Scottish Government

4. CHAPTER TWO: A MORE STRATEGIC APPROACH

Introduction

4.1 This section analyses the response in relation to Chapter Two: A More Strategic Approach to Affordable Housing Investment. The chapter proposes:

• the introduction of prospectuses for investment in affordable homes;
• key principles to support the adoption of regional areas for planning investment;
• a different approach for Orkney, Shetland, the Western Isles, Glasgow and Edinburgh (compared with the rest of Scotland).

Question 3

Do you agree that local authority Strategic Housing Investment Plans and related strategies should form the basis for identifying investment priorities for periods of up to five years?

Table 4.1: Responses to Q3 by Stakeholder Group

4.2 The overwhelming majority of respondents to this question agreed with the principle that SHIPs (and related strategies) should form the basis of investment priorities for five years.

4.3 Generally, respondents supporting the approach felt:

• five years was a good timeframe to work within (although some flexibility would be needed within plans);
• local authorities were well placed to coordinate the identification of investment priorities; and
• the existing processes in place to develop SHIPs and LHSs could support this.

"The Local Housing Strategies and Strategic Housing Investment Plans should be the main documents in identifying local investment and development priorities" (Perth and Kinross Council)

4.4 The few respondents who felt this was the wrong approach identified two main issues:

• the quality and consistency of the SHIPs across local authority areas varies, and the significant power this would grant local authorities; and
• SHIPs are currently bid documents, and are more speculative than the Local Housing Strategies.

"the quality of the SHIPs and Local Housing Strategies produced by LAs is variable." (Loretto Housing Association)

"Its strength is that it contains an overview of assessed need, a broad range of potentially deliverable sites, as well as an overview of the potential mix required. However, the SHIP is at present itself a bid document . . .[and] . . . some local authorities will have introduced a more opportunistic and speculative element". (Clackmannanshire Council)

4.5 These issues were reinforced by some respondents who broadly supported the use of the SHIP.

4.6 Respondents who were generally supportive identified other challenges or issues that need to be addressed for SHIPs to be successfully used as the basis for investment priorities up to five years:

• While the five year planning period was welcomed by most, some respondents felt it was ambitious. Several mentioned the need to have flexibility to be able to effectively respond to economic and other changes.
• There is a need to bring LHSs, SHIPs and prospectuses within the same planning cycle.
• Some SHIPs currently focus on subsidised affordable housing too much, and neglect private development.
• Detailed resource assumptions need to be provided in time to develop realistic and effective SHIPs.

4.7 A significant number of respondents were concerned about the lack of detail in the document about how the SHIP priorities will be reflected in regional prospectuses, and how national priorities and geographic allocation of resources will be weighted and determined. Respondents felt greater clarity and detail was needed on these issues. Some respondents highlighted that this process would be complex, resource intensive and costly.

"We have concerns about the ability to achieve consistency between local authority SHIPs and the proposed regional prospectuses. This will require decisions about the relative priorities within SHIPs of individual local authorities in each region." ( SFHA)

Question 4

Do you agree with our proposed principles on which geographic regions for investment will be based?

Table 4.2: Responses to Q4 by Stakeholder Group

4.8 Nearly three-quarters of respondents to this question disagreed with the approach to geographic investment.

4.9 Of those respondents who supported the general principles, many raised concerns about the size and arrangement of the regions set out in Figure 2 of the consultation paper. There were differing views between local authorities and RSLs - most local authorities broadly agreed with the principles, whilst most RSLs disagreed.

4.10 The size of the possible regions suggested was the biggest concern. Respondents felt that strong regional and cultural identity might be lost, diversity of needs could not be recognised, and there could be conflict between different local authorities' SHIPs. A combination of Highland, Moray, Aberdeen City and Aberdeenshire in particular was seen as much too large to take account of diversity of need and the capacity of existing small developers. For example, Dumfries and Galloway Council said:

"We have significant concerns about the size of the proposed regions. There is a risk that strong regional and cultural identity will be lost and the Council's development aspirations will not be achieved."
(Dumfries and Galloway Council)

4.11 Respondents questioned the assumption that larger regions might offer procurement benefits, and felt there is a lack of evidence to support the expected economies of scale:

"We have a fundamental problem with these principles. There is little evidence that simply creating larger geographical units will bring the economies of scale the Government are looking for." (I-Flair)

4.12 Respondents felt that the proposed approach would not take account of housing market areas, how the construction industry operates, or existing cross boundary relationships between local authorities and RSLs. These issues are taken in to account in strategic planning documents yet respondents felt that the proposed regional approach would cut across these.

