Housing / Housing funding reinstated but lack of clarity remains over how it could be used
THE AFFORDABLE housing funding budget allocation for Shetland has been increased following a U-turn by the Scottish Government.
But at this moment it remains unclear how the increased funding for the 2025/26 financial year could be spent, with a risk that the money could be diverted to other parts of the country if it looks like it will not be used in time.
Last year Shetland Islands Council (SIC) had been advised to plan housing developments over the next five years against a backdrop of reduced government funding via the Affordable Homes Supply Programme.
This resulted in the timelines of some developments, such as the Knab redevelopment, being affected, while some projects were also removed from the SIC’s strategic housing investment plan (SHIP) and placed on a “shadow” programme.
The latest SHIP for 2025/26 was £16 million down in total over the next five years compared to the previous year’s programme.
However, not long after the SHIP was approved the Scottish Government published a draft budget for 2025/26 which included an uplift in housing funding.
This budget had been bolstered by increased funding from Westminster following Labour taking charge in the UK Government.
Speaking at meeting of the SIC’s development committee on Wednesday, councillors were told that the funding for 2025/26 had increased from the £3 million in the current SHIP to £5.2 million.
Development director Neil Grant said this was a “significant increase” and added that the figure was essentially back to where it was previously.
He said the SIC is “looking through what we can do with that funding” and how quickly things can be brought forward.
Grant’s concern, however, was the timing for the current year, saying he was worried they will be “really pushed” to get projects ready to make use of that funding.
The council has had meetings with government on how the funding could be used, and said there could be opportunities to “flex” the money across regions – with one area for example perhaps using less one year and more the other.
Shetland North councillor Andrew Hall again raised the proposed 12-unit scheme at the former Moorfield Hotel site in Brae, which is led by Hjaltland Housing Association (HHA).
This was one of the projects which was moved onto a “shadow programme” when it looked like less housing funding was coming Shetland’s way.
Hall said there was frustration in the community over this as his understanding was that a contractor was in place for the work.
Grant said there are talks ongoing between the SIC, HHA and the government but there could be issues around the “headroom” each organisation has.
“We are discussing internally how best to manage these projects and what could be brought forward,” he said, adding that a briefing note is set to be prepared for elected members on the housing funding situation.
Lerwick South councillor Cecil Smith remarked how although there is improved funding in place, it is already three months into the 2025/26 financial year.
He also questioned if there are any sites “shovel ready”.
Grant said there are a number of options, including the purchase of existing properties, and added that there are several smaller projects that could be brought forward.
But Smith said in his view the council needs to be ready to prioritise projects – and that the SIC “needs to be able to tap into any funding” on offer.
Smith added elected members need to realise that if they want change then it is up to them to push for that and provide clear instructions to officers.
SIC leader Emma Macdonald said it was clear from conversations in the meeting that the “committee really wants to see something happen” with the £5.2 million of funding.
“We clearly need a plan of how we’re going to spend that,” she said.
Her Shetland North ward colleague councillor Hall urged that any reviewed SHIP includes “new builds for rural areas in Shetland” – a view shared by Shetland West member Liz Peterson.
However Lerwick North and Bressay member Gary Robinson noted that in the lifetime of the current council – which was elected in 2022 – “we haven’t produced a single additional home in Lerwick despite it having the highest demand”.
There are plenty on the horizon in Lerwick however, with the SIC’s Knab redevelopment set to include around 140 housing units.
Meanwhile constriction work is expected to begin later this year on the first phase of Hjaltland Housing Association’s large Staney Hill development in Lerwick.
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