Budget: Housing investment measures welcomed across the sector

Derek Mackay

A £756 million contribution to the Scottish Government’s target of delivering 50,000 affordable homes by 2021 and an increase of £138.9m for the More Homes Programme were amongst the investment plans set out in the 2018-19 Draft Budget by finance secretary Derek Mackay.

Publishing the Draft Budget to parliament yesterday, Mr Mackay set out a programme that will also:

  • Deliver a local government finance settlement worth more than £10.5 billion
  • Allocate over £4bn of funding for infrastructure, including £1.2bn in transport infrastructure for key road projects and further electrification of the rail network etc
  • Deliver £600m to ensure every home and business will have access to superfast broadband by 2021
  • Deliver the first £70m of a new £150m Building Scotland Fund
  • Set aside £340m for initial capitalisation of the Scottish National Investment Bank
  • Invest £60m in Low Carbon Innovation Fund to deliver innovative low carbon energy infrastructure solutions including for electric vehicles
  • Drive regional economic growth by more than doubling investment in city region deals.

Commenting on the housing investment, Annie Mauger, executive director of the Chartered Institute for Housing in Scotland, said: “As part of today’s budget announcement, we strongly welcome the Scottish Government’s commitment to invest £743m next year towards meeting its target of delivering 50,000 new affordable homes over the lifetime of the current Scottish Parliament.

“It was also encouraging to hear reconfirmation of the Scottish Government’s commitment to create a £50m ‘Ending Homelessness Together’ fund and to target this funding in accordance with the recommendations of the homelessness and rough sleeping action group. CIH Scotland will continue to feed into the work of this important group to enable it to make a real difference.

“In particular, we would highlight the significant success of Housing First initiatives across Scotland and the UK, as demonstrated by a special report recently published by CIH Scotland. Our hope is that the Scottish Government, guided by the homelessness and rough sleeping action group, will look seriously at further Housing First initiatives as a potential target for investment of the ‘Ending Homelessness Together’ fund over the forthcoming year.”

Ms Mauger added: “With the recent acquisition of significant new powers, we also look forward to the Scottish Government’s future policy on social security beginning to take shape next year with the creation of a new Social Security Agency. CIH Scotland has consistently highlighted the negative impact of certain aspects of welfare reform on the housing sector and we look forward to working with the Scottish Government to deliver a social security system that has dignity and respect at its heart.”

The Scottish Federation of Housing Associations (SFHA) welcomed the increase of £138.9m for the More Homes Programme.

Funding for the More Homes programme has increased from £583.6m in the 2017–18 Budget to £722.5m in the 2018–19 Draft Budget.

Sarah Boyack, SFHA head of public affairs, said: “The increase of £138.9m for the More Homes Programme is a very welcome announcement for the social housing sector. This funding – and the increase in the planning budget of £4.1m – should further assist our members in contributing towards the Scottish Government’s 50,000 affordable homes target and help to house more people who are in desperate need of a home of their own.

“The investment will also secure jobs and training opportunities, key challenges identified by our members in our Brexit report earlier this year.

“Access to the National Manufacturing Institute for Scotland and the Building Scotland Fund will be important for Scotland’s construction industry to secure new, innovative housing.”

Ms Boyack added: “While we welcome the government’s commitment to invest £60m in a Low Carbon Innovation Fund to deliver innovative low carbon energy infrastructure solutions, we are disappointed to see that there is only an increase of £0.2m in funding in the Draft Budget for fuel poverty and energy efficiency. The recent Scottish Household Condition survey showed that there are more housing association households in fuel poverty compared to the national average and, in order to tackle this and invest in energy efficiency, our members will require further funding.”

Ms Boyack concluded: “The Draft Budget includes an additional £4.3m for social security, which is welcome funding for mitigating welfare reform policies such as the ‘bedroom tax’.

“The SFHA looks forward to working with the Scottish Government on the creation of Scotland’s new Social Security Agency to create a fairer system for all.”

The country’s home builders said the Budget recognises economic importance of housing investment.

Chief executive of industry body Homes for Scotland, Nicola Barclay, said: “With home building in Scotland supporting over 60,000 jobs and contributing billions each year to the economy, we are pleased to see the Scottish Government confirming its ambition for the housing of all types our country needs.

“As well as a significant funding increase for affordable housing, the additional funding for skills bodies, colleges and universities that will help to plug the skills gap, is also welcome.

“The Land and Buildings Transaction Tax relief for First Time Buyers up to the first £175,000 of the purchase price could be a valuable boost for those aspiring to get on the property ladder, representing additional money towards their deposit or moving costs. However, given that this is not due to become effective until 2018/19, we are concerned that any delay may have a potential impact on purchasing decisions in the short term.

“Of particular note, however, is the establishment of the new £150m Building Scotland Fund which will have a prominent housing and infrastructure focus to support interventions that will further accelerate and scale up housing delivery. With the funding and delivery of infrastructure a major housing blocker, we keenly await further details in the new year.”

The Scottish Budget also followed Chancellor Phillip Hammond’s lead with a tax break for first-time buyers.

Under the plans, first-time buyers will be given a helping hand with a new land and business transaction tax (LBTT) relief for properties worth up to £175,000. As many as 80% of first-time buyers will now be exempt from paying any of the tax when buying a new home.

The move comes after Chancellor Philip Hammond exempted first time buyers from stamp duty – the equivalent tax in England – for homes up to the value of £300,000. Scottish ministers say lower house prices in Scotland means £175,000 is a roughly comparable figure north of the Border. Mr Mackay said the move will “make home ownership a reality for more of our young people.”

But the move does not go far enough according industry body the Royal Institute of Chartered Surveyors in Scotland (RICS Scotland).

Hew Edgar, RICS policy manager for Scotland, said: “Whilst this change has the potential to stimulate activity in the short term, it comes at a time when the market is subdued, and does not tackle the overarching problem of housing shortage supply across all tenures. This government must realise that prioritising demand side measures is not conducive to market fluidity and will do little to solve the chronic shortage of suitable accommodation across Scotland’s housing options.”

He added: “Once again, we call on Scottish Government to review the current LBTT as a priority going forward as this current framework is not only limiting market activity, but could ultimately bring the market to a standstill. That said, we hope that the ‘Building Scotland’ fund will provide the required support for alternative models of housing delivery.

“On a more positive note, the £600m investment in providing superfast broadband – ensuring the last 5% of Scotland’s ‘non-spot’ dwellings – will be connected to the fourth utility by 2021, will be greatly received.”

Cabinet secretary for communities, social security and equalities, Angela Constance, said the Budget shows the government’s commitment to continuing its major expansion of affordable housing with a 28% increase in funding for housing supply.

Ms Constance said: “We are ambitious for housing across all tenures through our More Homes Scotland approach, committing over £3bn to deliver 50,000 affordable homes over the five years of this Parliament.

“70% of today’s housing budget – in fact, £522.6m of it – continues to be capital funding for the affordable housing supply programme, chiefly for new social housing.  This is a £147m increase on the equivalent figure for 2017-18.

“We’re also supporting home ownership through our shared equity schemes and working with industry to increase supply across all tenures through growing the emerging Build-to-Rent sector in Scotland and targeting housing for investment from the new Building Scotland Fund.

“I believe that this approach is the most powerful way to deliver more housing for a fairer Scotland.”