Why are we building student flats and not affordable homes?

POSTED ON February 8, 2024 BY Euan McGrory

The problems in the property market making Edinburgh’s affordable housing crisis worse

There is currently rubble and an empty concrete yard where the Right Wing pub once stood.

The local bar had nothing to do with political leaning. The pub – more recently rebranded as the Radical Road in homage to the famous footpath nearby – was for years run by one of the city’s greatest footballers, Gordon Smith, a genius who uniquely won the Scottish championship with Hibs, Hearts and Dundee. He played, you guessed it, on the right wing with Easter Road’s finest, The Famous Five.

The empty plot in the city’s Willowbrae was going to be turned into 48 flats, a quarter of them deemed “affordable”. The loss of the pub was a blow to some, but the flats would smarten up the area – and the affordable ones are desperately needed in an area where, like most of Edinburgh, house prices have shot through the roof.

Then the developers changed their minds. The flat plans were scrapped, and replaced with plans for 138 student flats, in a practice known as “flipping”.

The feelings of many were summed up by local councillor Danny Aston who described the move as “a real slap in the face”, adding: “We have thousands of homeless families in this city.” Local MP for Edinburgh East, Tommy Sheppard, added: “It defies belief that despite having a workable proposal to build homes, this developer is focused completely on their profit margin and is planning to pack in students like sardines in a can instead.”

The developers at Willowbrae, 83S Student Residence Limited, are not alone. The same thing has happened at Arthur Street, off Leith Walk, where housing plans were “flipped” to student accommodation. And to plans to build 200 homes on the site of a warehouse in Canonmills and parts of the regeneration of the Canongate.

It is, says Edinburgh conservation charity the Cockburn Association, a “worrying trend” at a time social housing is so desperately needed in the Capital.

Meantime, house building sites sit silent

The steady stream of student flat developments stands in stark contrast to the relative stasis in the rest of the construction industry in the city.

Building lots of student flats would be okay, as long as we were building lots of homes too – but that simply isn’t happening.

Even in East Lothian – the fastest growing part of Scotland – some housebuilders have stopped work, as a double whammy of soaring construction costs and higher mortgage rates deterring buyers has persuaded developers to pause their plans.

For housing associations looking to build to rent, the outlook is even worse. Harbour Homes, the former Port of Leith Housing Association, announced last October that it was pulling out of new developments because they were financially unviable.

Some work is going ahead. Drum Property’s announcement last week of plans to build 7,000 homes over the next 10 years near Edinburgh Airport offered a glimmer of hope. However, other sites earmarked for large scale house building – at the Garden District, south-west of the Gogar roundabout, and Edinburgh Park, for example – remain conspicuously quiet.

All this at a time when the city needs to double the rate of building seen in recent years in order to hit its house building targets. The idea that 37,000 new homes – more than 17,000 of them “affordable” – will be built in the Capital by 2030 seems increasingly fantastical.

Students caught in wider housing crisis

No one is saying that students are unaffected by Edinburgh’s housing emergency. The latest survey by Slurp: Student Action on Homelessness suggests one in six city students were homeless just over a fortnight before the start of term, in September last year.

With nearly 70,000 students enrolled in higher education across the city and 30,000 beds in dedicated student housing complexes, there is still massive demand for accommodation in the city over above that provided by purpose built blocks.

Student campaigners are calling for urgent action to provide more affordable accommodation in the Capital in the face of the squeeze on the city’s renters.

Much of that is currently being met by tenement flats to the south of the city centre as well as in other parts of the city’s general housing stock. New student flat complexes help ease some of that pressure, but clearly do not do help those at the sharp end of the housing emergency in the way new social housing would.

Choose Manchester

So, what’s gone wrong? Are house builders simply turning their back on traditional housing in the pursuit of bigger profits?

The answer, says Dr John Boyle, director of research and strategy at Rettie, lies in the decisions being taken by large institutional investors in light of recent moves designed to protect tenants in Scotland.

The Scottish Government introduced emergency legislation in 2022 in response to the cost of living crisis, including restricting private rent increases to three per cent and banning evictions. Purpose built student accommodation was exempt from the new rules.

“Some of the institutional funds have tended to turn away from Scotland, at least for the time being,” says Dr Boyle, whose research included interviewing many of the major property investors.

“Some of these investors are still interested in PBSA because it’s not subject to the same restrictions. It doesn’t have an eviction ban or rent controls, so if you’re looking at developing in the next year or two PBSA is maybe looking a better prospect to build to rent, although this will depend on the location and viability factors.”

