Housing to 2040: consultation on outline policy options

Annex C: Some Points to Consider

1. Introduction

1.1. We are inviting views on the draft vision for 2040 and the underpinning principles as well as your suggestions for radical policy proposals to make the vision a reality.

1.2. This paper takes forward the commitment in the Scottish Government's 2018-19 Programme for Government^[1] to work on a vision for how our homes and communities should look and feel by 2040 and the options and choices to get there.

1.3. We are adopting a whole-systems approach to housing and, for this to be effective, we need to make the most of connections between different policy areas across government. We want to align housing to 2040 with longer term planning already underway, for example around infrastructure investment and the Infrastructure Commission, the Scottish National Investment Bank, and Scotland's inclusive growth agenda.

1.4. The Scottish Government has already taken significant steps to improve the housing system in Scotland and people's experience of it. This includes: a renewed commitment to social housing through record investment and ending 'Right to Buy'; improving protections and standards for tenants in the Private Rented Sector: and alleviating poverty through full mitigation of the bedroom tax through Discretionary Housing Payments and the introduction of the Universal Credit Scottish choices. Since 2013, over 120,000 homes throughout Scotland have benefited from our Home Energy Efficiency Programmes, making them warmer, greener and more energy efficient, and we have set out an Energy Efficient Scotland route map to 2040 describing how we will improve the performance of all our buildings. We are taking action to ensure everyone has a home, ending homelessness and rough sleeping in Scotland. In addition, our Affordable Housing Supply Programme is on track to deliver our target of more than 50,000 affordable homes by 2021. For each policy affecting housing, we must make the right changes at the right time to help us converge on the 2040 vision.

2. Vision and principles

2.1. Housing, and our approach to 2040, has a substantial role to play in contributing to the Scottish Government's Purpose, National Outcomes^[2] and UN Sustainable Development goals. It can help us achieve many of our ambitions for Scotland, including eradicating child poverty and homelessness, ending fuel poverty and tackling the effects of climate change; housing must play its part in tackling the global climate emergency.

2.2. The draft principles we published in July 2019 are designed to provide a coherent framework for future housing policy development in Scotland. The advantages of setting out principles are that they help improve:

• the consistency and focus of housing policies and actions; and
• the connection between housing policy and other priorities, e.g. around inclusive growth, health and education.

2.3. Housing to 2040 is for all of Scotland. Rural communities face particular issues, for example with higher housing costs, both build costs and living costs, than in Scotland's towns and cities. The vision and principles are designed to work across Scotland and include important implications and protections for rural communities. As we develop the route map, we will be subjecting it to an islands impact assessment and considering how to ensure it is rural-proofed, in line with the recommendations of the National Council of Rural Advisers.

Development of the vision and principles

2.4. The Housing to 2040 draft vision and principles emerged as a result of extensive engagement which concluded on 30 November 2018, and attracted contributions from over 800 people representing more than 100 organisations. A Scottish Government report on this stakeholder engagement in 2018 was published in May 2019 and you can find a copy of the 2018 discussion document and the final report on the website.

3. Drivers of change

3.1. The high level policies to deliver the 2040 vision will, in due course, be included in a route map to 2040. For the route map to have lasting value, it has to be resilient around different possible futures. Some major influencers of the housing system include: population and health; political; economic; technology; transport; energy and climate change; and climate adaptation.

3.2. When suggesting your policy proposals, you might like to consider how resilient your proposals are against the following variables or "drivers of change", noting that change may come faster or slower than forecast or be altogether different. (Note that this is not an exhaustive list.)

Population and health

• More single person households
• Relatively smaller working age population
• Geographical shift in population – areas of rising population and depopulation, especially in rural areas
• No natural growth in population – falling birth rate and an increase in the number of deaths
• Need for inward migration to maintain population
• Ageing population
• The gap between life expectancy and healthy life expectancy

Political

• Increased devolution of powers or full independence for Scotland
• Relationship with the EU
• Role of local government
• Public appetite to pay to fund public services
• Public engagement in decision-making

Economic

• Relative economic performance between Scotland and rUK
• Negative impact of Brexit
• Greater financial innovation, especially "green finance"
• Exchange rates
• Scottish Government borrowing limits
• Balance of imports, exports and internal consumption, e.g. around timber and forestry

Technology

• Increasing automation and artificial intelligence affecting the way we work - different jobs, changing work patterns and skills requirements
• Technology as enabler for communications, care and longevity
• Data gathering and integration to improve policy-making and service delivery
• Balance between on-line and physical interaction, e.g. in retail, and the impact on urban planning
• Speed of technological development and regulatory lag
• Growing need for robust cyber security
• Rollout of 5G and superfast broadband
• Greater customisation and personalisation

