Good Houses For All

Overview —

This paper presents a model for building an unlimited number of houses for social rent on a zero-subsidy basis using the Scottish National Investment Bank.

These houses would be built to extremely high standards of thermal efficiency and on a stable finance model ensuring costs to the tenant are far lower than the private market.

The case is made that this model could be used as a post-pandemic stimulus scheme which will reform and secure the housing and construction sector.


Craig Dalzell

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Scotland’s housing sector is deeply unbalanced.

The owner-occupier sector has inflated prices far out of reach of many whilst delivering cold, draughty and poorly built homes to those who can still afford them, the private rental sector has similarly inflated – trapping many in a situation where they cannot simultaneously pay rent and save for the deposit to buy a house and the social rented sector has been deeply stigmatised and run down over decades to the point where it no longer fits the purpose that it was designed for – to provide an affordable and high quality
home to everyone who needs one.

The economic crisis caused by the 2020 coronavirus pandemic coupled with the looming crisis of the climate emergency will mandate the mass construction of very high quality homes complying with zero-carbon and near-passive heating standards.

This paper lays out a plan by which Scottish Local Authorities could build an unlimited number of these high quality houses, subsidy free, with secure and sustainable financing and at a much lower cost than can be delivered at present.


― Scotland’s housing market should offer people a quality public rental option, whether for young professionals not ready to enter the mortgage market, lower income renters who have few good rental options or families at any point on the income scale who simply don’t want their lives dictated by mortgages. Public policy should also seek to constrain house price rises but also drive up the highest possible thermal performance for new build houses.

― Scotland also needs forms of stimulus after the Covid lockdown and public rental house building linked to an industrial strategy to create many more domestic supply chains can create that stimulus.

― There is a financing model which means this can be achieved at unlimited
scale without public subsidy, involving three steps:

  • Use ‘Land Value Capture’. At the moment the public buys land and pays
    for it as if planning permission had already been granted – but planning
    permission is a value added by the public sector and the public sector
    can capture that value rather than give it away by buying land only at
    its current use value and not its later value with planning permission.
  • Then borrow from the Scottish National Investment Bank over
    mortgage-style periods of time (30 years) and spread the cost of the
    borrowing over that period so that rents are low.
  • Finally, build in a proper maintenance budget so these remain high-
    quality houses in perpetuity. It is also possible to sell off a limited
    number of plots (for self build) and a small proportion of the houses.
    This can give the public developers some additional budget to include
    extra public infrastructure in new developments.

― To achieve this the Scottish National Investment Bank should be given
immediate dispensation to operate as a proper bank and local authorities
should open ‘lists’ for families who want to live in one of these houses.
Supply can then be allowed to meet demand.

― In the current market a three-bedroom family home would incur a monthly
cost in rent, heating and maintenance of about £1,400. A house built using
the above methodology would have a monthly rent, maintenance and
heating bill of only £820.

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