Housing - Need For Further Action?

Given the current difficulties with the housing market, it is salutary to think that the current Government identified within the last 18 months a target of 35,000 housing completions a year (an increase of 10,000 units per year from the figure then achieved). That figure of 35,000 units a year seems to be virtually unachievable at the present time. Statistics produced by NHBC as at the third quarter of 2008 show a drop of 74% on the number of private new build starts compared to the same quarter just a year ago. The problem is not just a Scottish one of course.

In June 2007 with a view to dealing or seeking to deal with a number of issues within the housing sector, the Scottish Government set up the Housing Supply Task Force. Its remit was "to identify and tackle impediments to increasing the supply of housing across all tenures – all with the view to ensuring that people across Scotland have the opportunity to access suitable housing that meets their needs and demands".

At the time the Task Force was set up the problems were of course very different. While there were serious issues in relation to affordable housing and the provision of affordable housing, the problems which now beset the housing market did not exist. Major Banks were still lending money (as were other lending institutions) and the endemic lack of confidence that now affects the whole banking sector did not exist.

The Task Force produced a report in early February which acknowledges that very different perspective. The view of the Task Force is that the current downturn "will undoubtedly be felt for a number of years". Interestingly enough they do however comment that the fundamental need "to increase housing supply over the longer term to meet housing needs and demand remains". That view is one consistent with the view of many house builders – demand has not gone away, the issue is one of confidence and supply.

The Task Force (which includes members from both the public and private sector but no planners) identifies in this report the impact on the housing market. The Task Force point out that in the third quarter of 2008 the number of loans for house purchases was 47% lower than a year earlier and the data produced by the Registers of Scotland suggests that the total value of Scottish housing transactions had fallen by some 41% - a factor no doubt reflecting both the downturn in activity and the decrease in prices. The Task Force also points out that the impact on jobs has been significant referring to information from Homes for Scotland that 26,000 direct jobs have been lost directly with approximately a further 20,000 indirect jobs having been lost.

Against that background the Task Force has been considering matters and looking into the situation with particular reference to a number of case studies. They have also carried out a number of thematic studies and the report sets out a number of conclusions and recommendations which are significant.

While acknowledging the steps taken by the Government, the Task Force identifies 4 priority issues which it considers need to addressed as a matter of urgency.

1. The first of these is one that is likely to find considerable support from the development industry as it relates to the advance funding of infrastructure. This is a difficult issue and there are concerns (acknowledged by the report) that the decision by the Scottish Government to postpone any significant review of planning agreements (with a view to avoiding additional burdens on the development industry in the current economic climate) may well exacerbate problems. While welcoming the ongoing consultation on the Circular in relation to planning agreements, the Task Force in the report indicate that there is now a "pressing need to consider the case for the use of alternative means to fund infrastructure associated with new housing, particularly for large and more complex developments". This is a view the development industry shares – indeed at the planning summit in October Dan Macdonald (in his capacity as Chairman of the Scottish Property Federation) challenged the Scottish Government on this very issue. As well, however, as the issue of funding, the Task Force acknowledged the difficulties in delivery, particularly when this needs robust co-ordination. The Task Force accordingly calls for all parties to consider new ways of financing infrastructure, suggest that consideration should be given to the scope of using funds to support up front the provision of infrastructure and to investigate a model of infrastructure delivery to support Development Plan action programmes. It is difficult to disagree with these views – the issue is how to come up with answers.
   
2. The Task Force also looks at the changes to the planning system and generally welcomes these. The concerns the Task Force have appear to relate not to the changes in themselves, but the change of culture and approach that many parties consider necessary in the planning system and the development management process. While they identify the need for local authorities to have a key role, the Task Force, correctly, makes clear that this is not just an issue for the public sector. Specifically they call on all parties to ensure that genuine improvements occur in the planning process.
   
3. The third priority issue identified by the Task Force is specific support for the house building sector with a view to trying to offset the impact of the skills already lost. Many are concerned that these skills will not be easily replaced. While commending the Government for the modern apprenticeship opportunities it is committed to, the Task Force certainly sees that more needs to be done, including analysing the needs of the industry, trying to keep track of individuals who may be attracted back into this sector, and considering ways to "skill up" the sector generally.
   
4. The final issue that the Task Force identifies as a priority is the issue of land supply. The report highlights that the release of surplus public sector land can assist in the effective provision of housing land in particular. While the Task Force notes that the Scottish Government intends to relax the requirements that currently exist to the effect that local authorities must seek ministerial approval before releasing land at less than best consideration, the Task Force wants further consideration to be given to how the sale of surplus public sector land can best be carried out whilst seeking to comply with best value requirements. It also suggests that all public agencies need to work together and share information with a view to achieving this successfully.

The report is an interesting one and sets out challenges (significant challenges) for all those involved in the development industry. It will be interesting to see the Government response.

There are of course other developments which may assist with some of the difficulties in the housing sector generally. The Government has announced further funding to support affordable housing. While many parties do not consider enough money has been made available, the sum made available is certainly a significant one. Equally the indications given by Royal Bank of Scotland that they will make significant funds available to homes buyers in Scotland is likely to provide impetus to the housing market. It is interesting to note how quickly the Royal Bank position was welcomed by Homes for Scotland. While mortgages at the levels previously available are unlikely to reappear (with the consequence that first time buyers need funds available to get on the property ladder), that position is somewhat offset by the fact that the housing market currently provides far better value than it has done for a number of years.

It is of course unclear how quickly the position of the Royal Bank of Scotland will affect the market. Northern Rock (previously one of the largest mortgage providers) are apparently equally committed to making funds available and it seems inevitable that Lloyds/Halifax Bank of Scotland will have to follow suit if they wish to retain a significant part of the mortgage market. Irrespective of these steps however, action in response to the recommendations of the Task Force is likely to be necessary with a view to helping the housing market and the house building industry recover.

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