The Scottish Government is investing £25 million next year in charitable bonds that could lead to up to 450 affordable homes being built, Social Justice Secretary Alex Neil has announced.

The money, from the UK Government’s ‘financial transactions’ funding, can only be used as loan and equity investment but, through a charitable bond model, the Scottish Government has pioneered an innovative way of creating grant to support affordable housing in Scotland.

The charitable bond enables the Government to make an ethical investment that brings forward future interest in an upfront donation for affordable housing by providing a loan to a social housing provider that is repaid in 10 years.

Through the bonds, £7.3 million of grant subsidy will be generated to deliver more than 125 social rented units, and £17.7 million of loan funding will be provided to support housing associations build over 300 social homes in Scotland.

The investment is part of a £200 million increase in next year’s Scottish Government housing supply budget.

That increase is forecast to support at least 6,500 jobs and lever in significant private investment to deliver £600 million of total investment.

Visiting an Edinburgh development by Castle Rock Edinvar Housing Association and Places for People, who were involved in the first Scottish Government charitable bond investment last year, Alex Neil said:

“In a fair and socially just society we want to make sure that everyone in Scotland has access to good quality housing that meets their needs.

“Charitable bonds represent the type of fresh thinking that is helping increase the supply of affordable homes and is supporting our construction industry.”

Heather Macnaughton, Head of Community Investment at Castle Rock Edinvar said: “We are delighted that there is further funding being made available to develop the use of the charitable bond model in Scotland, to increase finance available for affordable housing.

“Continued financial innovation by the sector is required to maximise the return on the Scottish Government’s investment and deliver housing that is affordable to everyone.”

Transport and city leaders from Birmingham, Leeds, London, Greater Manchester and Sheffield have come together to set out how transport funding reforms could transform the prospects of the UK economy.

London’s Transport Commissioner Sir Peter Hendy has thrown his support behind a new independent report which calls for reforms that would ensure a shift in power from Whitehall, enabling the creation of jobs across the UK and economic growth for the whole country.

Sir Peter Hendy said: “The current system of transport evaluation was developed in an era of under-investment, where governments managed the decline of cities. We are now in a very different world, where cities are the drivers of the country’s future growth.

“We need a new system that enables cities to work together to realise their full economic potential. For that we need more control over the tax revenue we raise and changes in the way in which the real financial return of transport investment is evaluated.

“If we are given the freedom to do so we will create new jobs and growth that will benefit the whole country.”

The report, which was commissioned by Transport for London and Transport for Greater Manchester, has been developed and delivered by leading economic consultants Volterra.

It states that the current approach to the evaluation and funding of transport projects is likely to lead to ‘damaging underinvestment’ unless it is tackled and that pay back in terms of economic growth and jobs would be optimised if the approach were changed.

The Mayor of London, Boris Johnson, said: “Greater financial freedoms for our cities are absolutely central to their ability to better plan and finance the infrastructure they need to flourish.

“Transport is no exception to this argument. It is a vital key to unlock the door to wider growth in our economy, helping to spur jobs, new homes and regeneration.

“Working in partnership with other major cities I have been making the case for Whitehall to give us a greater say over our own futures and in turn boost the prosperity of UK plc.”

Thousands of new homes will be build following a range of government measures announced this week to boost the construction industry and help growth.

Communities Secretary Eric Pickles said these new measures would support locally-led efforts to get the country building, building on the momentum gathered since 2010 which has seen house building levels rise to a 7-year high.

The government also announced measures that will provide hundreds of thousands of new affordable homes between 2015 and 2020 – the fastest rate of affordable house building in 2 decades.

Communities Secretary Eric Pickles said: “We’ve seen how getting the country building has been key to our long term economic plan – helping hard-working people become homeowners and creating thousands of construction jobs.

“Taken together with our plans for a new programme of affordable house building, these measures could deliver over 200,000 new homes across the country.”

Housing Minister Brandon Lewis said: “Since 2010 we’ve pulled out all the stops and got the country building, delivering the highest levels of house building for 7 years.

“And in doing this, we’ll support the construction industry – a key part of our growing economy – long into the future by creating thousands of new jobs.”

Some of the other announcements include:

• a locally-led garden town at Bicester, backed by the council and local MP, which will provide up to 13,000 new homes

• the provision of 10,000 new homes on surplus public sector land at Northstowe in Cambridgeshire

• a new target to release enough formerly-used surplus public sector land for 150,000 new homes between 2015 and 2020

• government support to provide 11,000 new homes at Barking Riverside in East London, and 7,500 new homes as part of the redevelopment of Brent Cross

Eric Pickles has offered a boost to the country’s small house builders, slashing the cost to them of building a new home by as much as £140,000.

The Communities Secretary said the move would help restore the sector which was hit by the 2008 crash, and boosting local jobs and constructions.

Figures from the National Housebuilding Council have suggested that the number of small and medium-sized builders has halved, from 6,167 in 1997 to 2,832 by 2012.

Plans announced today will boost England’s builders, making clear that most “Section 106” charges should not be sought from the smallest housebuilders – specifically on sites of 10 homes or fewer, including self-build, extensions and annexes.

Mr Pickles also confirmed that in very rural areas, sites of 5 homes or fewer should not face the charge.

He also launched a £25 million fund to boost development finance for small builders.

Eric Pickles said: “Small builders are being hammered by charges, which have undermined the building industry, cut jobs and forced up the cost of housing. By getting rid of these 5 and 6-figure charges, we will build more homes and help provide more low-cost and market housing.

“This will also be a massive boost to the self-build and custom-build sector. Overnight in many parts of England, it will be cheaper to build an extension, a family annex or just build your own home. Our long-term economic plan is helping hard-working people.

Protecting small builders

It is estimated that the policy will save, on average, £15,000 in Section 106 charges per home in England – with some councils charging up to £145,000 on single properties.

Further savings will be made from tariffs councils can use to charge more than £15,000 per home over and above any housing contributions.

Taken together, these changes will provide 6-figure savings for small-scale developers in some parts of the country.

This will also support the nation’s self-builders – ensuring any builder helping to turn someone’s dream home into a reality, or build an extension to an existing property, doesn’t get lumbered with Section 106 charges, mirroring what the government has already done on exempting them from community infrastructure levy.

Unlocking stalled smaller sites

Mr Pickles also announced plans for a new £25 million fund to unlock construction on micro-building sites between 5 and 15 homes.

These sites have local support and planning permission secured, but have struggled to get restarted after being mothballed during the downturn.

This new funding will come in the form of loans, which the developer will repay on completion and sale of the homes.