Appendix 1b - AJ STL Research Report
Perth and Kinross Council · 28 August 2024
Back to Economy and Infrastructure Committee — 28 August 2024 and its agenda
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Donna Milton (MCIH) Managing Director Elaine Byrne (CPFA) Director of Housing Consultancy Perth and Kinross Council Short Term Lets Evidence Research Report April 2024
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Perth and Kinross Council Short Term Lets Impact Research Table of Contents Executive Summary .................................................................................................................................. 4 Housing Pressure Analysis Conclusions and Recommendations (HMAs) ............................................. 4 Housing Pressure Analysis Conclusions and Recommendations (Hotspots) ............................... 6 1 Introduction and Study Overview ................................................................................................... 8 1.1 Project Methodology ................................................................................................................. 10 2 Assessing Housing Affordability across Housing Market Areas .............................................. 11 2.1 Housing Cost Comparison ........................................................................................................ 11 2.1.1 Social Rent Comparison ........................................................................................................... 12 2.1.2 Market Rent Comparison .......................................................................................................... 12 2.1.3 Mid-Market Rent Comparison ................................................................................................... 15 2.1.4 House Prices Comparison ........................................................................................................ 15 2.2 Income Profile: CACI Paycheck Data ....................................................................................... 16 2.3 Model Assumptions: Income to Rent Ratios ............................................................................. 18 2.4 How Affordable are Perth and Kinross Market Rents when using a 30% to 35% Income to Rent Ratio? ........................................................................................................................................... 19 2.5 How Affordable is the Perth and Kinross Housing Market? ..................................................... 21 2.6 Housing Affordability Outcomes by Tenure .............................................................................. 23 2.7 Key Findings: Perth and Kinross Housing Affordability Analysis .............................................. 24 3 Housing System Pressure Analysis ............................................................................................. 26 3.1 Housing Tenure and Dwelling Pressures ................................................................................. 26 3.2 Short Term Lets and Ineffective Housing Stock pressures ...................................................... 27 3.3 New Supply Pressures ............................................................................................................. 28 3.4 Household Income Pressures................................................................................................... 30 3.5 Housing Market Pressures ....................................................................................................... 31 3.6 Housing Affordability Pressures ............................................................................................... 33 3.7 Private Rented Sector Pressures ............................................................................................. 36 3.8 Social Housing Pressures ......................................................................................................... 39 3.9 Overall Housing Pressures by Housing Market Area ............................................................... 43 4 Research Conclusions and Recommendations .......................................................................... 46 4.1 Housing Pressure Analysis Conclusions .................................................................................. 46 4.2 Housing Pressure Recommendations ...................................................................................... 49
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Perth and Kinross Council Short Term Lets Impact Research Appendix 1:2024 Perth and Kinross STL Affordability Model (Data tables, available on request) Appendix 2:2024 Perth and Kinross Affordability and Housing Pressures Slide-pack (appended here) Appendix 3 2024 Perth and Kinross Housing Pressures Dashboard (Data tables, available on request) Arneil Johnston Falkirk Business Hu 45 Vicar Street Falkirk, FK1 1LL
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 4 Executive Summary In February 2024, Perth and Kinross Council commissioned Arneil Johnston to carry out research to evidence housing system pressures to inform policy consideration of short term let control areas. This Executive Summary provides a summary of the research conclusions and recommendations for each of the five HMAs across Perth and Kinross and the four proposed hotspot areas. Short term let control areas are intended to help manage levels of short-term letting where this affects the availability of residential housing or the character or amenity of a neighbourhood, helping local authorities to ensure effective housing system operation and good access to residential housing. To designate a short-term let control area, Perth and Kinross Council will need to prepare a statement of reasons for their proposal, explaining to those affected by the control area and to Scottish Ministers, why the designation is necessary. Housing Pressure Analysis Conclusions and Recommendations (HMAs) Key indicators have been selected and synthesized to evidence housing market pressure in HMAs to show that short-term letting may be affecting the operation of the housing system. These are: This indicator considers the extent to which short term lets are limiting residential housing supply. Highland has the greatest proportion of short term lets stock limiting the supply of residential dwellings in the area followed by Strathearn. Kinross and Greater Perth have the lowest. This indicator considers households lower quartile (LQ) incomes to house price ratios to assess the ability to access the housing market. Access is challenging across Perth and Kinross with households required to spend almost 7 times their LQ income. Access issues are greatest in Kinross and Highland with the least issues in Eastern and Greater Perth. Analysis of in-migration of house sales provides evidence of the extent to which households purchasing homes from elsewhere may be inflating prices. In the last 2 years the average in-migration across Perth and Kinross was 41% . High levels of in-migration in the Kinross, Highland and Strathearn may be fueling house prices in these areas. Analysis of housing market affordability provides evidence of households struggling to meet their housing needs in a HMA. 51% of households in Perth and Kinross cannot afford market entry home ownership with Highland and Strathearn having the greatest challenges. 36% of Perth and Kinross households cannot afford LHA rents with affordability most challenging in Eastern with 40% unable to afford LHA rate.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 5 This indicator considers the extent new housing supply will relieve housing pressures. Over the last 5 years house completions range from 59% in Greater Perth to 3% in Highland. The majority of land allocations in the Perth and Kinross 5 year Effective Land Supply is in Greater Perth (55%) followed by Strathearn (16%). The lowest is in Highland (3%). Interventions will need to be considered to maximize the existing housing stock. The outcome of the weighted scoring for each of the housing pressures indicators shows that Highland HMA has the highest score (177) followed by Strathearn HNA (139) and Greater Perth HMA has the lowest (45). Synthesizing a number of key indicators as measures of housing pressure in each HMA area would suggest the need for Short Term Let Control Area (STLCA) as follows. Eastern HMA: Clear evidence for the need for STLCA for hotspots within the HMA • High levels of ineffective residential dwellings caused by short term lets with evidence they are impacting on the supply of residential dwellings available in the housing market. • Evidence of house prices inflation caused by high in-migration impacting on local residents’ ability to access the housing market and to afford house prices Greater Perth HMA: No clear evidence for the need for STLCA for the HMA. • Low levels of ineffective residential dwellings caused by short term lets • No evidence of house price inflation being caused by short term lets or in-migration. Highland HMA: Clear evidence for the need for STLCA for the HMA • High levels of ineffective residential dwellings caused by short term lets which are impacting on the supply of residential dwellings available in the housing market. • Evidence of house prices inflation caused by high in-migration impacting on local residents’ ability to access the housing market and to afford house prices and private rents. Kinross HMA: No clear evidence for the need for STLCA for the HMA. • Low levels of ineffective residential dwellings caused by short term lets impacting on the supply of housing • Evidence of house price inflation being caused by in-migration but this is not caused by residential dwellings being used for short term lets.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 6 Housing Pressure Analysis Conclusions and Recommendations (Hotspots) Key indicators that short-term letting may be affecting the operation of the housing system in the four proposed hotspot areas include: There are variations across the hotspot areas from the Perth and Kinross average of 2% short term lets. The greatest impact on limiting the residential market supply is in North Eastern with 13% of the housing stock being short term lets. There are lower supply limitations in Perth City Centre with less than 0.5% short term lets. Access to the housing market is extremely challenging across Perth and Kinross with household on lower quartile (LQ) incomes having to spend five times their incomes. Households in North Eastern experience the greatest mortgage multipliers (9.2) while households in Perth City experience the lowest (4.7). Analysis of in-migration of house sales suggests that high in-migration levels in North Eastern (61%) and Comrie (54%) may be fueling house prices in these hot spot areas and creating housing market access issues. Perth City Centre has low levels of in-migration (25%). Analysis of housing market entry affordability suggest that households are struggling to afford market entry house prices. Market entry difficulties are greatest in North Eastern (74%), followed by Comrie (65%) and Crieff (55%) and are least in Perth City Centre (44%). Analysis of the 3,354 completions (2019 to 2023) shows that 40% of completions were in the Perth City Centre hot spot and 4% of completions in Crieff. There were 7 dwellings completed in Comrie and none in North Eastern. The majority of effective land supply is in Perth City Centre followed by Crieff with limited supply in Comrie (1%) with none in North Eastern. The outcome of the weighted scoring for each of the housing pressures indicators is detailed below with North Eastern having the highest score (147) and Perth City Centre HMA having the lowest (38).
