Rural Affairs and Environment Committee, 24 Sep 2008

Meeting date: Wednesday, September 24, 2008

Official Report 215KB pdf

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Rural Housing Inquiry

I welcome the second panel of witnesses, which comprises Neil Cameron, who is the director of Tulloch Homes; Hughie Donaldson, who is the Scottish Crofting Foundation's vice chair; and Susan Torrance, who is the Highland Housing Alliance's chief executive. All the witnesses have provided written submissions, so I will go straight to questions.

I have a series of general questions about the success and suitability—or otherwise—of the planning system. I was not a committee member when it received the evidence that I will ask about, but it chimes with stuff that I have heard in the south-west. Witnesses have said:

"Planning policy has at its core the desire to restrict housing in the countryside,"

and

"Planning for rural housing has generally had the attitude of allowing development only in exceptional circumstances when other options have been exhausted"

and

"the rhetoric of sustainability has been used as a rationale for resisting any development, housing or otherwise."

In the light of your experience, will you comment on those statements? Some people would say that Scotland—particularly rural Scotland—is not really full yet and that some of the restrictions on housing in rural Scotland are over the top. That is the basic proposition.

It can be difficult to get planning permission in remote and rural areas and the planning authorities should be more flexible. There is not a huge demand in such areas—we are probably talking about one or two houses a year at the very most—so zoning land for housing can be a bit restrictive because it might cause infrastructure problems. It would be an improvement if planning authorities were flexible enough to consider how they could build a house on the edge of a settlement, where it could be serviced, rather than on zoned land.

Is the main complaint a ban on or presumption against building outside the boundaries of an existing settlement?

I think that it is. It is not a huge demand to build on the edge of a settlement because it would not make a huge difference to the settlement. If the house were designed sympathetically in accordance with the buildings around it, it would be fine.

Do any of the other witnesses want to comment?

Yes, I want to talk about the local plan process. To be fair, there has been a much more proactive approach by planners in Highland to try to ensure that all the households and communities that are engaged in a local plan are notified of what is likely to happen in their community.

The planners try to get information at an early stage about whether zoned sites can deliver housing. A useful audit, done by Homes for Scotland, I think, showed that—off the top of my head—something like 30 per cent of land zoned in local plans was unable to be developed, because either there were access and legal problems or the landowner simply did not want the land to be developed. The land might have been included in the plan without properly consulting the landowner to ask whether they were serious about moving it into development.

The emphasis on getting it right at the local plan stage and taking on board all the community aspirations as well as the public and private sector aspirations is really important. Once the plan is in place, there must be the ability to drive it through in the knowledge that sites can be moved into development.

I have two points and I do not fully agree with Mr Cameron. Five to 10 years ago, it was our experience that when we looked to develop where it was possible, the bogeyman was Scottish Water. To be fair, its investment programme was given low numbers and there was a low expectation of development, but that meant that sometimes, before the plant was even on site, capacity was overreached. However, I take my hat off to Scottish Water because, over the past few years we have, on the whole, solved that problem. Well done to Scottish Water on that, and on some of the community planning and development forum work that has gone on.

The double-edged sword of crofting is that crofting legislation is seen as secondary to planning legislation. Despite the Planning etc (Scotland) Act 2006 and the recent Shucksmith inquiry, crofting legislation does not take primary place, which would allow the land to be opened up and developed. Instead, applications go to planning and, once there, the Crofters Commission will not act as a secondary planning authority or instruct that the best land is kept for agricultural use, and the envelope of the village is then developed. Current practice is restrictive, but there are two sides to the argument, and they are hard to reconcile at the moment.

I have several questions. For the record, should the best agricultural land be kept free of housing?

Exactly.

Secondly, you talked about dezoning, and the barriers created by Scottish Water. Given the previous panel's discussion, do you have experience of barriers created by any other utility companies? Finally, what are your views on the greater use of compulsory purchase orders?

Other barriers include getting discharge consent for soakaways in remote and rural areas, and the need to move to BioDisc systems and the enhanced cost of that. Also, the Scottish Environment Protection Agency's exaggerated flood management plans have recently come to the fore, in which half the Highlands are predicted to be under water in the next 10 years. In SEPA's disaster portfolio, Invergarry disappears under 28ft of water and half of the Great Glen floods every 10 years. Because of SEPA's projections of flood damage, it is extremely difficult to get planning consent.

