Housing Investment Taskforce report

Build investor confidence and unlock existing financial commitments

Rent control

9. A priority for the Taskforce from the outset has been rent control and the Housing Bill introduced to the Scottish Parliament in March 2024. Although the views of individual organisations may vary, the Taskforce has worked closely with the Scottish Government to develop a revised position on rent control, with the aim of providing greater certainty and allowing new investment to flow. The Taskforce discussed in detail the introduction of a mechanism to manage rental growth within rent control areas. The Scottish Government has confirmed a Stage 2 amendment to the Bill that where a rent control area is designated, a cap would apply to rent increases while rent control is in force at a level of CPI+1% up to a maximum increase of 6%. The Taskforce supports exemptions for Build to Rent and Mid-Market Rent properties from rent control and that these should be delivered urgently so that the waiting pipeline and future opportunities can start to deliver new homes.

10. The Build to Rent market in particular should be a priority for Scotland in providing new housing supply (including family homes) as an established route for private capital investment at scale.

11. On the assumption that exemptions are delivered, there should be ongoing work between the Scottish Government and investment and property development sectors to communicate positively and assertively that Scotland is open for business for both Build to Rent and Mid-Market Rent sectors.

12. More broadly, there is a need to combat perception and translate the ambition discussed within the Taskforce - of Scotland as one of the most attractive destinations for investment into all forms of housing - through clear, consistent and long-term policy.

Enabling viable development

13. Improvements to the planning system have been frequently raised in the context of making Scotland more investable; the Taskforce has not considered planning matters in detail. It is, however, a priority for housing investment and the Taskforce was positive about the potential it has as an enabler where there is the right empowerment, leadership and accelerated decision-making set within a regulatory environment which supports the construction of good quality, mixed tenure sustainable development.

14. The resourcing challenges in the system are well-recognised and the creation of a Planning Hub to accelerate the process is a welcome development. On the whole, there is assurance needed that the system can, and does, fast-track viable developments and that the implementation of NPF4 will result in an increase in housing supply. The Taskforce was not convinced that development viability is appropriately considered as part of the planning process and in wider policymaking. It is recognised that to be appropriately considered there needs to be improved information sharing between the public and private sectors, and a more open approach to discussing profitability and wider outcomes.

15. A focus on proactive pre-application submission discussions and engagement with local planning authorities was also considered a key step to encouraging quality planning applications with a high degree of compliance and acceptability. Specifically resourcing this pre-submission process either locally or through the new Planning Hub should translate to reduced determination times and improved delivery timelines.

Costs and competitiveness

16. Housing development of all types in Scotland competes for capital with projects in other parts of the UK and beyond. For businesses which operate across the UK, it is vital that Scotland is viewed as providing an attractive and welcoming environment in which to build much-needed homes of all tenures. While the Taskforce has focused on areas for particular growth – including in the rental market – this does not diminish the need for those developers already providing the majority of Scotland’s new build homes to be encouraged to continue to play a significant role in investing and building across the country. Supporting existing investment, and helping it to grow, is as critical as opening new investment channels.

17. The Taskforce considers that greater availability of contractors and, consequently, competition would reduce costs of building in Scotland and accordingly improve viability of some projects. Economic development agencies should take a greater role in supporting the contractor base and Small and Medium Enterprises (SMEs) to grow. On the assumption that the rent control exemptions noted above are delivered, in time, there will be an increase in demand in Scotland and we should be ready for it with an enhanced contractor base that can deliver the homes coming through the pipeline.

18. While pinch points in some rural and island areas are already well known, this is also an issue for delivery of large-scale city centre projects. In the same way as supply chain investment is a focus for other growth sectors, the contractor base should be seen as a key component to support private capital at scale into quality housing.

19. Taxation, and its ability to influence housing investment activity, merits a more detailed review not within the scope of the Taskforce. This review should include how taxation is affecting mobility through the housing system and how it can incentivise improvements in quality and support net zero ambitions.

20. The design and potential implementation of the Building Safety Levy is a live issue and if implemented in Scotland, would need fair and proportionate transitional arrangements to minimise impact on the delivery pipeline and those seeking to buy or rent a new home. Viability on a per-development basis will need to be appropriately taken into account alongside other development costs to assess the impact on delivery of new homes at pace and scale as well as the impact in those areas where securing acceptable returns is already challenging.

21. Infrastructure costs are a key concern. Within this, education was particularly highlighted by the Taskforce. For private development the cost of contributions towards new school buildings (particularly primary) has been highlighted, considerably outstripping inflationary rises and consequently increasing overall developer contributions. For affordable housing providers there is a need for certainty on whether these will be applied. There is no doubt that quality school buildings are required but there needs to be serious consideration by local authorities and the Scottish Government about whether efficiencies could be made in the manner of delivery of the current Learning Estates Investment Programme.

22. The Taskforce has noted the concern, including from SMEs, about infrastructure costs where the scale or availability of finance is preventing build-out. Market testing should be undertaken to assess the demand for refreshed loan options to support this, including what risk/reward sharing models would be workable. To support delivery, the Scottish Government should engage with the Scottish National Investment Bank and draw on its market expertise.