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Community ownership study finds that a mix of funding is needed for success

Communities have many options to secure and develop land, but the full range of financing models is often not widely known, and there is more scope to develop innovative finance models to support community ownership, a new report says.

The Scottish Land Commission has this week published a report on the issue, entitled The Range, Nature And Applicability Of Funding Models To Support Community Land Ownership. It identifies 13 different approaches that have been used across Scotland to successfully fund community ownership and development. 

The mechanisms include well-known approaches such as charitable and philanthropic grants, crowd funding, commercial lending, and corporate social responsibility. The report also notes that individual models are not mutually exclusive and that a mix of models are often used by community organisations to achieve their aims. 

The most significant funding to buy land and building assets is provided by the public sector – particularly through the Scottish Land Fund. The Fund is now in its third funding round with an annual budget of £10m per year for the period 2016-21. 

However, the Commission advises that while public funding remains important, with increasing interest from communities, and wider challenges to public finance, the fullest range of potential funding models should be considered. To help make community land ownership a normal option for communities across Scotland, access to a range of funding models will help meet different circumstances. Furthermore, information on these should be easily available and community groups should be able to fully explore all options, with expert advice, at the earliest opportunity. 

Scottish Land Commission chief executive, Hamish Trench said: 

“Following our recommendations last year on what is needed to support community land ownership as a normal option across Scotland, we have looked more closely at the range of potential financing models. Community ownership is not an end in itself, but a means to achieving a range of positive outcomes from social and economic development to environmental management and restoration. 

“This report shows that communities are already tapping into a wide range of funding options and that more can be done to share the awareness, experience and availability of these. It also suggests there is scope to develop new innovative financing models that meet the needs of both communities and investors, drawing on some emerging international practice.” 

To stimulate further investigation of these options the Commission will be funding a short-term internship. This will consider two models that are used in Europe for similar purposes (a Founders Fund with Repayment Threshold, and Impact Investing with Social Return on Impact Discount) to research and develop their applicability for a Scottish context. 

Case study: West Harris Trust 

The Trust was formed in 2008 to purchase three crofting estates belonging to the Scottish Government, consisting of 7225ha (17853 acres) of land with 119 residents. Since purchasing the land in 2010 it has released land for housing, created a community hub and invested in several renewables projects to create an income stream. 

The Trust has been able to secure significant public sector resources to deliver public goods for projects that would not deliver a free market return and has been successful in using a range of alternative financial models to finance revenue-generating projects, particularly in renewables. It has been excluded from traditional bank lending due to its lack of start-up capital, limited initial revenue streams and assets being held in crofting tenure. However, it successfully used social impact lending from Social Investment Scotland and different forms of private sector investment to deliver projects. Preferential lending from the voluntary sector to buy the estate and from the local authority to enable housing development has also played an important role. Other important factors in successful development have been institutional support from public sector partners and the skills available in board and staff. The combination of available financial models, public sector support and local determination has enabled the trust to develop significant revenue streams, provide important community and business infrastructure, create employment opportunities and raise the population from 119 to 143.