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 7 Synthesizing a number of key indicators as measures of housing pressure in each hotspot area would suggest the need for STLCA as follows: Overall Short term let Control Area Conclusions: Using the evidence based and scoring matrix recommendations can be made for the Council to consider STLCA in Housing Market Arears and hotspots in Perth and Kinross.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 8 1 Introduction and Study Overview In February 2024, Perth and Kinross Council commissioned Arneil Johnston to carry out research to evidence housing system pressures to inform policy consideration of short term let control areas. In particular, support was sought to build the evidence needed to enable the Council to consider whether pursuing an application for a Short-term Let Control Area would succeed in relieving housing pressure and improving housing system operation in specific communities and neighbourhoods. Under Section 26B of the 1997 Town & Country Planning Act1, the approval of a short term let control area means that if a residential property changes use for the purpose of offering short term lets, this will be deemed a material change and will therefore require planning permission. Short term let control areas are intended to help manage levels of short-term letting where this affects the availability of residential housing or the character or amenity of a neighbourhood, helping local authorities to ensure effective housing system operation and good access to residential housing. To designate a short-term let control area, Perth & Kinross Council will need to prepare a statement of reasons for their proposal, explaining to those affected by the control area and to Scottish Ministers, why the designation is necessary. The Council must consider whether there are: ‘systemic material planning considerations’ across one or more areas in the local area as part of deciding whether to designate one or more control areas. A ‘systemic consideration’ includes evidencing whether there is a cumulative impact from the use of residential homes as short term lets, with indicators including a ‘lack of affordable and appropriate housing for local residents, perhaps indicated by a high share of sale volumes to, and high prices paid by, non-residents’. Therefore, the Council wish to evidence the housing system impacts of short term letting providing credible evidence of housing system pressures including price inflation, housing affordability pressures, affordable housing pressures and the impact of ineffective stock on access to residential homes. Analysis by the Council suggests that applications for a control area could be considered in the following ‘hotspot’ areas: • Comrie, • Crieff, • North Eastern corridor • Perth City Centre. To support an application for designating a short-term let control area, a credible evidence base will require to be assembled which shows the extent and nature of housing pressures experienced by local residents in these hotspot areas, relative to other parts of the Perth & Kinross housing system. In doing so, the evidence should show that housing system interventions (such as STL control areas) would be beneficial in meeting housing need and could be justified within the local development planning framework. 1 As amended by The Town and Country Planning (Short-Term Let Control Areas) (Scotland) Amendment Regulations 2022
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 9 Map 1.1 below shows the location of the five HMAs in Perth and Kinross (Eastern, Greater Perth, Highland, Kinross and Strathearn) and the location of the four hotspot areas to be considered as part of the short let control area research study. Map 1.1: Perth and Kinross HMA and Hotspot Areas
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 10 1.1 Project Methodology The project methodology has been designed to build and deliver robust and credible evidence of the impact of short term lets in each control area by delivering evidence on: • housing affordability pressures across housing market areas (HMAs) and proposed hotspots in Perth and Kinross • income profiles and housing access barriers across each housing market/hotspot area • tenure diversity and housing choice including the extent of ineffective housing stock including short-term lets, second homes and empty homes • the operation of the housing market including sales to in-migrating households and rising price inflation • the scale, operation and affordability of the private rented sector • existing housing need and wider housing system pressures. To achieve this, the research programme was executed around the following three stage methodology: • analytical modelling of housing affordability across hotspots and HMAs relative to local incomes and range of housing options and tenures • analysis of the extent and nature of housing system pressures across hotspots and HMAs with a specific focus on market housing pressures • assembly of an interactive data-book showcasing the housing system evidence, headlines and insights assembled across each HMA and proposed hotspot. This research report details all aspects of the research, housing pressure analysis and housing system evidence disaggregated to HMA and hotspot levels.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 11 2 Assessing Housing Affordability across Housing Market Areas Housing affordability analysis provides essential insight into the extent to which households can independently access the housing market in each HMA/hotspot area or whether a wider range of housing options is required to meet housing need. In particular, this analysis will establish the proportion of households who can afford different tenure types across each of HMA/hotspot area to support the evidence for short term control areas. Chapter 2 details the evidence of affordability pressures across each housing market/hotspot rea in Perth and Kinross. An analytical modelling tool and summary slide-pack detailing this analysis can be accessed by clicking on the following links: Appendix 1 PKC STL HNDA Affordability Model MASTER.xlsx Appendix 2 Perth & Kinross STL slide pack HMA+HOTSPOT.pptx As part of the Perth and Kinross Short-Term Let Research Study, Arneil Johnston developed a modelling tool to comprehensively assess housing affordability by benchmarking the profile of local incomes to housing costs across tenure. This analysis is disaggregated by the model so that housing affordability can be tested at a housing market/hotspot area level. The following diagram illustrates how the model works in practice: The model is populated with data inputs and insights on the costs associated with various housing tenure options including: • rent levels for Perth and Kinross Council • rent levels for locally operating RSLs • mid-market rent levels set at 100% of the Local Housing Allowance • PRS market rent levels • housing market entry level prices • average house prices. Housing affordability is assessed by testing a range of income to rent ratios (the proportion of household income to be devoted to housing costs) to assess the risks associated with housing induced poverty in each tenure. Using a banded income profile from CACI PayCheck, the model calculates the proportion of households who can/cannot afford housing costs across a range of housing tenures and hotspot areas. 2.1 Housing Cost Comparison The housing affordability model has been populated with housing cost benchmarks, including: • social rent levels for Perth and Kinross Council and locally operating RSLs • market rent levels established through a snapshot analysis of the number and value of local residential vacancies, plus the Perth and Kinross dataset produced by Rent Service Scotland • mid-market rent levels set at a threshold of 100% of the Local Housing Allowance (LHA) rate for Perth and Kinross
