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Scotland’s housing policy is nuts

Robin McAlpine

One of the more notable elements in a pretty devastating Scottish Budget was the very substantial cut to investment in housing. What does this tell us about Scotland and its housing debate, and why does housing sit so high up the public agenda but not the political agenda?

Setting aside debates over funding envelopes and reduced capital budgets for a second, what remains indisputable is that housing is taking a proportionately bigger hit than almost any other aspect of government spending. It’s not that everything is getting an even cut; housing has been singled out for particularly severe reductions. It’s a choice to deprioritise housing.

On the face of it this seems strange. As I wrote recently, housing is actually the area of the main policy portfolios where the public are currently expressing the greatest level of dissatisfaction with the Scottish Government. That does not scream out ‘deprioritise me’.

What is being cut is also substantial – over £200 million from the affordable homes budget. Now probably about a fifth of that ends up in developer pockets because some of it is to encourage more low-cost housing for purchase. But about 70 per cent of it is for social rental housing.

That too seems like an odd choice to make given the current state of social housing in Scotland. This is a week in which Scotland achieved all-time records of reported homelessness and the statistics for social housing waiting lists are pretty eye-watering.

In fact right now there are 110,000 families in Scotland on a waiting list for a social rented house. Let’s just square that up with the Scottish Government’s current housing strategy. It proposes that there will be 77,000 new social rental houses in Scotland… by 2032.

Let’s stop and think about this for a moment; if you are on a waiting list for a social rental house just now then presumably there just isn’t one available. To make them available they need to be built (or purchased). Which will happen at a pace which means that, in theory, there will still be 33,000 families waiting for a home a decade from now.

So where are they now? Very many will be in some kind of temporary accommodation, and that is being paid for. Is it really sensible to keep that many people in more expensive private rented housing than it is to build houses that can give them a home in less expensive (but still better quality) housing? Remember, the families themselves are paying the same either way (whatever that is) so it’s the public sector which is paying more.

Which raises the question – how can it be economically sensible to not build this housing? Why is it being cut now? To think further about that it is also important to remember the context in which this is happening.

Two things are increasing costs in housing very substantially just now – the market in building materials and the market in house sales. Scotland imports about 80 per cent of its building materials and many of those are energy-intensive (particularly anything involving cement or metal). Which means the global supply chain snarl-up followed by the greedflation-generated cost of living crisis has pushed the costs of building materials way up.

And of course because these are almost all imports, it is just lost money. Very little of that cash gets recirculated elsewhere in Scotland’s economy. We just pay more and get less. This is the perpetual curse of our import-orientated economy.

Meanwhile house prices are rising rapidly, as it feels they always do (in fact, they’re currently rising at record rates in Scotland). You’d think this is counterintuitive in the current financial climate, but rationality is not really how the housing market works any more. A normal market would see prices decrease relatively during a financial squeeze like this – people would be bidding less for houses.

But it isn’t an equally-distributed crisis so there are plenty people at the top of the earning spectrum doing really well right now (like your Abrdn gaffer taking almost a million quid in bonuses for getting his business into a state where he has to make 500 people redundant…).

And the housing market isn’t the housing market it used to be. Houses used to be places people would live in but, as we have seen, almost nothing ever slows down the constant rise in house prices (or at least not for long) so houses remain a perpetually good investment opportunity. A lot of house price rise is driven by the speculative market and that doesn’t have much link to affordability.

So the Scottish Government is cutting capital subsidies to housing and is almost certainly motivated by spiralling costs. Now let’s have a look at the scale of the illogicality here. First, why on earth do we need to subsidise housebuilding at all? The great beauty of a house is (or should be) longevity. It’s not a car which depreciates and so needs constant real subsidy from the user.

Rather it is an asset which appreciates in value over time. That’s why we have mortgages; there is no need to buy long-term, secure assets with upfront spending. A sensible approach spreads the cost of the build over a lifetime. That’s what a mortgage is, the cost of a house spread over the working lifetime of its owner. 

Seen this way, there is never any need to subsidise housebuilding – you just need to get your borrowing timescales right. You might then need to subsidise some rent, but that’s what we’re already doing (and more-so than we need to).

You also need to ask why we keep inflating house prices and in whose interest that is working. Make no mistake, nothing in Britain is incentivised like home ownership, from endless generous tax perks to deliberate market inflation through hair-brained schemes like Help to Buy (which is really a disgraceful public intervention to increase developer profits) to a stated public policy of inflating house costs, we do this to ourselves.

Or rather it is done to us by government on behalf of developers. This is another one of those ‘Thatcherite for so long we’ve forgotten it was Thatcherite’ things. Other countries do not do these things and simply don’t have our housing problems. But other countries didn’t engage in an ideological war on social rental housing.

Equally, other countries didn’t take housing and shift it out of the government policy column ‘crucial social infrastructure’ and into the column ‘GDP-inflating opportunity’. If you look at everything from national housing policy to local planning strategies you will repeatedly find that it is nominally there to help people get into houses but in reality it turns out that it’s about ‘economic growth’.

