Small housing developers in Scotland: report

4. Solutions

Key points

Solutions included calls for (more) financial help, more co-ordination (of infrastructure and planning) and more co-operation between developers and those delivering planning, infrastructure and utilities

Potential actions for central government:

- directly finance small developers using grants or other mechanisms

- set up a fund from which SMEs in the building trade could apply for assisted finance

- act as a guarantor for loans

- put pressure on or, more collaboratively, work with (i) the banking industry to give favourable terms to SMEs, (ii) local government to reduce or defer payment for S75s

- take more of a role in co-ordinating (and funding) infrastructure, aspects of the planning system and utilities

Potential actions for local government:

- early, collaborative, open and transparent dialogue with developers to ensure a two way understanding of issues

- a change in mind-set in some planning departments where there is a perceived attitude that's "anti- development" to make the default position "pro- development"

- embrace creativity and innovation

Potential actions for developers themselves:

- approach local government and utility providers as a group or individually and engage to improve understanding of their issues and to help them understand the issues developers face

- combine together to become a stronger voice

Introduction

This chapter sets out the answer to the following research question:

• What actions/changes do small developers think are needed to improve their output?

We asked respondents to make suggestions for actions that could be taken to address or overcome the obstacles reported in Chapter 3 above and in turn increase output. We specifically asked for government actions, actions they could take themselves and general help and support that could help. The detailed suggestions are set out in Annex C, below is an analysis and summary of the key suggestions.

The majority of actions were addressed to central and local government and included direct action and, for central government, action to influence others including local government, private sector finance organisations and utility providers. Respondents also made suggestions for actions they could take.

Suggested solutions - Central government action

Funding

The majority of the action respondents called for central government to undertake address obstacles centred on solutions to financial issues, this included difficulties with infrastructure (s75s) which had financial consequences and impacted on viability.

The respondents called for direct (or grant) funding for SMEs in the building trade, variously they suggested this could come through subsidised workers' wages or help with up-front costs. The "Agricultural Business Development Scheme" ^[9] was given as an example of this type of funding.

There was a suggestion that central government could direct funds into infrastructure across Scotland (and utility organisations), although another idea suggested was that of co-ordinating as opposed to directly funding infrastructure (more below).

Less direct funding but still involving the use of public funds, respondents suggested the government could become involved in lending or acting as security. Models mooted for this included developing a central lending fund to give 'soft loans' or ' assisted finance'. Or to create a Builders Finance Fund (like the current UK fund ^[10] ). One particular use of such a fund was to introduce affordable housing delivery contracts with regular monthly payments giving certainty about funding for affordable homes for SMEs.

A further role suggested for the government was a scheme where it could act as a guarantor for loans for small developers building private homes. One respondent, who may have come across a similar UK government initiative, put it this way: "(the Scottish Government) ….could utilise their guarantee powers to support SMEs".

Respondents had suggestions for government action to address skills shortages. One was to specifically boost funding for Skills Development Scotland to address the issue in the building trade. Another suggestion was for government to fund incentives for the industry to bring young people into the business or to giving incentives to SMEs for training.

Co-ordination

Respondents saw a potential role for government in the co-ordination of infrastructure nationally and also to a lesser extent co-ordination of planning and utility provision. The suggestions were not detailed but were based on the premise that at present each of these systems is causing difficulties and should they be better co-ordinated this could remove key obstacles to delivery of more homes.

One specific high level idea was for there to be a national infrastructure system delivered by central government.

Respondents, noted the planning reform agenda already underway in Scottish Government, and set out some hopes that planning reform would "streamline some processes". Respondents key suggestions were for "simplification" more "efficient" processes, fewer "hold ups", "shortened planning and statutory consent time lines" and "reduced bureaucracy". The finding (in chapter 3) that as many respondents expected to come across planning obstacles in the future as had in the past suggests that there was little hope of a big impact of the process over the following five years.

Further suggestions on planning addressed the need for more certainty in the system most especially for timings, one example was a call for shortened planning and statutory consent timelines.

An issue that caused similar problems was the issue of delays in the delivery of utilities and respondents had a number of suggestions for government action to address these; including that the government to "put pressure" on utility providers to improve their speed and enhance their level of service. There were also calls for statutory time limits and charges to be imposed and "set connection charges at a fair level".

As well as this general call, there were calls for some action to address directly the issue with the one utility provider that was singled out as a particular obstacle to building for our respondents, that being Scottish Water. The government action suggested was "national review of Scottish Water". In particular and echoing suggestions for addressing the other obstacles respondents wanted "transparency about charges and timescales", this reflected the theme of a need for certainty.

