WHETHER you have watched your family grow up in your current home and are considering your next move or you are hoping to climb onto the property ladder for the first time, the impact of the credit crunch on the housing market will not have escaped your notice. And nowhere are the effects being felt more keenly than in Edinburgh.
Long before the credit crunch, the city had been facing a severe housing shortage which had pushed prices ever upwards. For at least the past decade, demand has been far outstripping supply and the situation has been particularly acute with regard t
o the lack of affordable homes for first-time buyers and family housing.
As the representative body for the country's home building industry, Homes for Scotland has long argued the case for a concerted political commitment to increasing production of new homes. We have been at pains to highlight the need for more housing across all tenures.
We were therefore encouraged when, almost exactly one year ago, Homes for Scotland was invited to join the Scottish Government's Housing Supply Task Force to help ensure the delivery of its ambitious new target of 35,000 new homes to be built in Scotland each year by the middle of the next decade – an increase of 40 per cent on the output levels achieved in the previous year.
At the time, Homes for Scotland and our members, who build over 95 per cent of the homes for sale in Scotland each year, were confident that this target was stretching but achievable. In fact, we continue to be committed to finding ways of exceeding it wherever possible in order to avert a housing affordability crisis, particularly in overheated markets such as Edinburgh.
However, the landscape in which we had all been operating has changed beyond recognition in the last 12 months. The long-standing challenges the house building industry faced – such as infrastructure development constraints; responding to the council's sustainable building standards policy which would have resulted in further inflated prices; outdated planning policies which restricted land supply – all pale into insignificance compared to the recent cataclysmic turmoil.
It is now the global economic crisis and resulting lack of mortgage finance, combined with a viral lack of consumer confidence, that is compounding the critical shortage of housing across all tenures in the city. With precious few sales, house builders are being forced to make thousands of redundancies. It is estimated that no fewer than 26,000 people have left our sector within the last few months. If unchecked, this will have a devastating effect on local economies in Scotland.
The irreversible loss of both skills and capacity will have far-reaching long-term consequences. Not only will it make it difficult for the industry to respond when market conditions recover, but a consequential lack of supply could conceivably drive significant pent-up demand, fuelling conditions for a potential return to house price inflation in the future.
There are also wider social and economic impacts. With the largest source of private investment in schools, roads, infrastructure and other community facilities being cut dramatically, if alternative investment mechanisms are not found, that will create problems in budgets for Scottish Government and all local authorities.
Because new-build housing output is plummeting, the timescales for achieving the Scottish Government's ambitious housing targets have been shattered. Without a significant economic re-inflation programme of public investment, combined with concerted UK-wide action to tackle the current mortgage crisis, it could take several decades for supply levels to reach the goal of at least 35,000 units per annum. This is a wake-up call to anyone who thinks the housing market is simply experiencing a 'necessary' short-term correction.
Very significant sums of public investment must be pumped into housing provision, combined with a range of new innovative approaches and mortgage products. Only then will we be able to stave off the housing shortage Scotland is now staring in the face.
We welcomed the First Minister's announcement on the first tranche of the £100m being brought forward within the Scottish Government's three-year 'Affordable Housing Investment Programme' to assist housing associations with site starts and land acquisition. Once allocated to specific projects, this will help inject some activity back into new home construction as well as providing more affordable homes.
Nevertheless, with much new residential development effectively on hold, we also need pragmatic application of existing funding models and planning policy so the council's own affordable housing investment plans can be used to open up sites that might otherwise be mothballed.
I am pleased to say we have recently had some very useful conversations with Edinburgh City Council leaders and executives about how this can be achieved. The council has reacted quickly to events by proposing a package of investments to stimulate housing activity.
We are hopeful recent announcements will have a positive impact on Edinburgh's market. The recent half point interest rate cut by the Bank of England was welcome, as were Gordon Brown's measures to stabilise the banking system.
With home building a key economic driver in Scotland, the hope is banks will continue to quickly pass on any falls in interest rates to home buyers and rapidly reinstate mortgage lending levels. All of this, in time, will help to restore consumer confidence on which a healthy, vibrant and robust Edinburgh economy depends.
The full article contains 903 words and appears in Edinburgh Evening News newspaper.
