Scotland’s ‘Housing Crisis’ – a question of supply?

Scotland needs more new homes.  That is the consensus amongst political parties and stakeholders in Scotland.  It is argued that housing problems such as the affordability of housing, access to social housing and homelessness can, at least partly, be tackled by increasing the supply of housing.

The picture of housing supply

Following the 2008 global financial crisis, new housing completions fell sharply, mainly because of a fall in private sector new builds.  Accessing home-ownership became more problematic, particularly for first-time buyers, because of more restrictive mortgage lending criteria and the need to save for a large deposit (Whitehead and Williams 2011).

The climate of public sector spending restraint has meant that, while new affordable housing completions have remained fairly constant over the last few years, the number of social rented housing units completed (which require higher levels of subsidy) has reduced. Alternative, innovative methods of financing affordable housing are being sought by the Scottish Government so that more homes can be delivered for less public investment.

With the upturn in the economy, and with the support of UK and Scottish Government initiatives, such as the Help to Buy scheme, private housebuilding levels have increased recently. But overall, total new builds still remain almost 40% down on 2007 levels (Figure 13).

New Build Completions 1999-00 to 2014-15

HousingSupply

Source: SPICe, based on data from Scottish Government 2016a

 

The numbers game

Many commentators argue that housing supply in Scotland is not keeping up with housing needs. But exactly how much housing is needed is a difficult question which has no definitive answer.

Local authorities have responsibilities for assessing local housing needs through their Housing Needs and Demand Assessments which are used to help inform local housing strategies and investment priorities. At the Scotland wide level the Scottish Government sets targets for its Affordable Housing Supply Programme but it does not set targets for the wider supply of housing.  A recent report commissioned by the Scottish Federation of Housing Associations, CIH (Scotland) and Shelter Scotland estimated  that over the next five years there is a need for a minimum 18,700 homes per year, of which at least 64% (12,000) should be affordable homes (Powell et al. 2015). Homes for Scotland is calling for the completion of at least 25,000 homes per year over the next Parliamentary Session.  This compares with 16,213 completions in 2014-15.

Scottish Government Affordable Housing Supply Targets

Over the last five years (1 Apr 2011 to 31 May 2016), the previous Scottish Government’s affordable housing supply target was to deliver at least 30,000 units, of which 20,000 would be for social rent. This target was exceeded, by at least 1,000 units as, by December 2015, 31,034 units had been completed (Scottish Government 2016b). However, there had been some criticism that the target was not ambitious enough.  Targets for the next five years (1 April 2016 to 31 March 2021) have been increased. The aim is to deliver at least 50,000 units, of which 35,000 will be for social rent (increases from the last five year period of 67% and 75% respectively).

What is the Scottish Government spending on housing supply?

In 2016-17, the housing supply budget is around £690m (Scottish Government 2015), with the majority, 83% (£572m), being devoted to the Affordable Housing Supply Programme (AHSP). While the overall budget remains broadly similar to last year’s budget, the amount allocated to affordable housing has increased by just over a fifth. In addition, the benchmark subsidy levels have been increased following evidence that previous subsidy levels were not sufficiently high (Scottish Government 2016c).

Most of the AHSP (about 70%) is distributed to local authorities who devise a local development programme to be agreed by the Scottish Government. Other programmes managed by the Scottish Government include those aimed at mid-market rented housing, low cost home ownership and other initiatives such as the Rural Homes Fund. New innovations in financing housing, such as charitable bond finance and the Local Affordable Rent Trust, are also being developed.

Most of the remaining housing supply money is spent on the Help to Buy (Scotland) Affordable New Build Scheme which helps buyers purchase a new build property from a participating developer (with the Scottish Government taking an equity share in the property).

What else needs to be done to increase housing supply?

Increasing housing supply, and meeting the affordable housing supply targets, is not just about money. Land needs to be available, and ready to build on, as do the materials needed to build houses. There also needs to be enough skilled people to build the houses. Other activities to support housing supply are underway. In particular:

  • A review of the planning system, part of which focusses on housing delivery, is being undertaken by an independent panel and is due to report later this year. The SNP Manifesto (SNP 2016) set out a commitment to bring forward a Planning Reform Bill based on the recommendations of the Review.

Removing infrastructure blockages: some major housing developments have been unable to proceed because of difficulties in getting the right infrastructure, such as roads, sewerage and water in place. A five year £50m fund comprising loans and grants has been established to help with these problems (Scottish Government 2016d).

Kate Berry

Sources:

Powell, R. Dunning, R. Ferrari, E. McKee, K. (2015) Affordable Housing Need in Scotland, Final Report – September 2015, Scottish Federation of Housing Associations, CIH and Shelter Scotland. Available at – http://www.sfha.co.uk/files/Affordable%20Housing%20In%20Scotland.pdf [Accessed 27 April 2016]

Scottish Government. (2015) Scotland’s Spending Plans and Draft Budget 2016-17. Edinburgh: Scottish Government. Available at- http://www.gov.scot/Resource/0049/00491140.pdf [Accessed 27 April 2016]

Scottish Government (2106a) Housing Statistics for Scotland – All sector new build. Available at – http://www.gov.scot/Topics/Statistics/Browse/Housing-Regeneration/HSfS/NewBuildAllSector

Scottish Government (2016b) Affordable Housing Supply tables. Available at – http://www.gov.scot/Topics/Statistics/Browse/Housing-Regeneration/HSfS/NewBuild/AHSPtables [Accessed 27 April 2016]

Scottish Government (2016c) Report of the 2015 Subsidy Working Group. Edinburgh: Scottish Government. Available at – http://www.gov.scot/Resource/0048/00482578.pdf [Accessed 27 April 2016]

Scottish Government (2016d) £50 million backs drive to build more homes. Edinburgh: Scottish Government. News Release 29 February 2016. Available at – http://news.scotland.gov.uk/News/-50-million-backs-drive-to-build-more-homes-231a.aspx [Accessed 27 April 2016]

Whitehead, C and Williams, P (2011) Causes and Consequences? Exploring the Shape and Direction of the Housing System in the UK Post the Financial Crisis. Housing Studies, 26 (7-8),p.1157-1169