Suggested solutions - Central government influence

Respondents called for central government to use its influence to remove obstacles to enable improve output.

Private finance organisations was one sector respondents suggested government could use their influence. A suggestion was for government to "put pressure" on banks to provide finance or enforce special conditions for the building trade. A more collaborative suggestion was for government and the banking sector to work together to develop some particular lending criteria for SMEs in the building trade.

Another sphere of influence respondents suggested government could use was that of their relationship with local government. Once again these suggestions took the form of either putting pressure on them or the more collaborative idea of working with them. There were some detailed suggestions for this work.

One was a call for the government to influence local authorities concerning planning obligations and affordable housing requirements (also variously referred to by respondents as 'section 75s', 'planning gain'). These were seen as a burden and were thought to have a severe impact in some cases on financial viability. Simply put by one respondent:

"…reduce contribution/ be more flexible on infrastructure and affordable housing for smaller developers"

Commuted payments was flagged as a similar issue and a suggestion was that the government should work with local authorities to enable them to be deferred until project completion when the developer would have recouped the build and land cost.

Referring to the council tax freeze, and showing understanding of the issues local government face, respondents also suggested that if local authorities were able to increase council tax they would be better able to fund basic and fundamental operations such as education and other infrastructure.

Suggested solutions - Local government action

Referring in the main to obstacles relating to planning and infrastructure respondents had suggestions for local authorities.

The main call relating to planning departments referred to a widely held perception respondents had that some planning departments had an assumption against development in general. They also perceived some planning decisions to be about personal preferences. The action they wanted to address this was a call for a turnaround in this attitude so departments became pro-development and 'can do' attitudes were the norm. They also asked for decisions to be more open and transparent to show that they were based on sound and objective analysis.

A further call was for planning departments to " embrace innovation and creativity" as opposed to " hiding under convention and precedent". Asks that came under this group were for more " relaxed attitudes to planning", with an " ease of restrictions", " flexibility" and "openness".

In a more collaborative suggestion respondents thought that difficulties could be eased if local authorities and developers talked with each other at an early stage, and each took the time to understand each other's difficulties and imperatives. Respondents called for this dialogue to be open and transparent from both sides.

A theme in the planning solutions was action to address the particular issues faced in remote rural areas. These suggestions were not detailed, for example, respondents simply asked for building in rural areas to be "approached differently by planners" or "simplified". One respondent did expand on the issues suggesting that the difficulty comes from difference in context including that there is no mains gas, for example, which makes it extra difficult to comply with legislation for energy efficiency and carbon reduction.

One further specific idea was that control of local authority stock could be and should be in the hands of local people. This was mooted as a way to encourage investment and raise quality.

Suggested solutions - The industry and individual developers

Respondents had some suggestions about how individual developers could improve their lot by taking action themselves. This centred on, firstly, action to improve their own work surrounding their building including, for example, better community consultations and better business plans. Secondly, a more general (philosophical) suggestion that if developers approached delivery of housing as a public good or an investment in society as well as a viable business they may be able to address more obstacles.

Individually suggestions were also made about pro-active engagement with the local authority planning departments and utility providers to try to understand the issues they were facing and to build up a relationship where these stakeholders could also better understand the issues respondents face. The idea was to increase co-operation to break down the barriers. This idea is also mooted below in relation to groups of developers.

Respondents recognised that individual small developers could have difficulty influencing the bigger issues and some sort of collective action was called for and there were several examples and suggestions of how this could be done.

Firstly, the work Homes for Scotland undertakes as a champion for the industry was highly praised and respondents called for more of the same.

Secondly, there was an example of a putting together a ' HUB' with local authority and other key stakeholders (Flood Team; Planning; Scottish Water and Scottish Enterprise) at the development design stage and a suggestion that this would make it easier to address any difficulties that arose throughout the projects.

Thirdly and similarly respondents talked of grouping together and having frank discussions with individual stakeholders about the problems they are facing and openly discussing the frustrations and costs they faced and how they could be addressed by understanding and a change of attitude. This is also detailed above in connection with local government and was particularly suggested for utility companies.

Fourthly, there was a call for small developers to tell their story, and build up the positive case of the contribution small developers make to local areas, including employing locally, buying materials locally.

A small number of suggestions referred to the issue of a lack of skills.

One idea was to offer incentives for previous employees to come back into the business. This was not to simply swell the numbers but also for skills to be passed on to new recruits.

Suggestions in this category also centred on attracting young people into the business. Promoting the industry to young people using social media and making the industry attractive to young people in the same way.