Last week, the Scottish Government’s housing investment taskforce (HITF) published its official report. Set against the backdrop of a stuttering affordable housing supply programme, budget cuts (now reinstated), wider struggles for developers, contractors and investors alike, as well as the provisions in the Housing Bill, the main report charts a course to what it hopes will be several initiatives and processes that will unlock housing investment across the housing system, including in terms of affordable supply.

We have also had political changes in the governance of Scottish housing. The housing minister, Paul McLennan, who initiated and led the taskforce, has left the government, and a housing cabinet secretary role has been created and given to Mairi McAllan. At the same time, the UK spending review identified £39 billion for the affordable homes programme over ten years and a further £10 billion for new borrowing from a reconstituted Homes England. There will be Barnett consequentials, which one hopes will stick to housing.

Let me declare two interests in this. I was a member of the taskforce, heavily involved in one of the work strands. Second, I wrote a rapid review paper on international evidence, which is published alongside the main report. In this blog, I want to summarise my sense of the key findings and recommendations from the taskforce and then set out the key messages I took for my own paper

The taskforce makes the following critical points about its remit and its understanding of the context in which it takes place.

Paragraph 3 of the introduction says: ‘the Taskforce has been clear that investment is not an aim in itself but a priority because of what it delivers for people, communities and businesses across Scotland. For those at the hardest edges of housing need, this investment can be life-changing. The Taskforce recognises that there are balances that must be struck and that government at all levels, housing providers, developers and investors need to make decisions in the context of their own objectives and priorities, looking after the interests of the people they serve. The Taskforce has sought to find common ground across these priorities to reach a consensus position that will enhance delivery of quality new homes in Scotland and improve resilience through economic cycles.’

Paragraph 4 goes on to say: ‘The investment focus is, by necessity, medium to long-term. Nevertheless, there are choices that could be made now that would set Scotland on a new trajectory for housing investment. This means focusing on the actions that will have the greatest impact on creating the conditions for new investment to flow – and ensuring Scotland reaches its potential. There is no silver bullet, but structural changes initiated now to deliver, over the long-term, fundamental improvements to supply are within our gift’.

The report goes through the taskforce’s workstreams, focusing on 1. Building investor confidence and unlocking existing financial commitments, encouraging and promoting new delivery partnerships, and, maximising investment opportunities in affordable housing (this section is most closely linked to my paper).

In the annex to this blog I have reprinted the 28 actions or asks from the taskforce. Several of these hark back to our Joseph Rowntree research published in 2024 (asks: 10, 17, 18,19.20, 21) and others feature in the paper I drafted for the taskforce (asks: 23, 24, 27, 28).

In the few days since this has been published and was presented at the SFHA conference in Glasgow on Wednesday of this week, two things are clear. First, there is much support for many of the actions and asks set out in the report. Second, there are some concerns e.g.  to what extent is institutional investment additional for social housing specifically (i.e. some have argued that there is ample debt finance available to supplement grant and subsidy). The case for institutional investment is stronger for build to rent and mid-market rent.

The other chief concern, and this is not surprising, is the specific concern generated by ask 26 – allowing, as in England, for profit housing associations to deliver affordable housing. This is currently off the table in Scotland, but the taskforce is proposing to explore its potential. What has never been clear is the precise meaning of affordable housing in his context and does it include social rented housing. For many, that is a step too far, generates worries for many about rising non-affordable rents,  and there will be a high bar required of the evidence that it would indeed be additional and sustainable. This will clearly be a focus of controversy going forward. Personally, I support the need for that evidence and share reservations in the absence of clear evidence. But I am willing to be persuaded by robust research.

The international evidence research paper

My own paper borrows from a lot of similar work I have been involved with in the past, going back to the global financial crisis in 2008, and also going into some of the earlier work we did in the first years of CaCHE. I also reviewed a lot of cognate literature and especially drew on evidence from AHURI in Australia, research by Julie Lawson, including, with Michelle Norris, the Housing 2030 report for UN/ECE. In all of it I continue to be very influenced by the work of Derek Ballantyne in Canada.

Figure 1 below comes from the work with Ballantyne. It essentially says that social or below market housing requires subventions in at least one of the four quadrants set out in the schema. Someone has to pay to make the below market element – it is unavoidable and there is always an opportunity cost to someone in the system somewhere. Innovation in affordable finance and subsidy, such as it is, ultimately involves rearranging and changing emphasis on one or more of these tiles. That is why there is no magic bullet and why in the end political commitment to prioritise a subsidy programme by government is the normal, necessary and vital condition for such programmes to deliver at scale. Politics can make a huge difference.

The key messages I would stress from the review paper are:

• We should not expect to find silver bullets lying around or uncover radical financial innovations, but we may find that some reconfigurations of the Ballantyne quadrants in figure 1 (above) may offer one of more positive contributions to support the financing of affordable supply in Scotland.
• The devolved application of the ideas suggested by Toby Lloyd and Rosie Grayston (2023) are likely to be important. These include changing the fiscal rules, increasing flexibility for councils, reducing the scope for HM Treasury to intervene in and interfere with conventions like the rent settlement that are so important to private investment, and, also adopting international accounting rules regarding public corporations debt and borrowing with particular respect to council housing borrowing. We do however need to be careful when applying English evidence to Scotland – particularly the focus on for-profit registered providers, which do not operate in Scotland. At the same time, however, there is social investment operating in Scotland to provide homes e.g. temporary accommodation and follow-on housing for homelessness presentations.  Social investment has scope for growth in the UK housing system.
• At the same time, debt finance and joint venture arrangements as well as different leasing models all would seem to be possible to be grown further in the Scottish environment.
• Blended subsidies in multi-level governance systems are of interest but work better in federal systems with more well-established systems of inter-grant transfer, etc.
• Guarantees and low-cost debt have a long lineage with good practice versions in countries like Finland, as well as soft loans, such as those associated with the applications of Financial Transactions Capital in the UK. This may be something to watch out for in the light of the UK Spending Review.
• Solidarity-based approaches such as the Netherlands, and particularly Denmark (the latter is well received, much like national wealth funds) are potentially valuable but it must be built up over time and there needs to be a ready mechanism of growing surpluses and sector acceptability to use these in a directed top-down way.
• Many of the success stories – Finland, France, Denmark and Austria – represent long term stable and predictable successful policies which help moderate the pro-cyclical nature of housing, insulate social housing from the market, also building up and maintain revolving funds and similar special circuits. They draw strength from the maturity of their sectors. They also indicate that moving away from ‘business as usual’ is unavoidably a long-term proposition but that does not mean deciding not to start down such a road now.
• Path dependency is important e.g. the strength of the social housing responses in countries lie Austria and Finland do not operate in a vacuum and are supported by a network of interlocking finance, regulation and strategic mechanisms, as well as long established partnerships, trust and verification. It is not straightforward to graft these models onto Scotland. The Irish experiment with low cost for limited profitability rented housing is an important evidence base in this context.
• ‘Housing 2030’ establishes that developing resilient housing finance circuits specifically for affordable/social housing delivery can create durable and stable models that allow for implementation but also considerable forward planning. It also indicates that there are long established financial circuits supporting housing through state savings schemes in France, as well as interventions to encourage investment in retrofit that need not undermine new affordable /social housing supply in countries like the Netherlands and Germany. Housing 2030 also sets out a series of ways to overcome land barriers.

This article was originally published on the CaCHE website.