Nine recommendations proposed to help Scotland achieve a shared understanding of housing affordability

Professor Kenneth Gibb

Based on findings from the Scottish Government’s Short Life Working Group (SLWG) 2022-2024 and chaired by Professor Kenneth Gibb (UK Collaborative Centre for Housing Evidence (CaCHE), the report concludes that this shared understanding should be viewed as a long-term objective or target of the Housing to 2040 strategy.

The report recommends that a shared understanding of housing affordability should have three components for renter households in Scotland, all of which need to be met, at least, by 2040:

• A maximum of 30% of net income should be accounted for by rent and service charges
• A minimum residual income should be achieved based on 100% of the After Housing Costs Minimum Income Standard set by the Joseph Rowntree Foundation
• Progress should be made towards reducing the numbers exceeding the UK after housing costs relative poverty threshold.

Moving forward, the report argues that to achieve affordability objectives for Scotland, stakeholders must recognise that affordability is shaped not just by housing costs but by income levels, economic growth, jobs and productivity, as well as equalities policies and benefit levels. It can only be understood as the combination of these factors and not in isolation.

SLWG recommendations

• Recommendation 1: as a key plank of fighting child poverty and constructing the human right to adequate housing, the new shared understanding definition ought to be a component part of the National Performance Framework national outcome indicators in line with the Government’s proposal for a new National Outcome for Housing.
• Recommendation 2: the shared understanding focuses on social, affordable and private rental affordability, but this is on the basis that other aspects of housing policy are supporting access to home ownership, also working and lobbying to support policies to help owners in financial difficulty.
• Recommendation 3: on grounds of simplicity and the existence of other complementary policies, we propose not to include minimum standards regarding housing conditions/standards in the working definition other than to be clear that the rent charged by a landlord should be based on meeting minimum legal and regulatory standards.
• Recommendation 4: on grounds of simplicity, locus of decision-making and alternative policy domains relevant to certain property related costs, we conclude that a narrow measure of cost, rent plus service charge, should be used.
• Recommendation 5: agreeing a framework for the shared understanding should allow regular monitoring and periodic review to consider updating of the indicators used in the light of evidence collected about affordability. In this way it should be possible to adopt the shared understanding to both immediate and longer-term questions re housing policy.
• Recommendation 6: it is essential that we have a shared understanding of what social rent levels are and the extent to which future rent increases in social housing can rise to over time but still meet the accepted sense that rents remain at social levels. The Scottish Government should undertake further work to better understand what that social level is across the existing housing stock and how it compares for instance to assumptions within published guidance regarding RSL social rent benchmarks. Affordability scrutiny is also required for the mid-market rent sector, specifically, regarding future MMR rent increases.
• Recommendation 7a: (1) national policy guideline or assumption – rent and service charge is no more than 30% of net monthly income; second, there is a minimum residual income relating to the after-housing costs version of the Joseph Rowntree Foundation Minimum Income Standard (with a possible supplementary indicator based on ASHE30, as discussed, conditional on it being successfully refreshed in the light of tax and benefit changes since its introduction and use in the SFHA affordability tool); third, if, after housing cost income is below the UK poverty benchmark, the housing is therefore not affordable.
• Recommendation 7b: (2) disaggregated version of policy assumption guideline – as (1) but with focus on average national measures for significant groups of household types where we expect to observe and analyse important variations e.g. working age single adults, single families, couples, couples with children, single and couple retired households, young adults, women, ethnicity and other important protected characteristics. This will require a degree of new data capture, analysis and publication to support work done by providers, trade bodies and wider citizen interests.
• Recommendation 8: Scottish Government, local authorities and providers need to collaborate to undertake a series of economic and equality impact assessments around the new affordability measure. They also need to consider how the new measure might be efficiently but fairly transitioned over time to deliver a progressive realisation of the new shared understanding. There will need to be new data collected to support monitoring the measure. This can draw on recent experience with the new fuel poverty measure.
• Recommendation 9: The shared understanding should be viewed as a long-term objective or target of the Housing to 2040 strategy. Targets should be progressively realised by its end date, but with ongoing monitoring. At the same time, the shared understanding target should be used forthwith to influence and shape future policy discussions relevant to affordability e.g. seeking to converge over time the definitions of affordability used in policymaking.

SLWG chair Professor Kenneth Gibb, CaCHE director and professor of housing economics at the University of Glasgow, said: “The working group always recognised that there is no pure or perfect answer to the question set – affordability is fundamentally normative, subjective and judgemental.

“We have tried to use a combination of evidence, argument and new research to help us build a sufficient consensus around our multi-part definition. It is now for the Scottish Government to respond to our shared understanding recommendations.”

Shelter Scotland said it welcomed the report’s findings and urged the Scottish Government to take immediate action to implement its recommendations.

“Housing in Scotland is not affordable for most people,” director Alison Watson said.

“Our analysis shows that someone on the median (not average) income in Scotland would need to spend 60% of their take-home pay each month to cover the average rent, or 50% to cover the average mortgage.

“While these figures do not represent any one individual’s circumstances, they illustrate the scale of dysfunction in Scotland’s housing market. Prices are detached from wages, unaffordable to most households, and a key driver of homelessness and the wider housing emergency.

She added: “The single most effective way to make housing more affordable is to build more social homes and repair the foundations of Scotland’s broken and biased housing system. Every other intervention in the market merely mitigates the consequences of not having enough social housing.

“This is why we are calling on every voter in Scotland to make building more social homes their number one demand of politicians ahead of next year’s Holyrood elections.“