An unlimited number of new homes for social rent could be delivered to extremely high standards of thermal efficiency on a zero-subsidy basis, according to Scottish thinktank Common Weal.
In a recently published policy document Common Weal outlined a financial model which would allow Scottish local authorities to build high-quality houses, with secure and sustainable financing and at a much lower cost than at present, using the Scottish National Investment Bank.
In the current market a three-bedroom family home would incur a monthly cost in rent, heating and maintenance of about £1,400, compared to £820 for a house built using the new model, which follows three steps:
- Use ‘Land Value Capture’ – The public buys land and pays for it as if planning permission had already been granted – but planning permission is a value added by the public sector and it can capture that value rather than give it away by buying land only at its current use value and not its later value with planning permission.
- Borrow from the Scottish National Investment Bank over mortgage-style periods of time (30 years) and spread the cost of the borrowing over that period so that rents are low.
- Build in a proper maintenance budget so the homes remain high quality. It is also possible to sell off a limited number of plots (for self-build) and a small proportion of the houses to give the public developers some additional budget to include extra public infrastructure in new developments.
The Scottish National Investment Bank should be given immediate dispensation to operate as a proper bank and local authorities should open lists for prospective tenants.