Scotland ‘faces enormous challenge’ to build enough homes

housing estate stockThe number of homes being built in Scotland is significantly lower than Scottish Government targets and does not meet current demands, according to new research.

A report by property consultancy JLL has concluded that Scotland faces an “enormous challenge” to build the homes needed for a growing population, with latest figures suggesting development volumes are plateauing at best.

The Rising to the Challenge report found that in the year to Q2 2015, a total of 15,260 homes were completed, well short of both the five-year average to 2007/8 of 21,170 homes a year, and even further behind the government’s current recommended target of 36,000 homes a year.

The number of households in Scotland is forecast to rise by approximately 74,000 in the five years to 2020, with 15,100 in Edinburgh and a further 10,400 in Glasgow. Even accounting for the Scottish Government’s latest £195 million funding stimulus, JLL believes that the forecast increase in households over the next five years will create demand that far outstrips the supply of additional housing.

Looking ahead, JLL believes that development activity will begin to rise, albeit modestly, but this will lead to even greater competition and pressure between demand and available supply in both the sales and the lettings markets in Edinburgh and Glasgow. JLL also predicts that the next few years will finally see the embryonic start of Build to Rent or Private Rented Community (PRC) development in Scotland’s key cities.

Jason Hogg, director of JLL’s residential team in Scotland, said: “2016 will be a year of challenging questions rather than unbridled forward momentum. And there are several questions on a variety of residential issues which need addressing.

“The greatest challenge is how the housebuilding industry and the Scottish Government will move towards building the greater volume of homes the country needs. Development activity is better than three to four years ago but still nowhere near the 23,000 homes a year target. The Scottish Government is allocating funds to assist, but we believe closer collaboration with the industry, more innovative and more directly beneficial initiatives as well as higher funding need to be considered if the housing shortfall is to be addressed.

“2016 will also bring into play legislation that will rebalance the private landlord and tenant relationships. However, we will have to wait and see whether there are any wider market implications or whether any local authorities will use their rent cap powers.”

The Chartered Institute of Housing in Scotland said the figures demonstrate the need for further investment in housing.

Director Annie Mauger told The Herald: “This new report underlines once again the huge challenges Scotland faces to deliver sufficient homes to meet demand.

“With more than 28,000 households assessed as homeless last year and around 160,000 households on local authority waiting lists for social housing, the demand for all tenures of housing in Scotland far outstrips supply.

“To create a fully functioning housing system, we need to provide people with a range of housing options at a range of prices to meet different needs. This includes supporting development in the intermediate and private sectors as well as increasing the supply of social housing.”

She added that political commitments to increase affordable housing were welcome, but “for those targets to be achieved, overall investment in affordable housing needs to increase”.

The Scottish Government said an independent review of housing is currently underway and expected to report in Spring.

A spokesman added: “We have a strong record on housing, having already exceeded our target of delivering 30,000 affordable homes in this Parliamentary term.

“Our new bold, credible and affordable commitment to delivering 50,000 affordable homes by 2021 represents a 67 per cent increase on our current target. This new target is being backed up with investment of over £3 billion - £690m of which will be invested in 2016-17.

“We are also easing housing pressures by working with partners to develop innovative funding approaches. We are working closely with all sectors to promote the construction of new homes, support jobs in the construction industry and inclusive growth in the wider economy.”

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