Transport

• Increased use of electric vehicles – could mean a way of storing energy for homes or, in the case of autonomous cars, the depot is a storage node on the grid
• More walking and cycling
• Smart public transport, responding to demand

Energy and climate change mitigation

• Growing public support for climate action
• More renewable energy generation and changes to energy infrastructure
• Improved energy performance for homes and businesses
• Future of the gas grid – closed or repurposed?
• Carbon capture and storage
• Changing patterns of land use and farming methods, re-wilding, re-planting forests, protecting peat lands
• Changing patterns of consumption of food and other goods

Climate change: adaptation

• Increased flood risk from sea level rise and excess rainfall
• Prolonged periods of low rainfall with increased drought and fire risk
• Higher temperatures and greater need for cooling measures
• Changes to land use

4. Constraints: financial and labour market

Financial

4.1. Scottish Government's capital budget of over £827 million for the Affordable Housing Supply Programme in 2019-20 represents 16% of the total capital budget^[3]. The current level of funding, however, will be difficult to sustain, especially considering the number of demographic, societal and fiscal challenges we face.

4.2. In the course of this Scottish Parliamentary term (2016-2021), it is anticipated that the Scottish Government will spend over £4 billion on housing in Scotland, primarily through affordable housing supply, shared equity schemes, energy efficiency measures and mitigating UK Government welfare cuts. The UK Government will spend over £8 billion on housing in Scotland, primarily through housing benefits and energy efficiency measures. This brings the total government spend to around £13 billion. Householders and the private sector will have made significant investment in housing infrastructure over this period too; publicly-funded housing infrastructure also attracts at least 50% private finance.

4.3. There are four major areas of investment and activity required in housing infrastructure in the period to 2040:

• delivering more homes across all tenures;
• adaptations of (some) existing homes to make them more accessible for disabled persons and appropriate for an ageing population;
• delivering the Energy Efficient Scotland targets through retrofitting energy efficiency measures in our existing homes; and
• addressing the backlog of major improvements, maintenance and repairs to existing homes across all tenures, but especially owner occupied homes.

4.4. The total cost of all this work might be expected to be of order of magnitude £100 billion^[4] over the 20 year period, apportioned between the public and private sectors and households. (By way of comparison, the total Scottish Government budget for 2019/20 is around £34.7 billion^[5].) One important constraint is the need to spread the cost of this work equitably across all sectors and distribute sensibly over time. In particular, public sector costs must be bearable and also take account of any revenue impact (positive or negative) from the policy options.

4.5. A whole systems approach to housing delivery needs to take account of all public sector housing-related costs and receipts. We need to bring more new and innovative forms of finance into the housing system and make sure that public investment complements, rather than displaces, private investment.

Labour market

4.6. Similarly, the work will need to be done by an evolving workforce and different skills will be required in different combinations for each activity. The planning and sequencing of the work in the route map will need to take account of the availability of people with the right skills in the different regions of Scotland. For example, there may be only so many electricians available at any given time in the Highlands and they cannot be overcommitted. This is a second important constraint.

4.7. Some important factors affecting availability include: the overall workforce size, shaped by demographic changes, including an ageing population and migration to, from and within Scotland; worker mobility across Scotland and between sectors of the economy; opportunities for training and re-training; the need for skills to evolve to suit new and emerging technologies; and the latency of the system – recruitment and training take time.

4.8. We also need to be active in shaping the future workforce to deliver the route map and the vision for 2040. For example, Scottish Government is already considering the future skills requirements to deliver new housing and more broadly^[6].

4.9. We need to think about efficient deployment too – if a home needs adapting and retrofitting, then it might make better use of skilled workers to do this in a combined effort. This is in line with the Place Principle^[7], requiring a more joined-up, collaborative, and participative approach to services, land and buildings, across all sectors within a place.

4.10. When we consider the sequencing of options, both these constraints need to be borne in mind.

5. Your policy suggestions

5.1. You might want to consider how your suggestions:

• contribute towards delivery of existing commitments post-2021, such as those around child poverty and tackling the global climate emergency;
• recognise the scale of the fiscal, demographic and climate challenges - we cannot simply continue with business as usual;
• facilitate an evolutionary approach, starting in 2021 and avoiding sudden shocks insofar as this is possible; and
• focus on the "win-win" of delivering wider objectives, e.g. housing and health.

5.2. You might want to consider how your suggestions fit with the financial and workforce constraints and how resilient they are in the face of the possible drivers of change.

5.3. Finally, we received a wealth of material in response to our stakeholder engagement in 2018 and this can be found in the report on the website. You might like to develop one of your earlier suggestions, or someone else's, and, informed by the draft vision and principles, develop it into a more detailed policy proposal.