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March 12, 2008

Local green homes that local people can afford

The lack of affordable housing is one of the biggest problems facing communities – particularly in rural Scotland. Last week, a group of local people from very different parts of the country met to consider a way forward that would also be environmentally friendly


Across Scotland, development trusts hold land under community ownership or have the potential to acquire land. Many trusts have identified affordable housing as one of their key concerns and priorities for action. Housing associations can provide housing for rent but low cost ownership gives people in local communities a stake in the future. Trusts have been frustrated at the lack of progress and have lacked capacity and expertise to tackle the issue.

So DTA Scotland is joining forces with Green Homes pioneer, the Environment Trust, to pilot a programme of privately financed affordable environment friendly housing in Scotland.

The Environment Trust is the UK’s leading non- profit developer of affordable environment friendly housing. It is a development trust itself, and is establishing a Scottish charity- Environment Trust Scotland, to take forward the Green Homes programme in partnership with DTA Scotland. It has in principle support from RBS Scotland for the programme, and relationships with Unity Trust and Triodos banks and the Ecology Building Society.

The Trust’s approach is holistic and creative, seeking innovative and imaginative solutions to environmental problems. Previous developments have included public space, apprenticeships in construction, and workspace.

Green Homes are built to the Trust’s specification which maximises the use of environment friendly building materials and techniques and minimises energy and water consumption. All schemes depend on the investment of land to produce affordable housing, and are financed by bank loans, with purchase on a mortgage at 50 or 70% of market value. Sale at full market price can further cross subsidise the affordable housing, and the unsold equity is retained as a community asset.

The development process is straightforward. Trusts participating in the programme identify land suitable for development in their ownership. Environment Trust Scotland acts as the developer of the scheme. Once homes are sold, the equity retained is held by the local trust. The process will help empower and enrich participating trusts.

Environment Trust Scotland will:

– Work with local stakeholders and residents to agree the scope of the scheme
– Consult with planning authorities to agree a planning framework
– Assess market conditions and values
– Investigate and report on site conditions
– Appoint a full professional team to design, specify and cost the works
– Apply for planning permission
– Manage a tender process with a range of suitable builders
– Manage the development and sales process to completion and handover
– Charge its costs to the project, and take a modest 10% profit on sales

Scheme Example

10 new green homes in following mix:

4 x 3 bedroom houses @ 95sq m
3 x 2 bedroom apartments @70sq m
3 x 1 bedroom apartments @ 45sq m


Construction @ 1500 / sq m £1,087,500
Professional Fees & other costs £350,000
Profit £162,000

TOTAL £1,599,500


100% Market Price Sales £900,000

2 x 3 bed @ £300,000
1 x 2 bed @ £200,000
1 x 1 bed @ £100,000

70% Market Price Sales £420,000

1 x 3 bed @ £210,000
1 x 2 bed @ £140,000
1 x 1 bed @ £ 70,000

50% Market Price Sales £300,000

1 x 3 bed @ £150,000
1 x 2 bed @ £100,000
1 x 1 bed @ £ 50,000

TOTAL £1,620,000

Equity Balance retained by local trust £480,000

The scheme example shows one approach, but the model is flexible.

For instance- the 50% sale homes could be financed by the local trust on a long term mortgage and rented out for holiday lets or local needs, or all could be sold at a lower discount.

Private finance, in the form of a loan, is available to meet the costs of the entire scheme once planning permission is granted and costs and values confirmed. So there is a liquidity hurdle to be overcome in order to develop a multi site implementation of the model. Each project will cost up to £200,000 before private finance can be drawn down.