It’s not about the cost of housing, it’s about what we get in return
The Herald’s front page story today is about the rising cost to the Scottish Government of building desperately needed social housing. A £3 billion funding gap has emerged in the cost to meet Government targets, driven by the fact that the cost to deliver a new social house has risen from around £150,000 in 2019 to closer to £200,000 in 2023. This price rise is substantially above the UK’s inflation rate (which would have suggested that the 2023 price would have been closer to £180,000 per house) and so raises a question about where the additional £20,000 per house costs have come from or where they are going.
The article appears to place much of the blame on the Government’s upgraded energy efficiency metrics but we have good evidence to show that this should not be the case. Friend of Common Weal and founder of the passive housing construction company MAKAR, Neil Sutherland, wrote an article for our In Common column in The National where he showed that his company’s innovative construction techniques - including off-site construction that allows houses to be built indoors even during Scotland’s temperamental weather that often halts conventional-build construction - can deliver social housing for the same cost or even less than a conventional house of the kind that the mass developers continue to build.
Even if the cost uplift of building social housing to what should be the minimum energy standards was to blame for the uplift in costs, the Government should be more than happy to pay it. £20,000 per house would pay for itself in less than fifteen years judging by average heating bills. This doesn’t even include the other costs to a resident that come from living in a cold, damp house like damage caused by mould or the cost to society of fixing people who have been made ill by their house. None of this appears to factor into the accounting of the house building programme or those critiquing the price rises.
Another possible source of the £20k per house is likely to be the developers themselves. Mass volume housing developers are a peculiarity of the UK compared to our neighbours in Europe where it is common for new housing developments to be built very much more by many smaller companies or by self-builders with the result that the houses in a street follow many different designs rather than the cookie-cutter approach taken here. The developers save money and time by this approach but that doesn’t seem to be translating into savings for either housebuyers or, as in this case, the Government. They should investigate the level of profits being made by mass developers (this article from last year suggests profits have increased tenfold in the past 15 years and now profits of £60,000 per house are not unusual) and start aggressively limiting them. Even better would be for the Government to accept the Common Weal policy adopted by members to launch a Scottish National Infrastructure Company to start constructing houses themselves instead of outsourcing them. This would allow homes to be built on a not-for-profit basis. These houses could be funded by low-cost, sustainable finance via vehicles such as the Scottish National Investment Bank as per our policy paper Good Houses for All.
Another piece of the cost puzzle is land. The price of land in Scotland is being speculated out of all proportion and the lack of availability of land for housing due to developers land-banking (building “enough” houses would reduce prices and therefore their profits. Restricting supply by not building them therefore keeps prices high) or simply because the existing 421 owners of half of Scotland refuse to sell. Local Authorities already have the power to compulsory purchase land for social housing and should be encouraged to do so by the Scottish Government. These purchases should also be made at “existing use value” - that is, a field should be purchased at the price of a field rather than at the price of what the land will be worth once a house is built on it. This would again bring down the price of building a new house by possibly several tens of thousands of pounds.
The final piece of the problem is one that the Government has acknowledged but could easily accelerate. There are more than 40,000 long term vacant homes in Scotland - more than there are registered homeless households. In addition to this, there are many vacant homes that are registered as commercial properties because they are above high street shops. These homes could be acquired at a “fair” price discounted from their market rate to account for state of repair or based on a multiplier of their rental income over the previous year (which might be zero), then retrofitted up to standard and brought into social use for a fraction of the cost of building a new home. Repopulating town centres in this way would have additional economic stimulus impacts (people living above shops may well be their local customers) and can revitalise town communities.
Housing is a critical problem facing Scotland and the Scottish Government is not doing enough - even where the steps it is taking are in the right direction. Simply throwing more money at the problem is not going to solve it. We need to know where the money is going when it’s not going into the houses themselves. We need to know what kind of houses are being built and what it’ll cost society if we don’t build them well enough. And we need to know who is making a return from the construction - because too often, it’s not us.