As far as I know, compulsory purchase has never been used in the Highlands and Islands.

I would be interested in other people's views.

Just because it has not been used does not mean that it cannot be used. We are in an interesting situation at the moment. Over the past five years, land prices rose dramatically and it was good business for farmers and landowners to sell on sites for housing development. Now that the bottom has dropped out of the market, there is no incentive for them to move their land into development. Farmers in particular would be quite happy to sit for the next 10 or 15 years doing nothing, in a village where a key site has been factored into the local plan. It goes back to my earlier comments on the importance of zoning and what that means for communities that want development. When landowners decide, because things are no longer at their peak, that they will just sit back and wait for the next boom in 15 years' time, they should be made aware that what they are doing is impeding the development of a village or a community.

Are you saying that landowners should be forced to build houses, despite the fact that there is no one to buy or rent those houses?

As I tried to say in my submission, it depends on the financial model that is being used. We have motored along for the past 10 or 15 years, relying on private sector development to deliver affordable housing and planning gain infrastructure. That model has gone, but it has not stopped the requirement for land and housing supply. Now it is about finding new ways of bringing land into development. I am not saying that landowners would have to give land for nothing under compulsory purchase—they would certainly get more than the agricultural value—but there have been examples of people sitting and waiting for the market to rise and rise, which just ain't going to happen any more. Therefore, in order to avoid having even more land that is zoned for development stagnating, agencies need to be serious about what tools we have at our hand to bring that land into development, whether it is for affordable housing, for private housing—when the market recovers—or for some kind of intermediate model.

Neil Cameron? Barriers to building?

I would add to what Susan Torrance said. We are in the middle of an unprecedented recession in the house building industry.

We will come back to that.

It will take a long time for the industry to recover, and the areas that are being hit are the rural areas. Over the past 10 years we have been building in rural areas that we would never have dreamed of building in before. Land values in those areas are still comparatively low compared to central belt and city prices. We are talking about a maximum of £30,000 for an unserviced plot in a remote rural area, whereas in Inverness, an unserviced plot would be £80,000. There is still a huge differential in land prices. Landowners can sit there if they like, but it will be a long time before anyone buys their land from them. The issue over the next few years will be how remote, rural areas—and areas that are not even remote, such as Dingwall, Evanton and Alness—are ever going to get affordable housing on the back of private development.

For the avoidance of doubt, are you saying that Scottish Water and SEPA are still barriers to development?

Scottish Water is still a barrier. Certain things cause difficulties in the Highlands. For example, the ground conditions are so impermeable that you cannot get soakaways to work, because of the rock. As you go further into Highland areas on the west coast, certain work becomes virtually impossible. You are up against a big barrier and a huge cost in trying to put in even basic sewerage systems.

You talked about Scottish Water and SEPA. Liam McArthur has questions about infrastructure.

Susan Torrance talked about access. In its evidence, the Scottish Crofting Foundation said that the overspecification of access roads in some cases tilts the balance away from affordability in remote areas. I would be the last person to argue for inferior infrastructure and services in remote and rural areas. However, is there a case for having slightly different specifications for access roads and other infrastructure in some rural areas?

I do not have direct experience of that, but I have colleagues who work for registered social landlords to deliver housing in Skye, where the housing association grant is being asked to bear the cost of an overspecified road. That is a real barrier to their being able to comply with cost limits and deliver more housing.

In my paper, I referred to the development forums that we have in Highland—I keep bashing Highland's drum, but what I am saying is true. Over the past few years, those forums have enabled the housing providers, planners and roads guys to sit together and bash through the issues from both sides of the fence. If the roads folk have genuine reasons for wanting to specify a road in a particular way, such as for safety reasons, they have to be listened to. There is a more flexible approach, but I still think that we could be a lot more radical in how we look at things, given that our aim is to ensure that we get good-quality housing in rural areas.

Some things have to be developed a bit further, as the schemes for development that were introduced by the 2006 act roll forward and we increase the capacity of townships to look for solutions for themselves, in partnership with more traditional house providers. We are looking at the lower-quality ground on the edge of townships, such as boulder fields, the bottom of an outrun or somewhere that might be close to a road, on which there might be three different types of tenure. There might be private sector plots for sale, which might fund the infrastructure. There could be RHOG plots. There will not be crofter housing on the land, but there certainly could be affordable housing provided by an RSL, or even at the township's own hand. It is about retaining control of that development. There is an example of that being delivered by the Highlands Small Communities Housing Trust, in partnership with crofters, in Shieldaig in Torridon.