4.13 Respondents were concerned that the proposed regional approach would raise practical challenges as well. In particular, they were unclear about how the different priorities (and competing interests) identified in SHIPs and any disagreements would be resolved. This led to concern from some that smaller, rural priorities might be lost alongside larger urban agendas. Some felt that practical difficulties would lead to inefficiencies that would outweigh any efficiency benefits.

Question 5

a. Do you agree with our proposed treatment of Orkney, Shetland and the Western Isles Councils?

Table 4.3: Responses to Q5a by Stakeholder Group

4.14 About half of all respondents offered a view on this issue. Most (about five out of six respondents) who answered this question agreed with the proposed treatment of Orkney, Shetland and the Western Isles, if the proposed regional approach were to be taken forward. However, a significant number of respondents (even those who generally agreed with the approach) highlighted that other rural areas should be treated in a similar way - they often have similar characteristics and offer similar challenges. For this reason, respondents called for other areas to be exempt from the regional approach. Examples included Dumfries and Galloway, some areas of the Highlands and Arran. Many respondents drew particular attention to the need to reassess the treatment of Argyll and Bute. A significant number of respondents also emphasised the need to reconsider the inclusion of some rural areas.

"Without rigorous rural proofing of both SHIPs and regional prospectuses our belief is that rural housing needs will be invisible." (Rural Housing Service)

4.15 Those who opposed the proposed treatment of Orkney, Shetland and the Western Isles offered various reasons. Most commonly, they felt that all areas should be treated the same. Responses also reflected the fundamental opposition to the regional approach:

"We feel that the justification for not including the three island authorities in the new regional structure, applies across the whole country. Taking local authorities together on the basis of geography does not take account of the particular local circumstances prevailing for each of the authorities . . . or the variance in the size of the current investment programmes."
(East Ayrshire Council)

b. Do you agree with our proposed approach for Glasgow City and City of Edinburgh Councils?

Table 4.4: Responses to Q5b by Stakeholder Group

4.16 Around three-fifths of respondents answered this question. Generally, their views were more polarised on this issue than on the treatment of the Island authority areas. Overall, more respondents agreed than disagreed with the proposed treatment of Glasgow and Edinburgh, but views varied between different groups - most RSLs broadly disagreed but local authorities broadly agreed.

4.17 Reasons for disagreeing included:

• Given the significant investment made in these areas, excluding them would reduce significantly the anticipated efficiencies the proposals are aimed at delivering.
• No good reasons or evidence had been offered in the consultation document for the exclusion of the two cities from the regional approach.
• Separate treatment would undermine the arguments for a regional approach and could conflict with existing relationships
• The Cities have key role in local housing market areas, and therefore have an important role to play within the regional structure.
• It would not take account of regional housing markets and the connections with surrounding areas - this was a particular concern in Edinburgh

4.18 Some of the respondents who agreed overall with the treatment of these two Councils voiced similar concerns. Some also highlighted their support for the transfer of management of development funding to all local authorities.

4.19 Some respondents to question 5a and 5b highlighted the potential tensions between rural and urban housing needs in the proposed regional structure. Some respondents felt that rural needs might not be met if the proposals went ahead. Some (particularly those who disagreed with the separate treatment of some areas) emphasised the need for clear, transparent decision making and funding priorities to ensure fairness and equity for all areas. An annual analysis of levels of investment was proposed as a way of monitoring this issue.

"The exclusion of such a significant proportion of Scotland from the proposals reinforces our fundamental view that local authority boundaries should form the basis of a strategic approach to partnership working and any cross boundary work should be by mutual not enforced consent." ( RIHAF)

Question 6

Do you agree that Councils, as the strategic planning and housing authorities, and in collaboration with RSLs, should advise on the regions to be adopted as the basis for Prospectuses?