Dr Boyle believes that private investor-backed building to rent could yet play a major part in solving Edinburgh’s housing crisis. The amount of build to rent properties completed in Edinburgh (just 2.2 per 1,000 households) is dwarfed by many major English cities. Salford has 61 per 1,000 households, Manchester has 31, Liverpool 11 and Bristol 7.

Edinburgh has one of the biggest “pipelines” for build to rent projects anywhere in the UK, with plans in place for more than 7,000 rental homes, but the vast majority are stuck on the drawing board due to investors getting cold feet.

Scottish Housing Minister Paul McLennan – who has presided over a cut in the Scottish Government’s spending on social housing – has been meeting with institutional investors to try to restore some of their lost confidence in the Scottish market. The potential prize is huge.

15,000 ‘missing’ homes

Earlier this month, international property consultancy Colliers published a study comparing the economic prospects, average wages and rents, “liveability” and other factors in 20 UK cities to identify the most attractive for residential property investors.

Edinburgh came top. Glasgow was second.

Highlighting the Capital’s “diverse economy, large population, highly skilled workforce”, and a residents’ life satisfaction rating second only to Oxford, the Top UK Residential Investment Cities Report highly recommends the city to property developers.

A separate report, prepared by Rettie & Co for the British Property Federation in April last year, compared how many rental homes had been built in major UK cities.

Edinburgh came in 72nd in the UK, despite being the fifth largest local authority by number of households. Glasgow was 89th, with the third largest household count.

Noting the far higher building rates to rent in major English cities, the report notes: “If the main Scottish cities had been completing BtR units (rental homes) at a similar rate to other leading UK cities, Scotland would now have around 15,000 additional new homes for rent.”

The Rettie & Co research estimated that £3.2bn of investment in new homes was put “on hold” or “at risk” as a result of property investors shying away from Scotland.

Councillors struggle to block student flats

Councillors sitting on the city’s planning committee have tried to resist the growth of student housing complexes in the hope that alternative house building plans might be revived for the sites instead. That hope in the short term at least seems increasingly forlorn.

There is another issue as developers are increasingly turning to the Scottish Government to overturn refusals in Edinburgh.

Four of the five PBSA proposals brought to the planning committee since December, 2022, were rejected, adding up to a total of 615 beds. One scheme has been approved in that time for a 148-bed complex at Yeaman Place, Fountainbridge.

At least three of the four refused – at Jock’s Lodge, Arthur Street, off Leith Walk and Lower Gilmore Place – are appealing to the Scottish Government to overturn the refusal and there is a widespread expectation that they will win.

There is a growing feeling among councillors that they are powerless to stop student housing complex plans going ahead under the current rules. If the schemes meet the same local planning criteria expected of other developments, then the developers are likely to win appeals against any refusal.

Councillor Chas Booth, who has been a leading voice for prioritising social housing over purpose built student accommodation, told the council planning meeting at which the Yeaman Place plans were given the go-ahead: “We need to keep those appeal decisions in the back of our mind as well. The definition of insanity is to keep on doing the same thing and expect a different outcome. Until we get different policies in place, City Plan 2030 for example, we’re not going to have a refusal for student housing upheld at appeal.”

‘A broken system’

What is needed, says Terry Levinthal, director of the Cockburn Association, is a fundamental reappraisal of public housing policy. The current system, he points out, is simply not delivering for the city’s housing needs.

“When the rent freeze was announced for mainstream housing (student accommodation has been exempt from the legislation), that almost immediately put a halt to the buy the rent sector in the city. I remember speaking to one planning consultant who told me that that pretty much the day after the announcement the scheme at Beaverhall went from having 26 notes of investor interest to one.

“We are seeing developers who are sitting on a site where the mainstream housing is presenting difficulties in assembling finance. They can just flip the scheme into being the PBSA scheme, and there’s much more readily available finance because it’s seen to be less risky with a quicker return on their investment.”

Levinthal said there was a lack of robust data about the demand for purpose built student housing to guide planning decisions. Should the number of students fall in future, he argues, the city could be left with a surplus of student halls which cannot easily be adapted to family living.

The Cockburn Association has been pushing against the increasing number of student flat complexes in favour of more flexible accommodation that could be adapted in future to other needs.

“This is a very complex issue with many influences, but it is fundamentally a crisis of social housing supply and affordability. Edinburgh is now one of the most expensive places to buy or rent in the UK,” says Levinthal.

“It seems clear to us that the housing sector is broken and the policy assumptions of the past are not viable or relevant for today’s problems.”


Image: Site of former Right Wing/Radical Road pub


This article was originally published in the Edinburgh Inquirer.

The Edinburgh Inquirer publishes regular newsletters covering city politics, business, culture and the environment. Its independent journalism is funded entirely by its readers.

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