James Andersen, a Property and Construction specialist at Grant Thornton in Scotland, on the need to tackle Scotland’s housing crisis and the role that the Private Rented Sector (PRS) can play in this.
In 2016, a new record was achieved in Scotland. Our population hit its highest ever level. 5,404,700 people now call this country home. After several decades of a declining population and the so-called ‘brain drain’, it’s positive to see Scotland’s vibrant economy retaining and attracting people rather than watching them leave.
But, with increasing populations comes increasing demand for infrastructure, services and housing. The latter has become a significant issue in the country with a chronic lack of affordable accommodation caused, at least in part, by painfully slow planning processes and a failure by politicians to work collaboratively with developers to place the problem higher up the agenda.
In 2016 another significant development took place. Homeownership levels had dropped to their lowest point in thirty years, driven primarily by the rapid growth of the country’s rental market. The combination of rising house prices, economic uncertainty and a shortage of access to finance is keeping young would-be first-time buyers in the rental market for longer. Further, there is a perception that ‘millennials’ do not always see the benefits of owning their home, and prefer the flexibility that renting allows.
The affordability of housing is clearly a significant issue, which needs to be addressed as part of a programme of solutions to tackle the country’s housing crisis. However, the rental sector can play its part in tackling the shortage right now. More than 150,000 people throughout Scotland are currently on council house waiting lists. While local authorities, supported by the government, are rapidly increasing efforts to build more homes, they’re facing an uphill struggle to keep up with demand.
That’s why initiatives such as the Rental Income Guarantee Scheme (RIGS) are so important. The scheme encourages property developers to invest in new developments that are specifically built for the Private Rented Sector (PRS) in exchange for financial guarantees. This offsets risk for developers, enabling them to access finance easier, and provides much needed housing, creating limited risk for all parties given the huge demand that exists right now for accommodation.
While PRS schemes are yet to gain significant momentum in Scotland, there are encouraging signs with projects in both Glasgow and Edinburgh recently being confirmed. Further, there appears to be support for the sector from the Scottish Government, although more is required to create the right conditions for the sector to truly thrive.
Since the 1970s, Scotland has developed into a nation of homeowners, laying the foundations for a booming property and construction. But, what we now need to see is a move towards creating the right mix of developments, meeting the needs of a rapidly growing and increasingly diverse population.