Chapters

• 00:00 Introduction to Housing Challenges in Scotland
• 03:02 Understanding the Housing Emergency
• 05:55 The Right to Buy and Its Implications
• 09:12 The Need for Increased Social Housing
• 12:03 Housing as a Merit Good and Economic Impact
• 15:00 The Role of Government in Housing Policy
• 17:56 Housing and Economic Growth
• 20:49 Productivity and Housing Quality
• 24:07 The Importance of Location in Housing
• 26:57 Challenges in Rural Housing Markets
• 29:52 The Future of Housing Policy in Scotland
• 33:04 Rent Control and Investment Concerns
• 36:00 The Need for Disruption in Housing Policy
• 38:48 Conclusion and Future Directions

Kieran Findlay

Hello and welcome to the Scottish Housing News podcast with me Kieran Findlay and co-host Jimmy Black. Professor Duncan MacLennan is a popular speaker at the big housing conferences, and it’s clear to see why. He has amassed knowledge and experience over six decades as an economist specialising in housing, advising governments in Australia, Canada and Scotland.

We asked him to come onto the podcast because he’s been leading a project funded by the David Hume Institute designed to find ways of transforming the Scottish housing system.

Jimmy Black

Duncan was a special advisor in the government of Donald Dewar and Wendy Alexander which tried to impose the right to buy with big discounts on Scottish housing associations, and of course, we had to ask him about that.

Kieran Findlay

Professor MacLennan covered plenty of ground in the 45 minutes he was with us, arguing that housing is vital infrastructure for productivity and economic growth. But first, I asked him if there really was a housing emergency and if so, how did we get there?

Duncan MacLennan

Actually, I don’t particularly like the term housing emergency. I do think that the women who have to remain in the homes or at least the houses of men that are violent towards them, they have an emergency. I think that, and for many kids who are living in temporary accommodation. There is an emergency in the sense that they’re already beginning to get by behind in learning, they’re getting behind in life, you know, by the time they’re two years old. These are emergencies. I don’t think that a younger person that maybe has to stay for an extra year or 18 months is an emergency. So I think the term’s too generalised.

It also gives the impression that, hey, this is something that’s just happened, but also an emergency, somebody’s going to come and help because that’s what we do in emergencies. I think that what we’re seeing in this diverse range of housing outcomes that now touches about 60% of Scotland’s households in a way that leaves them feeling dissatisfied, it’s actually been growing for 30 years in different bits.

It’s not recent, it’s not since the parliament, it’s not since the switch from Labour and Liberal to SNP, it’s not even since the big events like Covid. If you look at the main policy settings in fiscal policy, monetary policy, the way that social security has evolved, these are the big drivers and social and economic changes that drive the outcomes. The housing budgets that we choose to deal with are really palliatives, they’re sticking plasters. And what has happened is the events and the policies, so big policies, particularly over the last 20 years in this millennium, have all driven the housing outcomes that we now class as an emergency.

Have we known this for some time? In my world, yes, we have, and we’ve talked about it actively. We did a piece of work with people in Australia and Canada to the University of Glasgow about seven or eight years ago, talking about the housing circumstances of the future, and actually laid out almost all of the difficulties we have.

I mean, I think that when you get to it, you can summarise it as a kind of troublesome trinity here in that levels, rates of homelessness have gone up. Apart from a big policy onslaught in the early 2000s, homelessness rates fell for a while. And that was during the Blair administration, they really put a lot of effort into that. And during Covid, because we made a big policy effort, it fell again. It’s back to rising. That’s one troublesome, difficult area.

The second is, if you look at rental sectors, whether it’s the market rented sector or the social rented sector, there’s just been a growing problem of availability throughout this millennium, particularly in the social rented sector. And we’ve seen the rent burdens rise in the private rented sector and shortages. The difficulty in the market rented sector goes up and down. I mean, it’s gotten worse earlier. It’s been bad for the last five years. It’s actually easing a little bit at the moment, if you look at the numbers.

And then, of course, there’s the issue about the declining rate of home ownership for the under 35s, actually the under 40s, actually the under 50s now, that declining rate has spread up the age distribution. That started about 25 years ago. And the home ownership rate overall in Scotland went up because people like me were living longer, were homeowners. So that increased longevity of us old people was masking the fact that younger people were struggling to get in right from the beginning of this millennium.