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 12 • house prices (lower quartile and average), sourced from analysis of house sale transaction data provided by the Register of Scotland. Benchmark housing costs for each tenure are profiled for each property size and housing market/hotspot area below. 2.1.1 Social Rent Comparison Social housing rent levels in Perth and Kinross have been calculated using data submitted by Perth and Kinross Council and Registered Social Landlords (RSLs) to the Scottish Housing Regulator (SHR) in 2022/23 as part of the Annual Return on the Charter (ARC dataset). This data has been inflated to reflect the rent increases imposed by each landlord in 2023/24, as reported to the SHR. Table 2.1 details social housing rent levels across Perth and Kinross Council by property size as well as Local Housing Allowance rate for 2024/25 and average private sector market rents. Table 2.1 Social housing rent levels and comparison with LHA and market rents for Perth & Kinross Table 2.1 shows that average monthly Perth and Kinross Council rents range from £297 for a 1- bedroom property to £386 for a 4-bedroom property. Overall, average monthly Perth and Kinross Council rents (£321) are 17% lower than average RSL rents in Perth and Kinross (£376). RSL rents range from £353 for a 1-bedroom property to £460 for a 4-bedroom property. Despite the higher rental values posed by RSL rents in Perth and Kinross, they are considerably less than the Local Housing Allowance (LHA) rate for Perth and Kinross (the rate which subsidy levels are set for the private rented sector). Set at an average of £744 per month in Perth and Kinross, the Local Housing Allowance rate is 132% higher than Perth and Kinross Council rents and 98% higher than RSL rent levels. For RSL rents, the margin between the LHA rate is significantly above the RSL average rent by 98%, with LHA rates for 4-bedroom homes 171% higher than RSL rents. The margin between LHA levels and Perth and Kinross Council rents is also significant across all property sizes but most pronounced for 4-bedroom homes, where LHA rates (at £860) more than Perth and Kinross Council rents are 223% higher. This analysis showcases the extent of cost value between social and market housing costs in Perth and Kinross. It should be noted that social housing rents and LHA rates will be consistent across all housing market/hotspot areas in Perth & Kinross. 2.1.2 Market Rent Comparison Average market rent levels by housing market area, hotspot area and property size were derived from the monitoring dataset sourced from Rent Service Scotland to set the Local Housing No. of Bedrooms P&K Council RSLs Local Housing Allowance Market Rents 1 Bedroom £297 £353 £424 £452 2 Bedrooms £323 £383 £558 £613 3 Bedrooms £363 £419 £748 £836 4+ Bedrooms £386 £460 £1,247 £1,348 Average £321 £376 £744 £812 No. of Bedrooms Difference P&K Council/RSL Rents % Difference RSL/LHA Rents % RSL/Market Rents % 1 Bedroom -£56 -19% -£71 -20% -£100 -28% 2 Bedrooms -£60 -19% -£175 -46% -£230 -60% 3 Bedrooms -£57 -16% -£329 -78% -£417 -100% 4+ Bedrooms -£74 -19% -£786 -171% -£888 -193% Average -£56 -17% -£368 -98% -£436 -116%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 13 Allowance (LHA) rate in Perth and Kinross The sample provided covered the period from 2019/20 to 2022/23 with the results outlined in Graph 2.1 below. When analysing the Rent Service Scotland (RSS) data set it was agreed that market rent values for Crieff would also be used for the Comrie hotspot area. This is due to a small RSS sample size in the Comrie hotspot area, which created a significantly lower than average rent when compared to the Crieff hotspot and wider Strathearn HMA. The North Eastern area also had a small RSS sample size, however due to hotspot rents benchmarking well to the wider Eastern HMA, the rents were deemed robust enough to be used as a credible benchmark. In 2022/23, the average market rent in Perth and Kinross was £812 per month. Monthly rents vary significantly across property size from an average of £452 for a 1-bedroom property to an average of £1,348 for a 4-bedroom property. There is a high degree of variation in average rental market prices across HMAs in Perth and Kinross. Strathearn is the HMA with the highest average rental value at £868, followed by Highland at £850. In contrast, the Greater Perth HMA has the lowest average market rental value at £789 and lower than the Perth and Kinross average market rent of £812. The highest average market rents of all the four hotspot areas are found in Crieff and Comrie at £823.00 per month, which is slightly lower than the Strathearn HMA average at £868, but higher than the Perth and Kinross benchmark of £812. This suggests that there may be other areas driving market rent values within the Strathearn HMA. The North Eastern hotspot has the second highest average rent at £818 per month, which is slightly higher than the wider Eastern HMA average rent at £801. The Perth City Centre hotspot has the lowest average monthly rents at £764, which is £48 lower per month than the overall Perth and Kinross average. Graph 2.1: Average PRS rental values by HMA and property size Table 2.2 shows that average market rents in Perth and Kinross are significantly higher than Council rents, with the average Perth and Kinross market rent 153% higher than the average social rent. This ranges from 146% in the Greater Perth HMA to 171% in Strathearn HMA. These differentials follow a similar trend for hotspot areas, which range from 138% in Perth City Centre to 157% for Comrie and Crieff. The analysis also demonstrates a significant differential in rental values for larger properties as Council rents in Perth and Kinross have a much flatter rental structure. As a result, the larger
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 14 property size, the greater the differential between market rents and the average social rent levels with an overall difference of 249% between 4-bedroom Council rents and 4-bedroom market rents. Table 2.2: Market rent levels and comparison with social housing rent levels for Perth and Kinross To assess the affordability of the private rented sector for tenants who may be reliant on welfare subsidies to meet housing costs, the Local Housing Allowance (LHA) for Perth & Kinross has been compared with average PRS rents. Overall, market rents in Perth and Kinross are greater than LHA levels, with average market rents (£812) 9% higher than LHA levels (£744). Table 2.3 shows that average market rents exceed average LHA levels across every housing market and hotspot area. The margin between market rents and LHA is greatest in the HMAs of Strathearn (15%), Highland (14%) and Kinross (12%) and greatest in the hotspot areas of Crieff (11%), Comrie (11%), and North Eastern (10%). As market rents exceed LHA, for those households relying on welfare subsidies to meet housing costs, shortfalls of between £20 per month in Perth City Centre hotspot, £74 per month in North Eastern and £79 in the Crieff hotspot; are highly likely