10,000 goal on shaky ground

Unless the Scottish Government is prepared to cut other services, the initiative to deliver 10,000 new affordable homes a year is likely to run into the sand.

Elsewhere on these pages, we consider proposed budget cuts by the Scottish Federation of Housing Associations (SFHA), which challenges the idea that even 6,000 homes could be built in 2011. But the plain fact is that council housing stock levels have been running down since the 1980s.

In part, this has been due to the controversial right to buy policy, which moved large swathes of arguably the best council housing stock from public ownership to the private sector. That drain has now been partially closed by The Housing (Scotland) Bill, recently passed by the Scottish Parliament. The legislation has withdrawn the right to buy for all new-build council homes and has been welcomed by Scotland's housing associations and the SFHA.

However, the SFHA had been lobbying for the right for housing associations to refuse right-to-buy requests on older housing stock. This exemption runs out in 2012 and the new bill does not provide any extension, so some drain on housing stock from right to buy will continue.

But, the plain fact is that even with right to buy capped off, Scotland is simply not building enough affordable homes. During the boom years prior to 2008, the policy councils adopted of compelling developers of large-scale housing projects to include a tranche of affordable housing in the development brought some new-build to market. But, with funding for building projects almost impossible to come by, that avenue has largely dried up. Direct initiatives are required, which calls for more funding - unlikely in the current austerity regime.

Mary Wilks, a partner at Maclay Murray & Spens, points out that English housing associations have much more fund raising power than their Scottish counterparts. "English local authorities and registered providers are going to be able to increase the rent received from such properties relet on the new style 'flexible tenancy' to a rent equivalent of 80 per cent of the market rent," she notes.

Such an increase will provide additional funds to local authorities and registered providers which could be recycled into new housing development. This will put English housing associations in a slightly better position regarding future cuts to public housing grants.

However, the difference between the current affordable rent levels and 80 per cent of market rent is not dramatic, so this change is likely to only benefit high-value localities in England. In addition, English local authorities will be entitled to claim the new homes bonus in respect of new homes developed by them through 2011 and onwards. The bonus will be equivalent to six years' council tax, payable in respect of the new home delivered. This shows that there is scope for Scottish MSPs to think more creatively about the sector in Scotland.

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