So yeah, emergency, but I would say it’s a system crisis, that politics has been too long. It’s taken far too long to recognise it. And I actually really don’t think that understands it. I don’t think politics and I don’t think the administration really understand the issues that we’re dealing with right now.

Jimmy Black

Duncan, a long time ago, you were an advisor to Donald Dewar and Wendy Alexander. And at that time, there seemed to be a feeling coming from the government that social housing was going to be a residual tenancy, that it was going to disappear, that owner occupation would be the main form of tenure for most people.

You know, at one point, you were actually involved in perhaps extending the right to buy to housing association tenants. And in the end, that didn’t quite happen the way that the government originally proposed. But what changed?

Duncan MacLennan

I don’t recollect the dominant view of Donald and Wendy as being one of endlessly increasing home ownership. I think they were both acutely concerned about the condition of social housing, which was particularly bad at that time, but also the low levels of investment. In fact, levels of investment had went back up.

Actually, after 1997, they ticked up again. And sometimes, even though I’m too critical of the Scottish Government, I do think they’ve done a good job relative to many other governments of trying to stay committed to providing a sufficient level of social housing. They’ve done so more than other places. It just hadn’t been enough. And in fact, if I’m looking at somewhere like Edinburgh, it could really have had double the rate of, and I think that poverty commissions and so on in the city have taken that view as well. And I think it’s quite justifiable. It should have, in terms of dealing with the affordability issue, had double the rate of provision in the non-profit or sector in particular.

I’m smiling because I went to a meeting with the minister, six senior officials and me in Victoria Quay, and we were talking about trying to ensure uniform rights, the Scottish social housing tenancy across all the tenure sectors. And the problem in this was the right to buy that council tenants have, that housing association tenants didn’t have.

I was the only person in the room who was actually vehemently opposed to extending the right to buy to the housing association sector, because I thought it was a rather different set of circumstances. And I do think that the way that the policy was changed, I actually worked on that along with Tony O’Sullivan, who was the economist at Scottish Homes for a long time, but trying to redesign that in ways that would be less generous and where fewer people would do it. And that’s what happened.

When it was eventually scrapped, that wasn’t problematic for me. What I do think is, and I think the problem in a way was not having the right to buy. The problem was not in replacing every single unit that was sold. That was a problem. And I think that’s still an issue in many ways. When we look at the right to buy, the distribution of wealth in Scotland, the wellbeing of a fairly significant number of people, i.e. who exercised the right to buy, in the bottom third of incomes, actually significantly improved because of the right to buy.

We never talk about that because it’s in the conversation, oh, it’s a really bad thing. I’m not sure it was a bad thing. The bad thing was not replacing every single unit that was required that was lost. Scotland did a better job of that than England, because pretty much until the late 90s, the Scottish office very quietly just re-spent all of the council sales receipts in the Housing Association programme, which did not happen in England. So we weren’t great, but we weren’t as bad as we might have been.

As I say, I don’t want to sound too defensive, but I think a lot of the analysis of the effects of right to buy are not very analytical. I mean, there were a lot of not very well-off gainers, as well as future individuals who were losers.

Kieran Findlay

I agree. Yeah. For me, though, it was a lot of the generation who did buy the home through right to buy, and then perhaps they were able to pass that down to the next generation. But for me, that’s where it stopped. And I suppose that goes back to your point of the homes not being replaced, or enough of them not being replaced. If there was a way that could do that now, would you be in favour of its reintroduction and for housing associations?

Duncan MacLennan

I think that if you’re looking at the trinity of problems that I was mentioning earlier, homelessness, that’s about, first of all, significantly increasing the stock of available social rented housing. A lot of homelessness programmes, I do a lot of work in Australia and Canada as well as here. And quite often, we look at homelessness programmes to spend money on more or less everything apart from housing. Although Housing First has changed that mentality, and absolutely right, but we need a lot more of it. You almost need an excess of it, which we’re not going to have, to actually completely remove the issues.

So I think when we look at that problem, that’s a straight moral choice. The troublesome trinity that we have comes at a sort of big level, if you like, it comes from two things. It comes from the fact that over the last 20, 25 years, housing costs, whether it’s entry home ownership, or whether it’s rents, have grown faster than, particularly not only average wages, but particularly the wage rates of people entering the labour market as young people. I mean, housing costs have just outstripped that. Now, that’s a housing system problem in the sense that it’s a failure to match supply and demand as the system evolves. It’s taken a very long time for our politics to actually recognise that that’s the problem.

