to tackle housing need and demand and to inform future investment in housing and related services across the local authority area. It will include housing supply targets covering all tenures, which will have been informed by the HNDA. Housing supply targets are to include affordable housing as well as market housing and are to cover new housing supply, replacement housing, empty properties to be brought back into use and conversions. The LHS is expected to cover a 5-year period, in line with development plans, to be prepared in conjunction with a range of local authority departments and involve registered social landlords, other housing providers and the local community. The LHS Guidance is available at

Development Plans

13. SPP sets out the policy for development plans relating to housing, including timescales and the housing land requirement. The housing land requirement should be based on the outcome of the HNDA, and should therefore include affordable housing. A generous supply of land should be allocated in the development plan to meet housing requirements. Information from the HNDA and LHS will allow planning authorities to plan communities and consider an appropriate tenure mix.

14. SPP states that authorities may seek a percentage affordable housing contribution from developers of new housing developments where this is justified by the HNDA and included in the LHS and development plan. The benchmark figure is that each site should contribute 25% of the total number of housing units as affordable housing. If a different percentage is required locally, justified by the HNDA and identified in the LHS and development plan, then the 25% benchmark does not apply.

15. If a development plan includes such a policy it should not preclude a developer offering a higher percentage in an individual development. The local authority may also seek a higher percentage on a specific site but this should be justified and will only be appropriate in exceptional circumstances, for example linked to a substantial release of greenfield land or on a site owned by the local authority or another public agency which is being released for development.

16. As a general guide, local authorities and developers can normally expect on-site provision to be appropriate for developments of 20 or more units. For smaller developments, on-site provision will also often be possible, though off-site provision or a commuted sum may be appropriate (see paragraph 21). In rural areas where the general scale of development is smaller, a lower threshold for on-site provision may be appropriate in order to make affordable housing available in a range of locations.

17. Development plans should set out the scale and distribution of affordable housing required for an area and should outline what is expected from prospective developers. It is vital that development plan policies, including the percentage figure appropriate to the area, are fully justified by the HNDA and where necessary associated with a development brief. It is considered good practice for policies in development plans to:

  • be developed in full consultation with stakeholders, including the development industry, with the aim of achieving a shared understanding of the potential contribution of the development plan and avoiding disputes at development plan examinations or in planning appeals;
  • be justified by a HNDA which reflects the diversity of requirements within an area. However the scope for and scale of contributions through the planning system will depend on a number of factors, including the vibrancy of the local housing market;
  • have regard to financial obligations linked to particular developments, including any expectation that developers will contribute to infrastructure and supporting development such as schools or roads. Land values vary across Scotland, and the capacity of developments to bear a range of costs will also vary. Landowners and developers need to assess all the cost implications at the earliest possible stage;
  • be sensitive to different levels of need in different parts of the local authority area, particularly in rural areas; and
  • where higher percentages are sought on particular sites as exceptions to the overall policy, identify the percentage with a clear and reasoned justification for such exceptions.

18. Planning authorities will wish to consider whether the affordable housing policy in the Strategic Development Plan or Local Development Plan should be supported by supplementary guidance. This may cover issues such as how affordable housing should be delivered, developer contributions or methodologies for their calculation, design and management issues. Master plans and development briefs for specific sites may also be appropriate. More information on supplementary guidance can be found in Planning Circular 1/2009: Development Planning at

Box 1: Main Steps In Supporting The Delivery Of Affordable Housing

These steps should be considered with regard to Scottish Planning Policy, Planning Circular 1/2009: Development Planning, LHS guidance and HNDA guidance.

Step 1 - Define housing market areas and create housing market partnership

  • Local authorities should define the housing market areas and on this basis are encouraged to co-operate regionally in housing market partnerships. Further advice is provided in the SPP and HNDA guidance.

Step 2 - Undertake a HNDA

Step 3 - Consideration of affordable housing outputs of the HNDA

  • Housing and planning officials to consider policy approaches to dealing with the issues raised by the HNDA.

Step 4 - Where affordable housing is identified as a main issue - preparation of the Main Issues Report

  • Engage with interested parties.
  • Consider a settlement strategy to provide a long term context for development.
  • Present options as to the overall land requirement for new affordable housing.
  • Consider options for the distribution of new affordable housing supply by housing market areas and local authority boundaries.
  • Consider the distribution and sources of sites and decide whether or not a threshold for on-site provision of affordable housing is appropriate.
  • Consider an initial percentage affordable housing contribution from developers of new housing developments where this is justified by the HNDA.
  • Consider viability of proposed affordable housing percentages in light of any major costs which may be associated with elements of the established land supply (e.g. any known decontamination requirements) and availability of funds.
  • Form an initial view on authority's willingness to accept alternative contributions equivalent to a percentage requirement.
  • Input a preferred strategy and alternative options into the Main Issues Report.

