The Scottish Government published its parliamentary programme for 2021-22 on 7 September and reiterated its ambition of providing 110,000 affordable homes in Scotland by 2032. How likely is it that this target will be met?
The majority of affordable housing is provided as part of larger mainstream developments, either on-site or via commuted sums, and in July the Scottish Government published its report on the Value, Incidence and Impact of Developer Contributions in Scotland. This report concludes that the system for affordable housing delivery appears to be working well, but identifies concerns about contributions towards infrastructure, especially transport and education.
Value and Use of Contributions
- approximately £490 million of developer contributions were agreed in 2019/2020
- £310 million were towards the provision of affordable housing. This has increased from £251 million in 2017/18.
- £180 million of contributions were agreed for infrastructure in 2019/2020 (although this excludes 'in kind' contributions such as provision of land for infrastructure).
The evidence suggested that the majority of contributions agreed were subsequently delivered provided the development went ahead and was not subject to revised planning consents. Around 25% of planning authorities said contributions were 'always' delivered whilst 60% said they were 'mostly' delivered.
- The 5 largest contributing authorities are all in the central belt (City of Edinburgh, East Dunbartonshire, East Lothian, East Renfrewshire and Midlothian).
- They accounted for 43% of contributions for affordable housing in 2019/2020. The percentage has declined slightly from 50% in 2017/2018 suggesting that contributions are becoming more widespread across the country.
- 75% of authorities use developer contributions to secure affordable housing.
- Only two planning authorities don’t use developer contributions at all
- Perhaps surprisingly, only 7.7% of planning permissions involved planning agreements between 2017 and 2020, but prior to 2017 less than 1% of permissions required planning agreements.
- The majority were s75 agreements under the Town and Country Planning (Scotland) Act 1997, the rest came under section 69 of the Local Government (Scotland) Act 1973.
- 80% of planning authorities have policies in respect of delivering affordable housing
- Two thirds of authorities base the requirement as a % of new homes; generally using the national 25% policy or a % based on their own Housing Need and Demand Assessment.
- Permissions for around 33,000 new affordable homes were granted over the three year study period, but overall this is only 8-10% of all new homes permitted, well below the 25% national target.
- Areas with higher land values contribute more to affordable housing, this is due to the land value making development more viable, policy clarity, consistency in application together with grant availability.
- Thresholds below which no affordable housing is required, set by authorities, range from 2 to 50 units.
- Affordable housing is being delivered on average over a 2 year period suggesting that up front delivery to assist cash flow is not as common as we might have thought.
Generally it was felt that delivery of affordable housing through the developer contribution system worked well. Housing associations are able to acquire land at nil or nominal values or have the option to acquire completed units at an agreed price and the report highlighted that the "capacity to negotiate land as a developer contribution makes the affordable housing work in higher valued areas in a way which cannot be achieved simply through subsidy".
Furthermore, affordable housing is treated quite separately from infrastructure so agreement on the provision of affordable housing is not seen by developers as a trade off against other provisions.
However, in terms of further streamlining the process, it is felt that bringing the housing department and housing association into the process earlier, with perhaps greater clarity on exactly what is needed in terms of tenure and mix, would assist.
Grants also still have an important role to play. Developer contributions allow affordable housing to come forward on sites and in areas where land would not otherwise be available or where affordable housing would be too expensive to build without support and therefore can enable provision or a higher % of provision.
Delivery of infrastructure through planning agreements is definitely considered less successful than affordable housing:
- There are concerns over rising infrastructure costs as these are rising faster than indexation.
- There are issues with aligning new homes with transport and education strategies and better forecasting is required to address this.
- The timing of contributions can be problematic in cases where infrastructure is needed upfront but payments come later once development is underway.
- Larger sites involving a number of developers are complex with issues of equity between those developers – in fact this was the second biggest perceived challenge with 67% of authorities noting getting enough contributions to deal with such developments as an issue.
- Developers are seeing 'scope creep' with requests for contributions for areas they did not expect, such as healthcare, and in some instances further justification is needed to back up the request
Although an 'Infrastructure First' approach is welcomed, in order for this to materialise better co-ordination is needed between the local authorities and infrastructure providers to set out the infrastructure required and how that will be funded. This in turn will allow planning authorities to set clear guidance in their local development plans to provide clarity to developers early in the process as, at the moment the timing of consideration of contributions is often too late in the process.
The basis for requesting contributions is seen as more certain and fair however there is still room for improvement.
The response rate to the survey was 100% suggesting that planning authorities are keen to engage on this matter to find a system which works for all.
In terms of delivering affordable housing the current system seems to be fairly well established and implemented with sufficient clarity yet also flexibility to ensure locational requirements are met.
The biggest issue was viability for developers. Whilst this has been managed to a certain extent with the flexibility afforded to affordable housing the provision of infrastructure has been much more difficult. It is clear a more strategic approach is required with all parties involved having to work co-operatively at early stages to ensure developers can understand what is expected of them and it is welcome to see planning authorities recognising the steps which need to be taken.
What remains to be seen is how these early stage discussions will be implemented as infrastructure provision is fundamental to facilitating development which in turn will be essential to enable the Scottish Government to meet its affordable housing target.