The other problem is the moral judgement in that economists typically have looked at, and governments in some ways, have looked at housing as what’s called a merit good. In other words, there’s a belief in our society that individuals have a right to some, at least a minimum, and hopefully better standard of housing. Now, that’s a merit good requirement. And that’s what all the big council housing programmes were about. That’s what the housing association programme is about.

Now, if I said to you that we were going through a 25-year period when rents were increasing and faster than incomes, and actually social security in some sense is becoming less generous for particular groups, what we’re saying is, if we’d had a steadiness of our moral commitment, and we have to look at ourselves as individuals and who we vote for in this, if we’d had the steadiness of our moral commitment, we should have been doubling, we should have been increasing the size of the sector, or at least the sectors that house people at affordable rents and so on. And I don’t think we did that. We took an eye off that. And as I said, I think the Scottish Government remain more committed than many others, but it wasn’t enough. It’s still not enough.

But the other issues, and that would be for 60, 65%, 70% of us, it was about better management of the housing system. And housing policy in Scotland is still thought about as meeting the merit good need. When almost 80%, 75% of us live in the market system, we needed to have a much more coherent and effective market system, because that’s where most of our difficulties actually arise. I’m not saying the most severe difficulties, but quantitatively the greatest number of effects.

We don’t have a housing market system, a management system in Scotland. I don’t think we even have a national housing market strategy. So that when people say to me it was an emergency, and they’ll say, ‘oh, okay, it’s all right for that old guy. He can sit around and read books all the time. He’s not trying to solve the problem’. I just think that we lapsed into an easy mindset about housing in Scotland. ‘It’s a problem for poor people. Let’s spend a bit more money on that. And if the rates are too high, let’s just regulate them’.

You need to have a system that is investing and changing. And we have never created that.

Jimmy Black

Let’s look then at some of the work you’ve done in Sydney and Australia. And you were talking about the merit good argument. You said that that was too narrow a focus and you need to look at the wider economy.

So you carried out research that turned into two reports about the relationship between housing and economics. And you suggested that some housing outcomes could have a strong effect on economic growth. And maybe if we could persuade politicians of that, then they might actually build some more houses.

Duncan MacLennan

Well, maybe I picked too early on that argument, Jimmy, because when Rachel Reeves did our first speech as UK Chancellor, but I don’t think we can ever, I believe strongly in devolution and devolution being effective. But you also have to recognise there’s really important parts. And once you recognise that the housing market is the centre of our housing system, tax and monetary policy become absolutely critical. And they’re driven from Whitehall, Threadneedle Street and Westminster rather than Edinburgh. And there’s no discussion about what’s going to happen to them before decisions get taken and their implications for the Scottish housing market.

I have to say, one of the things that astonished me, referring back to when I did, it would now look really odd having somebody like me as a special advisor, but at that time, being really aware that there was no channel of communication between Whitehall and Holyrood right from the get go, any policy discussion was minimal. When I worked for Donald (Dewar), we would find out things that John Prescott was about to do at the same time as the people who listened to the BBC in the morning.

So that is a really important missing thing. And maybe we’ll come back to some of the governance issues. But on the economics question, I’m an applied economist. I got interested in housing because when I was a child, I lived in a very bad rented house. I was born in 1949. I was actually bitten by a rat. I’ve been bitten by many rats in my life, but this one was a real rat. I lived in Ardrishaig. And the best thing that harmed us as a family was when we got a council house when I was five. We moved to Glasgow after that.

As I grew up, I went to school in Townhead. You could smell Townhead before you could see it. Every morning, walking up the hill to school, I thought, ‘why do people have to live like this?’ So I was interested in economics, but I was interested in housing. So I’ve been interested in housing in the economy.

And right from, sorry, maybe digress too much. When I started work at the University of Glasgow, I went to talk to, at that point, we had something called the Scottish Economic Planning Department, which ran economic policy in this old Scottish office. And so a young man interested in housing, how unusual, a young economist. It turned out to be unusual and said, ‘what are you interested in?’ And this was in 1974. And I said, well, ‘I think house price inflation is really very interesting’ because we’ve just had the barber boom. And the response he got was, ‘oh, we don’t think house price inflation is going to last’.

So I think, but there’s an interesting thing called housing associations emerging. And maybe you should look at the activities and effectiveness of housing associations in Scotland, which was the first piece of work I ever did for government.

