The solution to housing crisis can be delivered

But solutions do exist. The main difficulty is the reluctance of politicians to regulate the ‘free’ market. It seems to be better understood in Europe, in nations not so beholden to free-market neo-liberal economics, that the State has a role in counteracting the centralising forces of the capitalist economy and that Government should redistribute wealth from economic centres and invest it in rural and peripheral areas. In doing so they build a stronger, more resilient, and diverse overall economy. The European project, through its structural fund, had this principle at its heart.

It is often noted in response to calls to address the housing crisis in the Highlands and Islands that the issue exists in other rural, as well as urban areas. While economic inequality, and commercialisation of housing, are global issues, they affect communities in different ways. The effect on language and culture can be very different. Skye, Tiree, and the Western Isles contain the last habitual Gaelic speaking communities. These communities are on the verge of extinction and their need for action is urgent. They also face much higher living costs, the highest rates of fuel poverty in the UK, lower wages and fewer job opportunities.

In island communities like Skye or Harris, and in many rural communities the lack of available homes, to buy or rent, means there is nowhere to go. No choice but to leave the islands for Inverness or Glasgow, or further afield. On Skye only 81.4% of households are occupied full-time compared with 95.9% nationally. The housing crisis needs addressed nationwide, but it is an existential crisis for our rural and island communities.

Opponents of the Short Term Let (STL) licencing scheme currently being introduced in Scotland, the powerful Airbnb lobby, often cite exorbitant sums of money they claim tourism ‘brings in’ to rural communities. Comhairle nan Eilean Siar recently conducted a Short Term Let Consultation which showed that, from the 230 respondents, 170 are currently operating a STL in the Western Isles. However, only 96 of the 230 respondents, 42%, were resident in the Islands, this means around half of the STL operators who responded are not resident in the Islands. Arguments that tourist rentals contribute to the local economy are undermined by figures like these.

While visitors will spend some money in local businesses, most of the income from these second homes is taken out of the local economy by second homeowners living elsewhere. The social cost of second homes to communities far outweighs the money spent by their guests in local shops and cafes – if working families lived in these homes, their taxes and spending throughout the year would far exceed that ‘brought in’ by visitors.

To be clear, there is a massive difference between second homeowners taking a home out of the local residential housing market as an investment, and local residents operating bothies, huts or caravan rentals in the gardens of their family home. While both these STL operations should be regulated, regulation should be appropriate and recognise the distinction between the two; the later generally supportive of local communities, the former generally damaging.

So, what can be done to ensure the stability and sustainability of rural communities?

In developing solutions to the housing crisis, there are three main aspects to consider. In order to reduce prices, we must address; supply – build more homes, ensure land is available to build on, and bring empty homes into use; demand – restrict who is permitted to buy homes in a community; and lastly: rental value - regulate and restrict the potential rental income of property to investors through licencing and local planning.

Some progress is being made on supply, with increased building of social housing, but this needs to be increased in rural areas. National funding formula which are appropriate in urban and suburban areas are totally insufficient in the rural Highlands and Islands where construction costs are higher, and where builders cannot take advantage of economies of scale. Alternatives to volume house builders, which heavily favour urban areas over the rural Highlands and Islands, need to be promoted and encouraged. Self-builds and collective custom builds are much more widely used around Europe, in the UK these account for around 7 to 10% of all new build homes, whereas in Austria, Belgium and Germany self-building makes up around 50% of new build homes.

More radical Land Reform is urgently needed to bring down the price of land for building homes. A Land Value Tax should be introduced. This is not only a fair, progressive and simple form of taxation, it can also be used to facilitate land reform, by penalising estate owners, increasing their tax burden and making Community Buyouts more likely and affordable. A Land Value Tax could also be used effectively to disincentivise second home ownership and appropriately tax rental properties.

‘Build more homes and the prices come down’ is the stock response given by politicians when confronted with the housing crisis. But the shortage of homes is not caused by an increase in rural population, ownership of second homes as holiday homes or rental businesses is reducing the available number of properties. The Scottish Government understands this concept as it has, rightly, ended the Right to Buy scheme for Council Housing. Clearly if we urgently need to increase the availability of homes, and reduce their price, we need to build more, but also stop the market leaking properties at the same time.