to make the costs of private renting extremely challenging for lower income households who have may limited housing options available to them. The difference is even greater for the Strathearn HMA (£124) and Highland HMA (£106) suggesting there may be other market rent hotspot pressure within these HMAs. Table 2.3 indicates that the LHA exceeds average market rents for all property sizes across Perth and Kinross as a whole with a notable margin in 2 bedroom properties by 10% and 3 bedroom properties by 12%. Table 2.3: Market rent levels and comparison with LHA rates by HMA and hotspot Property Size Market Rents P&K Council Difference % 1 bedroom £452 £297 £155 52% 2 bedroom £613 £323 £290 90% 3 bedroom £836 £363 £474 131% 4+ bedroom £1,348 £386 £962 249% Average £812 £321 £492 153% Area Market Rents P&K Council Difference % Eastern £801 £321 £481 150% Greater Perth £789 £321 £468 146% Highland £850 £321 £530 165% Kinross £835 £321 £514 160% Strathearn £868 £321 £547 171% Comrie £823 £321 £502 157% Crieff £823 £321 £502 157% North Eastern £818 £321 £498 155% Perth City Centre £764 £321 £444 138% Perth and Kinross £812 £321 £492 153% Property Size Market Rents LHA Difference % 1 Bedroom £452 £424 £28 7% 2 Bedroom £613 £558 £55 10% 3 Bedroom £836 £748 £88 12% 4 Bedroom £1,348 £1,247 £102 8% Area Market Rents LHA Difference % Eastern £801 £744 £57 8% Greater Perth £789 £744 £45 6% Highland £850 £744 £106 14% Kinross £835 £744 £91 12% Strathearn £868 £744 £124 17% Comrie £823 £744 £79 11% Crieff £823 £744 £79 11% North Eastern £818 £744 £74 10% Perth City Centre £764 £744 £20 3% Perth and Kinross £812 £744 £68 9%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 15 2.1.3 Mid-Market Rent Comparison In addition to benchmarking to social rents, PRS rent levels are also assessed against the affordability of rents in intermediate housing tenures. Table 2.4 below shows the differential between market rents in Perth and Kinross where Mid-Market Rent levels (MMR) are set at 90%, 95% and 100% of the Local Housing Allowance rate. As LHA rates fall short of market rent levels in every property size, Table 2.4 shows that in order for MMR to make any contribution to housing affordability, MMR rents require to be set at the full LHA threshold as a minimum. Table 2.4: Comparison between PRS rents and MMR rent scenarios by property size Table 2.5 below highlights the difference that MMR would make across the HMAs and hotspot areas to households who cannot afford market rents. There is evidence that MMR would make a difference to households across all the HMA ranging from 6% in Greater Perth to 14% in Highland and 17% in Strathearn. Across the hotspot areas only 3% of households would benefit from MMR in Perth City Centre but significantly 11% would benefit in Crieff and Comrie and 10% in North Eastern. Table 2.5: Comparison between PRS rents and MMR rent scenarios by HMA and Hotspot 2.1.4 House Prices Comparison In 2022/23, the average house price in Perth and Kinross was £274,907 which is over £58k higher than the Scottish average house price at £216,364. Highland has the highest average house price at £327,130 of the five HMAs, while Greater Perth has the lowest average price at £242,468. The highest average house prices in hotspot areas, are evident in Comrie and North Eastern at £359,268 and £354,616 respectively, with the lowest average house price in the Perth City Centre hotspot at £205,533. There was a £153,735 difference between the lowest and highest average house prices in Perth and Kinross across the hotspot areas, providing an indication of the diversity of properties available across the hotspot areas. Property Size Market Rents MMR 100% Difference 100% Difference 95% Difference 85% Difference 1 Bedroom £452 £424 -£28 -7% -12% -25% 2 Bedroom £613 £558 -£55 -10% -16% -29% 3 Bedroom £836 £748 -£88 -12% -18% -32% 4 Bedroom £1,348 £1,247 -£102 -8% -14% -27% Average £812 £744 -£68 -9% -15% -28% Property Size Market Rents LHA Difference % 1 Bedroom £452 £424 £28 7% 2 Bedroom £613 £558 £55 10% 3 Bedroom £836 £748 £88 12% 4 Bedroom £1,348 £1,247 £102 8% Area Market Rents LHA Difference % Eastern £801 £744 £57 8% Greater Perth £789 £744 £45 6% Highland £850 £744 £106 14% Kinross £835 £744 £91 12% Strathearn £868 £744 £124 17% Comrie £823 £744 £79 11% Crieff £823 £744 £79 11% North Eastern £818 £744 £74 10% Perth City Centre £764 £744 £20 3% Perth and Kinross £812 £744 £68 9%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 16 The market entry level house price in Perth and Kinross in 2022/23 was £155,385 with market entry prices lowest in Perth City Centre hot spot (£117,250) which is lower than the Perth and Kinross benchmark of £155,385. The highest market entry house price can be found in the North Eastern hotspot (£255, 000), followed by Comrie (£202,488) and Crieff (£160,00) which are all above the Perth and Kinross Bench mark (£155,385). When comparing the hotspots with their respective HMAs, lower quartile house prices are considerable higher in North Eastern Hotspot (£255,000) when compared to the Eastern HMA (£139,500) suggesting there are pronounced housing market pressures at market entry level in the North Eastern hotspot. Analysis of average house prices between hotspots and HMAs evidence similar housing market hotspot pressures with average house prices in Comrie (£359,268) significantly higher than the Strathearn HMA (£313,241), and the North Eastern hotspot considerably higher (£354,616) than the Eastern HMA (£228,176). This analysis would suggest exceptional housing market pressure and inflation in these hotspot areas relative to the wider Perth & Kinross area. Across the four hotspots only households living in Perth City Centre do not have to pay higher than the Perth and Kinross benchmark for market entry, median and average house prices. Table 2.6 below provides a summary of house all house sales by HMA/hotspot for 2022/23: Table 2.6: Average, median and lower quartile house prices by HMA (2021) 2.2 Income Profile: CACI Paycheck Data Establishing the income profile of local households is an important element of assessing the affordability of each housing tenure in housing market areas and also in the proposed short term let hotspots. To achieve this, analysis of CACI Paycheck data was performed to profile the value and distribution of local incomes across a banded income profile. CACI Paycheck data also provides the lower quartile income levels at a Perth and Kinross level. Analysis of Paycheck data reveals that the mean income in Perth and Kinross is £48,888 which is higher than the mean income for Scotland at £44,445. The lower quartile income for households living in Perth and Kinross is £22,662, which again is higher than is the case for Scotland (at £19,565). Graph 2.2 below details the profile of incomes across Perth and Kinross by HMA/hotspot and banded increments. Area Average Price 2022/23 Median Price 2022/23 Lower Quartile 2022/23 Eastern £228,176 £219,975 £139,500 Greater Perth £242,468 £215,255 £133,390 Highland £327,130 £288,527 £187,000 Kinross £305,880 £283,000 £184,875 Strathearn £313,241 £270,000 £179,475 Comrie £359,268 £276,391 £202,488 Crieff £286,330 £249,450 £160,000 North Eastern £354,616 £280,000 £255,000 Perth City Centre £205,533 £187,886 £117,250 Perth and Kinross £274,907 £239,500 £155,385
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 17 Graph 2.2: Banded income profile by Perth and Kinross HMAs (CACI Paycheck Data 2023)