So the view that housing was not important in the economy, nor important in the environment, has prevailed. And by all means, we have to meet the social objectives. Can’t ever forget the needs that we’ve talked about. But housing is much more than that. And I think that because we’re focused on the merit good argument, we’ve relegated thinking about the housing system to being a relatively minor portfolio. We have a cabinet secretary who will obviously report on it, but it’s not her direct responsibility. It’s the minister below who I think tries to do a good job in trying to apply that palliative to an ever increasing problem is not going to resolve that. But we’ve never had that real voice about the housing system. And the economic elites, whether it’s in Scottish academia, or whether it’s in government, have never taken housing seriously as an issue.

As I say, I advise governments in Australia and Canada and talk to them regularly. And the big breakthrough for them now is, and Canada’s in the lead on this and I think Australia’s about to go, housing responsibility has been moved to the Minister for Infrastructure. And people who run infrastructure, although we don’t have a department of infrastructure in the Scottish government, I know we’ve got an infrastructure group, but they have a different cast of view about what a policy area is, and whether it is economic, environmental and social effects from departments that are primarily about a social policy issue.

They don’t ask the economic questions. And they started to ask the environmental questions, because net zero has been the mission of the mission of the decade, if you like. But on the economy, no. And why is it important in the economy? The only argument we’ve traditionally had has been, oh, the economy has been in for a bit of a downturn. Let’s spend more money on housing, build more homes, create more jobs. This is a multiplier stabilisation argument. If you were to have that argument now, you’d probably build more ships on the Clyde than build more houses in Glasgow in terms of national priorities.

But what about the other big effects? Economists are interested in stability, they’re interested in growth and they’re interested in distribution. Well, look at these two big areas of economic work. On the distribution of income and wealth, housing prices and rents have a huge effect on the residual incomes of households. Once you do that, you can see that rising housing costs over a long period have significantly reduced the residual incomes that people have to spend on other goods and services. Now, if we as a society just pay more for the same bricks and mortar, we’re kind of shooting ourselves in the foot here, because if we weren’t paying so much for these bricks and mortar, we would have more to spend on other things.

So there’s lots of issues. But on the wealth side, I’d say really for the last 20 years, the distribution of wealth in Scotland has been more changed by rising housing prices and costs than it has been through profits or savings from effort. So we talked about creating a productive entrepreneurial economy and handmaiden of that would be home ownership. No, it’s not gone like that. We’ve created a system in which we haven’t created enough growth. We haven’t been innovative enough in our potential of thinking about it. And what people do is put their savings into the existing bricks and mortar.

And once you do that, you only become wealthier, not by selling and trading abroad or whatever. You become wealthier by the next generation paying more for the existing bricks and mortar that are there. So that’s why the dilemma we have in relation to my generation vis-a-vis anyone under the age of 40. We built it into the way we’ve thought about the economy and run the economy. So that the kind of run to the economy that people like Charles Piketty, not Charles Piketty, Thomas Piketty and Henry George thought about. I think there’s a lot more of that should have been in the thinking of governments running the economy than the fact that it’s this nice, smooth running neoclassical growth economy that if we’ve got all the factors flowing freely, it’s going to drive growth and productivity.

Now, coming to productivity, there are studies that are done of productivity in the construction industry. And what we know is it’s a difficult, complex industry. So the building industry productivity of labour is always below the average productivity rate. And some studies have talked about how modular housing or more efficient contracting methods and so on can improve that.

But what we’re interested in here is what are the productivity effects of the houses that we build? Because if you build houses in the wrong place, you distort people’s ability to get to the labour market. If you give kids houses that are unhealthy, if they’re cramped, if there’s no space to learn, that point about being behind other kids by the age of five, if they’re then in a disadvantaged neighbourhood through the housing system, layer on the effect of that, get to the age of 16 and they’re out and about. And there’s whole sets of neighbourhood effects and housing effects for youngsters. And it conditions our entry into the labour market or higher education or further education. So what you do is if you have a housing system that has poor quality and concentrates the poorest people in the worst places, you end up significantly lowering labour productivity for the long term.

Actually, the housing sector nowadays doesn’t make that argument. You go back and look at the great chief medical officers of health in Glasgow and Edinburgh in the 1880s. They were not just talking about health, they were talking about health effects of bad housing effects capabilities. And that’s that capability to be productive, learn and work. We call that human capital nowadays. And we’ve got endless skills programmes and we audit skills programmes and we audit skills. I wish we did about 10% of the amount of money that gets spent on skills research in Scotland. If it was spent on housing and understanding some of these housing things, we would be somewhat better off.

