Fixing a broken housing system

In a broken housing system, how we “do” housing needs to change, argues Andy Wightman.

The current housing system is broken. Here in Edinburgh it is virtually impossible for younger people to buy a home. Plans for new social homes over the next 10 years, don’t take social housing numbers back to anything like what they once were.

The main winners are private landlords with a quarter of households now renting privately in Edinburgh, and rents soaring by 34% since 2010. Edinburgh also now exports a large part of its housing need to the wider region, with huge consequences for traffic congestion in roads around the city.

The latest sign of a broken system is the growing trend for short term holiday lets – unregulated, untaxed and with little heed to the community impact. That is why I launched a “Homes First” campaign back in November.

But these are all symptoms of a deeper systemic problem. We need to change the way we “do” housing in this country and begin to plan housing as a human right and as part of public infrastructure.

In his Evening News column last week. John McLellan touched a proposal for “common good” funding (not a useful label since “common good” already has a specific legal meaning) but interesting as it involves separating the ownership or tenancy of a house from the funding and ownership of land and infrastructure.

Why is that important? Because the housing cost problem is a land cost problem. Housing inflation is largely a consequence of land values. According to figures from the Office for National Statistics last week, whereas the cost of land was around 50% of the cost of housing in 1995, it is now over 70%. The reason why our provision of public infrastructure – from district heating, to cycle-ways, growing space and community facilities – is so much poorer than our northern European neighbours is because our system of funding such works is not fit for purpose. This is writ large in the city’s local development plan with over £400 million of necessary infrastructure identified but funding for only about half of that.

So a model, championed by property professional Matthew Benson is worth exploring. It, involves people taking out a mortgage in the normal way for a house but because land value and infrastructure are taken out of the upfront costs, the cost of a mortgage and the need for a deposit, are slashed, by as much as half.

Meanwhile the land and infrastructure are owned collectively by, say, a trust set up for that purpose. The trust secures funding from pension funds looking for long term secure investments and gains an income from home-owners paying an annual charge over a much longer period (such as 50 years). The model can also apply just as easily to social housing and commercial build-to-rent.

Of course, the best way to reduce land costs and the overall cost of housing is to allow councils to buy it at its existing use value rather than the inflated value that arises when planning permission is granted. I will be working to amend the current planning bill to allow that to happen but, in the absence of these more fundamental reforms, we need to look at every means possible to make housing more affordable for everyone.

In the long term, we need to get rid of the speculative volume house-building model and put people back in control of the process of building the wide range of new homes we need in the places we need them.