Table 4.5: Responses to Q6 by Stakeholder Group

4.20 Three-quarters of respondents answered this question. There was strong agreement amongst these respondents that Councils, in collaboration with RSLs, should advise on the regions if the proposals go ahead. Almost all those who disagreed did so because they fundamentally disagreed with the general approach of the proposal, rather than believing different organisations should take on this role. Generally, respondents felt that local authorities were well placed to take on this role:

"Their strategic housing responsibilities, contributions to prospectuses, and subsequent delivery of the new framework are crucial." (Glasgow City Council)

4.21 Many respondents highlighted the importance of involving others in a meaningful way. RSLs, in particular were seen as being key to the decision making process:

"Given that RSLs will be the key suppliers in this new regime it is appropriate that they should have a say in how prospectus regions are developed." (Inverclyde Council)

"Housing Associations have significant experience of working across regions and their views on the basis for the establishment of regions are critical." (Aberdeenshire Housing Partnership)

4.22 Respondents also highlighted the need to engage developers, representative bodies and tenants in this process, although several highlighted that this dialogue might be difficult to manage (due to different views and priorities), particularly within the planned timescales.

"There are three parties involved in the delivery of affordable homes - councils, RSLs and private house builders. All three parties should be involved in the decision making process. A lack of integration remains the key issue why Scotland is not delivering more affordable homes." (Geddes Consulting)

4.23 Others highlighted that the Scottish Government must play a key role in identifying the outcomes expected from the new structures and in facilitating the discussion about a possible regional structure.

Question 7

a. Do you agree with the content proposed for Prospectuses?

Table 4.6: Responses to Q7a by Stakeholder Group

4.24 Around three-quarters of respondents answered this question. Overall, 65 per cent of those responding were supportive. Eighteen local authorities broadly agreed with the content proposed for Prospectuses. In particular, a number highlighted the importance of the LHS and SHIP forming the basis of each Prospectus.

"The Prospectuses should draw information from the SHIP for each of the constituent local authority areas rather than setting out new requirements". (Renfrewshire Council)

4.25 Glasgow City Council welcomed the strong commitment to housing quality. But a number of authorities qualified their support. For example, Aberdeenshire Council were concerned that the Regions proposed were too large. Highland Council had anxieties over how the budget allocations would be arrived at and whether they would be influenced by Lead Developers' ability to reduce costs which could mitigate against rural areas. Orkney Council felt that "the problem for the Government will be to ensure that each prospectus genuinely reflects the combined SHIPs…" And Renfrewshire queried where responsibility for the preparation of the Prospectuses would lie.

4.26 Of the 10 authorities that were less supportive of the proposals, issues of duplication and additional layers of bureaucracy were highlighted by a number of respondents.

"…the Local Housing strategy already achieves the aims of the proposed prospectuses and we see little merit in introducing a further layer of bureaucracy that could dilute local priorities and decision making". (Dumfries and Galloway Council)

"This would add an additional layer of complexity to matching housing needs to development between the SHIP and regional 'prospectus'." (Perth and Kinross Council)

4.27 Others raised concern that the final allocation of resources to be spent in each Region appeared to be dependent on the proposals from and performance of Lead Developers.

4.28 Whilst supporting the proposed scope of the Prospectuses, Loch Lomond and The Trossachs National Park were concerned that the consultation paper did not address what mechanisms would be put in place if local authorities were unable to agree regional housing funding priorities. They also highlighted that the paper had not considered whether there would be a requirement for a Strategic Environmental Assessment of the proposed Prospectuses - which in their experience was a resource intensive process.

4.29 Hillcrest Housing Association felt that it was unrealistic to identify specific sites for a five year programme. They, and other RSLs, drew attention to the role of Section 75 agreements in contributing to affordable housing supply and the need to accommodate opportunity led development. The need to recognise the dynamic nature of housing development and the importance of flexibility was reinforced by others.

4.30 A number of RSLs highlighted the role of the Prospectuses as bidding documents and the importance of quality standards being detailed and mandatory as it was unlikely competing developers would seek to enhance them. The Link Group felt that the focus must be on more than 'bricks and mortar'. Irvine Housing Association felt that it was important guidance on priorities was weighted towards housing need rather than deliverability to ensure that more complex developments were supported.

4.31 A sizeable minority of RSLs disagreed with the proposed Prospectuses. A common theme through many of their responses was their view that the SHIP was the right mechanism to prioritise development. Prospectuses were seen as introducing another layer of bureaucracy which could undermine accountability and local decision making.

