Scotland faces a housing disaster. Rents are ballooning, especially in Edinburgh and Glasgow; incomes are stagnant; and while its house prices would make a Londoner laugh (the average over Scotland as a whole is less than £200,000, and even in Edinburgh under £300,000), they are up by some 10 per cent since 2023. The Scottish government is determined to do something about it. Unfortunately, there is every reason to think that its remedies, straight out of the left-wing SNP rulebook, will make things rather worse.
The whole caboodle enriches builders, real estate developers and comfortably-off property owners. And the people it is meant to help, young workers needing a leg up? Hardly at all
Last year MSPs passed the Housing (Scotland) Act, which will eventually make permanent the system of emergency rent controls introduced after Covid. From next year on the government gets the power to declare ‘rent control areas,’ limiting any rises, even on a change of tenancy, to inflation plus 1 per cent, or 6 per cent, whichever is lower.
Well meaning? Certainly. But like most such measures, it is likely to be viciously counter-productive. With prices rising and rents capped, return on capital drops; and with it any incentive to buy homes for rental. If you already own a house on the private letting market, you are well advised to withdraw it, particularly since in the next few years (courtesy of further regulations from Holyrood) you may also have to pay large sums to satisfy energy efficiency standards which less than half the rented properties in Scotland currently reach. Thinking of building accommodation for rent? Forget it. Instead of constructing more homes for rental, which Scotland desperately needs, it’s far simpler, and more lucrative, to build a hideous block of student accommodation, which the country probably doesn’t need, but which has to reach far lower standards and is – whoopee! – free from the new rent controls.
In short, the only people likely to benefit from such a scheme are student landlords with a few hundred thousand to invest, and existing tenants sitting tight in property they rented years ago and would be mad to move out of – even if they have good reason. Nice one, First Minister.
All this is bad enough; but this week Holyrood announced another wheeze. First-time buyers will now get a £10,000 interest-free loan from the Scottish government to put towards a deposit, to be repaid only if and when they resell the property and then in the form of a 10 per cent stake in the price received.
Good for a young professional desperate to get on the property ladder? Think again.
The first point is the most obvious. If you are a developer, and you read that the government is going to add £10,000 to a first-time buyer’s deposit, what will you do? If you’ve any sense, boost your balance sheet by raising the price of each home by £10,000. (Indeed, since deposits are traditionally proportional to the total price, you may even be able to get away with a bit more.)
As it is, property development can be a knife-edge business; if you can expand your bottom line at the expense of hapless taxpayers north of the Tweed, many with no hope of ever owning a home, why not? And similarly if you are a Scotsman with a bottom-of-the-range house surplus to requirements, say because you have moved in with someone else or simply inherited it from a Generation X parent. Now that anyone wanting to buy as a first-time buyer will have an extra £10,000 will cause the estate agent you employ just to raise their expectations when it comes to the asking price.
It gets worse, too. Pouring public money into the hands of young professionals desperate to buy a place will not only disadvantage those who come afterwards and find prices artificially inflated. It will also make those who do buy more immobile. Suppose a lucky applicant under the new scheme buys in Aberdeen, but a year later is offered a higher-paying job in Edinburgh. They will have to face the fact that if they move the government will claw back 10 per cent of what they get for their old house, and not being a first-time buyer any longer they won’t get any help to buy the new one. So much for encouraging enterprise and self-improvement. Meanwhile, the whole scheme, by making the Scottish government a property owner on a fairly large scale, will create the most perverse incentive of all: the faster house prices rise, the more money it makes.
The Scottish Conservatives are right to call out this intervention as half-baked. If anything the language is too mild. The whole caboodle enriches builders, real estate developers and comfortably-off property owners. And the people it is meant to help, young workers needing a leg up? Hardly at all. For anyone with the welfare of Scotland in mind, there can be only one reaction to it. Please, please, save us from the SNP’s attempts to help us.
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