A Scottish Affordable Homes Programme?

by Ken Gibb

Speaking at the CIH Conference in Glasgow, the Scottish housing minister, Margaret Burgess, was reported to be considering a form of Scottish Affordable Homes Programme (AHP) for the post-2015 period. One can speculate the extent to which this is simply floating different ideas to see how they are received. Or, it may actually be something at a more advanced stage of development. It is certainly the continuation of the longstanding search for new ways to provide more non-market housing with less public funds (and still constrained private finance).

Most of the attention on the speech focused on the welcome initiative by the Government to set up a sector-wide working group to discuss in broader terms options for more housing supply – including the Scottish AHP. It will also explore closely related core elements of non-market housing models, namely, affordable rents, financial capacity and subsidy rates.

This is all to the good – but I remain intrigued by the possibility of a Scottish AHP. It is worth doing the thought experiment. First, what are its key features in England?

  • Much lower grant per unit (of the order of £22,000).
  • Reliance on ‘sweated equity’ – essentially drawing on the balance sheet growth housing associations enjoyed prior to the Global Financial Crisis.
  • Rents on new build in the programme are set at up to 80% of the Local Housing Allowance, depending on the depth of affordability problems i.e. councils in London have demanded rents at often levels closer to 65% (if they are willing to participate in the first place).
  • Local deals were often premised on utilising section 106 planning agreements – which have of course now been significantly undermined by subsequent policy changes to encourage market supply.
  • Additionally, participating providers can provide cross-subsidy by reletting vacant properties at higher AHP rents. Steve Wilcox estimated that to square the AHP finance circle, about three properties need to be relet on average for each new AHP unit. Among other things, this drives the proverbial coach and horses through the previous decade’s social sector rent restructuring.

There is much critical scrutiny of the English AHP. Good (sceptical) overviews are to be found in the relevant 2012 reports by the House of Commons Public Accounts committee and the DCLG select committee.

The English model raises big questions for Scotland. Do we have sufficient housing association financial capacity (and sweated equity at that) to make much lower grant rates worthwhile – and is that the best use of that capacity? What would this mean for the composition of development in terms of the providers who could work on this basis? Would AHP not create yet another niche in an already crowded social-affordable housing landscape? How acceptable would the sector find the new build rent levels and what about revenue subsidy based on higher rents for relet property? Would councils support the scheme through the use of Section 75 agreements (or might it vary across the country, as was the experience in England)? The English system will deliver large volumes – can that be achieved in Scotland and just what scale is involved? Both the Innovation Fund and Round 1 of the National Housing Trust each produced a little more than 600 units. Is that what we are talking about, or, like in England, is the wholesale replacement of the main housing association programme being contemplated?

Whether or not AHP is indeed part of this forward look, the new working group will have its work cut out. I wish them well and insofar as they are looking at AHP I hope they draw fully on the evidence from the experience in England.