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EXECUTIVE SUMMARY

The principal themes of last year's discussion paper, Firm Foundations: the Future of Housing in Scotland, were to secure a long-term increase in the supply of housing; more choice of housing; the creation of sustainable, mixed communities; and better value for public expenditure. As part of this we promised to consult on reforms to the way in which we provide subsidy for new affordable housing. We made initial changes to the way in which Housing Association Grant is calculated earlier this year. This consultation paper sets out our considered proposals for more far-reaching changes.

The central proposal is the introduction of a more strategic approach to the allocation of subsidy through a network of Lead Developers across Scotland. We would channel the majority of our investment programme through these Lead Developers, which would be registered social landlords ( RSLs) and which would take the lead in securing efficiencies in the delivery of new affordable housing. They would provide a specialist development and procurement function on behalf of other RSLs and the sector as a whole.

Much of the detail of the document is concerned with the mechanisms for the introduction of Lead Developers. Although our proposals reflect the original propositions for lead developers set out in Firm Foundations, they have been revised and considered carefully in light of discussions with stakeholders. Our proposals now take into account the existing strengths of the Scottish RSL sector and the progress made so far by many RSLs, and their local authority partners, in securing better value for money for their investment in new affordable homes.

Implications for RSLs

The new approach we propose and outline here will trigger a number of important choices for each RSL. The flow chart at Figure 1 highlights the main decisions for RSLs that arise from our proposals.

Implications for local authorities

The proposals for investment reform set out here are intended both to recognise the role of local government in housing investment, and to strengthen the agreed strategic role of local authorities within the reformed housing and planning delivery framework which has been implemented over the past year.

Figure 1 - Decisions to be taken by RSLs when considering future investment

Structure of the paper

The key elements of the proposed reformed approach to investment are summarised in Table 1. The issues are considered in more detail in the chapters of the document, as follows:

Chapter 1 explains how our proposals for the reform of investment are designed to address the present fragmented approach to procurement of new affordable housing. In doing this, the proposals are intended to secure more value for the Government's investment whilst also continuing to ensure the quality of new homes.

Since Firm Foundations was published the financial and economic environment has changed considerably. Chapter 1 also considers the implications of the credit crunch for investment reform. We have assessed the situation and reached the view that it in fact strengthens the need for investment reform, but we are seeking comments from stakeholders on whether they share that conclusion (see Questions 1 and 2). The need for a more robust approach to asset management and financial planning in order to cope with a more challenging lending environment is reflected in our proposals for introducing Lead Developers.

Chapter 2 describes how we propose to become more strategic in our approach to allocation of investment in affordable housing. This involves working with our local authority partners and RSLs to determine regions which would be used as the basis for investment and, with local authorities, developing regional Prospectuses which will be used to guide and inform investment decisions.

Chapter 3 explains the concept of Lead Developers. It sets out the role they will play in co-ordinating and leading on procurement and investment through development consortia, and how important housing management functions will remain in the hands of RSLs that do not opt for the Lead Developer role for themselves.

Chapter 4 explains how development consortia will be set up, and the types of bodies that we expect to be members of consortia. This chapter also focuses on the governance of consortia which we propose should be through a formal consortium agreement. Some of the risks and decisions that consortium members will face, and will need to manage, are highlighted and discussed.

Chapter 5 gives further detail of the proposed processes including "pre-qualification" for all RSLs that wish to apply to be Lead Developers or to receive subsidy from us. The route to becoming a Lead Developer is also explained, as is our commitment to longer-term funding for Lead Developers to enable them to programme investment more effectively and benefit from efficiencies. We also introduce our proposals for an outcome-focussed grant agreement for Lead Developers.

In Chapter 6 we set out our intended timetable and our intention to develop a monitoring and evaluation framework for the new approach to investment in affordable housing.

Annex A gives details about how to respond to this consultation paper. The deadline for responses is Tuesday 17 March 2009.

Annex B summarises the themes which emerged from discussions during regional seminars with RSLs and local authorities held between August and September 2008.

Annex C sets out the proposed pre-qualification framework.

Table 1 - our approach to reform

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