Why isn't there enough affordable housing in Scotland?

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Why aren’t there enough affordable homes in Scotland? Residents in Scotland’s cities, towns and popular rural destinations continue to struggle to secure decent, affordable homes. If Scotland is to transform its economy, wellbeing must start at home. At a time of historically high rents and homelessness in Scotland, a proposed exclusive resort for millionaires on Loch Tay is something more than market failure.

Why aren’t there enough affordable homes in Scotland? Simple. It is because there is no demand for them. If there were a demand for more homes, the market would provide them. That’s economics 101. And as everyone in the housing market is a "rational market actor", at some point, supply would equal demand.

All markets naturally fall into equilibrium. If people really want homes, all they have to do is to demand them. Through the price mechanism, the market will allocate a home to all who decide to rent or buy one. If this is not happening, then there is market failure. The problem is never the market. Perhaps there is too much government regulation or legislation, or maybe there is just a problem with people accessing up-to-date information. It could also be because those who want affordable homes aren’t providing enough value. There is a market for labour, too. So, if you weren’t able to demand enough of a wage to buy or rent a decent home, then you need to work out how to add more value. Because what you are paid = value. So, an orthodox economist would tell you anyway.

So, why aren’t there enough affordable homes in Scotland? The answer is probably obvious to everyone who isn’t an orthodox economist. It is not the lack of demand. It is the lack of supply.

READ MORE: Scottish Tories to force vote on short-term lets licensing scheme

The social surplus

The social surplus is defined as “goods and services over and above those necessary to continue production at the same level and composition in the future.” It is what households consume, governments use, and businesses invest. It is the fruit of our collective labour. A real-world perspective would state that what appears in the social surplus is almost exclusively driven by the decisions of those in positions of power. The ruling class.

People in influential positions determine the social surplus's size and composition. They decide what and how much investment and state goods are produced and also the quality and availability of different consumer goods. Their decisions are inherently biased. Collectively, they favour, for example, luxury resorts to affordable housing developments. American economist Fred Lee said we must “complain about the production of a set of consumption goods for certain classes. Why should the poor live in crap housing? We have a system that can produce excellent housing for them, but we don’t. That’s the issue.” Fred was talking about the USA, not Loch Tay, but this goes to show that the issue of who wields power is universal.

Degrowth scholar Giorgos Kallis puts it like this: “The expenditures sanctioned by a society re-produce its established order. Within capitalism, expenditure has to not only maintain growth but also class hierarchy.” In other words if you upset the apple cart, you don’t get invited to the party.

It is always worth highlighting that we do not think there is a global conspiracy of men making all the decisions in smoky rooms. Rather, a set of institutions have developed over decades that push production and consumption in a certain direction. But thankfully, that direction can change quickly.

In the mid-1930s, around 25% of this social surplus was made up of government expenditure. During the Second World War, it peaked at over 60%. Between 1940 and 1980, it averaged 40%. During that period, the ruling elite planned and delivered a different type of society. There had always been a demand for new homes. But now there was a supply.

READ MORE: Scottish university town sees rents rise by up to 100 per cent

During the first six years after the war, Clement Atlee's government built one million new houses across the UK, of which 80% were council-owned. The New Towns Act in 1946 signalled a massive reallocation and improvement of housing for the working class. Similar to many young families in the 1980s, my parents moved from a two-bed flat in the east end of Glasgow to a three-bedroom house with a front and back garden in Livingston. It was transformational. The house also came with a well-paid factory job for my father. Then, Thatcher started to create and support institutions that moved the composition of the social surplus. The % of government expenditure in GDP shrank by over 20% during the 1980s. The lack of affordable houses can be traced back to those policies.

The growing resistance to the planned development of Taymouth Castle is a local reaction to the provision of homes for the wealthy, but also a national dissatisfaction with how those in power are allocating the social surplus. We know instinctively that the wealthiest in society do not need more homes and that the market will not deliver the affordable homes we need. This is why a real-world view of our economy really matters.

The orthodox economic approach persuades us to focus on supply and demand. It gaslights us, telling us that we all have equal power. A real-world approach highlights where the power really lies. In Westminister, the current government and the one in waiting, are clearly unwilling to alter the provision of the social surplus. We must demand an alternative.

Join us to discuss housing issues in Scotland on September 27 on our monthly LIVE Q&A on YouTube.