Tackling Scotland’s housing shortage: key challenges to overcome in 2024 

22/11/2023
Bruce Robertson (Atelier)

By Bruce Robertson, Lending Manager at Atelier

SCOTLAND’S housing shortage is reaching a pinch point. With Edinburgh running out of land, and tenants facing rising rents, Edinburgh Council’s recent declaration of a housing emergency is a prominent example of the nationwide picture. The supply of residential housing across Scotland, including student and care accommodation, has long struggled to meet demand. SME property developers, who can often be nimbler and more in tune with local needs than larger developers, are doing their best against a tricky economic and political backdrop. So, what can be done to get developments off the ground and find solutions to Scotland’s housing shortage?

Regenerate to tackle the housing shortage

Given the scarcity of land in cities like Edinburgh, regeneration and conversion developments have a key part to play. SME developers are particularly well placed to take on these types of sites, with the right political and financial backing. In fact, having taken soundings of SME developers at Atelier’s recent Lending Update event in Edinburgh, there is certainly a willingness to take a strategic approach to developments that align with local needs – as ever, it’s all about the right product in the right location. 

For instance, Glasgow is seeing greater development of affordable housing, particularly as part of regeneration projects, but it does have more brownfield opportunities. Industrial sites sitting vacant are ripe for redevelopment. Thinking creatively about redevelopment opportunities is one way to quickly help solve the lack of new houses. However, for SME developers to unlock these types of opportunities, where they exist, and help get the market moving, they ultimately need to have access to a greater choice of flexible financing solutions so they can kickstart developments in the first place. 

Five-year house price forecasts strong for Scotland?

Historically, Scotland tends to be a less volatile housing market with smaller peaks and troughs than other parts of the UK, particularly compared to the south of England. In fact, a recent Savills forecast of UK-wide house prices found that Scotland stood out from the crowd (alongside the north of England, and Wales) as relatively robust. House prices are expected to grow by 20.2% over the next five years, compared to 16.7% growth forecast in the southeast of England for instance. However, these forecasts only apply to average prices in the second-hand market and new-build values are not expected to move at the same rate.

What about students?

The need for affordable housing is particularly hard felt amongst students across all Scottish university locations. Purpose-built student accommodation (PBSA) developers are facing difficult planning hurdles and university students in some cases are missing out on courses due to a lack of accommodation. This is partly exacerbated as universities attract growing numbers of international students, boosting tuition fee income. This is a prime problem in Edinburgh and Glasgow where there are major supply issues. However, in the hands of the right developer, who understands the bespoke needs of the location, PBSA can be a helpful anchor for regeneration. This, in turn, can have positive ripple effects across the residential housing market.

It takes years to develop a healthy housing pipeline to meet everyone’s needs. While the economic landscape may look changeable, in fact now – when housing shortages across Scotland are more acute than ever – is the time to be alive to the property development opportunities that already exist. As we look to 2024, if we are bold and tackle the housing problem head-on by backing SME developers, rather than crossing our fingers and waiting for the market to settle, we can help solve housing shortages sooner than we might think. 

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