Scottish Government affordable housing target could be missed by 35,000, according to new research

The feasibility of the Scottish Government’s affordable housing targets has been called into question by new research by the Fraser of Allander Institute (FAI), which suggests its 2032 target could be missed by 35,000.  

Commissioned by the Scottish Federation of Housing Associations and the Association of Local Authority Chief Housing Officers, the independent economic research unit’s findings suggest affordable home building faces significant delivery challenges unless underlying pressures across the housing and construction sectors are addressed.

The Scottish Government has committed to delivering 36,000 affordable homes by the end of the decade, backed by £4.9bn in funding. It also aims to have completed 110,000 by 2032.  

However, the report has found that, while the government’s current funding commitments are “broadly consistent” with the historical costings of affordable housing supply programmes, there is a lack of uprating to funding benchmarks, which will make the delivery within the existing cost framework difficult for providers of affordable housing, such as housing associations and local authorities.

The FAI has said this challenge will be felt most acutely in rural and island communities, where construction and infrastructure costs are higher. It also warns that this is becoming “increasingly pertinent” in urban areas as well.  

The research warns that housing associations and local authorities are at risk of increasing financial shortfalls as inflationary pressures, workforce constraints, and wider fiscal challenges mean development costs rise faster than available funding and rental incomes.

It projects that under the current circumstances, the Scottish Government’s 2032 target would fall short by 35,000 affordable homes.  

The FAI said that while the government’s housing targets reflect the scale of housing need across Scotland, achieving those goals requires policies that are more responsive to changing economic conditions and the practical realities of delivery.

Scottish Federation of Housing Associations chief executive Richard Meade said: “Despite the significant work of housing associations, local authorities and delivery partners to build the homes Scotland needs, there remains a significant gap between targets set by the Scottish Government and the funding and capacity needed to deliver them.  

“Sustained, long-term investment is essential and welcome, but as well as increased funding we need concrete steps to address the wider systemic challenges across the housing and construction sector which remain considerable barriers to progress.

“Affordable housing is critical national infrastructure and should be funded and planned as such. That means multi-year public investment that tracks real costs, closer partnership across the delivery system, and specific attention to capacity across planning, construction, and in rural and island communities where costs are highest, and the gap is widest. Only then can we begin to bridge these substantial gaps.”

Housing secretary Shirley-Anne Somerville said: “This government is delivering on affordable housing and we remain committed to our target of delivering 110,000 homes by 2032, which this report states is achievable.

“Latest figures show approvals up 42 per cent, starts increasing by 37 per cent and a 25 per cent rise in new build starts for social sector housing compared to last year.

“Overall, since 2007 we have helped deliver 146,000 affordable homes and Scotland has delivered 45 per cent more affordable homes than England and 69 per cent more than Wales, per head of population.

“However, we recognise the challenging delivery landscape and the need for step change in how we deliver homes. Our record investment of up to £4.9bn over the next four years provides a strong platform, and we will continue to work flexibly with partners to deliver more affordable homes.

“Our new agency, More Homes Scotland, will bring simplicity and scale to this work - enhancing delivery and maximising the impact of our investment. We will consider this report’s findings in full.”