Blog: Getting build to rent off the ground shouldn’t mean ditching affordable housing requirements

A build-to-rent scheme of up to 400 homes was approved at Fountainbridge in Edinburgh last year

A build to rent scheme of up to 400 homes was approved at Fountainbridge in Edinburgh last year

Shelter Scotland’s James Battye blogs on why affordable housing must be the priority in Scotland’s housebuilding programme.

There is a real need for new house building in Scotland. Housebuilding levels have remained stubbornly low since the global financial crisis and many thousands of people are still on waiting lists for secure, affordable homes.

Crucially, the Scottish Government understands this and has committed to provide the grant necessary to build at least 50,000 affordable homes (35,000 of which are to be for social rent) over the course of this parliament. While this may be short of the 60,000 researchers estimate need to be built to meet the existing and newly arising need for affordable housing, it is a very welcome movement in the right direction. Welcome as this commitment is, it means more than doubling recent affordable housebuilding programmes – an enormous challenge.

Of course affordable housing is only part of the picture. The total requirement for new homes in Scotland is estimated to be just short of 19,000 per year, not taking into account replacement of old or derelict housing. However, whilst we need new homes of all types the overwhelming imperative is to deliver more affordable housing.

This is, in part, why the government is taking another look at the planning system in Scotland, as well as considering how best to support new models of housing development.

‘Build to Rent’

So-called ‘build to rent’ is one such example of a new model of housing delivery in Scotland. These are large scale private rented sector developments let at market rents and usually owned and managed by one landlord or agent. Developers argue that to get build to rent off the ground in Scotland they need government assistance and barriers to this kind of development should be removed. The Scottish Government has responded by setting up a rental income guarantee scheme for build to rent developments, the aim of this is to compensate developers where projected rental income falls below forecasts.

But some in the development industry contend that more needs to be done. Specifically, they are asking the Scottish Government to remove requirements for affordable housing contributions for build to rent developments, to make them cheaper to build.

What are affordable housing requirements?

As part of the process of applying for planning permission for housing on a plot of land, local authorities can require that developers make contributions to infrastructure and for affordable housing as part of the approval process. Part of the justification for this is that the value of land increases once planning permission is granted, and some of this uplift in value should be recouped for public benefit to make necessary investments in the local area – for example, by building roads, schools and affordable housing. Where affordable housing policies are in place they can play a significant role in delivering affordable housing: between 2007/08 and 2011/12 around a third of all affordable units granted planning consent involved a contribution from the planning system, and the overall trend during this period was upward.

Why we shouldn’t scrap affordable housing contributions on Build to Rent developments

I’d like to cast a healthy dose of caution over the conclusion that affordable housing requirements should be removed on build to rent developments. It’s argued that developers will opt for more profit-making developments which do not always attract affordable housing contributions, such as housing for older people and student housing, over build to rent.

It is right to point at the unfairness that some types of residential developments do not attract affordable housing contributions while some others, including build to rent, do. But the answer is not to scrap affordable housing contributions on build to rent, but to carefully review how the whole system of developer contributions work. There is a strong case to be made for spreading these more widely. This could be done through a combination of community infrastructure payments levied on wider range of developments than is currently the case.

We should also consider providing local authorities with greater discretion to require affordable housing requirements on student housing and housing for the elderly through Scottish Planning Policy. There should be flexibility to enable for these decisions to be made locally, informed by local housing market evidence. In many cases these developments take place in areas where the need for affordable housing is high and the market can bear an affordable housing contribution. Given that evidence shows that to meet housing need and demand 64% of new build housing should be affordable housing, we shouldn’t drop affordable housing requirements easily.

It may be that purpose-built large build to rent developments in Scotland have a significant role to play, but we need to know exactly what kind of housing need they meet. If these developments mainly meet demand at the higher end of the rental market, then the justification for removing affordable housing requirements is weak. And while the system of securing developer contributions may be imperfect, we shouldn’t look to simply scrap affordable housing requirements to get build to rent off the ground.

A move such as this would set a poor precedent and be at the cost of leaving behind people who desperately need affordable housing in high pressure housing markets across Scotland.

  • James Battye manages Shelter Scotland’s Oak Foundation funded private rented sector project work