How the SNP is making Scotland’s housing crisis worse

The latest statistics suggest that the problem is only getting worse. According to the industry group Homes for Scotland, housing completions and starts are falling year by year, down 17 and 12 per cent respectively, this year compared to last. Meanwhile, more than a quarter of Scottish households are living in some sort of housing need.

It is clear that something has gone badly wrong, with a mismatch between the supply of housing and demand. It stands to reason that with the rising population, fuelled mostly by inward migration, we will need more homes. But there also have been market shifts which have altered the level of demand, particularly in certain localities.

Scotland’s population moving east

Overall, Scotland is seeing a population move from west to east, meaning areas around Edinburgh and the Lothians, and Fife, are seeing increasing housing demand, and with it rising prices. Meantime, more people living alone means that more housing units are required, and would be even if the population remained static.

There is a long list of the barriers that prevent new housing being constructed. In the private sector, top of that list for industry is the need for planning reform, with the existing complex, time-consuming and costly process needing to be streamlined.

But that is only one aspect needing to be addressed. According to Homes for Scotland, access to finance is a substantial problem, particularly for small-to-medium enterprises. They historically built nearly half of all the new homes in Scotland, but their share has now decreased to one in five.

One housebuilder told me last week that another major negative factor was the availability of electricity grid connection for new-build developments. Building regulations requiring that properties be fitted with renewable heat systems, such as heat pumps, together with the installation of electrical vehicle charging points, mean that the electricity load demand for new homes is far higher than was the case in the recent past.

Across very large parts of Scotland, these new builds cannot commence until the grid constraints are removed. In some cases, that means delays of five years or more before construction of these new homes can even commence.

£3 billion of lost investment

If the challenges are significant in relation to building homes for sale, they are even more acute in the rental sector. According to industry experts, more than £3 billion of private investment has been driven elsewhere as a consequence of the rent freeze and then the rent cap introduced by Patrick Harvie, the co-leader of the Scottish Greens, as a minister in the Scottish Government.

While the rent cap has now gone, the current Housing Bill proceeding through the Scottish Parliament contains measures for rent controls which continue to cause alarm amongst investors. While Scottish ministers try to make encouraging noises towards the sector, it remains the case that build-to-rent in Scotland remains an unattractive option for those looking to make a return on their money which can be better guaranteed elsewhere in the UK, or further afield.

As if that were not bad enough, the Scottish Budget recently passed by Holyrood increases the additional dwelling supplement on house purchases in Scotland from 6 to 8 per cent, well above the level payable south of the Border. The Scottish Association of Landlords (SAL) has warned that the consequence of this will simply put landlords off purchasing properties for rent, pushing supply down, and rents up.

Small buy-to-rent investors will certainly see the prospect of paying an additional 8 per cent on the purchase of a property as a highly unattractive prospect. According to SAL, 53 per cent of their members are looking to cut their rental portfolio size, citing perceived hostility towards landlords from government as a major factor.

Supply and demand

We have already seen private rents in Scotland rising faster than in any other part of the UK, including London, as a direct consequence of government market intervention which has reduced supply while demand is rising. Decisions such as the additional dwelling supplement increase illustrate how there is nobody within the current SNP Cabinet who seems to understand the most basic economic rule of supply and demand.

But there may just be some glimmers of hope that ministers are starting to get the message. Last week the Acting Net-Zero Secretary Gillian Martin MSP told the Scottish Parliament that the draft Heat in Buildings Bill would no longer be taken forward in its current form, scrapping what had been flagship plans to make homeowners switch to green heating soon after buying a new home.

It had become increasingly clear that this requirement was simply unaffordable, and to impose these burdens on new-build properties would just put them further out of the reach of families already struggling with the rising cost of living.

On Monday, the Scottish Government followed this up with the announcement of the launch of a new national planning skills commitment plan, involving a coordinated skills and recruitment drive for the planning sector. This is intended to help address shortages in the planning departments of local authorities and within the Scottish Government, to help reduce one of the severe blockages the housing industry has identified.

These measures are certainly welcome, but there is a long way to go yet before we see a policy framework which will help rather than hinder the supply of new properties, either for sale or for rent. To date, SNP policies have made the housing emergency worse, not better.

Murdo Fraser is a Scottish Conservative MSP for Mid-Scotland and Fife