The idea is to develop the capacity of townships to find their own solutions. They need partners to do that. To go back to the previous panel discussion, though, if the infrastructure has to be front-loaded and has to be built to the highest specification from day one, that tends to knock schemes into a cocked hat right at the beginning.

A scheme that is being brought forward in Tong in Lewis, just north of Stornoway, has had every obstacle thrown at it, as a result of which there has been piecemeal development. Of course, the scheme is then criticised because the development has been piecemeal, but there have been so many barriers to overcome to get the houses built.

The development plan is multigenerational. It is about putting the infrastructure in for the next generation, so that we do not lose the young people and so that they have the opportunity to stay and take part. They are few in number, but they are important. That is one of the things that we have to work at for the future. The infrastructure costs from day one are a problem.

We heard evidence this morning about the up-front costs of electricity connections. Do any of you have experience of that issue in your area?

We deal with Scottish and Southern Energy all the time and we have up-front costs. It is just something that you get used to. You accept it.

Is that resignation in your voice?

That is exactly right.

If a development is properly planned on the site, and if you are working to a programme, Scottish and Southern Energy is not a problem.

What is your average waiting time?

We do not have a problem with that at all, as long as we tell the company eight weeks in advance that we need people on the site. That would all be part of the planning and building of the road. However, it would be asking the impossible if we were to phone the company and say, "Right, we've done the track and we need you to lay a line tomorrow because people are moving in on Friday."

But if you give a set time, the company will generally deliver at that time.

Yes. The service that we get from Scottish and Southern Energy is good.

I would say so too—though sometimes we balk a bit at the cost. The standard reason given for the cost going up is that the cost of copper has gone up.

In trying to fund serious up-front infrastructure costs, we are trying to develop a model that uses the land bank fund that is funded by Highland Council and the Scottish Government. We would go to sites—perhaps slightly larger than the sites that Hughie Donaldson was talking about—and say that we would fund the up-front costs of the infrastructure. We would define the housing to go on the site, and that element of the cost would be funded by the land bank fund in the first instance. As the site developed, we would recoup the cost and repay the fund. That model provides a clear route to getting the infrastructure in place and avoiding the kind of piecemeal development that we have heard about. Public housing providers would be defining the housing and determining whether the community wanted plots. It would be a different way of doing things—different from the piecemeal approach that we have often relied on in rural areas, which responded to demand and to people's ability to get mortgages.

We think that the new model is good, and we are using it. For example, if there is a large zoned area in a local plan, with several landowners who cannot agree on how to make progress with the development, and if no landowner can go ahead on his or her own because the cost of the infrastructure is too great, we can come in, act as a catalyst, and get the landowners to agree that we should front-fund the development. As the development proceeds, we will recoup the cost and repay the land bank fund.

I make that sound really easy, but it is actually quite difficult. It becomes more difficult as timescales for developments grow longer because of the lack of activity from the private sector. However, it is a good model for getting infrastructure in place and avoiding the piecemeal approach that Hughie was talking about.

Some unfortunate circumstances can arise when you are the last one in the capacity pile for an application—circumstances relating to a transformer on a pole, for example, or the size of a cable. If the transformer has to be replaced in order to make the connection, the cost can be very high. However, suppliers will generally bend over backwards to allow people to reduce costs. In communities, we normally have the skills and the machinery to dig trenches, supply cable, backfill the trench and put the ducts in, so that we are left with just a pole-to-pole connection. We work with suppliers closely—

Do you know of any alternative providers who operate in your area?

Have you tried pricing a lorry on a ferry? People will not come out. It costs £1,000 to get a lorry over to Barra and back.

So as far as the islands are concerned there is no real competition.

We do some work ourselves, if we can. The actual connection is made by the service provider, but in crofting communities we can normally reduce the costs—for cabling, and for a place for the transformer to go—by doing the work ourselves.

So you are providing aspects of competition yourselves, in effect.

We can keep the costs down.

Neil Cameron talked about the state of the market—which we will come back to—and Susan Torrance has talked about significant up-front costs. You are obviously having to balance risks the whole time, and trying to anticipate and meet demand. To what extent are you already having to scale back ambitions, because of the costs that you would have to bear for up-front infrastructure?