"Local authority SHIPs should be the main method of articulating investment priorities at local level". ( GWSFHA)

"It is difficult to see how such large and disparate regions will result in more strategic decision making". (Forth Housing Association)

4.32 COSLA agreed that investment priorities should be made at the local authority level:

"Any decisions on priorities for investment must be made and agreed at local authority level, even if a regional approach is developed for the delivery of affordable housing." ( COSLA)

4.33 This view was reinforced by a number of RTOs.

"Tenants are concerned that certain local authority areas will lose out because of the way priorities may be identified in prospectuses". ( TPAS)

b. How can we ensure that the housing need of people with specialist requirements or in remote or rural areas are fully reflected in Prospectuses?

4.34 Many respondents said that the existing information gathered to inform the LHS and SHIP should be used as the basis for the Prospectus. Respondents felt that there should not be duplication of this work to assess housing need and demand.

"The SHIP and LHS should provide a basis of information for providing housing for people with particular needs and should be included as part of the prospectus. There will also be the need to review this at regular intervals in the course of the development programme." (West Lothian Council)

4.35 Several respondents expressed concern that the move to a regionalised approach to development would marginalise specialist housing requirements due to costs and added complexity. These consultees argued that, for specialist and rural / remote housing requirements to be met, planning should continue to take place at the local level.

"There is a concern that rural housing priorities could become marginalised if a regionalised basis is pursued because they are more expensive to deliver." ( COSLA)

"We suggest that the LHS and SHIP form the basis of investment planning and prioritisation... The prospectuses proposal and the overall approach by the Scottish Government...gives us significant concerns that rural housing schemes will become increasingly sidelined by any regional lead developer." ( RIHAF)

4.36 Several respondents felt that specialist housing development would inevitably become marginalised but suggested solutions. Some consultees said there should be a separate category for this type of development as a requirement for the Prospectuses. Turner and Townsend proposed that more complex developments should be tied in with contracts for more 'straightforward' or inexpensive development:

"There is the risk that bidders may be tempted to "cherry pick" the lowest cost developments in any prospectus in order to win bids and this raises the prospect of expensive but necessary sites with unusual requirements not attracting bidders. It may be necessary to link "easy" developments with more complex sites which might include specialist elements, in order to attract bidders." (Turner and Townsend)

4.37 Loretto Housing Association said that specialist developments could be excluded from the Prospectus:

"Where housing needs are very specific there are risks in the broad-brush approach. We would suggest that developments for people with specialist requirements or in remote / rural areas are generally best not included in prospectuses, because the design solution may be crucial to the success of the project and could be compromised if procured as part of a large scale programme." (Loretto Housing Association)

4.38 Several respondents emphasised the importance of not losing existing RSL expertise in these types of development - regardless of consortia membership.

"It is important to recognise that different RSLs will have expertise and knowledge in different areas of provision and it will not necessarily be the case that each consortium has experience across the range of housing. RSLs with expertise in the provision of housing for particular needs may not necessarily opt to become part of a number of consortiums if they are currently working across the country. It is important that this expertise is not lost..." (East Renfrewshire Council)

4.39 Some consultees stated that more specialised development requires a level of flexibility to be built into the system including flexibility within the funding regime.

"Specialist requirements arising in more remote or rural areas could be met by ensuring that there is a degree of flexibility built into the programme to allow adjustments to the specific development proposals at a later stage as and when specific individuals needs become known." (Perth and Kinross Council)

"The greatest risk in relation to meeting the needs of people with specialist housing requirements, or housing in remote rural areas will be the lack of flexibility." (South Lanarkshire Council)

4.40 Forth Valley Housing Network also raised the issue of revenue funding requirements for the development of specialist accommodation and the need to address this in Prospectuses:

"Certain types of supported housing, for example very sheltered housing, cost more in development terms but also require subsequent revenue funding. Any element of supported housing in a prospectus must therefore be accompanied by assurances from the relevant local authority that such revenue support is planned and provided for, in particular through Supporting People." (Forth Valley Housing Network excluding Link Group)

4.41 A number of consultees emphasised the importance of consultation with local communities and relevant stakeholders (including health and social work professionals). Some respondents stated that there may be a role for Rural Housing Enablers in the development of Prospectuses.

