Scottish Government

Housing Supply Task Force - Minutes of 4th Meeting 2009

Conference Rooms 7/8, Victoria Quay

Monday 14 September 2009

Members Present:

Alex Neil MSP, Minister for Housing and Communities

Councillor Harry McGuigan, CoSLA Spokesperson on Community Wellbeing and Safety

Jonathan Fair, Chief Executive, Homes for Scotland

Brian Frater, Heads of Planning Scotland

Ritchie Johnson, Association of Local Authority Chief Housing Officers

Graeme Brown, Shelter Scotland

Rachel Gwyon, Deputy Director, Housing Markets and Supply, Scottish Government

In attendance:

Lindsay McGregor, CoSLA

Andrew Field, Scottish Federation of Housing Associations

David Melhuish, Scottish Property Federation

Jen Wallace, Consumer Focus Scotland

Graeme Ogilvy, ConstructionSkills

Ian Sillars, Royal Bank of Scotland

Jim Dunn Vice Chairman, Council of Mortgage Lenders Scotland

Apologies:

Martyn Evans, Consumer Focus Scotland

Kennedy Foster, Council of Mortgage Lenders Scotland

Ken Ross, Scottish Property Federation

Ronnie Jacobs, Miller Homes

Brian Gegan, Scottish Federation of Housing Associations

HSTF Secretariat:

Ewan Cameron-Nielsen, Housing Markets and Supply, Scottish Government

Ian Fairweather, Housing Markets and Supply, Scottish Government

Stephen Hall, Built Environment, Scottish Government

1) Welcome and Introductions

1. The Minister welcomed Members and substitutes to the meeting. He also welcomed Graeme Ogilvy, attending for agenda item 4, and Ian Sillars and Jim Dunn, who would be speaking to agenda item 5.

2) Minutes of the Previous Meeting

2. The minutes were agreed.

3) Update on the Scottish Housing Market

3. The Minister asked Members for their views on any relevant developments in the housing market. Key points during discussion were that:

· There was some cautious optimism about the market, which appears to be showing some tentative signs of recovery albeit from a much lower base than previous years. Lending activity is also showing signs of increasing, although again from a low base.

· Individuals' (particularly first time buyers) ability to access mortgage finance remains constrained in many cases.

· Whilst significantly lower than previous years, there were positive signs for developers in the shape of increasing reservations in quarter two 2009.

· Developers were however being stricter with prospective purchasers and ensuring their ability to raise the necessary finance prior to reservation.

· The broad availability of stock in the private rented sector was putting downward pressure on rents.

4) Capacity in the Construction Industry

4. Graeme Ogilvy of ConstructionSkills Scotland set out the current position with regard to skills and training in the Scottish construction industry, highlighting that:

• Compared to an average annual number of 2,000 new entrants to apprenticeships in Scotland, there had been 1300 new entrants in 2009 to date. In addition, ConstructionSkills had successfully found places for 400 of the 900 apprentices who had lost their place in 2008.
• Whilst still in its early days, the "Adopt an Apprentice" scheme had already helped find places for 100 apprentices. The Commonwealth Games scheme was also offering attractive subsidies to encourage companies to take on apprentices.
• New dedicated apprenticeship schemes were being established for specialist trades which had not previously had one.
• There was concern that the construction industry is no longer seen as the industry of choice for school leavers. Left unchecked that could have an impact not just on vocational skills, but a whole range of other related occupations.
• Key "jobbing trades" such as e.g. plumbers did not seem to be suffering as badly due to the availability of work in the domestic market (e.g. home improvements).
• The climate change agenda would demand a completely new skills set, which was not currently available on any scale. In addition to needing to develop new techniques for new-build housing, remediation work would need to be done on old existing (some pre-1919) houses. CS had established a new Scottish Traditional Skills Forum in conjunction with the Scottish Qualifications Authority and Historic Scotland to look at this issue.

• In follow up discussion, the following key points were made:

• Concern that efforts to help displaced apprentices might have a detrimental effect on companies' willingness to take on new apprentices.
• Consideration should be given as to whether the Commonwealth Games Scheme model had relevance elsewhere in Scotland.
• It would be important to maximise the limited resources that we have and to strengthen co-ordination between partner agencies and other organisations to that end. There was a great deal of expertise and best practice throughout Scotland which should be brought together.

· There was a clear link between this issue and the efforts of local authorities and RSLs to ensure that all social housing stock meets the Scottish Housing Quality Standard.

