A MORE STRATEGIC APPROACH TO AFFORDABLE HOUSING INVESTMENT
14. If we are to ensure the best possible return for the available resources, it will be necessary to adopt a more strategic approach to determining how these resources are invested in affordable housing developments. Central and local government need to be clear about their priorities for new developments over the next three to five years. RSLs need to be clear about what these priorities will mean for their current and future tenants, and also need to be able to translate the priorities into plans for development activity and investment across a number of years. This chapter sets out how we propose to introduce a more strategic focus into the planning and allocation of investment in new affordable housing, and highlights the role of local authorities in bringing this about.
Reform of the housing and planning delivery framework
15. Firm Foundations set out a substantial programme of reform to the housing and planning delivery framework in order to strengthen the strategic role of local authorities, to enable more consistent assessments by them of housing need and demand, to enable more efficient identification of land for housing, and to enable all stakeholders involved in the supply of housing to take a longer term view. These reforms have to a large extent already been implemented and form the basis for a future approach to investment in affordable housing which is longer-term and better prioritised on need.
Introduction of Prospectuses for investment in new affordable homes
16. Central and local government have agreed that Local Housing Strategies are at the heart of the new arrangements for housing and planning, both through their links to development plans 9 and in terms of the direction of local housing investment. The Strategic Housing Investment Plans ( SHIPs) 10 prepared by local authorities set out specifically how investment in affordable housing will be directed in terms of the type of housing needed, where it is needed and what priority should be given to developments.
17. We propose the introduction of Prospectuses for the purpose of guiding investment in affordable housing. This approach will enable local authorities, RSLs and other partners and stakeholders to consider their approach to investment in affordable housing over the longer term.
18. The Prospectuses will draw on and complement, but not replace, the SHIPs prepared by local authorities. They will in effect represent a combination of individual SHIPs over a geographic region. The introduction of Prospectuses accords with our agreement with COSLA to work with local authorities to increase the consistency and transparency of decision-taking on projects funded by Housing Association Grant. Prospectuses are also consistent with our agreement to move away from annual allocation of investment towards allocation on a longer-term basis. We therefore intend Prospectuses to cover periods of up to five years.
Regional Structures - The Principles
19. We propose to base Prospectuses around regions comprising a number of local authority areas for the purposes of regional investment, rather than on the basis of separate local authorities. We propose the following principles as the basis for the regions to be used:
- Each region needs to be of sufficient size to enable RSLs investing there and other stakeholders involved in the construction of new affordable homes to take a broad view, in order to exploit potential economies of scale and secure increased value for money; in most parts of Scotland we envisage regions comprising at least three or four local authority areas;
- Each region should be capable of supporting a substantial programme of investment in affordable housing for periods up to five years;
- The regional boundaries should take account of the housing market areas recognised by local authorities for strategic assessment of housing need and priorities; and
- The regions should be consistent with local authority boundaries and not split up individual council areas.
Do you agree that local authority Strategic Housing Investment Plans and related strategies should form the basis for identifying investment priorities for periods of up to five years?
Do you agree with our proposed principles on which geographic regions for investment will be based?
The three island authorities
20. We believe that a reformed approach to affordable housing investment that includes three to five year planning could work in Orkney, Shetland and the Western Isles, but it would have to be applied in a different way compared with elsewhere in Scotland. Consequently, the investment decisions for each Island authority will be made separately and they will not be part of the new regional structure. This is in recognition of:
- their separate administration by the three Islands councils which is in contrast to other islands that are part of mainland local authorities;
- their unique geography which separates them physically and economically from the mainland; and
- the size of their combined investment programmes which are considerably smaller than that which is typical for other local authorities.
City of Edinburgh and Glasgow City Councils
21. There are current Transfer of Management of Development Funding arrangements in place with Glasgow City and City of Edinburgh Councils. Our proposals for a more competitive and strategic approach to award of subsidy takes these Councils' approaches to investment in affordable housing into account. We propose that at this stage, these two Councils should retain their responsibility for awarding subsidy within their own areas, adopting approaches which are in accordance with the agreed competitive arrangements.
a) Do you agree with our proposed treatment for Orkney, Shetland and the Western Isles Councils?
b) Do you agree with our proposed approach for Glasgow City and City of Edinburgh Councils?
