Craig Sanderson

I understand that the More Homes Division of the Scottish Government has just introduced revised, ‘updated’ affordable housing investment benchmarks to take effect immediately.

These replace the benchmarks issued in October 2024, using data from the Scottish Social Housing Tender Price Index.

This has led to a 4.6% increase across all benchmarks (except for that related to zero direct emissions heating systems (which has been increased by approximately 24.7%). The following comments are in relation to the said across-the-board increase.

As ever, we need to look back to assess how we have arrived at the current situation.

In 2013, Scottish Ministers approved benchmark subsidy (i.e. investment) levels which enabled local RSLs to develop new social housing at genuinely affordable rents.

The grant rate was set at 58% based on a basic rent for a 3apt, 3-person dwelling of about £72 per week and resonated with incomes/wages/salaries and social security benefit levels at the time.

Given that RSL’s full development costs (site acquisition, construction, consultant fees, allowances) were then about £100,000, this meant that the benchmark funding per new home was about £58,000.

Fast forward to 2026 and suffering from the consequences of Welfare Reform (eg Local Housing Allowance caps), Brexit (eg removal of access to European Investment Bank relatively cheaper funding), COVID 19 and the war in Ukraine (and now Iran) have resulted in the cost of a new home in Edinburgh being some £300,000 (ie 3 times what it was) while wages, other incomes and Local Housing Allowances are ‘frozen’ as housing costs rise.

Meanwhile, the affordable housing investment benchmarks (although regularly reviewed by the Scottish Government) have failed to keep up (see below).

Couple this with the shortfall in funding for Edinburgh for decades and we arrive at the current situation where major traditional suppliers of new social housing have shut up shop because they need some 60% grant subsidy but are likely to qualify for only half of that.

And that opens the door to developers of unaffordable Build to Rent and Purpose Built Student Accommodation projects.

I have to question whether the Scottish Social Housing Tender Price Index is appropriate.

I would suggest that it is too focused to reflect on and resonate with the broader ‘basket’ of prices which affect ‘affordability’ and which are included (to different extents) in the RPI (Retail Price Index) or CPI (Consumer Price Index).

According to ChatGPT, the total cumulative price increase between October 2024 and January 2026 using CPI is 4.2% and using RPI it is 6.0%.
This might arguably suggest that the Scottish Government’s across-the-board application of 4.6% is therefore not unreasonable when compared with the CPI. But that ignores variations in costs in different parts of the country.

And although CPI includes owner occupiers’ housing costs it does not include mortgage costs or Council Tax, both of which have risen well above CPI.
So, RPI might be more appropriate?

In which case, an increase of 4.6% is clearly insufficient. Moreover, the index is only as good as the base to which it is applied.

And that base, as far as subsidy benchmarks are concerned, may well have been ok in 2013 but has been too low ever since.

There is no simple answer, and it is not helped by journalists erroneously reporting a reduction in inflation rates as prices going down, or a 4% rate as if it were the highest in history (29% RPI under Harold Wilson, if I remember correctly).
  
The Scottish Government’s More Homes Division continues to reiterate that benchmarks are only used to determine the way that grant applications are assessed. They are neither grant rates nor grant ceilings. Sadly, at least one local authority has repeatedly not paid enough attention to this.

I have to be critical of the government’s current approach to ‘consultation’ about such issues. Back in the day, representative organisations with positive contributions to make to the discussion were involved round the table with politicians (ministers, even) before decisions were made.

Not now….

PS… I note from the minister’s announcement this week that More Homes Scotland “will also aim to expand modern methods of construction, standardised designs and collaborative procurement to achieve economies of scale”.

This is exactly what six HAs (Castle Rock/Edinvar, Hillcrest, Kingdom, Link, Perthshire and West of Scotland) did two decades ago when they formed the Larach consortium to deliver 800 new social homes across Scotland.

• Craig Sanderson is a former chief executive of Link Housing and a member of the Edinburgh Poverty Commission