Sorry, that’s a bit of a rant on the skills side. But on the Australia side, what I was looking at there was again, the question of younger people, rising housing costs. Young people get pushed out to the edge, that pushes, by the way, the opposite result from the Chicago school model would predict that poorer people live at high densities close to city centres. But that’s not what happens nowadays.

So they’re out there, and the people that recognise that are transport departments. They say, ‘whoa, these people are having to spend more time travelling. Therefore, we need to improve travel outcomes because there’s lost productivity’. Half the time spent travelling, they say is roughly lost work time, therefore lost productivity. But you can also say that’s not just a problem for a transport decision. It’s also the housing decisions that are made about where the housing are.

The housing lobbies have never been smart enough to make that argument to claim that’s a productivity effect from where you put the housing and what housing you put where.

Jimmy Black

So Duncan, just to take up that point, I was doing some sums and I reckon for the £4 billion that we’re going to need for the A9, we could actually build 32,000 social houses. Should we do that?

Duncan MacLennan

Well, I do think that during the A9, it’s been such a long-term issue. And obviously, the cost of lives and accident rates are terrible in some of the portions. That is a significant choice. Personally, I would have leaned towards 32,000 houses. But again, that’s where you would put them and who would occupy them. I do think that building more non-market housing can improve productivity. And there’s a particular issue here for skilled workers, and particularly in rural areas and small towns.

I was involved in writing the first draft of the local housing systems analysis that emerged in the A9 case. And when we did it, we said this isn’t a very good basis for forecasting. It’s a good way of making councils think about the system. It’s not just their own houses, it’s the private rented sector, it’s home ownership. You’ve got to think about these people. And the council has to think about it. Well, of course, the Scottish Government has centralised most of that back to Victoria Quay to do that, which actually completely missed the point of doing it in the first place. Have people out there in their own councils thinking about their housing systems, but now that’s done in Victoria Quay instead.

But also, it was really trying to get to grips with where the actual pressures were. But it was then turned into a device for forecasting the number of people who become homeowners or others. We didn’t feel it was strong enough to do that. But also, I remember actually writing the paragraph saying, and you shouldn’t apply this in rural areas, because the technique is based on looking at house price observations and movements from the registered sales signs. And in rural areas, the markets are too thin. There’s only odd transactions and they’re scattered all over the place. You have to do a much more personal, people-centred analysis of housing needs and whatever. If you now go to the Highlands, you can see the failure of the formal way of looking at local housing systems. Because of no market, they can’t do the calculation.

Meanwhile, there’s lots of young people who want to stay. Meanwhile, in the Highlands, and particularly related to the drive to provide alternative energy from them, potentially, if at least to put the transmission lines in really important short-term but long-term jobs, it’s very difficult to use the standard techniques of analysis to generate the case for housing investment. So we don’t shift the resources we do have to support investment in the right places. Now, I think that’s partly because we don’t get the economic arguments and productivity arguments.

What I will say is actually doing the research to do it is quite difficult. It’s not easy stuff to do. And I would say that, going back to my comment about Rachel Reeves, when she was saying ‘I’m going to speed up planning and it’s going to much faster and growth is going to increase’. And I see the other strategic bodies in Whitehall go down that line as well. Apart from the fact that if you had faster growth, you would build more houses, which you would. There wasn’t any growth case in the paper. When you read the paper, nobody knew what the mechanisms of actually building faster, the more homes there was actually going to be.

Because you have to think about it, not at that macroeconomic level. You have to think about what housing are we talking about where. You can only run an effective housing system if you come down from a national level, not only down to a Scottish level. But we have to make strategic housing decisions in places where there’s informed judgment about where what is needed is done.

Now, too much economic policy gets made by calculations. Calculations and decisions are not the same thing. And in Scotland, in a lot of the housing system, we started using calculations when in fact what you need is well informed decisions. I would go back to the earlier 2000s, I actually think Scottish Homes did a good job of upping the game about getting people to try and make informed decisions without imposing calculations.

And we miss that because I think the level of understanding about the housing system, I don’t want to be unfair to Scottish Government civil servants, but most of them are not people who have careers thinking about housing anymore. That was true in the 20th century. It’s not too in the 21st. People move around a lot from different departments and different careers. Getting to know the housing system is pretty tricky.

