The cost of materials and new environmental standards were among the factors that were found to be responsible for the rising cost of development
The average cost of building a new home in Scotland has increased by up to 21% since 2016, according to research by the Scottish Federation of Housing Associations (SFHA).
A report from the trade body, titled The Cost of Compliance, found that the average works cost per new housing unit in 2020/21 was £134,000 to 138,000, compared with £114,000 in 2016/17.
The research was commissioned by the SFHA ahead of a meeting between the Scottish government and a review group led by the Convention of Scottish Local Authorities to determine whether adjustments are required to the grant rates available under the Affordable Housing Supply Programme.
A number of factors were found to be responsible for the rising cost of development, including the cost of materials and new environmental standards.
For example, the report found that initiatives such as the Glasgow Standard, a design standard introduced for all homes grant-funded by Glasgow Council, is raising costs by between 5% to 10% and 13% to 15%.
Meanwhile, building to the Passivhaus Standard can add 17.3% to the cost of a typical two-bedroom property.
There is also evidence that the combined impact of COVID-19 and Brexit is putting further pressure on labour and materials costs, the report found.
In addition to the rising cost of development, the report also explored other costs being faced by housing associations, such as investment in existing stock and new regulatory requirements, which are having an impact on the levels of investment available for new builds.
This includes the cost implications of the Scottish government’s Energy Efficiency Standard for Social Housing 2 (EESSH2), which will require social landlords to retrofit all homes to a minimum of energy performance certificate (EPC) of B by 2032.
Landlords that have analysed the cost of EESSH2 estimate that it could add between £7,000 and £10,000 per unit to capital investment programmes, excluding replacement heating systems.
New fire safety requirements for existing homes are also expected to add to costs for housing associations, again impacting the amount of money available for development.
The report comes shortly after the Scottish government published its Housing to 2040 strategy, which included a commitment to develop 100,000 affordable homes over the next 100 years.