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 18 In Perth and Kinross, 20% of households earn less than <£20K per annum. There is clear evidence of income inequality locally with just over half of households (51%) earning £40k+ annually. Most HMAs and hotspot areas have a similar proportion of middle earners (£20k - £40k) to the Perth and Kinross benchmark average of 29%, with more variation between HMAs and hotspot areas on the proportion of high and low earners. In Kinross HMA, only 14% earn less than £20k while 62% earn £40+k. Whilst Perth City Centre hotspot has 25% earning less than £20k and 44% earning £40-+k. North Eastern hotspot has the highest proportion of households earning £40+k at 53% in contrast to 44% of households in Perth City Centre hotspot. 2.3 Model Assumptions: Income to Rent Ratios A key model assumption relates to the proportion of household income that an individual must devote to meeting housing costs. Housing affordability analysis measures a person’s ability to pay for housing. It is a complex issue influenced by local housing and labour markets as well as wider economic, environmental and social factors. The housing affordability model tests the interaction between housing costs, household incomes and the proportion of income that households are typically willing or able to devote to rental payments. When households struggle to meet the costs of housing because they are devoting unsustainable levels of income to meet the costs, they are typically described as experiencing housing induced poverty. Measures of housing affordability are a topic of debate. UK social policy since the 1980s has typically used a percentage of income spent on housing costs to estimate the number of households experiencing difficulties. Generally, those who require to spend more than 30-35% of their household income on housing costs are regarded as experiencing affordability difficulties; although in highly pressured housing market areas, housing consumers may opt to spend well in excess of this benchmark in order to meet housing needs. A key aspect of model development has been to scenario test the proportion of household income required to meet market rental costs at a 30% and 35% income to housing cost ratio. The PRS is often a tenure of last resort for working age households who are not eligible for social housing and who cannot access the housing market. For lower income households, the affordability of market rents is a key indicator housing market pressure particularly where there is evidence of unmet need for social housing.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 19 2.4 How Affordable are Perth and Kinross Market Rents when using a 30% to 35% Income to Rent Ratio? As shown in Graph 2.3, whilst Perth and Kinross PRS rents generally sit below Scottish average rents; this in itself doesn’t prove rents to be affordable relative to local incomes. Graph 2.3: Cumulative changes in 2-bedroom market rents by Broad Rental Market Area 2010-22 (Scottish Government, PRS Statistics 2022) In order to assess affordability, analysis has been performed which benchmarks PRS rents to local income levels and assesses whether those earning minimum income thresholds (without reliance on housing subsidies) could afford market rents and other rental tenures. To test this, analysis was carried out to measure how much a household in Perth and Kinross would have to earn to be able to afford PRS rents if 30% or 35% of their income is devoted to meeting housing costs. Based on the mean income, at a 30% income to rent ratio, annual average market rents in Perth and Kinross would require to be no more than £12,369 per annum to be considered affordable at a 30% income to rent ratio. Calculated from the average monthly rent for Perth and Kinross at £812, the average annual PRS rent equals £9,749. It could therefore be concluded that households earning the Perth and Kinross median income could generally afford the cost of market rents when devoting 30% of their household income to housing costs.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 20 However, based on the lower quartile income benchmark in Perth and Kinross (£22,662), at a 30% income to rent ratio, annual average market rents in Perth and Kinross would require to be set at no more than £6,749 per annum. As the average annual PRS rent in Perth and Kinross is 43% higher than that amount at £9,749 the evidence suggests that PRS rents are not affordable to households on lower incomes. To assess the affordability of PRS rents to households on minimum income thresholds, the income required to devote no more than 30-35% of earnings for each rental tenure has been benchmarked to annual earnings under minimum wage (£20,821 for 21+) and living wage (£21,840). Graph 2.4 illustrates that based on both a 30% and 35% income to rent ratio, average PRS rents in Perth and Kinross are clearly unaffordable to those earning minimum and living wage benchmarks. Graph 2.4: Minimum Income Affordability by Rental Tenures in Perth and Kinross 2023 Graph 2.4 shows that a single household earning around £18,083 would be able to afford the average Perth and Kinross 1-bedroom market rent if they were devoting 30% of their income to housing costs. This is marginally below the annual earnings of a single person reliant on Minimum Wage (£20,882) or Living Wage (£21,840). For a low income household relying on the lower quartile income in Perth and Kinross (£22,662), a 1-bedroom market rent is within reach (£18,083), however a two bedroom market rent would create affordability pressures (£24,526). Similarly households earning minimum or living wage, would not be able to afford the cost of a 2-bedroom market rent (£24,526) at a 30% income to rent ratio. This analysis provides evidence that households relying on lower income measures will struggle to meet the costs of PRS rents, without devoting unsustainable proportions of household income. Furthermore, analysis was performed using the CACI 2023 Paycheck data at an HMA and hotspot
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 21 level to assess the proportion of households across each locality who can/cannot afford average PRS rents in Perth and Kinross based on a 30% and 35% income to rent ratio. Graph 2.5 below illustrates the proportion of households who cannot afford the average market rents per locality using these rent to income ratios. This shows that on average across Perth and Kinross, 48% of households cannot afford the cost of PRS rents when devoting 25% of their income to housing costs. At a 30% income to rent ratio, on average 44% of households in Perth and Kinross cannot afford PRS rents. Graph 2.5: % Households who CANNOT afford the average market rent per sub HMA Using the 30% income to rent ratio, affordability of the PRS across the 5 HMAs affordability is best in Greater Perth (42%) and worst in Strathearn (47%) closely followed by Highland (46%). Average market rents are most affordable to households in the hotspot of Perth City Centre (41% cannot afford) while 44% of households cannot afford market rents in the remaining three hotspot areas where average market rents are higher than the Perth and Kinross average of £812 at £823 for Comrie and Crieff and £818 for North Eastern. Affordability pressures in the Strathearn and Highland HMAs are likely to be driven by the higher than average Perth and Kinross market rents (£812) in these areas at £868 and £850 respectively. This analysis suggests that there may be wider PRS hot spot pressures in the HMAs than the proposed hotspot areas. This analysis shows that the relationship between household incomes and housing costs is dynamic, with housing affordability more complex than simply benchmarking the value of housing costs. 2.5 How Affordable is the Perth and Kinross Housing Market? Accessing the housing market is clearly challenging across all the HMAs and hotspots in Perth and Kinross, however there are some HMAs and hotspots with greater market access pressures than average. Analysis of housing market access reveals that across Perth and Kinross, households must spend up to 6 times the average local income to afford the average house price. Using the Scottish Government’s methodology to test market entry (benchmarking lower quartile incomes to lower quartile house prices), reveals that households must spend more than 7 times their income to purchase a home in the Perth and Kinross area. Housing market access varies across HMAs