Question 8

Do you agree that there is a need to provide guidance within Prospectuses on maximum rent levels and is the proposed framework acceptable?

Table 4.7: Responses to Q8 by stakeholder group

4.42 Just under three-quarters of respondents gave their view. Overall, around three-fifths of respondents agreed that there was a need to provide guidance on maximum rent levels. But there were significantly different views between the different respondent groups. Local Authorities were more likely to agree than disagree, but respondents from the rural RSLs and smaller urban / stock transfer RSLs generally disagreed.

4.43 Many respondents (both those who agreed and disagreed) agreed with the Scottish Government's concern that the award of grant on the basis of the lowest requirement for subsidy could put pressure on rents. But there were a number of concerns about the proposed approach. Many respondents felt that the proposals did not take account of wider issues which have a significant influence on affordability. In particular, the availability of subsidy and private finance were highlighted:

"The major factor in controlling rent levels is the availability of subsidy." (City of Edinburgh Council)

"Ensuring affordable rents is more about the level of subsidy available, accessibility and affordability of private finance than about RSL's potentially acting irresponsibly in seeking to develop at all costs." ( CIH Scotland)

4.44 Others voiced concern about setting guidance at a national or regional level, as it does not take account of local circumstances, and could undermine the autonomy of individual organisations:

"The Prospectuses should provide guidance on maximum rent levels. However, these need to take account of different circumstances across the proposed regions, particularly the relatively lower income levels in rural areas". (Moray Council)

4.45 A number of respondents called for the Scottish Government to consider how local needs, rent policies of Housing Associations and local circumstances be taken into account.

"We have serious reservations about the use of such guidelines. All our associations are businesses which have to make informed decisions about rents. Balancing the need to protect viability and affordability. The imposition of such guidelines . . . would service to undermine the autonomy and in turn to reduce the scope for associations to make sensible business decisions on behalf of their organisations and tenants." (I-Flair)

4.46 Others were concerns that maximum levels would become the "expected norm".

4.47 As with other questions, some respondents disagreed because of their opposition to the general approach set out in the consultation document and emphasised their general opposition to the lead developer approach:

"We understand the rationale behind rent guidelines, but have concern that their introduction will erode business freedom of individual associations. . . The perceived need to introduce rent guidelines reflects how the competition 'solution' creates unintended and undesired consequences." (Forth Valley Housing Network - excluding the Link Group)

Question 9

a. Are there other issues which would similarly benefit from guidance?
b. What are these and what is the case for including them?

4.48 Most respondents suggested areas where further guidance and clarification needs to be provided. There were a wide variety of suggestions, but some issues were consistently raised by a number of respondents:

• Further guidance on how governance and decision making processes will operate within the proposed regional structure was requested. In particular, respondents asked for guidance on how LHS and SHIP priorities would be developed into a regional prospectus. Some respondents expressed concern that arrangements need to be in place to safeguard local priorities and ensure local needs are met.
• Quality and environmental standards were key issues that respondents felt required guidance to ensure standards are preserved. There was general concern that quality might be compromised with the drive for greater efficiency, and that the consultation document does not highlight or take account of the importance of quality. Some respondents mentioned the need for guidance on "specialist" developments and the need to explicitly mention Housing for Varying Needs Standards.
• Respondents asked for definitions and guidance on affordable rents and affordable mortgage levels to ensure housing meets needs.
• Some respondents asked for guidance and definitions on mid market rents, and their relative priority within the local housing strategy and SHIPs (although several respondents mentioned the Scottish Government's plans to do this).
• Respondents raised a number of issues that related to clarity about different responsibilities - they felt it is important to be clear about the different responsibilities of the different agencies and organisations involved in development. For example, there is no mention of forms of contract, contract conditions or the relationship between client and employer agent. Others for clarity and guidance about risk sharing.
• Some respondents asked for more guidance on rural areas, and how barriers can be overcome and efficiencies delivered.
• A number of respondents felt clarification is now needed on how the future HAG benchmarks and grant appraisal methodology will fit with the approach.
• Some respondents were concerned about the impact of the proposals on a wide range of matters for RSL's including financial, legal and constitutional issues (like charitable status) and felt that further guidance was needed on these issues.