My board is having interesting discussions about that, given the dramatic decrease in starts. I heard that whereas there were about 600 starts in Inverness in 2007 there have been only 60 starts to date this year. The housing supply in the Highlands is drying up. The Highland Housing Alliance exists to take more risks than RSLs would do and in some senses we are taking more risks than the private sector would do, by funding infrastructure costs up front. If we do not maximise our programme, who else will build affordable houses and supply the investment that is required to provide housing through RSLs?

A debate about that is going on in the board. Circumstances are changing rapidly, and we do not have 18 months to plan strategically. Developments can take two, three or four years to come to fruition, so if we halt everything now because of the current circumstances we might limit our ability to deliver in two or three years' time, when our houses might be needed because the whole industry might be deskilled and labour and private developers might not be available to the extent that they used to be. It is a huge issue.

I presume that the witnesses deal with Highland Council and the Western Isles Council—

And Orkney Islands Council, Shetland Islands Council and Argyll and Bute Council.

I presume that those councils have affordable housing policies—you might want to comment on that presumption. What are the witnesses' views on those policies, particularly in relation to rural housing, which is the subject of our inquiry? Perhaps Tulloch Homes has a view on section 75 commitments.

Highland Council's policy is that 25 per cent of housing in a development must be affordable. We have worked with that so far—

Is the policy delivering?

Yes. However, it has been delivering on the back of an unprecedented housing boom. We were able to subsidise the affordable housing. It did not really matter to us if we put an extra—

You are talking about the Highland Council area. Are you building in other council areas?

Yes. We have built in the Cairngorms national park, in Skye and Orkney and all over.

Is the same approach taken across the board?

It is virtually the same approach across the board, although I think that the national park's policy is to have 33 per cent affordable housing, which will be difficult to deliver.

Was it deliverable until the current crisis?

It was, but every year it has been getting more and more difficult, because the benchmarks have not gone up to cover the costs and more costs have been added. Before a development can get off the ground there must be badger surveys, squirrel surveys, insect surveys, bat surveys and so on, which cost a fortune. By the time you are finished you have spent about £50,000, just on environmental issues. Then there are archaeological surveys—we have one in North Kessock—which might cost £100,000 for starters. There are many costs other than infrastructure costs.

When money is tight, people start to wonder whether it is worth spending all that money up front to try to get planning permission. They think, "We do not need that planning permission yet. Let's hold back." That is how things have been going during the past six months. We have been putting off making planning applications.

We will talk about the current circumstances, but I wanted to know whether you thought that councils' affordable housing policies had been delivered.

In Highland, the policy is to have 25 per cent affordable housing, which is generally the approach in other areas in which we work.

We work only in Highland, but I think that Highland Council has delivered more affordable units through section 75 agreements than any other council has. The policy has worked.

I want to drift a wee bit away from planning gain through section 75 agreements. The presentation that Tulloch Homes supplied says that the company has completed 1,000 homes in the 15 years since 1992. However, the rural home ownership grant produced 793 homes in the same period and the croft house grant scheme produced 658 homes in half that time. The financial instruments that put affordable houses in place are as important as planning policy.

I have done a little research into the various grant mechanisms and the level of public subsidy. GRO grants for owner-occupation, which were administered by local authorities, were basically grants of £30,000 that were lost; they could not be recycled when the owner sold up and moved on.

The homestake shared equity scheme and the low-cost initiative for first-time buyers have not been in place long enough to get a figure for how much grant can be recycled. As the credit crunch takes effect, we might not be able to recycle the grant because the owner might not be able to trade up. This is touchy-feely information because we do not have the research results but, typically, the grant is about £40,000 to £45,000 per unit.

According to the Scottish Government's research, the average RHOG over the 15-year period was £65,000, but the local authorities that made most use of that mechanism were Highland and Orkney, and the Orkney figure was even less, at about £35,000. I do not know what is going wrong with RHOG in the rest of the country, but we urgently need a replacement for that scheme.

Will you forward that information to us?

I will do that.

Additionally, the average croft house grant was £21,300. According to private developer Tulloch Homes's figures, the deliverable cost of a house is £125,000; it is debatable whether that is affordable on an average income. Your own Scottish Government private sector grant is currently targeted at £50,000 over three years for 100 homes. If we iron that out and try to find out which instruments we can use to do more in rural and remote areas, I think that we will drill down on RHOG and the croft house grant scheme and find better ways of delivering them.

