Scotland (and the UK in general) is increasingly in the grip of a Local Authority housing crisis. We’re going to examine what it is, how it happened and what can be done to reverse it.

The Private Rented Sector (PRS) already plays a major role in providing homes for thousands of families, but can, or indeed, should it step up to do more?

As property professionals with years of experience serving the PRS we’re going to try and understand the root causes and possible solutions of a problem which affects so many.

The roots of the housing crisis

If you Google the causes of the housing crisis, you’ll get a lot of answers. Not all are helpful and the fact is that there is no single cause of the problems we are currently encountering.

The sale of council houses, planning legislation and greedy landlords all get blamed. None of these suggestions tell the whole story, but they’re worthy of some exploration.

Sale of council housing

We’d suggest that the sale of council houses has been one of the most significant events to affect the housing market throughout the UK. We’d also be the first to confess that it’s a long and complicated story.

So, to avoid writing a book, we’ll limit ourselves to some key factors, but as you’d expect there is a considerable body of work from all viewpoints available on this subject.

Contrary to popular belief, it was possible to buy your council house prior to the introduction of the Housing Act 1980 and the Tenants Rights Etc (Scotland) Act 1980 in Scotland. It was far more difficult, but it was possible.

After the Act passed into law however there was very rapid uptake of the opportunity to own your property, often at a substantial discount.

In Scotland, some 500,000 council properties were sold under the Right to Buy between 1980 and 2016. Over a similar period, some were built in Scotland.

In theory, local authorities would replace sold properties on a one-for-one basis, but given the discounted pricing, it’s hard to imagine that those responsible for the Act really believed that would happen.

As a result, although home ownership boomed, the stock of local authority housing contracted severely and the resources to replace it were simply not there.

There is an excellent digital article available through the National Library of Scotland which covers the pros and cons of the policy in some detail.

In short: some tenants got excellent deals, others discovered that home ownership wasn’t for them and councils and remaining tenants found themselves struggling as a result of greatly diminished housing stocks.

To help you understand the numbers, according to Belvoir! In an article dating from 2022, Edinburgh alone saw a fall of 72% in the number of council houses since 1981.

Planning to fail, or failing to plan

The Town & Country Planning Act, 1947, set the basis for post-war planning policy in the UK, and although heavily amended since, some basics still persist.

One of the biggest areas of contention is the fact that local authorities still have the ability to decide what can and cannot be built. Although there is a right to appeal decisions, this single factor can make planning a tedious and expensive process.

Planning decisions are also made on a case-by-case basis which is time-consuming and can lead to inconsistent results.

It’s always worth bearing this in mind when governments, of whatever stripe, speak about ‘building homes’ – in many respects it’s not their decision.

There is a school of thought which holds that Britain’s housing crisis is in large part a direct result of this Act. Many other countries used a zoned system (zoning) to determine what can be built.

Under this system, areas are zoned and each zone determines what can be built and which regulations apply. Meet those requirements and it’s perfectly legal to build. This arguably speeds up the process and many would like to see this in the UK.

We’d suggest that the best we can say is that the current planning system is not helping the housing crisis but until it is overhauled it will be difficult to quantify to what extent it is hindering home building in the UK.

Greedy landlords

We can be pretty succinct here: no.

While landlords get blamed for many of the ills in the housing market these days, and a few landlords may be guilty as charged, they are not responsible for the housing crisis.

An investor can only buy and let a property which is available for sale, and the problem afflicting the UK is a lack of sufficient properties for sale. This impacts landlords and would-be homeowners alike.

Yes, former local authority housing stock does form part of the PRS, but since it couldn’t have been purchased initially by landlords, only by tenants, then either such property was sold by the buyer or the original buyer has decided to let the property.

Investors didn’t sweep up local authority properties and deny them to the larger market.

Advice from the property pros

There has been a considerable amount of discussion about the role of the PRS in alleviating the local authority housing crisis.

Some of those discussions conclude that it can’t, or that it shouldn’t. Others feel equally strongly that it can and should. Our view is that the PRS never evolved as a replacement for social housing and is not well suited as an alternative.

That’s not to say that privately rented properties don’t have a role to play in the broader market, but the PRS lacks the integration with other agencies which most social housing enjoys.

As a consequence, while many landlords are willing to house tenants on benefits, they do so as outsiders, reliant on both the tenants and agencies to do their part to ensure that rent is paid on time but unable to influence either.

Some local authorities are using private landlords to help them with the shortage of social housing but this can only be seen as a stop-gap and not  a long-term solution.

To complicate matters further we are all staring down the barrel of a General Election in the UK, with a reasonable expectation that the Labour party will form the next government, and possibly for more than one parliament.

In Scotland, the end of the Bute House Agreement, and the exit of the Green Party from the cabinet table of John Swinney’s new administration, may have an impact on the housing market north of the border.

In a survey we conducted on social media, 52% of respondents felt that this was a positive step for the market in Scotland. Against that optimism, housing in Scotland is still governed by temporary legislation and will be for some time.

The Housing (Scotland) Bill was introduced at the end of March this year and accordingly will take some considerable time to make it onto the statute books. Possibly the only certainty is that the crisis is not going away any time soon.

In summary…

The crisis in local authority housing has been a long time in the making and it will take time and concerted effort to resolve. The PRS may be part of that solution, but  historically it never evolved as a replacement for social housing. 

While private renting is a viable choice for many individuals and families it is not some universal panacea to the broader housing crisis. Achieving a balance between the PRS, social housing and home ownership demands government leadership.

At present we are in a period of flux, awaiting the outcome of the UK election, and in Scotland reliant on the progress of a new housing Bill to define what the future of the housing market will look like.

Uncertainty is never positive for markets, and housing is no different. However, as we’ll discuss in an upcoming blog, there are positive signs that the PRS is in better shape than it was a year ago.

We cannot resolve all of the problems afflicting the market at present, but we can offer our years of experience and professional approach if you are considering entering the private rented sector as an investor.

Ping us an email or pick up the phone to start a new conversation!

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]