In the past, the people who were running a housing policy in the Scottish office, they had people who in a sense were part of their culture through housing SSHA and the Housing Corporation. But these organisations were also part of the culture who were running housing in Greenock or housing in Easter Ross or whatever. I just think that there’s now a huge gap between policy thinking about what housing and housing system is in Edinburgh in government and on the ground in the many places I’ve talked to in terms of doing this work.

What I’ve been really impressed by is, Jimmy, when you’re saying should we have had 32,000 more houses? There’s a lot of really good innovative thinking that exists on the ground. And I think Scottish housing policy now has an innovation inversion where there’s more ideas about how to drive the system out there than there is in Victoria Quay.

Kieran Findlay

Moving on to rent controls, I’m not intentionally tying that into when you were saying bad policy making, know, bad decision making, but in your report with Kenneth Gibb, you write that poorly constructed rent control measures have deterred investment. Now, again, we’re talking in this era of emergency or crisis, and there were many people making the argument that something had to be done to stop rents, including obviously in the period of Covid. But has the government shot themselves in the foot here? Has it deterred investment later down the line and stopped the homes being delivered that would have helped people in the long run?

Duncan McLennan

I think that if you impose a control system on any sector but rented housing where a normal rate of return to the investor dips below what’s available in other sectors, investors turn away from that. So what the Scottish Government have got to think about is what would happen if you impose a control that is sufficiently strict that you will divert investment away from the sector. And I think there’s enough evidence in the Scottish context generated from a number of studies, and particularly the build to rent sector has clearly been diverted away from Scotland. The major student housing investment stuff, and incidentally, my former colleague, not so much my colleagues, but my senior academic leaders, get horrified when I say I think Scottish universities had a free ride on the rental housing market when they expanded student populations. None of them built much accommodation that we did in the private sector to do it. I think that’s a good example of a housing system effect where relatively well off and middle class kids essentially displaced poorer people down the rental housing market.

So this notion that we all have a supply side crisis, think if you look at rental housing markets, and this is where the Scottish Government got their timing wrong, there’s a demand side crisis as much as a supply side crisis, occasioned by provincial regulation rationing people out of young people out of home ownership, more students, higher rates of immigration, all at the same time. So there’s pressures in that sector. So you actually need a significant expansion of supply and there was nothing done to do that.

In fact, I think that if you look at the sectors that have worked in Europe, like in Germany, you know, there’s actually quite a number of states and metropolitan areas in the United States who actually have systems of rent controls and they’ve worked for a long period of time because they were introduced in the right circumstances and they’ve allowed the rents to allow investors to have a reasonable rate of return on their investment. I think that the Scottish Government tried to do this in a way that they didn’t design the instruments very well. I think that the present discussions about the (Housing) Bill are backtracking.

I think Ken Gibb and his colleagues wrote a really good review of European experience in this. And I don’t think that he would have to speak for himself. But I don’t think the government used any of it in terms of the kind of decisions they took. In other words, I do think that the government are not that good at looking outside their own bubble.

Actually, some of the best housing researchers in the UK, in fact, I’m not just talking about Glasgow, but there’s couple of people at Heriot-Watt, have really great global reputations. I don’t think they ever get involved in advising the Scottish government. And I think that’s really unfortunate because there needs to be a much freer flow of ideas than there is now.

And there was in the past. And one thing I would say is that before I was a special advisor, I think the tradition in the Scottish office in early devolution, it was very open to people talking about what was happening and what was going on. I don’t think that happens now. But as I say, I don’t base my research career in Scotland because after I’d been a special advisor, everyone assumed I could only ever say anything that favoured one party, which was not a very accurate characterisation of what was the case even when I was a special advisor. I think that we have a relatively close-minded system.

But on the rent controls, I do think you have to be really careful. We are going to be so constrained for resources going forward. I think that we can’t do business as usual. And that includes going back to, ‘we’ll solve this by building massive amounts of council housing and we’ll have rent controls’. This is not 1915 and it’s not 1924. The 2020s are a terrible time for policy making, but we need, I think, basically a disruption in about four or five areas.

The Scottish Government and Scottish elites have to disrupt how they think about housing policy. They have to get economic and environmental stuff in there. They have to disrupt not just us thinking about the supply side. I don’t just mean laying the blame for all this at the doors of council planning departments. That’s really disingenuous. The Bank of England has much more responsibility for house price inflation than councils and tax policy does.