Step 5 - Preparation of LHS

  • Specify a housing supply target covering all tenures. This should cover a five and twelve (or ten outside SDP areas) year period, give an indication of the possible housing requirement up to year 20, and may also be set at sub-local authority level.
  • Include a reference to the percentage affordable housing contribution which will be sought from developers of new housing development considered in Step 4.
  • Describe the extent and type of housing need and demand, including the balance of provision needed between affordable rented housing and other types of provision set out in paragraph 5, and consider whether this should vary to reflect different needs and market circumstances within housing market areas and sub-market areas.
  • Provide clear strategic direction for housing investment.

Step 6 - Preparation of Proposed Plan

  • Prepare an affordable housing policy for the Proposed Plan taking into account consultation at Main Issues Report stage. This should include maps and site-specific proposals as appropriate.
  • The policy in the development plan may be supported by detailed Supplementary Guidance.

Step 7 - Examination and Adoption

  • Where the housing need and demand assessment is considered robust and credible by the Scottish Government, the approach used will not normally be considered at a development plan examination 6 .

Step 8 - Development Plan Action Programme

Include action(s) relating to the delivery of the affordable housing policy and development proposals.

Step 9 - Monitor outcomes

  • In reviewing the development plan, account should be taken of successes and failures in the implementation of existing sites and policies and any changed or new circumstances.
  • Consider monitoring a range of relevant information including the number of consents and completions for all tenures and house sizes, the number of market houses on a site, grant and commuted sums and the contribution to meeting housing need.
  • This information can feed into the Monitoring Statement and HNDA.

Step 10 - Review and revise policy as appropriate

  • The HNDA, LHS and development plan should be reviewed every five years.


Delivery of Land for Affordable Housing

19. Affordable housing should ideally be integrated into the proposed development and wider community. To achieve this, the contribution from the developer of a market housing site will normally be the provision of serviced land, e.g. a proportion of the site which can be developed by or for a RSL or the local authority. Such land can be transferred either at a value relating to its end use for affordable housing or by agreement between the developer and the RSL or local authority, at a lower value. In any event it should be transferred at less than the value for mainstream housing for sale. Best practice is that the value should be independently determined by the District Valuer or a chartered valuation surveyor suitably experienced in the type of property and the locality. Wherever possible the relevant parties should agree to appoint and instruct a valuer, failing agreement on which the valuer should be appointed by the Chairman of the RICS in Scotland. The valuation should reflect the location, the type of affordable housing and any other factor which will influence the value. The RICS in Scotland intends to publish a Guidance Note on the valuation of land for affordable housing.

Other Contributions

20. Depending on the type of affordable housing required, there will be a variety of other ways in which developers can provide affordable housing on site. For example, paragraph 5 noted the range of tenure types that may contribute towards affordable housing. The local authority should monitor how many units of each type are provided (see also Box 1 and paragraph 35).


21. Exceptionally, a site may be unsuitable for affordable housing for a variety of reasons, including the size of the site (see paragraph 16), location, topography, conversion of buildings where relevant standards cannot be met and other local circumstances such as whether an appropriate tenure mix can be delivered. In such circumstances developers may offer to provide the contribution on another viable site within their ownership or in some cases provide a commuted sum as long as the proposed alternative will help to meet an identified need in the same housing market area. Commuted sums should only be used sparingly. The decision to accept a commuted sum is one for the planning authority, and the rationale for accepting or rejecting a commuted sum should be set out clearly in local policy.

22. Where it is agreed that an alternative to a contribution of land within the proposed development site is acceptable, the developer will provide either land or homes or a commuted sum of a value equivalent to the cost of providing the percentage of serviced land required by the policy. Best practice is that the value should be independently determined by the District Valuer or a chartered valuation surveyor suitably experienced in the type of property and the locality. Wherever possible the relevant parties should agree to appoint and instruct a valuer, failing agreement on which the valuer should be appointed by the Chairman of the RICS in Scotland. The commuted sum is a matter for negotiation between the developer and the local authority, having regard to development costs, other contributions that are being sought, and other relevant factors, for example layout and design. Planning authorities may wish to consider a policy for calculating a commuted sum, but this should be the subject of consultation with stakeholders before being applied.


23. Pre-application discussions are helpful in avoiding delay in the subsequent stages of development management. This may include discussions about the number, type and tenure of affordable housing required for a particular site. More information can be found in Planning Circular 4/2009: Development Management Procedures at

Planning Conditions and Planning Agreements

24. Provision of land for affordable housing may need to be the subject of a planning condition, particularly where a proportion of a site is to be made available for on-site provision of affordable housing. A Section 75 agreement may be necessary, for example where a phased commuted sum is to be negotiated to enable off-site provision or to ensure retention of affordable units. Local authorities should ensure that where a Section 75 agreement is considered necessary it meets all of the policy tests in Planning Circular 1/2010 and can be drawn up and agreed as swiftly as possible. For more information see Planning Circular 1/2010: Planning Agreements at

Negotiating Developer Contributions

25. Calculating the appropriate percentage of affordable housing for a development plan policy, or for an individual site, must take into account an understanding of land valuation. Where non-market housing is to be provided as part of the development, or part of the site is to be purchased by a RSL or council at a value lower than market housing, this will affect the price which can be paid for the land and will require to be negotiated with the site owner. Early dialogue between landowners and developers and the local authority should be established wherever possible.

