Housebuilding in Scotland

As the housebuilding sector is working hard to get back on its feet after facing significant challenges stemming from the Covid-19 pandemic, it has never been more important to consider the social and economic benefits which the housebuilding sector brings to Scotland.

In March this year, Homes for Scotland published a report on “The Social & Economic Benefits of Home Building in Scotland”. The report focuses on the following four key themes which are considered in turn below:

• Inclusivity;
• Quality of Life;
• Environmental Sustainability; and
• Economic Growth.

Inclusivity

The report focuses on the important role that the house building sector plays in providing employment in Scotland.

There are many ‘direct’ jobs created by the sector such as the housebuilders themselves, who employ design, planning, finance, contract, engineering and project management professionals as well as a wide range of tradespersons.

In addition, the sector creates ‘indirect’ jobs being jobs in the house building supply chain such as jobs in the legal and finance sectors and ‘induced’ jobs, companies that provide goods and services for house builders and their suppliers.

The report estimates that together these direct, indirect and induced jobs total up to 79,200 jobs in Scotland, equating to 3.5 jobs for each house built and approximately 3% of Scotland’s total employment.

Quality of Life

One of the key themes emerging from the report is the importance of creating varied and balanced communities and the value that delivering affordable housing as part of mixed tenure developments has in ensuring lower-income families are not negatively impacted.

The report discusses the impact that houses with poor insulation, heating and overcrowding can have on health. We now see modern day housing developments including areas of open space, leisure facilities and bicycle stores and developments being located in areas where residents can easily access nearby walks and cycle paths. The report cites the importance of this as a factor which can improve physical and mental health.

It is noted that in 2018/2019 there was investment into sport and leisure facilities in the sum of £21.5M and investment into public open space facilities in the sum of £6.9M from developer contributions paid via section 75 planning agreements (Table 3.2 of the report).

Environmental Sustainability

The house building sector has a significant role to play in tackling climate change and reducing carbon emissions and the report credits the sector for showing commitment to doing so.

The surveys which Homes for Scotland commissioned in connection with producing their report showed that increasingly housebuilders are ingraining zero emissions heating systems and enhanced energy-efficiency measures into new housing developments.

The re-use of brownfield land is key to both delivering new homes and environmental sustainability. This can be useful in areas which have a limited supply of land that can be developed. It is estimated that one fifth of all homes built in 2019 were built on brownfield sites.

Emerging policies will require house builders to encourage more sustainable communities and healthier lifestyles, supporting the principle of 20-minute neighbourhoods (a concept focused on creating housing developments whereby residents can meet their day-to-day needs within a 20-minute walk or cycle).

One of the key ideas behind this concept is to reduce reliance on cars and so larger-scale developments will be encouraged to incorporate new public and green transport links, and local employment uses, encouraging people to travel less and by walking or cycling rather than by car.

Economic Growth

In addition to paying developer contributions and creating various employment opportunities, the sector contributes to the Scottish economy in many other ways.

The report recognises the contribution the sector makes to the Scottish economy through the economic output (measured by Gross Value Added) it produces. In 2018, it is estimated that £1.8 billion of economic output was generated by the construction of homes which is equivalent to 1.8% of Scotland’s output.

The report also acknowledges the sector’s contribution to the Scottish economy through national tax revenues, particularly LBTT paid on the purchase of land and buildings in Scotland. It is estimated that the acquisition of homes and sale of new builds produces approximately £21M in LBTT each year.

The sector contributes to the economy at a local level as well as a national one, for example by the Council tax which is paid to Scottish councils. It is estimated that Council Tax generates nearly £2.6 billion for Scottish Councils every year.

Is Scotland building enough houses?

It is evident therefore that the housebuilding sector makes a significant contribution and brings many social and economic benefits to Scotland.

However, the report observes that the sector is hindered by the under-supply of housing - and if housing supply was increased to 25,000 houses being built per year economic output would be £0.3bn greater than in 2019. There would also be £52M extra investment in local infrastructure.

In addition to many economic benefits, this increased supply would result in significant social benefit as having a greater supply of well-designed, energy-efficient homes improves health and access to education.

Tackling under-supply

The report is clear in that to support housebuilders to achieve this higher supply, we will need to see support from the planning process (at national, strategic and local levels) when new policies and requirements are being set to allow the sector to generate increased activity.

The increased economic and social benefits that can be achieved if the constraint of under-supply is removed cannot be ignored - and are particularly important when the country is striving to overcome the economic challenges suffered as a result of the Covid-19 pandemic and to meet Scotland’s net zero targets.

Homes for Scotland have produced a very useful and timely report which sets out the clear and demonstrable case for investment in the housebuilding sector.

The UK and Scottish governments must now proceed to take advantage of the opportunities highlighted.

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