To follow up the exchange that the convener had with Hughie Donaldson about the self-sufficiency competition in more remote areas, I note that the Highland Housing Alliance submission talks about bulk procurement deals and bulk procurement finance. People in Orkney have raised the point with me that if we bulk out procurement and finance, the opportunity that local suppliers and firms have to engage in the process and compete becomes far more limited. Having a pipeline of projects to which such firms can sign up is of more interest to them than a massive project that covers every element of construction in a given area. Can Susan Torrance expand on that?

Because the project that we are talking about will be delivered all over the Highlands, the main developer on the contract will not send its staff to all sites. Instead, the developer will subcontract work to local contractors. We would expect that because it is the cheapest way for it to deliver and to bring economies of scale into the project. I hear what you are saying; I knew that there was an issue in Orkney because I was lobbied by the concrete manufacturer up there.

People need to understand what opportunities there are within bigger contracts, but there needs to be certainty, as Liam McArthur suggests. When there is a forward programme or a large one, that brings in certainty so that the developers and contractors can sharpen their pencils; they know the product that they are getting and can begin to think about delivering not necessarily huge savings but a house at a certain price. That contrasts with some of the vagaries of the tender system. Over the past couple of years, some of the west coast schemes have seen dramatic tender prices; contractors are not interested in taking on such projects because they have too much going on. How do we get past that to ensure that we continue to deliver housing on a reasonable basis?

As with all procurement, however, there is a problem with prime contractors taking out margins that then depress what the subcontractors can take from the contract.

Obviously, we are not privy to such negotiations. At the end of the day, it has to be a win-win situation or the main contractor ain't going to get the co-operation from the subbies in order to do the work. There might be a short-term issue but, in the long term, there has to be something in the contract for everybody who takes part, otherwise they will not take part or they will go to the wall.

My questions about affordability have been largely answered. I will move on to ask about the current situation. We have been through a successful period in which it seems that the affordable housing targets for Highland have been delivered broadly. Perhaps you have been more successful than others elsewhere because of the methods that you have used.

We have now moved into a different world. Susan Torrance's organisation has land or the potential to buy land and Tulloch has a history of having a good land bank, so land per se is not a particular issue in the Highlands—correct me if I am wrong on that. Given that, what is the essence of the problem? Without giving away too many commercial secrets, will Neil Cameron explain the decisions that he is taking? Do they relate to Tulloch's liquidity—its cash to build homes—or people's ability to obtain mortgages to buy properties? Is a combination of factors involved, including the housing grant situation? What would bring an immediate conclusion to the contraction of house building? What will you do about that? What is your top line for getting out of the situation?

What has happened in the past six months has been dramatic. There is no money for people to get mortgages. Banks are not giving it out and are becoming much tighter about whom they lend to. At the bottom end of the market, where shared ownership and other mechanisms attempt to put people on the housing ladder, banks will no longer operate.

Such financing mechanisms allowed you to deliver your affordable housing in the past.

Yes.

So because the first element has gone, the second will go.

Yes. We are selling perhaps one house a week, when we should sell 30. We now have 100 stock houses in Inverness—that is £20 million lying there. We must sell those properties before we build more houses. We employed 50 joiners in Inverness, but now we have six. Sites are on care and maintenance status. That is how bad the situation is—I do not think that people fully appreciate that. That will hit the rest of the economy by Christmas, because that will filter through to car buying and everything. We are in a very serious situation, which I do not expect to improve until the end of 2010.

You build houses not only for sale but for rent or for shared ownership and shared equity mechanisms with Highland Housing Alliance. Susan Torrance hinted at some mechanisms in her submission. What needs to happen now to minimise the contraction and to meet affordable housing targets again? Can the Government take effective steps? Can local authorities take action? Should we just put our hands up in the air and say that we do not know what to do?

I have an interesting paper from the Joseph Rowntree Foundation that looks back at what happened in 1989 and 1993—mainly in England, although the Scottish rent-to-mortgage scheme is also covered—when Government money was used to try to underpin the system, whether through buying vacant stock or providing financial mechanisms or guarantees to encourage lenders to re-enter the market and lend. However, a point that we do not really understand—Neil Cameron hinted at this—is that banks have no money.

We are trying to sell plots and we have a perfectly fair mechanism to ensure that the discount is not given just to the individual who buys the discounted plot—we will postpone the discount to the private lender, so no risk is involved—but no lenders will touch that system. The reason that they give is that the decision must go to a policy committee because the mechanism is new and whatever. One applicant works for a bank, and even she cannot obtain a mortgage on that basis.