This is another one of those ‘financialised economy’ things – how is paying more for the same house in the economic interest of the nation? It’s another GDP fiddle and was, for a long time, a middle class voter mega-perk. Imagine if we were taking train tracks and, every single year, we were making them more expensive to use even though they were deteriorating and all of that cost was passed on to passengers with no gain or benefit.

That would be nuts, right? That’s our national housing policy. It is utterly beset by dogma and ideology. It is designed by a category of people who are in on the buy-to-let scam influenced by the big developer lobby (Homes for Scotland is one of the most powerful lobby bodies in Scotland and is working against your interests) and imposed on people who can’t afford to live in a single house.

What would the alternative look like? Sometimes I get worn out repeating the same thing in the face of what really does seem like policy stupidity, but here goes. First, definancialise housing in public policy and make controlling house price inflation an explicitly-stated national policy goal. Stop subsidising developers, introduce land taxes and make property tax genuinely proportional to achieve that.

Then influence the market through large-scale public rental housebuilding. Do it by borrowing over the lifecycle of the house (local authorities could perfectly reasonable borrow over 50 years if they build houses good enough to last 100 years, which they should anyway). Do it with the mindset that this is about creating a market of choice; not a choice between ‘live with mum and dad, rent a shit house in the private sector for crazy money, somehow scrape together a mammoth deposit or live in housing clearly designed by people who think it is an emergency shelter for the poor’.

Instead explicitly try to out-compete the developers – attractive housing estates in desirable areas designed to create economically diverse, mixed communities. And to finally get some actual economic benefit from all of this, introduce a building supply chain industrial strategy. Had Scotland been building houses out of native timber (and indeed stone) as we should be, we’d be looking at a very different economic and financial picture.

We modelled doing all of this. We estimated that a house which would cost about £1,400 a month in rent, services and maintenance in the private sector could be built to close-to-passive standards with a larger footprint in the public rental sector where the costs would be about £800. A better house for half as much.

Why don’t we do it? Since both local authorities and housing associations have prudential borrowing powers (meaning they must have a solid business case for repaying any loan), they can borrow whatever they want. And there is always a solid business case for the long-term repayment of housing loans. Just to repeat, we have no empty social housing. Rents are guaranteed.

But because of a combination of venal developer lobbyists, short-sighted politicians, ideologically-slanted senior policymakers and the searing legacy of Thatcher, instead we decide that having 33,000 families having to wait a decade and still not get a home isn’t an ambitious enough target. The Scottish Government now wants way more than 33,000 families to have no home in a decade.

For me, this is a stunning dereliction of duty on the part of government. And if you need a startling reminder of how unhinged this decision is, just remember that the slashed funding for housing is about the same size as that put into a Council Tax freeze which benefits the wealthiest and acts to inflate house prices.

Dear god, we really do do these things to ourselves…

6 thoughts on “Scotland’s housing policy is nuts”

  1. If neither HA nor Scottish government are willing to build, there must be an opportunity for another type of organisation to fill the gap. A not for profit, build properties for rent at affordable prices, built from materials sourced in Scotland, and using the Scottish national investment bank to fund it.

  2. I’m sorry Robin but if nutters like George Galloway can form an outfit called the Workers Party from scratch to success in such a short period of time, surely it cannot be beyond the realms of possibility for one of the cleverest and sanest persons I know to reform Common Weal into a new political party with yourself and Craig as leaders/founder members.
    It’s what the public are crying out for

  3. florian albert

    Robin McAlpine downplays the electoral politics involved in Scottish housing. Prosperous Scotland – probably 40% of the population and the group most inclined to vote – wants to pay as little tax as possible. The political parties which are serious about winning know this and respond according. (This is seen most clearly in the determination to keep Council Tax low.) This group has also survived the recent inflation crisis best. They have benefited from house price inflation for decades now.

    ‘influence the market through large scale public rental housing.’
    How much public support – I mean real support, not in an opinion poll – would there be for this ?
    Not very much. There is, understandably, very little confidence in local authorities capacity to engage in large projects.
    Further, the history of Scottish public housing in the second half of the 20th century is more one of failure than success.
    Lastly, how would such housing be allocated ? That, in 21st century Scotland, would be a real can of worms.

    1. James Addison

      But the history of social housing under Tom Johnston was a success,the failures came later ,driven by “old is bad new is good” mentality.

  4. Alasdair Macdonald

    My wife and I own our flat. We bought it using an endowment mortgage over 20 years. At the end of that period, the financial markets were fairly buoyant with the net result that the endowment payout not only paid for the cost of the flat (less the deposit we had paid up-front), but also reimbursed us for all the monthly payments and insurance we had paid over the 20 year period, and left £1-2K. The current market price for similar flat in our area is around 60 times what the price was in 1974.

    Of course this is illusory. We bought this flat as a home, not as an ‘investment’. If we decide to sell and move we would have to pay for a new home at current prices, so it is unlikely that we will make a ‘gain’.

    So, I agree with you that we must deal with the Ponzi scheme that is the housing market which is geared to channel public funds to the very wealthy financial interests. So, we do need land and property taxes to stop tax avoidance and minimise the profits.

  5. The author is punting the idea of increasing council house rental from about £400/month to £800/month?

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