Housing Beyond 2021 (Scotland): Discussion Paper

We gave the Scottish Government our opinions on their proposals to address housing issues such as an ageing population, climate change, affordability and more beyond 2021.

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Summary of our response

Affordability and supply

Homeownership

To help tackle the issue of affordability the Scottish Government must increase the supply of housing stock and review the current Land and Buildings Transaction Tax (LBTT) to prevent a limiting of market activity. 

Policies to assist first-time buyers will increase demand from this portion of the market. We welcomed the Scottish Government’s decision in June 2018 to exempt first-time buyers from paying Land and Buildings Transaction Tax (LBTT) on property purchases up to £175,000. However, members in England have noticed that first-time buyers are now saving for longer to make the most out of the tax relief. To combat this issue, the Scottish Government must increase the supply of new, affordable housing for First-Time Buyers.

Private rented sector

To improve affordability for tenants and encourage further investment into the private rented sector, the Scottish Government should do two things. 

  1. Scrap surcharge above Land and Buildings Transaction Tax (LBTT) residential rates for landlords.
  2. Work with the UK Government to revoke the Mortgage Interest Relief changes brought about in Section 24 of the Finance Act 2015.

These additional costs to landlords are leading to higher rents for tenants as they look to cover these costs. This in turn impacts on how much a tenant can save towards a house deposit. This could result in home-ownership being out of reach and reduction in the Scottish Government’s LBTT receipts.

Ageing population

By 2036, it is estimated that 1 in 3 people will be over the age of 65 in most Scottish regions. In order to cater for this demographic, the Scottish Government must do two things.

1. Improve the mix of housing across all tenures and build these homes where older people want to live

One of the main barriers for older people and pensioners wishing to sell their family home and relocate is the lack of suitable choices. In 2015, Legal & General commissioned a report which found that when last time buyers are looking for a new home, the most common preferences are:

  • being close to family and friends (32%),
  • being near their current neighbourhood (18%),
  • having easy access to healthcare (16%) and;
  • being located near shops (10%).

2. Offer tax relief on specific properties that are suitable for pensioners looking to downsize

By offering last time buyers a LBTT exemption, it will encourage them to downsize their homes freeing up properties for larger families. In January 2017, we asked NAEA Propertymark members about enquiries they had received from over 55-year olds.  The results show that the main reasons for enquiring were downsizing 68%, bereavement 16.3%, affordability 5.2% and heating costs 0.6%. Other issues cited included lifestyle change, relocation, retirement or for family members.

By making it easier for older people to sell their homes it will free up family-sized homes for the next generation and boost much-needed housing supply. Our analysis from the Housing 2025 report reveals that in most regions, the number of larger homes (i.e. those with three or more bedrooms) being built, far exceeds projected growth in households with two or more dependent children.

This suggests that making pre-existing properties available would not only be an easier and achievable solution but takes away the need to build larger properties where they already exist but are under-occupied.

Energy efficiency

The Landlord’s Energy Saving Allowance (LESA) should be reintroduced and extended to include anything contained within the Recommendations Report of an Energy Performance Certificate (EPC). This would help landlords with the cost of making energy efficiency improvements to their properties in compliance with the Scottish Government’s proposals for properties in the private rented sector to achieve a rating of EPC Band C or better by 2030.

Standards

New regulations must be introduced for short term lets such as Airbnb.  Without proper licensing arrangements, we believe the short term lets market will have a bigger impact on the wider letting market. As the short term lets market grows it could take more properties out of the private rented sector because the returns on short term lets are potentially more lucrative and there are less regulatory requirements.

Read our full response