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 22 and hotspots from 6 times households’ income in Eastern to 10.5 in Kinross, and from 5 times household income in Perth City Centre hotspot to 7 in North Eastern hotspot. Required mortgage multipliers are even greater for market entry prices with households in the Kinross HMA having to spend over 11 times their annual income to meet market entry house prices and 8.5 times in Highland HMA. In hotspot areas, North Eastern households require to spend over 9 times their incomes to meet lower quartile house prices, with Comrie households having to spend over 7 times their incomes. This is in well in excess of the typical 3.2 X’s multiplier used for mortgage purposes. As well as clear evidence of market access barriers from a loan to value perspective (LTV), this analysis assumes that households will have at least a 15% deposit in place before income benchmarking takes place. This is likely to be a further barrier to home ownership for many households seeking to access the housing market in Perth and Kinross. Table 2.7: House price to income ratios for market entry and average house prices by HMA In terms of the affordability of home ownership at market entry point, further analysis evidences the challenges for lower income households. Using the Scottish Government’s methodology to test the affordability of the market entry point to low income households, the lower quartile house price in Perth and Kinross (£155,385) has been benchmarked across lower quartile incomes (£22,662). Assuming a loan to value ratio of 85% (based on bank of England statistics for First Time Buyers in Q4 2022), and a mortgage multiplier of 3.2 times income; a household would require earnings of £41,274 per annum to be able to afford the cost of market entry home ownership. This is well in excess of Perth and Kinross lower quartile incomes of £22,662. This analysis suggests that home ownership is therefore out with the reach of local households on lower incomes, which is challenging given the tenure dominance of home ownership in the Perth and Kinross area. A more diverse range of rental tenures which offer options to working households on lower incomes is therefore likely to improve the ability of households to meet housing need. HMA Eastern Greater Perth Highland Kinross Strathearn Perth and Kinross Lower Quartile Income £20,908 £19,002 £22,195 £16,267 £24,636 £22,662 Average Income £39,085 £35,069 £40,516 £29,169 £44,435 £48,888 Lower Quartile Price £139,500 £133,390 £187,000 £184,875 £179,475 £155,385 Average Price £228,176 £242,468 £327,130 £305,880 £313,241 £274,907 House price to income ratio (Lower quartile) 6.67 7.02 8.43 11.37 7.29 6.86 House price to income ratio (Average) 5.84 6.91 8.07 10.49 7.05 5.62 HMA/Hotspot Comrie Crieff North Eastern Perth City Centre Lower Quartile Income £28,748 £28,099 £27,713 £23,440 Average Income £52,453 £51,021 £50,122 £43,733 Lower Quartile Price £202,488 £160,000 £255,000 £117,250 Average Price £359,268 £286,330 £354,616 £205,533 House price to income ratio (Lower quartile) 7.04 5.69 9.20 5.00 House price to income ratio (Average) 6.85 5.61 7.08 4.70
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 23 2.6 Housing Affordability Outcomes by Tenure Graph 2.6 details the proportion of households per housing market area and hotspot who cannot afford each housing tenure when devoting 30% of their income to benchmark costs. Council rents are affordable to 9 out of 10 households across Perth and Kinross with just 9% unable to afford rental costs without subsidy support. The analysis shows that on average, 13% of households are unable to afford RSL rents (without subsidy) in comparison to 44% of households who cannot afford market rents. The analysis of Mid-Market rental values is interesting, as in some areas, this tenure clearly improves PRS affordability outcomes. Whilst 44% of households can’t afford PRS rents across Perth and Kinross, this drops to 36% if MMR rents are set using the Local Housing Allowance (LHA), an improvement in affordability for 8% of households. Whilst this pattern is not consistent across HMAs or hotspots, MMR would appear to improve affordability outcomes for households in the Highland (12%) and Kinross HMAs (18%) and the hotspot areas of Comrie (12%) and North Eastern (13%) when set at 100% of the Local Housing Allowance rate. When analysing housing affordability within hotspot areas based on 30% income to rent ratio, whilst pressure varies across the housing tenures, clear pressures are evident in the private housing market. While market entry prices are least affordable in North Eastern hotspot (74%), Comrie has the highest number of households who cannot afford average house prices (89%), closely followed by North Eastern (88%). This is significantly worse than the 79% of households across Perth & Kinross who cannot meet the average cost of purchasing a home in the housing market. These outcomes are particularly challenging given the dominance of home ownership in Perth and Kinross, which will restrict the range of accessible housing options available to those in housing need. This is true for all housing market and hotspot areas in Perth and Kinross, where the proportion of households who can’t afford the average house price ranges from 71% in the Perth City Centre hotspot to 89% in Comrie. Graph 2.6: % households who CAN/CANNOT afford housing tenures by HMA