In the current circumstances, is the answer to focus much more on building social housing for rent rather than for purchase? That would still get building going and would remove the problem of people having to find mortgages.

Another elephant in the room is the whole business of the new regime for RSL funding and housing association grant that the Scottish Government has introduced. The Government is trying to drive efficiencies into HAG and to obtain more money for Government investment, which is fair enough, but it has introduced a set of assumptions—particularly on private borrowing—that do not apply at the moment.

Some associations—I will not name them—are saying, "We have a choice here. At board level we are seeing financial projections that show us building no more houses and being very comfortable, thank you. Alternatively, we can accept the new HAG assumptions and build. However, that could put our businesses in jeopardy, because we cannot borrow at the rates that Government assumes that we can get, we are being asked to cut back on other parts of our operation in unsustainable ways, and we cannot keep increasing rents, because we would make our product unaffordable"—

Is the drying up of money from the banks affecting housing associations?

Yes.

It all comes back to the availability of money.

Yes, it does.

I agree entirely with Susan Torrance, because I work with housing associations and the Highlands Small Communities Housing Trust and we have been through the argument ad infinitum. There is an ever-decreasing circle, which we cannot get out of. Either we use the reserves and go bust or we stop building—that is it.

What could be done to change that situation?

I will answer from a crofting perspective. People say that there is nothing new under the sun. The Scottish Government used to operate a loan element in two grant mechanisms. If such money were available, it could kick-start small numbers of private building developments. Such an approach would not rescue the housing industry, but it would address issues in remote and rural areas, where house building could continue.

A beneficial effect of the current situation is that, whereas less than six months ago we were operating in Lochaber with build costs of £1,350 per square metre, costs are now under £800 per square metre, because builders need the work. People say that building costs in the Western Isles have always been higher, because of transport costs, but the effects of that are now negligible, given the lower build costs. If we are to get the self-build sector moving again, a loan element attached to a grant—it should be an intergenerational loan, with a 40-year repayment period—would help to kick-start that small part of the house building sector.

I cannot comment on the larger issue, which is outside my remit.

We must find financial institutions that are willing to lend or that can tell us in what risk-free circumstances they would lend. That might happen through collaboration with Government or through the introduction of new mechanisms. I have never understood why pension funds do not invest in property in better ways than they currently do. There are issues to do with the 21-year lease rule, which other parts of Government are considering. The rule has been an impediment to community land trusts and long leases.

It is about sitting down with the financial institutions and asking, "Why aren't you lending? If you ain't got the money, how can we help you to access money and how can we lend it on in a way that you regard as relatively risk free but which should ultimately give you a reasonable return?" The money will probably be safer than has been the case, given some of the more dodgy places that banks have seen their money drifting off to during the past five to 10 years.

The Housing Finance Corporation, which I do not think has been a huge success in England, was designed to be a Government-backed body that would raise money in the private markets to lend on to housing associations at fixed rates. The report from the Joseph Rowntree Foundation that I mentioned talks about the need for much longer-term deals. The short-termism of the banks, whereby they swap money and securities, has created the current crisis. If we can find a way to lend that ensures certainty over 40, 50 or 60 years, we should begin to reduce risk and encourage lenders to come back into the fold.

I am not a money expert. I just want to sit down with the financial institutions and say, "What is the risk? We are talking about affordable housing and folk who will pay rents to well-managed organisations, with the back-up of Government support, through benefits, for example." I suspect that some reasons for not lending that organisations are currently being given are smokescreens, because the money simply is not there. I am sorry if my answer was not helpful. We need to be radical.

We can identify the problems; the question is how we identify the solutions. Does Neil Cameron want to add anything?

In the short term, Highland Council is considering whether we have anything in stock that it could use its underspend to buy and then rent on or sell on a shared ownership basis. That is a positive step.

I think that many councils are considering such options, but what you have built is not always a good fit with what councils need.

That is the problem.

The Scottish Crofting Foundation submission mentions Government loans at fixed rates.

Hughie, you seem surprised by that.

No. That is exactly what I was talking about.

If you were to make one key recommendation, would it be that the Government should reintroduce loans to reignite or kick-start things?

