Report launched on cost pressures of delivering social homes

Cost pressures and delivery challenges across the affordable housing sector are making it harder than ever to build new homes in Scotland.

Between April 2023 and mid-March 2024, the Scottish Government and SFHA – with support from Homes for Scotland – established a short-life working group to try and create a shared understanding of the increased cost challenges currently facing the housing sector, and to explore solutions.

Focussing on collaboration and risk-sharing, land cost mitigation and approaches to funding, the group, which included affordable housing providers, private developers, contractors and partners. To support discussion, the group also called upon expertise from the Scottish Land Commission and UK Finance.

Collective approaches to reducing costs and spreading risks emerged as a potentially effective response to the increasing costs of development with early engagement between developers and housing associations seen as key to reducing costs. Local models and frameworks, shared procurement, elements of standardisation (where appropriate), support for collaboration, and opportunities for housing providers and private developers to pool resources, expertise and responsibilities were explored.

The group also discussed areas where costs could be taken out of the system altogether, and called on Scottish Government to lobby the UK Government to urge zero VAT on re-development given this adds considerable cost when renovating buildings either to bring them back into use as housing or to bring them up to required standards.

The group briefly considered land cost mitigation and the vital role land reform could play in ensuring that the housing land market is accessible and affordable for development initiatives across Scotland, as well as approaches to funding.

The group explored a range of short-term and medium-term solutions including the need for sufficient staffing and resource within Scottish Government to carry above benchmark assessments swiftly and effectively and options for dealing with on-site issues such as infrastructure requirements, and abnormals which at present can be very costly.  

The report has been sent to the Local Government, Housing and Planning Committee this week and can be seen here.