The Scottish Government published their 2013 housing statistics key trends (http://www.scotland.gov.uk/Publications/2013/08/2641) earlier this week. While the data covers lots of standard issues it is the house building statistics that are striking. Three main sets of findings are highlighted:
• Overall new supply (including conversions and refurbishments) fell between 2011-12 and 2012-13 by 14%, such that in 2012-13 in total new supply amounted to 14,629 units. Completions fell for both private housing and for housing associations. This is, apart from the immediate aftermath of war, the lowest figure since 1945.
• New house building (all tenures) fell by 13% in terms of completions and by 9% in terms of starts.
• However, the affordable housing supply programme with its 6,000 units target did achieve it, with 6,009 completions. Nonetheless, this total is the third consecutive decline in this total and is 13% less than in 2011-12.
Despite the achievement of the annual 6,000 units affordable/social building target (for the 2nd of a proposed 5 year programme), there are a number of challenges and further reflections that can be made. First, there is the remarkable and precipitous fall in private new housing supply – shocking in its own right but also important in its geographical spread and its wider effects e.g. undermining planning gain support of social or affordable supply (through Section 75 agreements).
Every year between 2003-04 and 2007-08 led to private completions of between 20,000 and 22,500 units. Since then the numbers have fallen every year – now at less than 10,000 in 2012-13. These are the lowest levels since the 1960s. Private new supply was strong in the buoyant North East but paradoxically weak in the biggest building local authority – Glasgow.
Second, meeting the affordable supply target for a second year has to be put in context:
• Housing association completions fell by 32% in a year to 3,244 units in 2012-13.
• The council building programme (965 units in 2012-13) was 13% lower than the previous year.
• While the principle of achieving 2/3 of the total as social housing is still being met there is evidently more reliance on affordable programmes of one kind or another.
• Looking at the data over a longer period of time and with the exception of 2009-10 and the year after (when completions were high and supported by accelerated funding, etc.), the level of 6,000 or so completions is not untypical.
• Finally, and against the trends, affordable housing starts have risen sharply – 4,279 in 2011-12 rising to 6,484 in 2012-13. Will this be borne out in completions and support the attainment of the target in the third year of the five year programme? We all know that starts can take a long time to come through, if at all. More worryingly, however, affordable programme approvals fell 24% to just under 5,000. While accepting the complex overlapping relationships between approvals, starts and completions – we cannot stand easy with regard to the target being met.
In the end the private sector is critical to both the state of the housing system as a whole and to the affordable supply programme. There is a major shared equity programme underway in Scotland (our version of Help to Buy 1) and mixed evidence more broadly of market recovery in prices. Will this support a wider, stable organic market recovery in house building? The market building figures reported above are truly terrible and getting worse. We need a prolonged sustainable recovery in new supply and it remains to be seen whether Scottish borrowers (with flat or falling real earnings) will be able to accommodate this on the demand side (and to what extent lenders will soften on new mortgage lending in part underwritten by Help to Buy 2).
The jury remains out on the affordable supply target. It will depend on future terms and availability of finance necessary to give housing associations confidence that approvals can go forward, as well as the arithmetic of now higher grant rates and the overall size of the programme. Lurking behind the scenes also is the worry for all social landlords about the business impacts of higher levels of arrears associated with welfare reform.