Banking & Finance

The BBC recently reported a huge shortfall in new home construction in Scotland with the latest figures showing 7,000 fewer homes constructed per annum than needed. Extrapolating back over the last 10 years and assuming an equal level of shortfall in each of the preceding years, the aggregate new homes shortfall conservatively now stands at over 70,000 homes.
In the last year, the private sector contributed approximately 13,000 new homes, the housing association sector 3,000 new homes and local authorities a further 1,500 homes.
There are of course a myriad of contributing factors that have resulted in this undersupply, including the demise of the SME house builder sector following the last financial crises, funding availability, an acknowledged skills shortage across the construction industry, land allocation and consent issues and land banking.
The private sector operates on the basis of supply and demand, with a focus on delivering profit and return for shareholders. Their contribution to the housing supply equation will therefore always be naturally constrained and whilst addressing some of the factors outlined above may result in additional supply, the build record of the private sector in Scotland over the last 10 years indicates it will not of itself provide a solution to the overall gap in delivery.
The increased development initiative of the housing association movement, supported by generous levels of HAG, has contributed significant additional supply from that seen in previous years. The overall annual shortfall however is currently standing at twice the level of supply through the housing association sector. It is difficult to envisage capacity within the sector to make-up the shortfall.
Increased council house building is also helping to bridge the gap but again of itself will only have a limited overall impact.
We need another solution focused on delivering the necessary level of supply of homes of the types and tenures required now and in the future for people living in Scotland. This needs to cover the whole spectrum from housing for sale, mid-market housing through to social rented housing. It needs to recognise and embrace the technology advance in housing supply including the increased use of modular construction techniques and the installation of technology relevant to the work and life style requirements of the occupants.
Delivery of homes at the volume required requires radical thinking. I would suggest that for this purpose we looking to a central delivery model – a new Scottish housing corporation, established with a mandate to deliver new homes, and associated infrastructure, throughout Scotland and with requisite skills and financial backing. Such a body should be empowered to develop on a delegated consent basis, with deemed planning and other necessary permits, and with an obligation of local authorities and other statutory bodies to make available to it unused brownfield and other sites.
We can ensure that design is at the forefront of any such body, ensuring that the housing delivered is fit for purpose and attractive to live in.
If we are serious in seeking to address the housing undersupply, we need to be bold and take a radical approach, addressing the various issues currently inhibiting the supply.
There is a cost to such supply but given the pivotal importance to our economy that the people who live here have a warm and secure place to live, it should be at the very forefront of our central priorities.
Scotland is a small country. There is no reason why we cannot take control of this issue and successfully address this issue.

Chris Dun
Partner, Brodies LLP
1 February 2019

Chris Dun

Partner at Brodies LLP
Chris Dun is a lawyer who specialises in real estate finance. He has a particular interest in housing finance, including build for sale, build for rent and social and affordable housing.
Chris Dun