By John Muir, executive chairman of Muir Group
IT is no surprise that the Bank of England’s decision to cut interest rates will have been welcomed by homebuilders up and down the country. With it comes more affordable mortgages for customers and higher market confidence. Both of these will help stimulate much needed growth in the economy and help us to solve the housing crisis in Scotland.
Last week’s bank rate decision is a much needed tonic after the Office for Budget Responsibility forecasted that they would be higher for longer compared to their last prediction in March, and only return to 3.5% by 2030. To younger generations, and to those who are struggling on tracker mortgages at the moment, this might still seem quite a high cost for borrowing money. For someone like me, who has run a construction company since the early seventies, it is not ideal, but certainly more under control compared to those seen in the decades prior to the turn of the century.
The chancellor also reported in her budget that although there will be a welcome economic boost next year, and the year after, it will then fall back again to just 1.5% GDP growth thereafter. The reality is that this will not be good enough if we want to continue to pay for things like social care and better public services, whilst keeping government borrowing under control.
That is why, regardless of how helpful the Bank of England’s Monetary Policy Committee is to us housebuilders over the coming years, we must make it easier to build more homes. There is a very persuasive economic argument to support this. As a builder for over fifty years, it will be no surprise that it is an argument that I subscribe to. But this is not the most pertinent reason.
Ultimately, we do not have enough high quality housing for our population in Scotland, or indeed across the UK. Shelter Scotland says that two million people in Scotland are affected by our housing emergency. Likewise, Homes for Scotland says that there has been an accumulated shortfall of 110,000 new homes since 2007. It is clear to me that beyond the economic argument, there is an even stronger social one. Having a good home keeps you healthy, improves educational outcomes, and with ever higher environmental regulations, makes our country greener too.
In Scotland, the planning and consents system is one of the main barriers to solving this crisis. Waiting for the new local plans expected by 2027 is an example. The delays facing developers are everywhere, and not just for homes. It holds up investments and can even make them go elsewhere. Councils need more resources for planning. We cannot let something as important as providing good housing for our people be derailed by a regulatory bottleneck.
Similarly, the lack of funding for affordable homes from the Scottish Government is holding up investment too. The cut made last year must now be restored. If the government is as focused on solving the housing crisis as they claim, then using the extra funds flowing from the UK Budget to invest in new social homes is the only credible option, unless the bottlenecks preventing pension funds and private capital are resolved. This, in turn, unlocks more private housing too.
Giving a welcome boost to housebuilding and accelerating regeneration projects, together, the interest rate drop will bring the prospect of home ownership to many more people and take us an important step forward in navigating the housing crisis.
