Subsidy levels for affordable homes for rent being delivered by councils and registered social landlords (RSLs) are to increase up to £14,000 for each new home over the next three years, the Scottish Government has announced.

The increase in grant subsidies, which help councils and RSLs acquire land or buildings and to build, convert or improve housing for social and affordable rent, comes with additional incentives being offered for those homes achieving the higher greener standard.

Recommendations on increasing subsidy levels made by an expert Subsidy Working Group, which included housing associations and council representatives, have been agreed in full and will now be implemented for all new grant applications.

The move means subsidies for RSLs in city and urban areas have increased from £58,000 to £70,000 and from £46,000 to £57,000 for council homes.

Housing minister Margaret Burgess said the announcement will help towards delivering the Scottish Government’s target of delivering at least 50,000 affordable homes.

Ms Burgess said: “I would like to thank the group for their work on the report. We are aware of the pressures being faced by councils and housing associations, and support their recommendations on increasing subsidies.

“Housing is at the heart of our ambitions to create a fairer and prosperous country and councils and registered social landlords will play a critical role in realising that.

“We have a strong record on housing, having exceeded our target to deliver 30,000 affordable homes in this Parliament. We also started a new generation of council house building and have taken steps to safeguard social housing for the future by abolishing the right to buy.

“Our new target will be to deliver at least 50,000 affordable homes, which will be backed by over £3 billion of investment.

“The new target is a 67 per cent increase in affordable housing supply, with 70 per cent of the new target being for social rent.”

The increase in grant levels was also supported throughout the sector.

Chartered Institute of Housing in Scotland director, Annie Mauger, said: “Given the funding shortfall currently being experienced by affordable housing providers, the proposed increase in the level of grant subsidy per unit is very welcome.

“The adjustments to the subsidy framework and benchmarks outlined in today’s announcement fully reflect the recommendations of the 2015 Subsidy Working Group of which CIH Scotland was an active participant.

“Setting subsidy benchmarks at a realistic level to reflect rising delivery costs is absolutely crucial if we are to achieve the Scottish Government’s ambition to deliver many more affordable homes through its Affordable Housing Supply Programme.

“Today’s announcement will give an important boost to that programme as well as helping to keep social rents affordable. Increasing the supply of affordable homes offers multiple benefits including improved health and wellbeing and an important stimulus to jobs and the economy.”

Annie Mauger added: “Delivering those additional homes will also require an improved land supply, a planning system that is fit for purpose and increased capacity within the construction sector. Nonetheless, today’s announcement is a crucial step towards achieving that goal.”

Mary Taylor, chief executive of the Scottish Federation of Housing Associations (SFHA), said: “This announcement is long-awaited and most welcome. We are pleased that the government has listened to the views of the Subsidy Working Group which was specifically convened to look into grant levels. We look forward to seeing the detail and to working with our members, funders and the Scottish Government and local authorities, to add to the supply of social housing at affordable rents.

“As researched showed last October, new affordable homes are urgently needed and these measures will go towards helping the sector to meet housing need. It can take a long time to get houses ready for occupation, and this clarity about investment rates will allow our members to plan ahead. Crucially, the increase will also ensure that the homes are affordable to those working in low paid jobs and on low incomes.

“While the increased grant levels are a welcome boost, we are aware that other factors impact on the sector’s ability to deliver increased numbers of affordable housing. The key issues are planning, infrastructure and the availability of affordable land.

“We will continue to work with the Scottish Government, the housing association sector, local authorities and other partners to find solutions to these challenges.”

Peter Howden, chair of the Glasgow and West of Scotland Forum of Housing Associations, said: “The Forum warmly welcomes ministers’ acceptance of the Subsidy Working Group’s recommendations on grant rates. Keeping rents genuinely affordable to people in low paid work remains a top priority for community controlled housing associations, and the new grant rates give us a fighting chance of making a significant contribution to the overall programme with high quality new homes which help regenerate our communities. The new rates, alongside the pledge to greatly increase the supply of social and affordable housing, show that at a difficult financial time, housing is a very high priority for ministers.

“In welcoming the overall announcement we would express disappointment that, for 2016/17 at least, it hasn’t been possible to implement the recommendation on a small, separate fund for environmental and place-making works as such funding can make a real difference in enabling regeneration projects to go ahead. We look forward to discussing with the Scottish Government the inclusion of this element in the three year programme from April 2017.

“We will also be keen to discuss with the Scottish Government their expectations around procurement partnerships. Identifying efficiencies and sensible collaboration – for example around private finance – obviously makes sense, but at a time when quick progress towards the ambitious new supply target is crucial, we wouldn’t want to see providers’ agility hampered by the creation of cumbersome procurement frameworks which, to say the least, have a dubious track record so far in enhancing new housing supply in Scotland.”

Kingdom Housing Association chairman, Charles Milne, congratulated the Scottish Government on the announcement.

Mr Milne said: “Margaret Burgess, Housing Minister, is to be credited for having the recommendations of the subsidy working group accepted and these new levels will assist those housing associations such as our own, who have remained active in developing housing to tackle Scotland’s ever increasing need for new affordable housing.”

And he welcomed the minister’s pledge to create 50,000 new affordable housing units in the next parliament but also welcomed how the debate on housing was becoming central to the next Scottish Parliament elections.

He added: “I am optimistic that Scotland’s housing crisis can be tackled now in the foreseeable future with the Scottish Labour Party committed to setting a target of 60,000 new homes should they lead the government . This matches the targets as set out in the recent joint report by Shelter, SFHA and CIH so between these two pledges, then surely we can get a consensus that the scandal which is Scotland’s housing crisis can now be seriously tackled in an urgent manner.

“Apart from the case for social justice, the economic case for a huge housebuilding programme is now being discussed. If implemented there may be a skills shortage so the time is now right to look at increasing further education courses and creating more apprenticeships and training opportunities.”

Mr Milne explained: “Last year Kingdom’s Fife Works team assisted 244 into employment and assisted 202 into training places. That was with limited funding and generally with more money going into the provision of housing then we can do so much more and provide many more young people with opportunities to develop.”

Lastly Mr Milne urged whichever party that was in government to continue to expand current initiatives to facilitate private lenders to match the huge increase envisaged in affordable housing investment.

He stressed: “This would also pave the way for the many housing associations in Scotland who are straining at the leash to get on and fulfil what they consider to be central to their cause in protecting and providing value to tenants and building houses.”