Deciding on the regions
22. Local authorities will have a strong interest in the specification of the regions since authorities within a region will need to adopt a shared approach to assessing priorities for development. Many RSLs will also have a strong interest in this, especially those which already develop in a number of local authority areas, or which have aspirations to be Lead Developers. We are therefore inviting authorities, working with RSLs locally, to agree proposals for a regional split in line with the principles set out above. Purely for illustrative purposes we have provided an example of the possible regional geography at Figure 2. However, no decision will be made until after receipt of advice from COSLA and the SFHA and further consultation with these stakeholders.
Do you agree that Councils, as the strategic planning and housing authorities, and in collaboration with RSLs, should advise on the regions to be adopted as the basis for Prospectuses?
The content of Prospectuses
23. The Prospectuses will set out the opportunities and priorities for development in specific locations. Each Prospectus will need to reflect the combined SHIPs and available resources for each of the authorities concerned. In effect, the Prospectuses will act as invitations to RSLs to bid for subsidy. The proposed content of the Prospectuses, set out in Table 2 below, will be subject to discussion and agreement with our local authority partners.
Table 2 - Content proposed for Prospectuses
Number of new homes
The target number of all new affordable homes over the period covered by the Prospectus will be set out.
Size and type of new homes
The Prospectus will detail the different sizes of affordable housing, both for rent and low cost home ownership, that will be required, reflecting the needs of families, couples and single people as assessed by each local authority. Careful consideration about the housing needs of older people, people with disabilities and other equality groups in terms of the future investment will be expected, and will be covered in the Prospectus.
Location and sites
The identification of land and specific sites as well as the broad specification of the preferred location of new affordable homes will be set out. This will need to reflect the priority to be given to supported or specialist accommodation, and to remote and rural areas. It should also take account of surplus public sector land and the requirements of SPP3.
This will set out matters such as the quality standards required for individual new homes - including building standards as updated from time to time (eg to reflect new standards in respect of energy efficiency) and the requirements of SPP6. This part of the Prospectus will also set out the importance of planning for well-designed places and housing developments which contribute to the creation of sustainable, mixed communities - through building houses and neighbourhoods which relate to their surroundings, support healthy lifestyles and allow for reasonable access to employment, amenities and services.
Allocation of funding
Each Prospectus will outline the funding that will be allocated in line with the resources available and the affordable housing investment priorities for the region.
The priorities for regeneration and the contribution which the required investment will make to regenerating an area, revitalising communities, and links to other projects (such as Urban Regeneration Companies) will be highlighted.
Timescales and priorities
The timing and priority for bringing forward development and completing new homes will be set out. This will, of course, have a strong relationship with the housing need as assessed by each local authority, local Development Plans, the availability of land, and public funding over the period covered by each Prospectus.
24. Prospectuses will also set out the indicative budget available, which will be specified at local authority level and for up to three years ahead. We have agreed with COSLA to set up a joint group of officials to look at the Strategic Housing Investment Framework which is the basis on which these allocations are determined. However, the final allocation of resources to be spent in each area will depend on the proposals from RSLs in response to the Prospectuses, and on how successfully the investment and new homes are delivered in each area by the RSLs.
a) Do you agree the scope of the content proposed for Prospectuses set out in Table 2?
b) How can we ensure that the housing need of people with specialist requirements or in more remote or rural areas are fully reflected in Prospectuses?
25. Some stakeholders have indicated to us that it would be beneficial if other information is provided within Prospectuses, for example on maximum permissible rent levels.
26. The issue arises from concern that the award of grant on the basis of the lowest requirement for subsidy could put pressure on rents. Affordable rents are an essential characteristic of social housing in Scotland and nothing in these proposals for investment reform is intended to detract from this, not least given the pressure on household incomes emerging as a consequence of the present economic climate.
27. We have concluded from this that it might be appropriate to provide guidance on maximum rent levels in Prospectuses. We therefore propose that:
- The Prospectuses should set out maximum rent levels (which will take account of affordability to households in low paid employment and will assume future rent increases will be no more than inflation plus 1%) and each RSL will have discretion to propose rent levels below these maxima;
- Rents proposed below the maxima would be accepted for the purposes of assessing proposals; and
- Rents that are within 5% of the maximum would be accepted, if supported by a case that justified affordability for the tenants.
a) Do you agree that there is a need to provide guidance within Prospectuses on maximum rent levels and is the proposed framework acceptable?
a) Are there other issues which would similarly benefit from guidance?
b) What are these and what is the case for including them?