beta

You're viewing our new website - find out more

Innovative financing

We work with the public and private sectors to create innovative financing models to increase housing supply.

As part of the More Homes Scotland approach to deliver at least 50,000 affordable homes by 2021, we use innovative ways to help make the most of existing public funding and secure additional private sector investment.

This is to help developers, councils and housing associations get new affordable housing developments off the ground, and kick-start developments that have stalled.

Examples of our initiatives

Charitable bonds and financial transactions

The charitable bond model means we can make an ethical investment in affordable housing in the form of a loan to a social housing provider that is repaid over ten years.

We are the only national government in the UK to invest in charitable bonds, and by April 2017, we had invested in twelve bonds with total investments of £70m providing development finance for 935 affordable homes and generating over £17m in additional grant for charities.

This bond model was developed by Allia, a community benefit society.

Expanding the provision of mid-market rent

Mid-market rent (MMR) is a type of affordable housing where rents are lower than in the private market, but higher than social housing. We continue to support the delivery of MMR through the mainstream grant-funded Affordable Housing Supply Programme, as well as enable innovative funding solutions that build on the success of Scottish Government-supported schemes, such as the National Housing Trust initiative the Local Affordable Rented Housing Trust (LAR).

Launched in February 2016, the Mid-Market Rent invitation seeks proposals to deliver affordable MMR homes at scale by 2021 backed by Scottish Government financial support and attracting significant private investment. The current application window for MMR Invitations is now closed and we are carrying out robust assessment of proposals received.

Build-to-Rent

In line with our private rented sector (PRS) strategy we are working with industry to create the right conditions to deliver new purpose-built homes for private rent at scale.

As part of this we have supported Homes for Scotland's Building the Rented Sector study focused on attracting institutional investment into Scotland's new-build private rented sector.

We are also:

  • about to launch Rental Income Guarantee Scheme (RIGS), an initiative to help kick-start delivery of Build-to-Rent, by sharing investment risk with the private sector, by guaranteeing a proportion of the rent for a specified time period

  • supporting the industry to launch an Opportunity Document, setting out the investment opportunity to invest in Build-to-Rent in Scotland

Local Affordable Rented Housing Trust (LAR)

LAR is a Scottish charity set up to provide long-term, mid-market rented housing in Scotland.

We have given LAR a £55 million loan facility. This is expected to be matched by private investment funding to bring total funding to over £100 million and deliver 1,000 homes.

House builders and developers, in partnership with LAR and councils, have been invited to get involved in delivering this affordable housing.

Find out more at on the Local Affordable Rented Housing Trust website and read the news release.

National Housing Trust initiative (NHT)

Under NHT, developers are appointed to build a specified number of affordable homes on land they already own.

Once complete, a local partnership company – made up of the developer, the participating council and the Scottish Futures Trust (SFT) – buys the homes and lets them to tenants at affordable, mid-market rent for a period of between five and 10 years, after which time they are sold.

We guarantee the money borrowed by councils to help fund development of the homes.

The success of the original model has led to the creation of variants, including a council variant and a variant for registered social landlords.

The original NHT model for councils and developers was developed in partnership with the SFT and lending institutions.

So far, deals have been secured with 17 developers for the delivery of over 1,600 homes across 10 council areas through this version of the initiative.

Over 1,000 homes are completed, with hundreds more in the pipeline across the country.

More information about the National Housing Trust is available on the SFT website.