Scotland’s affordable housing problem

Photo Credit: itmpa Flickr via Compfight cc

Dr Roger Cook, Director of Research at the Scotland Institute, discusses their recent report on Scotland’s housing market.

A recent report by the Scotland Institute has highlighted a number of problems with Scotland’s housing market. Fundamentally we have a major failure in housing supply despite some welcome initiatives by the SNP Government since 2010.

Two statistics stand out. The cost of housing is high enough that it pushes a further 210,000 Scots into poverty. Second, Crisis have estimated that some 50,000 adults (just over 1% of the population) experiences some form of homelessness each year and 5,000 will have to endure at least one night of living on the streets.

The underlying reason for both figures is the shortage of affordable social housing – whether supplied by local authorities or the charitable sector. The benefit of social housing is clear, average weekly rents in the sector were £65pw compared to £108pw in the private sector.

The problem is the legacy of the destruction of social housing following the ‘right to buy’ legislation. In 1990, Scotland had almost one million homes available for social renting, by 2000 this had dropped to 600,000 (and has continued to decline since). The current Scottish Government deserves credit for first stalling and now halting further sales. Equally the provision of 31,000 homes for social renting under the Affordable Housing Act over the last four years is welcome – but points to the scale of problem.

One problem is that housing policy cannot be conducted in isolation to wider social policy. Again the Scottish Government deserves credit for mitigating the impact of the UK Government’s ‘bedroom tax’ and some recent changes to Housing Benefit. However, wider welfare caps, benefit sanctions and the malign impact of Universal Credit all threaten to undermine these small gains. Also, as is widely acknowledged, the cost and supply of housing are determined by increases in the price of land – and as long as profits earned from land price inflation remains a cornerstone of UK economic policy, addressing the predictably adverse consequences is not easy.

Despite the UK-wide aspect to Scotland’s housing problems, unusually the solution is mostly in our own hands. We would argue that the clear need is to fund the provision of more social housing. Realistically, given the existing levels of debt held by Scotland’s local authorities, this cannot be funded by borrowing. An option is, as suggested by the Association of Local Authority Chief Housing Officers, to raise rents by £10 per week as this would generate around £150m per annum. The problem with this approach is that it would place an even greater burden on the poorest households who are already struggling to meet their weekly bills.

There is a different solution and it rests in adopting a new approach to funding local government in Scotland. Lost in the debate about new powers coming to the Scottish Parliament is the simple reality that local government finance is already fully devolved. For the last 15 years, Scottish governments (of all hues) have side-stepped dealing with this, and the recent lack of attention to the report of the Commission on Local Tax Reform is simply the latest failure.

From a series of our reports that we have published over three years, we keep on finding ourselves drawn back to arguments for land value taxation. This offers the means to raise a substantial sum of money from land that is currently under (or not at all) taxed. In addition it offers the means to offset the gains of land price inflation accruing to very few households. What is lacking is the political will – but until that is found we are condemning more and more Scottish households to housing poverty. It is one thing to point to UK government welfare policies as a major cause of this, but, if we are to be honest, the solution already rests at Holyrood.