IN the June 16 edition of The National Lesley Riddoch wrote compellingly about the housing crisis in Highland Scotland (Do SNP or Greens have will to tackle Highland housing crisis?) A right to housing of a standard required to live with dignity, health and security is a fundamental human right and should be enshrined in a Scottish Constitution, along with a right to food, energy, water, work, education, health and other similar fundamental rights.

Unless the housing shortages in parts of Scotland are addressed these areas will suffer depopulation and economic decline. In meeting this vital social need, pension funds could have an important role to play in providing a share of the investment necessary to build the supply of social housing that our people need.

Everyone needs a place to live, so pension fund investment in social housing provision is a long-term, stable source of income, derived from the rents paid by social housing tenants. The need for housing does not fluctuate with the economic cycle, and so investment in housing carries a low risk matched by a stable revenue stream over a long time period. It is normal for pension funds to include stable and predictable assets in their investment portfolios, and social housing has the advantage of being a cash flow-rich asset and should be treated as such, rather than as a tradable financial asset.

READ MORE: Lesley Riddoch: Do SNP or Greens have will to tackle Highland housing crisis?

Local authority pension funds receive their income from pension contributions out of local council tax and central government grants. All of this is public money. Together, the 11 Local Government Pension Scheme (LGPS) funds received £1.45 billion in pension contributions in 2019/20. They control assets with a total value of £45.5bn.

The LGPS has both the firepower and the public responsibility to support the building of the social housing stock we need in Scotland. In saying this, we are not advocating that pension funds should become developers or landlords themselves, but that they commit to providing investment to local authorities or housing associations to enable these providers of housing to build the stock of social housing that communities need. In return, pension funds benefit from the revenue streams derived from social housing rents.

In an independent Scotland, local authorities should be given powers to borrow themselves by issuing local authority or municipal bonds, which would be a low-risk asset suitable for pension funds to buy, thereby providing the funding for local authority spending, including spending on social housing. In this scenario, pension funds derive investment income from interest payments made on the bonds, with the local authority income to pay the interest being derived from rents.

But here is the rub: social housing rents and other day-to-day spending by households which accrue as investment income to pension funds constitute a flow of wealth from those who do not have the benefit of a pension fund to those who do. This is one of the factors reinforcing other underlying causes of social inequality. It is also a compelling reason for Scotland to have a single national pension fund in which all citizens are members. If all citizens benefit from a single national fund, then all the pension contributions into the fund and all the investment income, from whatever source, benefits all. When households spend, they will also be contributing something to their own future pensions.

A single national pension fund is for the future. Meanwhile, our local authority pension funds have the capacity to support the expansion of Scotland’s social housing stock. It is our locally elected councillors who sit on the pension committees of the 11 LGPS funds. It seems unlikely that the financial professionals working in LGPS fund management or as advisers to the funds will take the view that investing in social housing sits well within current investment mandates. However, investment mandates are ultimately set by pension committees. What we need our elected representatives to do is redefine the mandates they set.

Elected councillors on pension committees need to be asking their advisers, “how can our pension fund help provide the investment needed to support our productive economy, and to provide the infrastructure and housing we need in order to make the transition to a zero-carbon economy in the shortest time possible, whilst also fulfilling our duty to the beneficiaries of the fund?” The answers to this question are what will define the investment mandates which direct how pension funds invest in the future.

LGPS fund investment mandates can be changed now. This doesn’t have to wait until independence, and if mandates are changed now, so that pension funds provide investment in our economy, infrastructure and housing, Scotland will reach the start of our post-independence journey from a much stronger position.