26. Where a contribution for affordable housing is specified in a development plan, developers should indicate as part of their planning application how they will deliver the affordable housing element. The provision of serviced land for development by a RSL or local authority will normally be sought, but the most appropriate mechanism will depend on the type of affordable housing needed, the nature of the site and the nature of the project.

27. Planning authorities will also need to be aware of other issues which may affect the viability of developing a site. In some cases there may be a requirement for the developer to either provide or make a financial contribution to other major supporting and infrastructure elements, such as a new school or expansion of an existing school, drainage and road improvements. On particular sites there may be high costs to remediate contamination or address poor ground conditions. In determining an application, local authorities may consider all these issues and the strategic priorities for a site holistically. This will be particularly the case where the developer can demonstrate and clearly justify that there are exceptional costs, unknown when the initial offer of purchase was made, which render the development of the site unviable as originally proposed.

28. Where the development of a large site is phased, the implications for the supply of affordable housing should be considered. For example, it may be appropriate to include some affordable housing in each phase or to allow solely market development in the first phase in order to generate a positive cash flow where this can be justified. It may be appropriate to address these issues in a development brief and in any legal agreement associated with the planning permission.

Retention of Affordable Houses

29. Local authorities should consider whether new affordable housing should remain affordable in the future and, if so, the most appropriate means to achieve this outcome. Occupancy conditions will not be necessary where a charitable RSL is responsible for the management of rented housing. Shared equity schemes may provide another means of retaining housing as affordable. Planning agreements may be used, where justified, to ensure that the affordable housing is occupied only by households falling within those categories of need defined by the local authority through its LHS.


30. Additional or alternative means of delivering affordable housing which authorities may wish to consider include:

  • Allocating new sites in local plans specifically for affordable housing to meet requirements identified in the HNDA and LHS. This approach is most likely to be appropriate for small scale sites within or adjoining existing villages to provide for locally arising needs.
  • Identifying plots for self build dwellings.
  • Using compulsory purchase powers to support the delivery of new supply and regeneration.
  • Making appropriate surplus local authority owned land or buildings available for affordable housing, either individually or as a package of site disposals.
  • Working with third parties to assemble sites for affordable housing in appropriate circumstances, including other public agencies with large land holdings who may be able to identify opportunities to convert surplus properties in their ownership or develop new affordable housing. Development Trusts may also have a role in assembling land.

Local authorities may also take other action including:

  • Opting to increase the rate of council tax on second homes and long-term empty properties from 50% to 90%, raising revenue which can be used to increase the supply of affordable housing within the housing market area. This may be particularly relevant in rural areas with a high proportion of second homes.


31. The Scottish Government's objectives of creating successful places and achieving quality residential environments should guide the whole process of delivering new housing. National planning policy set out in Designing Places, Designing Streets and the SPP, aims to achieve high quality, well-designed homes in all new housing developments, including affordable housing. A range of housing types and tenures, linked to community facilities and services including public transport, should be considered. Attention should therefore be on both individual homes and the layout and design of the wider community.

32. Affordable housing ought to be, as far as possible, indistinguishable from the general mix of other houses on a site in terms of style and layout, use of materials, architectural quality and detail. Both 'pepper potting' of individual affordable houses throughout a development and large groupings of houses of the same tenure are best avoided. Concentrating affordable housing for rent in small groups will ease the subsequent management of the homes by an RSL and contribute towards providing mixed communities.

33. Further information can be found in Designing Places, Designing Streets, PAN 67: Housing Quality and PAN 72: Housing in the Countryside. These documents and additional advice on design issues can be found at

34. The Scottish Government can provide additional advice on design standards that RSLs must meet in providing affordable housing (see paragraph 38).


35. By monitoring the successful delivery of affordable housing, planning authorities will help to retain confidence and support for the policy. Box 1 provides
information on monitoring. Where circumstances change, the detailed components of the policy should not be adjusted, including the affordable housing or financial contribution, until the proposed changes have been subject to full consultation and subsequent approval by the planning authority. The Scottish Government has been conducting the Affordable Housing Securing Planning Consent survey annually since 2005 and publishes the results and analysis at


36. This Planning Advice Note and further information about housing can be found on the Scottish Government website at For more information on this PAN please contact the Scottish Government on 0131 244 7888.

37. Further information about LHSs and HNDAs, including the relevant guidance, can be found at The Centre for Housing Market Analysis website also provides information on the HNDA process:

38. Further information regarding RSLs and their geographic areas of operation, affordable housing design standards and the Affordable Housing Investment Programme is available from Scottish Government area offices. Contact details can be found at

39. A range of statistics relating to planning, house building and affordable housing can be found on the Scottish Government's statistics web pages at and



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