So we’ve got to think about ‘How do we do a revolution in the supply chains, including modular housing, including land and the price of land?’ Nobody will talk about the price of land, but it’s much too high in relation to the switch from non-residential to residential use. On the demand side of the system, we haven’t thought about ‘how do we stabilise prices?’ With the 2040 vision, which was great, there’s no discussion about monetary policy or fiscal policy that would take us towards a more stable… they were right about the ambition of a lower rate of house price inflation, but you’ll never do that without fiscal policy.

And I think one of the hopes for the next Scottish Parliament would be, well, it won’t address the taxation of housing issue, but what you might begin to see is some consensus, the development of consensus across the parties that they have to talk about the taxation of housing because people will say, ‘oh, our housing assets’, I talked earlier about the housing wealth effects. People say, ‘well, we’re homeowners, we worked hard, we earned, we pay for…’, well, you don’t actually pay for your homes. Basically, the next generation have paid. I did some calculations that suggested that people who are 65 in Scotland have probably paid for about, something about 30% of the value of their house and the rest has been either deliberate or passive speculation. And I think that we do have to address that. It’s been 50 years we haven’t done it.

Jimmy Black

My daughter has been making the same arguments to me. She’s in that 25 to 35 group that you mentioned earlier.

Duncan, Free Kirk ministers are known for long sermons construing the meaning of enigmatic texts, developing fixed ideas about right and wrong and an evangelical zeal to spread the word.

Does that sound like you? I’m thinking of what you said at the CIH Festival.

Duncan McLennan

That’s a very different question, Jimmy. I had to go to church sometimes three times every Sunday, until the age of 16 or 17, in Lochgilphead Free Church, followed by Partick Free Church at the bottom of Dowanhill Street. And I saw different styles of minister. I was rather shocked. I was giving a presentation as the economic advisor to the (Joseph) Rowntree Foundation for about 12, 15 years in the chair at that time, late night, mid 90s, was Sir Donald Barron, who was a Scot. And I’d given this talk in London about housing and the economy. And he said to me, Duncan, said, you’re speaking style. It’s about like that of a minister. said to him, do you mean, a minister for housing or a minister for finance? No, no, he said, a free church minister.

Maybe some of the, I’m not getting into the issue of religious or other beliefs. I’m not a church attender. But I do think that it’s important as academics to apply the analytical skills that you have to understand what they do, not to present, particularly in economics, not to lapse into this so easy politics of saying, well, the market always works and it’ll do.

And part of the problem we have in the supply side debate and the notion of removing planning will resolve it comes from the ideology of basically Chicago School of Economists. It’s not an accurate representation of how housing systems work, but it’s a belief that is a quasi religious belief, if you like, of many people in the economics and the profession. I don’t think we should do that. I think we need to look at the real thing is, if you’re concerned about real issues, you don’t simplify them so the theory works.

What you do is analyse them to see what the complexities are and think about what are the ways through them or how can you advise governments that what they’re trying to, well, you can have two arguments. You can say what you’re trying to do is wrong. I don’t think that’s my job. Actually, as a professor of economics and public, what my job is to do is say if you’re trying to achieve these aims, this is not a very good way of doing it. Here’s a better way of doing it.

I have been lucky in my career. I’ve found something that’s engaged my interests, all my working life. Maybe I feel I’ve always felt strongly about it. I’ve always tried to provide what does it seem like is a reasonable thing to say on the basis of, you know, a sense of high tolerance and how the housing system works.

I think we’ve lost that. And I had some reservations about doing this David Hume project. First, because it’s a really big issue. Also in classic Scottish terms, we have not just one piece of work going on, but there’s three or four going on. And no doubt we’ll all end up with recommendations. And this will get me into trouble, I’m going to say it anyway. We’ll all end up saying we need more collaboration between Westminster and the Scottish government and local authorities. We need more collaboration. And so you do. That’s how you manage complex systems is through collaboration and engagement. Well, when we do these things in Scotland, we don’t even collaborate with each other in terms of these inquiries and so on. And I think they’d be much more effective and much stronger if people did actually do that.

And that’s where we ended a fascinating discussion with Professor McLennan. We hope to have him back for a roundtable discussion with other academics or politicians or both in the fairly near future.

You can find a full transcript of this episode on the Scottish Housing News website. And Jimmy Black has written a blog picking up some of the major themes. So it’s goodbye from me, Kieran Findlay, and co-host Jimmy Black. We’ll be back in a couple of weeks.