NewsArticle-30-09-2008

With new build housing output currently plummeting, the timescales for achieving the Scottish Government’s ambitious housing targets were shattered today by new recovery scenarios released by Homes for Scotland.  Their analysis shows that, without a significant economic re-inflation programme of public investment combined with concerted UK wide action to tackle the current mortgage crisis, it could take several decades for supply levels to reach the goal of 35,000 units per annum – many years behind schedule.

The home building industry is predicting the number of new homes being built in Scotland next year will fall to their lowest level since 1924 (outside the war years).  The scenarios also show that it could potentially take up to 17 years for output levels just to recover to those of 2007 if trends from previous decades were blindly repeated.

Jonathan Fair, Chief Executive of Homes for Scotland, the organisation which represents companies building 95% of the country’s new homes, believes that strategic changes and fundamental interventions now require to be made and said:

“Our analysis confirms the devastating effect the credit crunch is having on the delivery of much needed new homes across all tenures in Scotland.  These scenarios must be a wake-up call to anyone who thinks the housing market is simply experiencing a ‘necessary’ short-term correction”.  

Fair called for immediate further action by the Scottish Government in light of the figures released today.  He said:

“Westminster has continued to dither in implementing focused monetary and fiscal measures to address these problems.  In contrast, where it has the ability to do so, the Scottish Government has already demonstrated that it is prepared to listen, then act swiftly and those early actions were welcome. 

“Nevertheless, with the severity of the situation facing us and the prospects for achieving housing aspirations, even in the medium term, appearing very remote indeed the Scottish Government needs to be even bolder.  It must think strategically and massively accelerate its Affordable Housing Investment Programme to bring forward the delivery of new homes in 2009/2010.  In addition there is an immediate need to expand its wider public infrastructure spending and also leverage out the maximum benefit from its already pre-funded reskilling and retraining programmes.  Maintaining the skills base within our sector is essential if speedy recovery is to be possible.

“Very significant sums of public investment are required to be pumped into housing provision, combined with new innovative approaches and mortgage products from within the private sector.  Only then, collectively, will we be able to stave off the housing shortage Scotland is now staring in the face.

“With up to as many as 26,000 directly employed jobs in our industry already lost and much new development now effectively on hold, this is not the trimming of excess ‘fat’ but the industry’s basic structure which is being cut away.

“As today’s figures show, this irreversible loss of both skills and capacity will have far-reaching long-term consequences.  Not only will it make it very difficult for the industry to respond when market conditions recover, but a consequential lack of supply could conceivably drive significant pent-up demand - perversely fuelling conditions for a potential return to double-digit house price inflation in the future.”

Fair also warned of the wider social and economic impacts for Scotland because of what is happening in the home building sector.  He maintains that the largest source of private investment in schools, roads, infrastructure and other community facilities is being cut dramatically and, if alternative investment mechanisms are not found, that will create problems in budgets for Scottish Government and Local Authorities alike.

Whilst the Scottish Government’s recent announcement to bring forward £100 million of its three year Affordable Housing Investment Programme was welcome (designed to enable private developers, housing associations and registered social landlords to increase provision of homes across Scotland), Fair considers this is nevertheless a drop in the ocean in the context of an industry which last year contributed £6bn to the economy. 

Ends   Enquiries to: Beth Hocking, Homes for Scotland – 0131 455 8350 / 07946 421521 Jennifer Kennedy, Homes for Scotland – 0131 455 8350 / 07763 240694 Note to Editors:

1.  Homes for Scotland (www.homesforscotland.com) represents the country’s home building industry which: - is the largest source of private investment in Scotland - is the largest user of the planning system in Scotland - last year built 20,000 new homes, contributed £6bn to the economy and directly impacted the employment of 100,000 people

2. NHBC figures show that there was a significant drop in house building activity during the three months from April to June 2008, with the number of new homes started in Scotland down by 46%.  Visit www.nhbc.co.uk for more information.

3. Evidence from Homes for Scotland member companies suggests that half of the industry’s directly employed workforce (26,000) may have already lost their jobs.  Applying a multiplier of 1.8 to take account of the industry’s strong forward and backward linkages takes this figure to over 45,000.

4.  Click here to view Homes for Scotland’s ‘Restoring Housing Output:  Scenarios for Recovery’ research.