Exclusive:'Disruptive' change needed to Scotland's housing system, leading economist warns

A major report on housing in Scotland claims current policies ‘do not add up’.

The use and taxation of housing wealth across Scotland will need to be reassessed to “rebalance” the nation’s housing system and economy, according to a new report that calls for a major “disruption” to existing policies.

The analysis, published by the David Hume Institute, advocates a significant shake-up in how housing strategies are shaped, to reduce inequality and secure long-term economic growth. The report cautions that persisting with the status quo will only lead to worsening affordability and a decline in regional cohesion.

Leading housing economist Professor Duncan Maclennan, the author of the report, said the nation’s housing system was in crisis and “at the edge of a precipice to an even bleaker future”. He criticised the long-standing focus on housing policy as a social welfare issue that was “largely siloed” from the broader economic agenda.

Spelling out the need for “bold, disruptive change”, Prof Maclennan said housing should be treated going forward not merely as a “social good”, but as essential economic infrastructure on a par with transport, energy and digital connectivity, with overhauls of land reform and the planning system.

dinburgh became the first city in Scotland to declare an official housing emergency, amid a growing number of homeless people, a shortage of social rented accommodation and soaring rents in the private sector.The council called for more funding from the Scottish Government and committed to co-operate with outside organisations to build an emergency action plan to tackle the Capital's housing crisis. | PA

The emeritus professor in urban economics at University of Glasgow said housing wealth was among the key issues that had to be addressed by policymakers.

Drawing a comparison with the protests surrounding touts selling tickets for the Oasis concerts in Edinburgh this summer at hugely inflated prices, Prof Maclennan said there was “little recognition that successive cohorts of over-50s households have been giving the under-30s a housing ‘haircut’ for the last half century”.

“Someday, to rebalance the Scottish housing system and economy, the role of housing wealth, and how it might be used and taxed, will need to be reassessed unless real house price inflation withers away,” his report states.

Prof Maclennan said while there was not yet any “real momentum” in the Scottish political economy to address the accumulation, uses and consequences of housing wealth, the issue ought to be viewed as a “major” concern for Scottish economic policy over the next decade.

“Home ownership rates in Scotland are now falling for every age decile under 50 and more electoral wards and parliamentary constituencies are moving towards electorates with a majority of renters rather than owner occupiers,” he noted. “Allied to the discontent of the ‘left behind’, sorted by the housing system into particular localities, the failure to address the roots of the ‘troublesome trinity’ will only exacerbate the current crises in the Scottish housing system.”

Professor Duncan Maclennan | Contributed

The report, entitled ‘Prosperity begins at home: Scottish housing policies for faster, fairer economic growth’, stresses the need to “rethink what housing is and does” for wider wellbeing across the country. “Reshaping the Scottish housing system to deliver faster, fairer and greener growth is, given the depths of the crises, a long and difficult journey,” the report states. “It is time to start.”

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The analysis accuses housing policy at both Edinburgh and Westminster of having “lost any coherence”, noting the private rental sector has “filled the gaps” in provision, but now faces unclear control proposals that are diminishing new investment.

“This approach does not add up and it does not offer a coherent system of governance for exiting the housing crisis that is, in mid-2025, still deepening,” Prof Maclennan said. “With an inadequacy of public resources to halt deterioration in housing outcomes, let alone remedy them, major, not marginal, change in how Scotland understands and manages the housing system is required. It is time for policy disruption.”

His report said while housing was a “core system” in the Scottish economy, the thinking in the Scottish Government had seen it become a "modest budget managed by a minister without Cabinet rank”. The analysis adds: “Scottish policy has little sense that housing is essential economic, social and environmental infrastructure.”

The report also criticises the approach to housing in rural areas. “It is becoming blindingly obvious that an inability to think about the limits of housing market information and the inadequacy of housing planning for thin rural housing markets has needlessly denuded rural localities of younger and skilled workers,” it hits out.

“That market failure has remained unrecognised in housing policy and planning since Scottish Homes/Communities Scotland were abolished two decades ago.”

The report also scrutinises the decision by a dozen local authorities to declare a housing emergency, describing the label as having “limitations” in the face of wider pressures.

“It has the implications that difficulties have arisen suddenly in an unanticipated way, and that heralding the emergency will induce more rapid resource support from others and usher in the onset of crisis resolution,” the analysis said. “However, fiscal constraints aside, this is unlikely.”

Outlining the shift in housing policy that is required, Prof Maclennan called for a “rapid consolidation and strengthening” of “scattered and inadequate” evidence to inform policy choices, with a new “whole of government” approach essential.

He also said there was a need to rethink the way non-profit housing operators operate in rural and small-town Scotland, envisioning such entities as “cross-sectoral agents for change”, and called for ministers to consider future demands for housing and tax arrangements for the sector.

In an accompanying op-ed piece, published in today’s The Scotsman, Prof Maclennan said the cost of “inertia” was clear.

“Without a step-change in approach, Scotland will see worsening housing unaffordability, declining regional cohesion, and underperformance in key sectors of its economy,” he warned. “More and more households will be priced out of opportunity, while communities continue to struggle with poor-quality homes and fraying infrastructure.”