· It would be helpful if Construction Skills could re-run their Labour Market Intelligence Report to see how the skills /training requirements for relevant trades have shifted as a result of the credit crunch.

· To ensure maximum "take up" of all the available support initiatives it would be important to ensure the whole industry and agencies are fully aware of what is available.

· It would be worth exploring the extent to which Housing Associations could be more involved in efforts to increase the recruitment of apprentices, including through the "Adopt An Apprentice" scheme.

Action

· Graeme Ogilvy to:

o meet with Jonathan Fair to discuss how developers could learn more about the relevant apprenticeship schemes and thereby maximise take-up.

o meet with the SFHA to talk about potential Housing Association involvement in the "Adopt an Apprentice" scheme.

o "re-run" the ConstructionSkills Labour Market Intelligence Report to identify the impact of the economic downturn on the skills and training requirements of the construction industry.

5) Future Availability of Finance

5. The Minister invited Ian Sillars and Jim Dunn to speak to the CML papers circulated in advance to Members on mortgage finance and lending to housing associations. He then invited comments from members.

6. Key points on the general position were that:

• Banks and building societies were having to strike a balance between two competing pressures - one to increase lending, the other to maintain adequate capital ratios in accordance with new FSA requirements.
• Building societies were having difficulty persuading individuals to invest their money given the low interest rates on offer. Banks were also now beginning to compete given the need to boost their own capital holdings.
• While LIBOR has reduced, fixed rate swaps - which have a strong bearing on the cost of any bank borrowing - have not.
• There would need to be an improvement in confidence before the wholesale market re-opened. There was money there, but still a great degree of caution. This was a world wide problem and would not be solved by internal UK policies alone.
• The cost of borrowing over the long term would be likely to remain high and business plans/projects would have to be adjusted to address this.

7. With specific reference to mortgage products:

• Higher deposits will continue to be required in the near future. Higher loan to value products could come back once confidence returns, but with an associated cost in terms of e.g. interest rates.
• Banks and Building Societies were expecting individuals purchasing via shared equity to provide a deposit, over and above the equity share provided by the developer or SG.
• Lenders treat Shared Ownership products completely differently to shared equity as a result of their greater legal complexity and higher levels of risk to the lender.
• The Scottish Government's Open Market Shared Equity Scheme is over subscribed in a number of areas due to high levels of demand.
• Some local authorities were offering their own shared equity schemes. However, not all councils could offer this due to pressures on resources.

8. The following points were made in relation to lending to Housing Associations.

• The RSL sector continued to be seen as a low risk sector for corporate lending. There were still around four or five main active lenders (plus some selective, small lenders) and tenders were getting two or three expressions of interest.
• No Housing Associations had been refused private finance, although this might have been secured at a more expensive rate than previously. Available rates were broadly in line with HAG assumptions.
• In addition to existing private finance providers, the European Investment Bank (EIB) had provisionally earmarked £50m for Scotland. A number of RSLs were considering how they could work together to access this finance.
• Across the UK, around £50bn of lending commitments had already been made to the sector, with rates set in a different time and economic context. Over the next five to six years, there would be a need to address the lack of parity between past lending and new commitments, with a blending of new and old margins.

Action

• Secretariat to identify whether or not there had been any issues surrounding lenders' perception of Shared Equity in Scotland.
• Secretariat to arrange for there to be discussion on the criteria for any future rounds of the council house building programme to be placed on the agenda for the next again Ministerial liaison meeting with CoSLA. It was agreed that it was now too late to change the criteria for the 2nd tranche of funding (bids due in from 25 September).
• Ritchie Johnson to write to the Minister and to Councillor McGuigan, providing further detail on his ideas for new ways of funding council house building through the market.
• Minister's Office to arrange a meeting between the Minister and representatives of CML and SFE to discuss the availability of finance in the Scottish housing market in more detail.

6) Infrastructure Investment Update

9. It was agreed that this item should be deferred to the next meeting on 16 November and tabled as the first substantive agenda item.

Next Meeting

10. In addition to the already agreed November meeting, the Minister suggested that there should be a further meeting of the Task Force on 9 February 2010.

11. In recognition of its value as a forum for discussion of issues and sharing of views with key stakeholders, the Minister indicated that he would wish to see the Task Force continue to meet beyond February, at least until 2011. Accordingly he asked the Secretariat to prepare a paper on the Task Force's future for the next meeting, drawing on the views of all Members.

Action

• Secretariat to canvass Members on their view of the future role of the Task Force and prepare a paper for November.

AOB

12. There was no further business.

HSTF Secretariat

September 2009