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 24 In summary, the outcomes of housing affordability modelling across Perth and Kinross show that: 2.7 Key Findings: Perth and Kinross Housing Affordability Analysis Average monthly Perth and Kinross Council rents range from £297 for a 1-bedroom property to £386 for a 4+bedroom property. Overall, average monthly Council rents (£321) are 17% lower than average RSL rents in Perth and Kinross (£376). Despite the higher rental values posed by RSL rents, they are considerably less that the Local Housing Allowance (LHA) rate for Perth and Kinross (the rate which subsidy levels are set for the private rented sector). Set at £744 per month in Perth and Kinross, the LHA rate is 132% higher than Council rents and 98% higher than RSL rents. The average market rent in Perth and Kinross in 2023 is £812 per month. Across Perth and Kinross, market rents are more than double social rent values. Furthermore, LHA rates exceed average market rent values across all housing market with the difference greatest in Strathearn (17%) followed by Highland (14%) and Kinross (12%) and lower in Eastern (8%) and Greater Perth (6%). Across the hotspot areas the difference ranges from 3% in Perth City Centre hotspot to 11% higher in the Comrie and Crieff hotspots (slightly lower than the wider Strathearn HMA (18%) both are located in. The mean income in Perth and Kinross is £48,888 and the lower the lower quartile income for households living in Perth and Kinross is £22,662. In Perth and Kinross, 20% of households earn less than <£20K per annum. There is clear evidence of income inequality across the region with more than double proportion of households (51%) earning £40k+ annually. There are clear variations in mean and lower quartile incomes across both HMAs and hotspots. In the Kinross HMA, just 14% of households earn less than £20k while 62% earn £40+k. Whilst Perth City Centre hotspot has 25% earning less than £20k and 44% earning £40-+k. The North Eastern hotspot has the highest proportion of households earning £40+k at 53%, in contrast to 44% of households in Perth City Centre hotspot To afford average market rents in Perth and Kinross, a household would require to earn £32,495 per annum. Overall, 44% of households in Perth and Kinross are unable to afford the average
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 25 market rents at 30% income to rent ratio. Whilst 44% of households can’t afford PRS rents across Perth and Kinross this drops to 36% if MMR rents are set using the Local Housing Allowance, an improvement in affordability for 8% of households. Average market rents are most affordable to households in HMAs of Greater Perth (42% cannot afford) but are least affordable to households in Strathearn (47% cannot afford). Forthe hotspot of Perth City Centre (41% cannot afford), whilst 44% cannot afford market rents in the remaining three hotspot areas where average market rents are higher than the Perth & Kinross average (£812) at £823 for Comrie and Crieff and £818 for North Eastern. The evidence for short term let control areas is most compelling in specific HMAs and hotspot areas when considering and comparing the proportion of households who cannot afford the cost of purchasing a home. Across Perth and Kinross 51% of households cannot meet the costs of market entry point with 79% unable to afford the average cost of purchasing a home. Highland HMA has the highest proportion of households who cannot afford average house prices (85%) closely followed by Strathearn (83%). Comrie has the highest number of households who cannot afford average house prices (89%) out of the four proposed hotspot area, closely followed by North Eastern (88%) while Perth City Centre has the lowest number of households (71%). At market entry level three hotspot areas are above the Perth and Kinross benchmark of households who cannot afford market entry prices, namely North Eastern (74%), Comrie (65%) and Crieff (55%). Perth City Centre has the lowest number of households unable to afford market entry prices at 44% similar to its HMA Greater Perth at 45%. North Eastern is considerable higher when compared to the Eastern HMA where 50% of households cannot afford market entry prices. Comrie is considerable higher than the Strathearn HMA where 56% cannot afford market entry prices. Out of the five HMAs, the largest proportion of households who cannot afford market entry prices are located in Highland HMA (59%).
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 26 3 Housing System Pressure Analysis Important contextual analysis informing the need for short term control areas, evidencing existing housing need and housing system pressures was assembled by housing market area and hotspot. This analysis was focused on identifying signals of housing system pressure which may indicate the need for policy interventions, where the designation of a short term let area may ease housing systems pressures and improve the operation of the housing system including: • tenure analysis by HMA/hotspots and dwellings • analysis of short terms lets and ineffective dwellings by HMA and hotspot • housing market operation including sale volumes, prices and containment/migration patterns • potential for future supply side interventions • the outcomes of the disaggregated housing affordability model • housing demand information from locally operating social landlords • ratios of housing applicants to turnover. To produce a holistic assessment of housing market pressure across each housing market/hotspot area, a range of housing system pressure indicators were developed and synthesized into an interactive data book and scoring model, producing a housing pressure dashboard for the Perth and Kinross area. The dashboard produces HMA/hotspot level outcomes to determine evidence of housing system imbalances, where housing or planning policy interventions could be considered to relieve existing housing pressures. The interactive dashboard and summary slide-pack detailing this analysis can be accessed by clicking on the following links: Appendix 2 Perth & Kinross STL slide pack HMA+HOTSPOT.pptx Appendix 3 Perth & Kinross STL Housing Pressure Dashboard.xlsx 3.1 Housing Tenure and Dwelling Pressures According to the Council Tax Register in February 2024 there are 76,361 dwellings across the Perth and Kinross area. Graph 3.1 below shows that homeownership dominates the tenure profile across Perth and Kinross providing 62% (47,335) homes, with 17% of all dwellings (12,828) offering social tenancies. The Private Rented Sector (PRS) provides the smallest proportion of housing options at 14%, accommodating 2,856 households across Perth and Kinross Graph 3.1: % of Housing Tenure by HMA
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 27 Graph 3.1 also showcases the diversity of housing options across Perth and Kinross housing market and hotspot areas. The most diverse HMA is Greater Perth with 60% homeownership, 20% social housing and 16% private rented sector homes. The most diverse hotspot area is Comrie with 62% owner occupation, 17% social rent and 10% private rent. In comparative terms, the Kinross HMA and Highland HMA have a lower diversity of housing options. In Kinross this is due the dominance of owner occupation which represents 80% of the tenure profile, with social renting accounting for 9% and the private sector only 7%. North Eastern hotspot has the lowest diversity of housing tenure out of the four hotspot areas with a lower than average owner occupied (41%) and social rent (1%) sectors, but higher than average private rented sector (24%). The more limited tenure diversity in the Highland housing market and North Eastern hotspot areas is due to a lower percentage of owner occupied stock, 47% and 41% respectively and higher percentage of private rented at 17% and 24% respectively. Both these areas also have a higher proportion of ineffective stock (short terms lets, second homes and empty homes) which will be discussed further later in this section. The proportion of social housing also varies considerably across Perth and Kinross HMAs and hotspots with the Greater Perth HMA and Perth City Centre hotspot offering the largest social housing stock at 20% and 19% respectively. In comparison, the Kinross HMA offers only 7% of stock as social rented while in the hotspot area of North Eastern only 1% of stock comprises social housing. The outcome of the scoring dashboard for housing tenure and dwelling pressures across the four Perth and Kinross hotspots identifies that for households who cannot afford market entry and therefore have to rely on social rented sector options, there are more limited housing options in the North Eastern hotspot (ranked 4) which has an overall rented sector (PRS and social housing) of 25%. Crieff is ranked third due to its higher proportion of owner occupation and lower social housing. Perth City Centre has the least housing options pressures due to having a greater proportion of market rent and social housing (37%) compared to the Perth and Kinross benchmark (31%). 