We are often told that we need to build more houses. The two reasons usually given are social (to provide people with higher quality housing) and economic (to prevent house price-induced boom/bust and to prevent so much capital being tied up in the housing market). It is good to see, put into facts and figures, some of the benefits created by the housebuilding industry.
According to the report, the housebuilding industry directly employs 31,603 people in Scotland and, taking into account indirect/induced jobs (including lawyers!), this rises to 63,260. There are also approximately 380 apprentices and 200 graduates each year. I have had the pleasure of working with a number of those graduates at two of the largest housebuilders in the UK; they speak highly of their experience and of the opportunities that they have enthusiastically taken.
The report also points out that (according to a survey of developers) 0% of employees directly employed in the housebuilding industry are on zero hours contracts and 96.7% are paid the living wage.
This shows that (compared to a number of other industries) the housebuilding industry could be seen as a relatively good employer.
Tax, planning gain and owner expenditure
The estimate of SDLT receipts from the housebuilding industry (SDLT paid by developers when buying sites plus SDLT paid by plot purchasers when buying homes) in 2014 was £22million. Once corporation tax and income tax contributions are added, the total tax contribution from the Scottish housebuilding industry was considerably in excess of £130million. (This figure does not take into account the additional tax paid by the firms and individuals.)
In addition, the new houses led to approximately £15.4m per year being paid in council tax. Developers also contributed £83.7million in Section 75 contributions in Scotland in 2014 - in the form of (or paying towards the cost of) affordable housing, new and improved schools, sports facilities, community facilities and the like.
Another benefit that the report points out is first resident expenditure - the amount of money that purchasers of new build homes spend on furniture, carpets, curtains etc when they purchase a new build home. This is estimated at over £5,000 per home.
The report points out that over 75,000 households in Scotland are overcrowded and that 51% of the existing housing in Scotland fails the Scottish Housing Quality Standard. The effect of this on families and on children in particular is one of the many reasons that politicians often refer to Britain's housing crisis.
What was built, where and by whom, in 2014?
There were 15,562 new homes constructed in Scotland in 2014, compared to pre-recession levels of 25,000 per year and boom numbers in the mid-fifties and mid-seventies of over 40,000 per year. The report is keen to point out (with detailed estimated figures) the increase in the above benefits that would be brought about if construction was increased to 25,000 homes each year.
Further, with more than 50% of new houses built in 2014 being constructed on brownfield sites, the worry that all of our greenspaces are being destroyed as a result of housing development is not entirely justified.In 2014, 78% of all new homes came from the private sector. Therefore if we are to get anywhere near the many ambitious targets set by various bodies for new home building (or even close to the pre-recession figures) then the majority of these are going to have to come from the private sector.
Developer interest and homebuyer demand
From our recent experience (acting for a number of the UK's largest residential developers), interest among developers in the acquisition of new residential development sites is strong. In the last couple of years demand has picked up to the degree that many developers now regularly look to make strong offers for sites at closing dates.
However the pressures on the housing market remain the same as they have for the last few years. Larger development sites, particularly those requiring significant upfront infrastructure costs or those with more than one landowner involved, can struggle to get off the ground. Also, with many sites being delayed due to the planning process, the number of houses being built is not reaching the housing supply target (the number of new houses that the local authority has determined is needed in an area) in many areas.
New homes are generally in high demand - but funding can be an issue. While things may have eased slightly in recent years, it remains difficult for many would be home owners to secure mortgages and/or to save up sufficient deposits to allow them to purchase other than using Help to Buy.
For there to be a significant increase in the number of new houses being built (so that the country can reap the benefits set out in the report) these problems will have to be tackled head on in the years to come.