Having solved The Adventure of the Empty House, Sherlock Holmes no doubt returned to 221b Baker Street to play the violin and reflect on another successful investigation. Although we never see Sherlock issuing any invoices for his services to Crown, Country and everyone in between, he must because – according to Stylist, the rent on 221b Baker Street is £10,000pcm. Apparently, this is affordable to Sherlock (he does have a lot of private clients), but it's certainly not "Affordable".
So, what is Affordable Housing in Scotland? For investors seeking investment opportunities here which are specifically in Affordable Housing for rent, how can they be confident that investments are in fact investments in Affordable Housing as opposed to being investments in housing which is simply affordable to someone.
Affordable Housing for rent in Scotland is delivered by way of social rented housing and mid-market or intermediate rent housing ("MMR").
Identifying social rented housing is quite straightforward. Scottish Government describe it as "housing provided at an affordable rent and usually managed locally by a RSL (Registered Social Landlord) such as a Housing Association, Housing Co-operative, local authority or other housing body regulated by the Scottish Housing Regulator".
Aside from the mandatory requirement that the housing is provided by a body regulated by the Scottish Housing Regulator (easily deduced from a quick search on the Regulator's website), social rented housing has other distinctive characteristics that make it easy to identify – a key one being the form of tenancy agreement granted to tenants of social rent properties, which will be a Scottish secure tenancy, and is a distinctive feature of social housing. Another one being the level of Housing Association Grant Funding provided to support its delivery which will generally be aligned with benchmark levels published by Scottish Government which are higher than the levels applying to MMR.
But how can MMR be conclusively identified? On the face of it, MMR is affordable housing, but what makes it Affordable Housing rather than housing that is affordable? Unlike with social rent, there is no special tenancy type for tenants occupying MMR homes – Private Residential Tenancy agreements ("PRTs"), in the form prescribed by legislation, apply to MMR on the same terms as they do to the most expensive private rented homes in the land – if 221b Baker Street was in Glasgow, Sherlock's lease would be a PRT. Landlords of MMR housing will not generally be regulated by the Scottish Housing Regulator (although they are often, but not always, arm's length organisations controlled by RSLs and Local Authorities). Housing Association Grant Funding will not necessarily have been provided.
Further investigation is required!
In Planning Advice Note PAN2/2010, Scottish Government describes MMR as "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 (the rent level being informed by the Housing Need and Demand Assessment and agreed by the local authority and/or be in line with Scottish Government requirements)".
The trail leads us then to Local Authorities.
Local Authorities are responsible for developing and implementing through the planning system, affordable housing policy. This policy will stipulate Affordable Housing requirements to be delivered in terms of planning permission for residential development – including approved Affordable Housing tenure types. If planning permission granted for a residential development includes a requirement for Affordable Housing delivery on site (and National Planning Framework 4 provides that they all will unless there's a good reason why they won't!) the housing on that site which is identified as being the Affordable Housing contribution will, as a matter of fact, be Affordable Housing, and this whether the tenure is social rent or MMR.
In practical terms, where the identified Affordable Housing tenure is MMR, the continuing availability of MMR on the site as the approved Affordable Housing tenure stipulated in the planning permission will be Affordable Housing by virtue of the rents payable being set at levels initially approved by the local authority with permitted inflationary increases subject to a cap. All of this will be regulated and enforceable by the local authority by virtue of a s.75 planning agreement, registered in the Land Register of Scotland and therefore a matter of public record – an easy find (really too easy) for Sherlock.
Sherlock is most likely to declare a question of whether a housing investment opportunity is truly Affordable Housing as BORING!not because it's not an important question, but because even in the case of MMR which has fewer distinguishing features from other PRS housing which is simply offered for rent at a level which is described by the landlord as being "affordable" – there is hard evidence available, if one knows where to look.
Sherlock might not want to take the case, but we are more than happy to get our magnifying glasses out…