‘Gamechanging’ Highland freeport ‘threatened’ by major housing shortfall
The project has been hailed an “unprecedented opportunity to reverse the alarming decline in the working-age population” in parts of the Highlands. Up to 10,000 jobs are expected to be created and more than GBP3 billion of investment. But new projections by Highland Council show it will require an additional 24,000 or so houses in the next ten years – double the number that would normally be built – to meet current and future demand.
To accelerate the plan will require additional investment of around GBP2.8 billion. The local authority said “new solutions” are required and lessons could be learned from other parts of the country where urgent schemes have been established such as the Commonwealth Games village in Dalmarnock in Glasgow. Rural areas face the particular challenge that the cost of building a new home is significantly higher than the value.
Highland Council say a limited number of contractors are willing and able to build social housing because of a lack of skilled labour and accommodation and higher costs for materials. Pre-Covid, the average cost per housing unit was GBP157,000 but this has risen to GBP227,627 for projects committed to this year. The council said it had received a tender of GBP400,000 per house recently.
According to a Highland Council report there are “limited contractors willing to build affordable homes in highlands due to lack of skilled labour and accommodation for workers.” It goes on to mention that this has led to projects collapsing. It said: “Construction tender price inflation (higher than any time in the last 20 years) has resulted in some projects no longer being viable.
“Contractors cite lack of skilled labour, lack of accommodation for their workforce, material price uncertainty”. Compared to Scotland[1], Highland has proportionally less socially rented housing, making up around 18% of all housing while the national average is around 23%. Pressure is greatest in Wester Ross, followed by, Badenoch & Strathspey, Nairn, Inverness, Lochaber and Skye and Lochalsh.
The council said it may be forced to use compulsory purchase order powers where it can be shown that landowners are not releasing land when market values are being offered. Calum MacPherson, chief executive of the Inverness and Cromarty Firth Green Freeport, said the success of the project was dependent on having the right infrastructure in place. 
“Key to this is housing,” he said. “A very important factor is ensuring the right mix of housing is available in the area, including affordable entry-level homes and accommodation for letting. “We encourage the public and private sectors to work together to accelerate their vision for housing in the area to meet the growing need.”
Highland Council is negotiating an outstanding housing debt of around GBP365.2 million. A significant element of this is historic debt associated with the council house-building programme to support local economic development in the hydro and oil industries. Highland Council leader Raymond Bremner wrote to Michael Gove, Secretary of State for Levelling Up, Housing and Communities in May to request a meeting to discuss a partial write-off of the housing debt.
A similar letter has now been sent to Angela Raynor, Deputy Leader of the Labour Party. A council spokeswoman said: “Highland Council will consider a number of strategic objectives with the aim of finding solutions to a Highland Housing Challenge. “The future demand for housing is based on an updated ten-year Housing Needs Demand Assessment, which incorporates economic modelling based on potential increases in jobs connected to the development of the Inverness and Cromarty Firth Green Free Port.
“Highland Council and its partners are on course to meet the challenge of building 24,000 houses, but over 20 years. “The Housing Challenge will be explored in a future summit with partners, which will explore the Council’s agreed objectives including levering finance[2] from different means; finding varied mechanisms to build new housing; flexibility regarding the ownership of housing; and finding new ways to maximise the supply of land.” The Scottish Parliament declared a national housing emergency on 15 May 2024.
A target to deliver 110,000 affordable homes by 2032 has slowed and it is now under review.
The budget for the government’s affordable housing programme for 2024-2025 has been slashed by GBP163million.