The Rural Housing Fund aims to increase the supply of long term affordable housing in rural areas over the next three years, by assisting the building of new homes and refurbishment of existing buildings.

The fund is open to a wide range of applicants, including long-established affordable housing providers, and also community-led organisations and private landowners, enabling them to take a more active role in meeting the housing needs of their community.

In addition to providing support toward the capital costs of housing projects, the fund will offer much needed feasibility support to enable organisations to develop robust plans for their projects.

Housing minister Margaret Burgess, who announced the fund while visiting an affordable housing scheme in Friockheim, Angus, said: “Good quality, affordable housing is essential to help attract and retain people in Scotland’s remote and rural communities.

“We are committed to improving lives across all areas of Scotland by making sure homes are affordable, attractive, and warm.

“We know building affordable housing in rural areas presents different challenges compared to urban areas which is why we are ensuring this fund is open to rural interests, including community bodies, private landlords and landowners.”

Derek Logie, chief executive of Rural Housing Scotland, said: “Affordable rural housing is critical to sustaining and developing our rural communities. The Rural Housing Fund has the potential to offer a huge boost to the delivery of affordable rural housing and we are delighted that the Scottish Government has demonstrated its commitment to rural Scotland with this announcement.

“We are particularly pleased that community organisations can apply to the fund and access feasibility support. Developing affordable rural housing has many challenges: we hope the Rural Housing Fund will help rural communities to overcome these and deliver good quality, warm and affordable housing.”

Scottish Land & Estates warmly welcomed the launch of the Rural Housing Fund but cautioned that a consistent private housing policy is still required to rejuvenate the sector.

Katy Dickson, policy officer (business & property) at Scottish Land & Estates, said: “Scottish Land & Estates has been involved in the stakeholder group which directed the Scottish Government as to what was needed to support the delivery new affordable rural housing. We are delighted that recognition has been given to the additional problems and costs that developing new housing in rural areas brings.

“Previous schemes such as Rural Homes for Rent, which we were at the forefront of developing, were pioneering in their delivery of affordable rural housing but it should be recognised that many land-based businesses are consistently delivering homes at an affordable level without the help of public money.

“We now need to see consistent private housing policy. The Scottish Government is providing this fund to assist the development of rural affordable housing while also taking the Private Tenancies Bill through parliamentary process. The Bill may result in a reduced number of landlords willing to let properties, particularly at affordable rents.

“The long term health of the private rented sector is absolutely crucial in rural areas where social housing is lacking. We fully support more security for tenants but this must come hand in hand with the robust and comprehensive grounds which landlords were promised at the outset of the Bill. We are now in a situation where the landlord’s position has been so eroded that there is little incentive to take on the risk of letting property, particularly at a lower than market rent.”

The project in Friockheim will provide business units for rent, a fitness suite, sports hall and meeting rooms. Three new affordable homes for rent are also being built, by the council, on adjacent land not required for the community hub.

Angus Council is working with the community to transfer the building to local community ownership. The community asset transfer plans were agreed in principle in 2013 and Friockheim Community Hub Ltd was set up to progress local plans for the development.

A recommendation for final approval of the transfer will be considered by the communities committee on 1 March 2016.