Housing is Cinderella sector of Scotland's economy
Scottish government simply isn’t doing enough to encourage investment in newbuilds, writes David J Alexander
The Scottish government has a real opportunity to address the housing emergency in the forthcoming Scottish budget on December 3rd. There are serious pressures across all tenures of the housing market in Scotland which need to be addressed.
Housebuilders need greater financial incentives to boost the number of newbuilds, there must be more encouragement for investment in the private rented sector (PRS), and a substantial increase in the volume of social housing is required if we are to begin to address existing and future housing demand.
While issues for housebuilders such as rising material costs, higher interest rates and increasing wage pressures cannot be addressed directly by the Scottish government there is much that they can do. The best way to increase the number of houses being built is to ensure that the planning system is simplified to allow developers to build more quickly and efficiently.
The number of homes being given full planning consent has halved since 2020, resulting in new starts and completions plummeting to their lowest level in decades. Without a substantial increase in the number of new homes being built the current housing emergency is never going to be addressed.
The PRS continues to be an integral part of Scotland’s housing mix yet is rarely encouraged by the Scottish government. A fairer tax system which encouraged property investors and landlords to buy – rather than punishing them – would go some way to showing good faith in the market and provide a level playing field with the rest of the UK. The 8% additional dwelling supplement (ADS) charged on all purchases by second homeowners and landlords is a clear discouragement and the Scottish government needs to be wary of pricing themselves out of the market.
An example of this can be found in recent media reports which stated that stamp duty receipts fell £541m (14%) in England during the 18 months following former Chancellor Rachel Reeves increase in the stamp duty surcharge in England on second homes to 5%. There is little reason to assume that landlords in Scotland will continue to remain patient and pay these considerable supplements on house purchases in the future. A reduction in ADS charges would go some way to helping deliver more homes for the PRS in the future.
Clearly more social housing is urgently required. The Scottish government is widely predicted to miss it target of 110,000 affordable homes by 2032. With only six years to go they have built 36,500 and there are only 7,100 starts by mid-2026.
There needs to be a much greater investment in social housing to address the enormous waiting list of over 180,000 which is actually increasing rather than being reduced.
There also needs to be a greater sense of urgency in delivering more housing across all tenures. The new national housing agency More Homes Scotland is not due to start until next April and not be fully operational until a year later indicating there is little sense of the importance of acting immediately to deal with the current emergency. If the budget doesn’t produce any concrete proposals on housing, then I fear housing will remain the Cinderella sector of the Scottish economy.
David J Alexander is CEO of DJ Alexander Scotland Ltd
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