Housing associations across Scotland have the power to build new homes with much less public funding, a new study reveals.

Leading experts at Heriot Watt and York universities examined the capacity of social landlords and councils to finance and build new housing stock against a range of assumptions.

They found that the sector as a whole has the capacity to make taxpayers' money go further.

The Scottish Government's Affordable Housing Investment Programme allocated £1.7 billion over the last three years, subsidising an average of 60 per cent of the construction costs of each home built by housing associations.

The Scottish Government has injected £80 million to kick-start a new generation of council house building across the country offering a grant of £30,000 per house, approximately 25 per cent of costs.

The research was supported by an expert advisory group with members drawn from housing associations and local authorities.

The research findings will inform the forthcoming housing policy paper, due to be published in early 2011.

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Housing and Communities Minister Alex Neil said: "The UK Government's planned £80 billion cuts over the spending review period mean that next year, Scotland's housing sector faces the prospect of a reduction in funding for low cost homes.

"As this research highlights, if housing associations and councils work together to lever in resources to make Scottish Government funding go further, there is untapped potential to build significant levels of new housing at a lower cost to the taxpayer.

"It will be for landlords to take their own investment decisions. I hope they will carefully consider the findings of the study and, in the context of the UK Government's savage cuts right across the public sector, rise to the challenge and help deliver much needed affordable housing across Scotland."

The research was led by three of the UK's leading professors in housing:

• Glen Bramley, Professor of Urban Studies at Heriot-Watt University since August 2002, one of Britain's eminent academics in housing and urban economics, having been engaged in academic and applied policy research since the mid-1970s.

• Hal Pawson, Professor at Heriot-Watt University's School for the Built Environment, leads the school's Housing & Urban Society Research Group and is an experienced researcher specialising mainly in housing management and housing access issues.

• Steve Wilcox, Professor of Housing Policy at the University of York since 2000. He has specialist knowledge in the area of housing finance and is editor of the highly respected and widely used annual UK Housing Review (formerly the Housing Finance Review).

The Heriot-Watt and York universities report A Study into the House Building Capacity of Local Authorities and Registered Social Landlords in Scotland, was commissioned by the Scottish Government.