Barely a week goes by when there is not something in the press relating to the shortage of housing, particularly social housing, in Scotland. This is a particular concern for remote and rural areas, and in April 2023, the Scottish Government pledged their commitment to "delivering 110,000 affordable homes across Scotland by 2032 - with at least 10% in our remote, rural and island areas."

There is plenty of forthcoming investment in the Highlands and Islands with the ScotWind leasing bid and the Inverness and Cromarty Firth's (ICF) successful bid for green freeport status, as well as £100 million of investment earmarked for Orkney, Shetland and the Outer Hebrides via the Islands Growth Deal. All very positive for the area, but there remain concerns about a lack of houses for local workers.

In recognition of the critical influence the housing crisis is having on businesses and communities across the region, a group of stakeholders was set up by the Highlands and Islands Regional Economic Partnership and had its first meeting in July, with members agreeing to challenge the norms and bring about changes that will better support local housing needs. It will be interesting to see what proposals arise from this group.

Brodies recently brought together key figures in the living sector to discuss the challenges and opportunities for housing in Scotland's main cities and regions. Common themes included the challenges around planning and sustainable development, particularly relating to the refurbishment of existing premises. This aligns with the transition to Net Zero as well as the regeneration of town and city centres but is an expensive process, perhaps prohibitively so.

Another challenge that we hear about on a regular basis from the construction sector is the increase in construction costs generally, which anecdotally has halted some developments by housing associations that may otherwise be looking to expand their portfolios.

The BCIS Private Housing Construction Price Index reports that the costs of housebuilding increased about 10% between Q1 2022 and Q1 2023. That is on top of the circa 15% increase the previous year, creating a real issue for already tight budgets. Pricing does seem to have now stabilised and there are some methods that are being suggested as possibilities to reduce or at least maintain prices going forward.

So what are those methods? Modular construction is one that has received both positive and negative press – indeed, its advantages and contractual challenges are one of the areas our construction team will be looking at next month at our seminar in Inverness. For a long time, house builders have made use of certain modular elements, but could a wider roll-out assist? The benefits of modular construction are projects that can be delivered more quickly and cheaply with elements of housing units, from bathroom pods to whole units, being manufactured offsite and then installed on site. One example is Legal & General and its modular housing factory, which successfully completed the build of two modules required to make a house within 14 days, and the subsequent installation on site, hoisting of roof and finishing of interiors within a further 12 weeks. These houses look similar to other traditionally built houses but are more energy efficient and a long way removed from the post war, pre-fab houses.

However, that success story is quickly followed up by the downside of modular construction; L&G recently announced closure of its factory. Other modular home manufacturers have become insolvent, demonstrating that modular housing is not without its challenges and perhaps not the answer that everyone was hoping for.

It may be that more innovative tax incentives and similar are required to encourage the development that is required, and it is encouraging to see that the Highlands and Islands Regional Economic Partnership group is prepared to think beyond the norms to identify new and innovative solutions that will work for the region in addressing its housing issues.