Ahead of the Scottish National Investment Bank’s annual conference in Glasgow, Karen Peattie hears about its Market Creation function which is taking a partnership approach to helping investment flow into the country’s housing market and other sectors
WITH Scotland in the midst of a national housing emergency and widespread acceptance that the country urgently needs many more quality, affordable homes, the Scottish National Investment Bank (the Bank) is exploring new partnership models to stimulate the market, achieve the significant economic benefits waiting to be exploited, and secure much-needed accommodation for those who need it.
Ahead of the Bank’s conference today – Investing with Impact: A Catalyst for Change – in Glasgow, in association with The Herald, the Bank spoke about the role of its recently established Market Creation team which aims to encourage investment around some key development areas for Scotland, housing being one of them.
With its aim to provide development capital to Scottish firms engaged in the Bank’s three core pillars – the drive to net zero, tackling place-based inequality and supporting innovation – to date it has deployed over £710 million of capital investment into a portfolio of 40 businesses and projects, each with a goal to contribute in some way to its core missions.
“A real opportunity for the Bank since we opened nearly five years ago is to make a difference beyond simply investing directly,” explained David Ritchie, its chief strategy officer.
“We’ve always been aware that we are in a privileged position to interact with government bodies, the private sector, and others so we are really challenging ourselves to use these relationships to harness our collective skills and experience to understand barriers to investment and develop solutions
“Looking at the housing challenge that Scotland is facing, there is considerable capital out there that is not necessarily flowing into the sector. We need to develop long-term approaches and sustainable investment models that mean sharing both risk and rewards”
The Bank supports and sits on Scotland’s Housing Investment Taskforce which has been tasked with identifying actions that will unlock both existing and new commitments to investment in housing by bringing together key interests of investors and investees.
Launched last year, its wider remit is to encourage and promote new delivery partnerships.
“It’s about building investor confidence to attract more capital investment into the housing sector and our Market Creation function also has this aim, so we are having lots of fruitful conversations through the taskforce.”
Director of Market Creation (Place), Susan Campbell, pointed out that the housing challenge is cross-tenure and countrywide. “We simply don’t have enough affordable housing in Scotland,” she said. “There are constraints around the private rental sector too and challenges faced by private housebuilders.
“So, when we look at it through an investment lens, we must look at how we create viable mixed tenure models that bring partners together from a commercial and economic perspective, and also unlock the social benefits of building more affordable housing.
“It is about creating an environment and pipeline of activity that will attract investment, it is about scale and looking across different areas and regions – and it is about creating a clear vision and conveying the scale of opportunity for investors and the supply chain, taking a whole system approach.”
While the crisis is a countrywide challenge, there is a particular need in rural and Highland communities where investment is in danger of being thwarted through a lack of housing for the people companies need to work on major projects in industries such as offshore wind, for example.
The Bank notes that communities across the country are affected – but points out that offshore wind “needs lots of people fast”, with Mr Ritchie using Haventus, the owner of Ardersier Port near Inverness, which is developing the energy transition facility to boost offshore wind capability, as a prime example Haventus, a member of the Inverness and Cromarty Firth Green Freeport (ICFGF) consortium, last year secured a £100m joint credit facility from the Bank and National Wealth Fund (NWF) with £50m investment from each.
The financing follows a £300m capital commitment announced in 2023 by energy investment firm Quantum Capital Group, when Haventus began the redevelopment of Ardersier Port.
“We know that employers are struggling to attract staff and for companies trying to attract workers into Inverness and the surrounding areas it is clear that lack of housing is one of the biggest challenges,” Mr Ritchie said.
“It is a constraint to the growth of the Highlands. Offshore wind will be recruiting thousands of people in the coming years.
“Haventus is already securing customers and it is recruiting – but what we don’t want to see is people commuting into the area Monday to Friday then leaving the area to go back home at the weekends without engaging with or bringing benefits to the local community. So, we’re having conversations with the port owner and Highland Council and speaking to potential housebuilders and investors to highlight the scale of the opportunity.”
Mr Ritchie also highlights the Bank’s role as a facilitator in bringing all interested parties to the table.
“You’re dealing with different people from different organisations with different priorities – all with different reasons for being there and looking at it from their own perspective,” he noted.
“So, we’re driving discussions forward and helping everyone find solutions to take opportunities over the line. It’s a work in progress but we are keen to advance as quickly as possible – lining up different partners is a challenge, but the Bank accepts that challenge and we are pleased to be working with like-minded partners who see the opportunities and want to seize them now.”
Commercial capital money, Mr Richie pointed out, “goes where the biggest return is and to projects that don’t necessarily create the biggest social impact”, adding: “Part of the solution is changing mindsets and asking private investors and the public sector to think differently – we see it as a different approach involving multiple partners. By sharing the risk and rewards, a joint venture has the potential to be more fruitful, so we need open-minded partners willing to explore the unproven, partners who are willing to take calculated risks and a long-term view.
“As I’ve said, we see ourselves at the Bank in a privileged position – we have credibility in the commercial world and in the policy/regulatory world. We have a track record, and we are keen to leverage that as much as we can – and housing is just one of the challenges where our Market Creation function can be a catalyst for change.”
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Summit laid foundations for solid Highlands partnerships
IN November, the Bank participated in the inaugural Highland Housing Challenge Summit in Aviemore, convened by Highland Council and Prosper.
The event brought together key players in the housing sector, with an action-focused objective of realising the housing opportunities which will emerge from the expected economic development of the region in the coming years.
Susan Campbell, who spoke at the summit, added: “We know that 24,000 new homes are required over the next 10 years around the Inverness and Cromarty Firth Green Freeport but that is not taking into account other growth opportunities and the needs of existing businesses such as hotels who need accommodation for staff.”
Last year, she noted, the Bank committed a further £20m to the Mid-Market Rent strategy fund (New Avenue Living) managed by Thriving Investments, the social value and ESG-focused real estate fund manager. The Bank’s follow-on investment takes its total investment in the fund to £60m.
New Avenue Living, which has a mandate to build over 1,000 high-quality, energy efficient homes within close proximity to major Scottish city centres, has to date delivered over 700 homes, with over 400 more currently in development. The homes are rented out at a lower rate than is available in the private rental market, helping to deliver the much-needed supply of affordable homes.
“The fund provides the high quality homes that people need, in areas close to their families and jobs, including for key workers –and the beauty of this model is that we can build at pace and scale,” said Ms Campbell.
“However, while this is a model that works across the central belt, it can’t necessarily be replicated in rural areas or at a national level. So, we want to look at where the money is not flowing and why. This is a good example of why we are ambitious to do more in this space through our Market Creation function.”
The supply chain is key, she said, but “we need to find ways to support and encourage more builders to grow their businesses outwith the central belt”, adding: “Without this supply chain growth in rural areas it will remain much more expensive to build homes and harder to build investor confidence.”