What we can pull out of the list of possible financial instruments that I have referred to is that not everyone is a crofter and not everyone has land. We have to address the problem of those who have no access to land. Indeed, with regard to Peter Peacock's comments on land, we need to keep up the pressure on land assembly not only in the Highlands and Islands but throughout Scotland. We simply cannot slacken in that respect. Even though Scottish ministers and commissions are the biggest landowners in Scotland, we still struggle with access to land.

We should streamline the grant mechanisms to two choices: those without land go for RHOG, while those who have land go for the croft house grant scheme. The system should be relevant, but not necessarily easy, and backed up with your money, which you know will be recycled over a longer period at a fixed rate.

At the time that the loan element was removed, 358 homes were receiving £7,500, and the awards included 47 repair grants. The loan element was factored into the costs, not the repayments, which went back to the Exchequer. You will not get a more efficient house building system than that.

I am not sure that the Scottish Government will find the idea of money going back to the Exchequer hugely attractive.

Back into the Scottish Homes fund, then.

With regard to Hughie Donaldson's point about land assembly, I should clarify that I was not referring to the wider position. I was simply saying that the Highland Housing Alliance and Tulloch Homes had land.

Susan Torrance said that there is a need for new models. Has there been sufficient debate in Scotland over that issue or is the discussion still to be had?

I am not sure that the matter has been sufficiently debated. All I can say is that there is an appetite for such a debate and that a number of seminars and so on have been organised. However, talking shops are one thing; even with the best will in the world, it still takes a long time to turn around a supertanker. It might be no bad thing if Government took the lead and tried to get everyone to understand the issues and formulate some new models.

However, my plea is that we do not end up with models that simply support affordable housing provision. The housing market that we have created includes the private sector, which has been a mainstay in assisting with infrastructure provision and land assembly and subsidising affordable housing. If we do not look at the whole system, we are in danger of propping up one element while the other falls off the edge of the precipice.

The rural home ownership grants and so on that Hughie Donaldson mentioned are okay for people who own their land, but one of the problems with the rural economy is that too many people are on low wages. If there are any jobs, they are low-wage ones. Instead of forcing people into buying their own homes when they really cannot afford it, we should build them rented accommodation. Whether the private sector should provide those homes through grants and 21-year lease agreements with housing associations, I do not know, but there are various ways of addressing this problem.

I wonder whether Susan Torrance has anything to say about councils' allocation policies, particularly in connection with the drive to reduce homelessness. Previous written and oral evidence contained a couple of bits and pieces about tension in some areas.

Are you talking about the suggestion that councils might be putting homeless families inappropriately into communities?

Yes.

To be honest, there is a lot of myth surrounding that. However, in tackling the current huge homelessness crisis, councils have become stretched and are trying to use every available means.

The alliance has tried to ensure that options are available for everyone. Sometimes, people exhibit nimbyism and other such attitudes because they are frustrated that they do not have many options or that no one seems to be doing anything for them. We need to communicate with communities, let them know that all sectors have to be provided with housing and try to offer solutions to issues such as self-build, the availability of plots, housing for key workers and the rental models that we are beginning to explore only now. I appreciate that that response might be strange, given that we are in a world where things are shrinking and becoming terribly difficult. However, if we do not try to find solutions that involve all the communities, we will run into problems.

What about the impact of the loss of the local connection criterion, which is a concern that has been raised with me?

I can certainly see both sides of the coin on that very difficult issue. I do not think that it will have a huge impact, because responsible housing providers try to make sensible decisions about who gets houses in communities. Only when very urgent cases are dealt with do people feel that they are being run roughshod over. When you dig down into cases of so-called injustice, you usually find that there is not that much of an injustice. I am not for the local connection criterion, because it was a way of fudging difficult decisions.

As ever, please communicate further with us if you wish to bring anything else to our attention. Hughie Donaldson, for example, referred to a paper that we would like to see.

I should also mention a project located in Kincraig outside Kingussie that has been designed for a housing trust by the well-known architect David Somerville and which will use the timber felled on site for houses. The project should be seen in conjunction with the Government's climate challenge fund. John Rathjen, who is in charge of the fund, told me that he has spent an inordinate amount of money on sustainable housing design, but he needs to get it out into the house building sector. Perhaps the committee could promote that approach.

It is not really our job to provide advertisements for private companies.

But this is the Government's climate challenge fund, which is involved with housing design.

That is fine. In that case, we can raise the issue directly with the Government.

I move the meeting into private session and ask everyone to clear the committee room.

Meeting continued in private until 12:47.