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The Role of Land in Enabling New Housing Supply in Rural Scotland Front page image reproduced with the permission of R House EXECUTIVE SUMMARY The Role of Land in Enabling New Housing Supply in Rural Scotland 3 Contents OVERVIEW EXECUTIVE SUMMARY 4 1.0 INTRODUCTION 10 2.0 METHODOLOGY 12 3.0 LITERATURE REVIEW 16 4.0 DEFINITION OF RURAL 21 5.0 KEY THEMES 23 6.0 THE PRICE OF LAND 36 7.0 ADDRESSING THE KEY LAND CHALLENGES 43 8.0 CONCLUSIONS 53 APPENDIX 1 RECOMMENDATIONS APPENDIX 2 ORGANISATIONS INTERVIEWED APPENDIX 3 WORKSHOP ATTENDEES APPENDIX 4 DEAL STRUCTURES APPENDIX 5 HOUSEBUILDER APPROACH APPENDIX 6 TOOLKIT APPENDIX 7 CASE STUDIES All plans are reproduced from the Ordnance Survey Map with the p Document Copyright Savills (UK) Ltd. The contents of this document must not be copied or reproduced in whole of in part without the written consent of Savills.(UK) Ltd. Issue Date: May 2020 Written by: G Reid, D Mackay, C Crawford and H Belford The Role of Land in Enabling New 4 Housing Supply in Rural Scotland EXECUTIVE SUMMARY To what extent is land, specifically the cost of land and access to land, a barrier to new housing delivery in rural and remote rural Scotland? Land is a crucial ingredient in the development process. It must be available and it must be cost effective to developers, in order to facilitate new housing development. The economics and viability of development and the profile and key drivers of landowners varies from project to project. In reality there is no ‘one size fits all’ approach to rural housing development and there are a wide range of factors that may prevent land from being developed that, if overcome, can unlock housing delivery. Land is just one piece of a relatively complicated jigsaw puzzle, and this is particularly the case in rural Scotland where market failure exists in many areas. The findings of this study show that greater facilitation and support, better approaches to rural planning and community engagement, improved private and public sector engagement together with support for new models and approaches would help support the delivery of more homes and better places across rural Scotland. CONTEXT PURPOSE FINDINGS There is a widely accepted view The purpose of this particular Our review of the literature, coupled that not enough new homes are study is to firstly investigate and with our interviews with stakeholders being built in rural and remote rural consider the role of land in enabling and our own team’s experience, Scotland to satisfy need. Without the or preventing the supply of new quickly revealed that there are a wide provision of high quality new homes housing and thereafter to put forward range of variables, or pieces of the our rural communities will become a number of potential solutions and jigsaw, that can act to frustrate or increasingly fragile. In particular our recommendations that our research enable new housing delivery in rural discussions with key stakeholders, suggests will help to boost housing Scotland. To understand the role of coupled with our own professional delivery across rural Scotland. land and whether or not further land experience, highlights that in many reform is required in this particular rural areas there is a clear gap in the METHOD area it is therefore necessary to provision of new build “mid market” understand all the pieces of the housing options (both for sale and for Our qualitative data based study has jigsaw and how they interact. rent) for locals. taken place between October 2019 and February 2020 and has involved Landowners and Land Price: The Scottish Land Commission (SLC) an extensive review of existing Interestingly, the suggested barrier are examining issues around the role literature, interviews with a wide range that landowners prevent the supply of that land plays in inhibiting the supply of stakeholders from across Scotland, new homes by not providing access of new homes in places where people case study analysis and two focused to their land featured more heavily want to live and at prices that they stakeholder workshops. Our research in our literature review than in our can afford. Previous work carried has also been complemented by our stakeholder interactions. In addition out by the SLC indicated that land own practical day-to-day experience land price, whilst relevant, was more ownership and the price of land can as development and planning of an issue either in ‘hot spot’ markets, cause difficulties for communities professionals active in the rural where land supply was constrained looking to access land at an affordable housing market across Scotland. through planning, or where land price price to meet community needs. was simply very low as a result of all of the costs of development in the first place making it uneconomic for the land to be developed. EXECUTIVE SUMMARY The Role of Land in Enabling New 5 Housing Supply in Rural