In England, areas such as the Lake District National Park and Cornwall, for example, make use of Section 106 agreements, under the Town and Country Planning Act, to limit the use of homes given Planning Permission. New build homes are only permitted in the Lake District where they; contribute towards helping communities remain vibrant and resilient; help achieve a better balance in the housing market; and are secured in perpetuity for the purpose originally intended using planning controls attached to the deeds. This means that new open market housing is not permitted.

The North Yorkshire town of Whitby recently voted by 95% to stop people building new properties as second homes there. Residents were asked the question: ‘Should all new build and additional housing in Whitby Parish be restricted to full time local occupation as a primary residence only and forever (in perpetuity)?’ This would introduce a similar policy to that in place in the Lake District.

The Channel Islands have even stricter rules. Guernsey operates a two-tier housing market, a ‘Local Market’ and an ‘Open Market’. Only people who meet the criteria may purchase a Local Market property; those who were born and grew up in Guernsey, have a strong family connection with Guernsey, or those who move to work in Guernsey in positions where there is a shortage of suitable local candidates. Property sold on the ‘Open Market’ is freely available and far more expensive, and there is a very limited supply of properties with ‘Open Market’ status.

In Jersey, the right to buy and occupy residential property is controlled by law. Residents fall into 4 categories; Entitled, Licensed, Entitled for Work, and Registered, with different restrictions placed on each category. Only those who are ‘Entitled’, people who have lived in Jersey for 10 years, are permitted to rent and purchase property.

Further afield, the Governments of Australia and New Zealand have banned non-domiciled sales of existing property. Only people with a right to reside permanently in those countries can buy property there, a common measure internationally aimed at curbing foreign investment and speculation in local property markets. Given the extent of foreign ownership of estates in the Highlands, this seems like an attractive step in a Scottish context.

In Wales efforts are underway to address their housing crisis primarily using local taxation. It was recently announced that from 2023 Local Councils in Wales will be permitted to charge up to 300% Council Tax on second homes. At the same time, the Welsh Government are tightening the rules on self-catering accommodation being liable for business rates rather than council tax. Under the changes properties must be available to let for a minimum of 252 days, up from 140, and actually let for at least 182 days, up from 70, to qualify for business rates.

Of course, the housing market is only one aspect of the problem. The UK economy encourages property ownership and incentivises landlordism, rent farming, as an industry and as a safe haven for investors. The value of property as an investment must be addressed through rent controls, as well as through Short-term Let licensing and regulation.

Covid-19 lockdowns provided the opportunity to study the impact of Airbnb style short-term lets. In Australia research was undertaken which showed that; “In areas with high concentrations of STR (Short Term Rental) Airbnb-style listings, even small reductions in the number of listings have generated benefits to the permanent rental market including significant reductions in rent. These benefits should be encouraged through stronger mechanisms to preserve permanent rental housing in high demand markets.” The research authors concluded that “Better understanding and regulating the STR sector would support more flexible and efficient use of the entire housing stock.”

In Scotland we should move to a formal ‘two-tier’ housing market in certain areas through licencing and regulation, alongside Planning Controls both of existing properties, and conditions attached to new-build homes. The Short Term Let licensing scheme must be strengthened, with Control Areas introduced across the Western Isles, Skye, Mull, large parts of the rural Highlands. Once the licensing scheme is in place and Control Areas introduced, prohibiting additional homes from being used as short-term rentals, a secondary ‘letting market’ will exist for properties which already have a STL licence. With all new build homes then subject to an enforced planning condition securing their use in perpetuity as permanent residences, these will then change hands on a ‘residential market’, alongside existing properties which don’t have a STL licence.

We need land-reform to free up affordable house plots for self-builders, we need many more new-build homes, affordable homes, and social housing, all permanently restricted to full-time occupation. We need empty properties brought back into use. We need Short Term Let Control Areas introduced and a robust STL licensing scheme. We need Rent Controls to ensure the affordability of long-term tenancy. We need restrictions on big foreign investment in real-estate, particularly estate ownership. We need a progressive Land Value Tax disincentivising large estate holdings, as well as second, third and fourth homes. And we need all this to be robust, free from loopholes and properly funded and enforced. Most of these are steps which could be taken by the Scottish Government, working with Local Councils. The main question is: will politicians act to ensure our communities have a sustainable future?