Sheila Gilmore says that supply of new affordable housing is restricted by developers, but the social housing we need may already exist, and it’s time for public money to be directed to solving this problem rather than perpetuating it.
The Redfern report on Housing, commissioned by Labour, has pointed out that the main problems facing younger people looking to buy homes are not so much lack of supply as restrictions on mortgages and flatlining incomes.
It is frequently argued that increasing supply is the way to reduce property prices. That assumes that the housing market operates like the market in other consumer goods – a glut of tomatoes will bring down prices because the crop has to be sold – but with houses, developers control supply.
It is no coincidence that among the loudest voices for this argument are developers and builders. ‘Give us more land, more houses will be built and those houses will be more affordable.’ This argument is part of the reason why the Scottish Government has insisted that councils like Edinburgh identify more land for housing than was thought necessary locally. But once so identified will all these sites get built on?
In previous planning periods over the last 25 years or more the full allocation has never been taken up. Developers like to have a wide choice of potential sites. Releasing too much land for housing places great pressure on greenbelt and greenfield sites. Measures to improve access to mortgages and various forms of subsidy can help stimulate the market, but historically builders have tended to build out slowly, both to test the market and to keep prices high. They can land bank the rest. Some land has changed hands several times in recent years without being developed.
In Edinburgh, the most recent housing needs survey states that 64% of additional supply needs to be for affordable rent. In many places new developments have to include a proportion of properly affordable housing. In Edinburgh this is set at 25% on most sites. Significantly, since the recession some developers have tried to wriggle out of such conditions, arguing that they act as a brake on building. If our need is for 60% of new supply to be affordable, but at best private developments produce 25% and push for less, it is going to take a lot of building to meet that need. To get 25 affordable homes, 75 market homes will have to be built. If there are insufficient buyers fewer will be built, and that means fewer affordable homes. Not a very efficient way to meet the assessed need!
Properly affordable housing needs subsidy. Generally this is achieved through a grant from government towards the capital cost. Social landlords then only have to borrow part of the build cost enabling rents to be kept down. Smaller subsidies have been used to create ‘mid rent’ housing with rents below the private rental market. Currently in Edinburgh the average private rent for a 2 bedroom property is £831 per month, compared with around £570 for ‘mid market rent’ and £420 for ‘social rent’. The various forms of low cost home ownership also need subsidy of some kind. There is land in Edinburgh ready and waiting if subsidy were available. Of course public subsidy is public spending but it is an investment and in the longer term can reduce other forms of public spending.
When numbers of council and housing association homes for rent are looked at together, there has been little increase in the last ten years. In 2005/6 4698 houses were built. There was a rise to nearly 6000 in the years between 2009/10 and 11/12 but numbers have been dropping since, down to only 3458 in 2015/16.
And the truth is that many of the houses needed are already in existence. More and more previously owner-occupied properties are moving into the private rented sector. What was 20 years ago a residual housing tenure concentrated in city centres and university areas has now spread out all over our towns and cities. We see it every day in the To Let signs. Lower-value properties such as former council houses have proved particularly attractive to landlords because of the high rental yield compared to capital outlay. Good ‘first time buyer ‘ homes are being snapped up by landlords.
Many people are living in these very houses, unable to qualify as being in sufficient urgent need for a ‘social let’ and unable to raise enough deposit to buy. They are paying high rents to landlords to live in the very houses they would often love to buy, with limited security of tenure and their rent making it hard to save towards a deposit.
So what can we do? One option would be to for councils and housing associations to acquire properties which exist, not just build brand new. In Edinburgh we have just seen an example on a small scale where a housing association stepped in to buy homes from a charitable trust which had been planning to evict tenants and put the properties on the market. But why not purchase more widely? One objection is that it could lead to inflation in house prices. So too do many of the measures introduced to help buyers like Help to Buy schemes. In the case of social landlords, a ceiling on what they could pay (pegged to the cost of new build plus land costs) would limit inflationary impacts. I have also heard it argued that these properties might not meet the standards landlords set for their new builds. Maybe so, but price will reflect condition, and in the real world people are living in these homes but paying high rents to do so. We have to be careful not to let the quest for the ideal stop us doing good things along the way.
Both buying and building are needed. However both will come from the same subsidy pot and unless this is seriously increased progress will be slow. The Scottish Government now has greater borrowing capacity, and tax varying powers. It’s time to use them.
3 thoughts on “A better way to address our housing crisis”
So this week the Scottish Government must use the tax raising powers (such as they are) to subsidise the crisis in social housing, last week it was the crisis on the railways and the week before it was the crisis in the NHS. Great ideals but very little credibility.
I love how Labour is able to spend money in opposition they can never find when in Government.
How many times does a Labour drone have to be reminded that the Scottish budget is being cut year on year on year at a rate of about 1.5 billion per annum and thanks to Brexit it is going to get even worse.
As long as Labour opposes FFA and Independence they cannot keep coming up with spending initiatives knowing full well there is no spare cash available to use on them as most of our revenues are still reserved to Westminster. The Scottish Government has to balance its budgets There is no spare spending.
Labour as clueless in opposition as they are in Government.
Total Independence of Scotland from Westminster is what is needed. That plus the riddance of Trident, and long overdue land reformation. Then an independent Scotland can get down to real business. Including a viable national housing start-up. Labour needs to join the Independence Cause to see their desires fulfilled.
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