Scotland As there is generally a lack of activity by mainstream builders in rural contractors to service this market Scotland there is a lack of published if they work in partnership with Indeed, in many cases the cost of land transaction data available thus landowners and the not-for-profit land can be relatively insignificant making it harder for landowners to sectors to manage risk. For example, when considered in the context of all establish whether or not a price they we explore various models that of the other costs of development. may have been offered represents can be implemented to reduce risk In higher value and more densely best value. In some cases this can including joint ventures, deferred land populated urban markets land lead to landowners or their advisors payment or land for infrastructure/ may account for c.30% of the cost having unrealistic expectations on profit type contracts. The ability of a of a new home, whereas in rural what a piece of land is actually worth small contractor to perhaps deliver Scotland, land often represents a thus frustrating negotiations. homes for an affordable housing very small proportion of the overall provider or an aspirational self-builder cost, or has no value at all if the The Speculative Housebuilder Model with no sales risk may give them traditional, speculative and profit- – Market Failure in Rural Areas: One of sufficient confidence, depending on based approach to valuing land is the most interesting themes of our the market context, to expand their adopted. research has been the confirmation business model and begin to invest that the model of speculative in marketing collateral in an attempt housebuilding that delivers the vast The Role of Not-for-profit Organisations: to help secure ‘off plan’ sales, for Not-for-profit groups, supported by majority of new homes in our larger example. towns and cities simply does not public sector grant subsidies, are active in the delivery of new homes work across much of rural Scotland. Cost of Development in Rural Scotland: and therefore the land market in rural Even if there was a plentiful supply of Across much of rural Scotland, other Scotland. Not-for-profit developers low cost land in our rural towns and than in a number of market ‘hot tend to comprise community villages the majority of speculative spots’, the stark reality is that the development companies, housing volume housebuilders would still not cost of building a new home, even associations and local authorities. engage in this market. There is often disregarding the cost of land, can be As these groups are targeting not sufficient depth of demand nor greater than the value of the home housing need (rather than market value to allow developers to generate once it has been built and more than demand) they tend to develop adequate levels of profit to sustain what many people living and working smaller homes for rent or for low their business models. With this in rural communities can afford. All cost home ownership. The price of crucial segment of the housebuilding things being equal, the more remote land for affordable housing projects market missing from our rural areas it a market is, the more expensive it is heavily influenced by the level of is not surprising that there is a distinct is to build a house and the more grant funding made available and lack of ‘mid-market’ new build supply extreme the viability gap becomes. the business plan of the not-for- across many of our rural communities. Many commentators are reporting profit provider. However, based on that build costs are steadily growing experience, land can be a small However, whilst the volume and are predicted to increase further element of the overall cost of a housebuilder market is unlikely to as building standards become more project, sometimes less than 10% of feature in the rural housing market onerous and as legislators seek to the total cost. going forward, our research and own impose ever growing sustainability experience suggests that there can standards. still be a role for smaller custom build The Role of Land in Enabling New 6 Housing Supply in Rural Scotland Site Effectiveness/ Deliverability: As a best value. Indeed, in stark contrast The Role of the Planning System: In result of the relatively low prices that to community groups, volume many cases, even where there is a not-for-profit organisations can pay housebuilders invest heavily in their willing landowner and a robust and for land, especially where land is land procurement teams, processes viable business plan, projects can expensive to service or unlock, then and consultants, often investing often be held back by an inability to it can be very difficult without further hundreds of thousands of pounds secure planning permission and/or subsidy (whether in the form of further speculatively on land during the very other technical consents.

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