On #ScottishHousingDay, 5 graphs which show why Scotland needs systemic housing transformation

Ben Wray

Common Weal head of Policy Ben Wray look at key problems in housing in Scotland: low supply, high house prices, the rise of the private rented sector, vacant & disused land and the need for energy efficient homes

ON Scottish Housing Day, Common Weal Policy provide an analysis of Scotland’s housing situation in five graphs, which collectively reveal the need for deep, systemic transformation of our housing system – tinkering round the edges will not cut it.

In just over two weeks, these issues will be debated and discussed in more detail at Common Weal’s Housekeeping Scotland Convention, which will begin to build a new vision for homes, communities and places in Scotland. If you would like to attend, tickets are available on Eventbrite.

Low supply

The above graph (from housing Professor Ken Gibb) provides a long-range view of housebuilding in Scotland that puts quibbles over building 10,000 or 12,000 affordable homes per year into perspective. In the 1950’s, 60’s and 70’s, housebuilding was regularly around the 30,000 per year mark. This was largely driven by council housebuilding, and peaked in the post-war recoconstruction period and the New Town programme in the late 1960’s.

Since the 1980’s, social housebuilding has fallen off a cliff as the sector became increasingly privatised. Housebuilding was around about the 20,000 per year mark 1980 to the mid-2000’s, but has slumped after the financial crisis, with historic lows since 2007. This is inherent to the speculative housing industry which has inequality built into its very fabric – if enough houses are built, prices fall and banks and property developers make less money.

The requirement therefore for social housebuilding in particular to pick up the slack is clearly evident, but it remains stuck at a low level, one that would not seriously change the dynamics of supply and demand in the housing market.

The average price of new builds in 2017 was £222,000, over 70,000 above the average house price meaning private-sector builds appear to be aimed at the middle to upper end of the market. The average cost of a first-time buyer was £120,000 – much too high for the bottom half of income earners in Scotland to afford. Around 150,000 people remain on the council house waiting list and with demographic changes, Audit Scotland has estimated 21,230 homes are needed each year from 2011-2035 (500,000 in total) just to keep up with the existing ‘low-supply equilibrium’ in the market. In practise, to meet demand and reduce the inequality in the housing market far more are needed than this. Only large-scale government intervention can change this.

Historically high house prices

This ONS graph looks at house prices in Scotland from 2000-2017: the average price of a home in Scotland peaked in July 2017 at £149,000, just above the previous pre-recession high. Rises are also highly unevenly distributed – prices in Orkney have risen 14% over the past 12 months, and 9.6% in Edinburgh. While the average remains below property values in much of England, it does show that inequality in Scotland’s housing market is reaching new highs.

Since the turn of the century, average house prices in Scotland have tripled while wages have stagnated. For those who are on the housing ladder, this is good news for as long as prices continue to rise – not only are they wealthier, but they can offset lower incomes and pensions with using their propertied wealth to buy-to-let, anticipating the value of their newly acquired asset will grow over time while they take in a tidy sum each month in rents. But as people become increasingly indebted, they are vulnerable to a major crash, with negative equity a real danger.

Nonetheless, if you were lucky enough to get in at the right time it is unlikely that even a crash would make you poorer than where you start. For the other half of the population who weren’t wealthy enough to get on the housing ladder and for the younger generation who don’t have asset-rich parents to give them a leg-up, the situation is much worse – housing becomes increasingly unaffordable as rents rise and they fall further behind those with propertied wealth as inequality grows. Once again, this is inevitable in a speculative housing market – by its very nature, there has to be losers as well as winners. Policies aimed at restricting house price growth are now a necessity.

The privatisation of the rented sector

This graph from Gibb shows changes to the rented sector in Scotland since the start of devolution. It is not a graph to be proud of. The private-rented sector has tripled in size to become the largest single rented sector in Scotland, while council and housing association stock has stagnated. In other words, successive governments at the Scottish Parliament have overseen the increasing privatisation of the sector.

The private rented sector is significantly more expensive than social housing and is highly driven by market forces, hence the geographical unevenness of private sector rent rises in Scotland since 2010: in Edinburgh PRS rents are up 25% over that period, in Greater Glasgow 23% and Aberdeen 15%, while in Ayrshire, West Dunbartonshire and the Scottish Borders rents have barely increased at all. Meeting social need is not part of the equation.

PRS homes score far lower in meeting the Scottish Quality Housing Standard, meaning dampness and mould which is a major cause of health problems. With no regulation tying prices to quality (as a proper system of rent controls would do, like in the Netherlands), the economic incentive for renovation and upkeep is low unless developers have gentrification in mind, which acts to displace and force out low income people.

Scottish Government policy of rent controls in rent pressure areas could help regulate some of the worst excesses of the PRS (although prices are already too high and this policy does not incentivise increased quality), but it will not fundamentally challenge the problem of a rented sector that has become much too privatised over the past 20 years.

Land going to waste

This graph from the Scottish Government shows vacant and derelict land in Scotland by hectare, including in urban areas. It reveals that far from there not being the space to build within existing urban environments, there is disused spaces that landowners are land banking – deliberately not using in the presumption that land prices will increase over time thereby making the land more valuable even when doing nothing with it.

Common Weal published a report earlier this year looking at vacant and derelict sites in the north-east of Glasgow alone, identifying at least 40 such sites. 59% of disused or vacant sites are within 500 metres of the most deprived communities in Scotland.

The current economics of land and housing mean builders tend to build where land is at its cheapest – 30-80% of the cost of housebuilding is in land purchase. Therefore brownfield sites on the edge of cities are identified, rather than disused land in the existing built environment – far better for building healthy communities that are good to live in. The Scottish Greens have proposed a tax on vacant and derelict land that could raise £200m and would incentivise landowners to use the land productively.

Tackling vacant and derelict land is not in itself enough – asset price inflation of land and homes distorts the whole housing system away from meeting social need towards speculative behaviour, despite the fact that the ownership of land and property in and of itself produces nothing of intrinsic value. Until rentier capitalism is challenged, inequality will continue to grow and productivity will continue to stagnate.

A long way off energy efficiency targets for homes

This graph shows energy efficiency of Scotland’s homes from 2010 to 2015. The aim of the Scottish Government is to have all homes at least band c energy efficient by 2030. While progress is happening, it has slowed in recent years and at this rate will fall well short of meeting the target.

Why does this matter? For two reasons: heating is the number one contributor to carbon emissions in Scotland and poor energy efficiency of homes is the number one contributor to fuel poverty. By making homes more energy efficient, two birds can be killed with one stone – increasing Scottish households’ ability to spend their income on other things in the process.

The Scottish Government’s energy efficiency programme has £500 million committed over the parliamentary term, but they themselves have admitted £10bn is needed for this work, so a funding gap exists. There is other ways than increased government spending to deal with this: the private sector does not currently have to meet the Scottish Quality Housing Standard, meaning it’s not required to build and renovate homes to sufficient energy efficient standard. Given the extent of landlord, developer and banker profits in recent years from house price and rent rises, asking for them to ensure their homes are energy efficient is reasonable.

New technologies is also making the building of energy efficient homes much cheaper, but building regulations have to change to put legal requirements on this. Cardiff University has shown zero-carbon homes which actually export energy to the grid can be built for the same price as a normal council house now. Other techniques, like off-site ‘house factories’ can improve construction quality. Many of these techniques can also be used for renovation as well.

Either way, the need for significantly increased government investment and regulation to ensure energy efficiency of existing homes and future housebuilding is a social and environmental imperative.