The slump in new affordable rural homes being built in the Highlands is set to get much worse unless subsidy levels are improved, a housing conference has heard.

The number of rural developments has dropped from 325 homes in 2006/7 to only 82 this financial year and is predicted to drop even further after the Scottish Government cut its grant levels to £40,000 a house.

Allan Maguire, Head of Property Partnerships with Highland Council, told the CIH Scotland conference in Glasgow that while the local authority was hoping to build 100 new council homes annually, the contribution from housing associations was now worryingly low.

These local organisations had delivered 300 of the earlier 325 units but were only responsible for 25 of this year's 82 properties. “The number of housing associations developing in the Highlands has also dropped from six to two in that period,” he said.

"The current situation is not sustainable in the long term. Housing associations can not continue to develop rural affordable housing at current grant rates, coupled with non-competitive private finance."


He said that previously high grant levels had recognised the additional costs of developing in remote areas and given the associations confidence to go ahead with high cost projects.

"Banks at that stage were falling over themselves to lend to registered social landlords at very competitive rates, seeing correctly that housing associations were blue chip low cost organisations," he said. "The world has turned on its head since then and RSLs are looking at costs and risks to their business plans to determine whether to continue developing."

The overall Highland Council investment allocation, for both local authority and RSLs, is 200 units, 82 of which are envisaged for rural areas. This broke down into 60% social rented and 40% low cost home ownership or other ‘mid-market’ rent. To be closer to the analysis of local housing demand, the social rented figure would need to be closer to 80%.

He explained that the council funds its own house building programme based on an average of £130,000 per house. The capitalised revenue stream from rent equated to £45,000, leaving a shortfall of £85,000 to be subsidised.

The authority received £30,000 from Scottish Government grant and a further £10,000 from council tax income on holiday homes, leaving a net deficit of £45,000.

However, the more rural housing there is, the higher the impact on existing council tenants, and he said that in simplistic terms it would be nearer 2p per week for every rural house the authority built.

The council was better placed than associations in that it could take advantage of ‘prudential borrowing’, but there were still limits to how much its existing tenants could or should fund new housing development.

He supported the housing association movement in lobbying the Scottish Government for higher grant levels for rural housing and warned that, without these, the number of affordable homes in rural areas will continue to fall.

(CD/GK)