When discussing solutions to the housing crisis, the instinct is often – understandably – to focus on social and affordable housing. However, increasing supply of those tenures alone will not address our long-term shortage and affordability problems.

Additionally, the crucial link between an all-tenure approach to delivery and increasing social and affordable capacity is often overlooked, given around 30 per cent of our social and affordable homes are built by private housebuilders via Section 75 agreements. 

Scotland has been building fewer homes than it needs for far too long. Since 2008, our lack of development has created a backlog of around 100,000 homes, which has a direct impact on affordability. Research from the Centre for Policy Studies shows that UK-wide, our long-term underbuilding has pushed prices around £75,000 higher than if output had kept pace with our European counterparts. 

Addressing the shortage with mixed tenure supply is critical. Housing need is not static. People’s circumstances change: career moves, family formation, relationship breakdown and retirement all affect the type of home you need.

A functioning housing system must accommodate those transitions rather than trap people in tenures that no longer fit. Artificially narrowing the supply of any tenure type creates bottlenecks that ripple through the whole system.

At the Scottish National Investment Bank, our recent investment in Strathcarron Homes helps demonstrate how enabling tenure transitions frees up capacity in our existing social housing stock. Our loan facility has supported the development of 25 homes on a brownfield site adjacent to the Nitshill train station in the south of Glasgow.

Just under half of those homes have been reserved by households moving out of social housing. This is just one example of how private development is unlocking capacity across the whole housing system.  

Capital is a critical enabler. At the Bank, we recently made two strategic fund investments aimed at bringing a new tenure model to Scotland and attracting more private capital to our market. 

Octopus Capital had been inactive in Scotland because the product it was developing in England wasn’t transferable north of the border due to differing regulation. We worked with its Affordable Homes Fund to create a new product to fit our Scottish market, which involves using Local Housing Allowance or discounting market rent by around 20 per cent.

Our £50m investment required a pound-for-pound matching, meaning a minimum of £100m will support the development of these discounted rental homes in Scotland. 

Likewise, our investment in L&G’s Build to Rent Fund will accelerate the delivery of another important tenure in Scotland. High-quality and well-managed build-to-rent properties provide reliable housing options that are particularly attractive to skilled young professionals, supporting workforce mobility and driving wider economic growth.

Our £50m investment will unlock a further £75m to be invested in Scotland, keeping L&G active in the Scottish market and guaranteeing an additional £1.50 for every pound the bank has invested. 

Capital is essential, but the homes won’t be built without homebuilders and a thriving construction sector.

New starts have fallen to their lowest level since 2013 as sites increasingly become unviable for development due to planning delays, the regulatory burden, labour shortages, and rising construction and supply chain costs.

At the Bank, we have been working with SME homebuilders, whose numbers have declined sharply, to understand and help overcome the barriers they face. 

The challenge is real, but so are the solutions. Unlocking capital and delivery requires the public sector, housing associations, institutional investors and private builders working within a framework that actively supports all-tenure delivery. Only that combination can build at the scale, speed and diversity the country needs.

Nicola Douglas is Executive Director, Sustainable Investment, Scottish National Investment Bank

Partner Content in association with  Scottish National Investment Bank