3.2 Short Term Lets and Ineffective Housing Stock pressures Graph 3.2 highlights the proportion of short term lets and ineffective housing stock across Perth and Kinross housing market and hotspot areas. Across the HMAs, the proportion of ineffective housing stock is greatest in Highland at 24% with 9% second homes, 9% short term lets and 5% empty homes, giving a total of 23% of all dwellings. This compares to an overall Perth and Kinross Hotspot % Owner Occupied % PRS % Social Housing Rank Comrie 62% 10% 17% 2 Crieff 65% 15% 14% 3 North Eastern 41% 24% 1% 4 Perth City Centre 59% 18% 19% 1 Perth and Kinross 62% 14% 17% Housing Tenure
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 28 benchmark of 8% of ineffective stock, comprising 2% second homes, 2% short term lets and 4% empty homes. Ineffective dwellings across hotspot areas are greatest in the North Eastern corridor at 34%, with 13% of dwellings second homes, 13% short terms lets and 8% empty homes. This rate of ineffective stock is substantially higher than in the wider Eastern HMA at 7%. Comrie has 10% ineffective dwellings (including 3% second homes, and 2% short term lets) which is slightly above the wider Strathearn HMA position of 8%. In comparison, Perth City Centre has the lowest proportion of ineffective stock at 4% with less than 1% of short term lets and second homes and 3% empty homes. Graph 3.2 % of Short term Lets and Ineffective Stock The outcome of the scoring dashboard for ineffective housing stock across the four Perth and Kinross hotspot areas identifies that there is significantly higher proportion of short term lets, second homes and total ineffective stock in North Eastern, which also ranks highest in terms of poor tenure diversification. This further limits housing options for households who wish to meet housing need in the area. Comrie ranks the second highest hotspot with 10% ineffective stock, consisting of 3% second homes, 2% second lets and 5% empty. Crieff and Perth City Centre rank the lowest with 7% and 4% of ineffective dwellings respectively. 3.3 New Supply Pressures The extent of the potential supply side interventions and the availability of effective land supply is also a consideration when considering housing system pressures and policy interventions required to assist the operation of the housing market. Between 2019 and 2023 there were 3,354 house completions in Perth and Kinross. Graph 3.3 below shows that the majority of these completions were in Greater Perth HMA (57%) followed by Kinross and Strathearn HMAs (14% respectively) and Eastern HMA (12%). Highland HMA had the Second Homes Rank Short Term lets Rank Total Ineffective Rank Comrie 3% 3 2% 3 10% 3 Crieff 1% 2 1% 2 7% 2 North Eastern 13% 4 13% 4 34% 4 Perth City Centre 0% 1 0% 1 4% 1 Perth and Kinross 0% 1% 7% Hotspot Ineffective Stock
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 29 lowest proportion of competitions at 3%. Analysis of completions in the hotspots shows the greatest proportion, 47% are in Perth City Centre which is part of the Greater Perth HMA. Less than 0.5% of completions where in Comrie with no housing completions evident in the North Eastern corridor. Graph 3.3 Land Supply and House Completions The Perth and Kinross Council Land Audit 2023, shows an effective 5 year land supply of 3,762 units of housing, with just over half (55%) in the Greater Perth HMA. Highland HMA has the lowest effective 5 year land supply (6%). In comparison, there is no 5 year effective land supply in North Eastern hotspot despite a wider 13% in the Eastern HMA. Perth City Centre hotspot has the highest 5 year effective land supply (59%) and is part of the Greater Perth HMA. Crieff has a 10% effective land supply and is just below the Strathearn HMA land supply of 16%, while Comrie has only 1%. Hotspot areas such as Comrie and North Eastern do therefore not have the potential to rely on supply side interventions to ease housing pressure, which could make planning policy considerations more important in this context. Between the period 2023/24 to 2027/28 1,691 affordable housing units are projected to be completed as part of the Perth and Kinross Strategic Housing Investment Plan (SHIP). The majority of the affordable housing projects are located in Greater Perth HMA (59%) followed by Eastern (19%) and Strathearn (10%). There are only two hotspot areas with affordable housing completions projected in the next 5 years with the majority (36%) in Perth City Centre and a smaller proportion in Crieff (6%). Both Comrie and North Eastern hotspots have no affordable housing completion projected which aligns with the 5 Year effective land supply and previous housing completions which are minimal in both these hotspot areas. The outcome of the scoring dashboard for new housing supply pressures across the potential hotspot areas identifies that there is significantly higher proportion of new supply in the urban centre of Greater Perth HMA and the hotspot area of Perth City Centre. In contrast there has been a small number of new housing completions in Comrie, none in North Eastern while there has been some new development in Crieff. It is unlikely that there will be any significant new supply of housing in Comrie or North Eastern over the next five years with no effective land supply identified and no SHIP completions projected for either of these areas. The majority of new housing supply will continue to be in Perth City Centre with some provision in Crieff.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 30 3.4 Household Income Pressures Analysis of CACI Paycheck data, which provides a profile of annual household incomes across each HMA and hotspot in Perth and Kinross, was performed to determine the extent to which incomes may match evidenced housing pressures. Across Perth and Kinross, the average annual income in 2023 was £48,888, which is above the average income for Scotland (at £44,445). Graph 3.4 below shows income benchmarks for annual average and lower quartile incomes across HMAs and hotspots. Annual average incomes vary considerably across HMA with lowest average incomes evident in the Kinross HMA (£29,169), followed by Greater Perth HMA (£35,069) with the highest average income achieved in the Strathearn HMA (£44,435). In comparison, all of the hotspot areas have higher than the Perth and Kinross average income with the exception of Perth City Centre (£43,733). The highest average income is in the Comrie hotspot (£53,453) followed by Crieff (£51,021). Lower quartile incomes also vary across Perth and Kinross HMAs and hotspots, ranging from £16,627 in Kinross HMA to £24,636 In Strathearn HMA and from £23,440 in Perth City Centre to £28,744 in Comrie. Graph 3.4: Income by HMA The outcome for the scoring dashboard for income pressure across the proposed hotspot areas identifies that Comrie and Crieff rank the lowest in terms of pressure for both average income and lower quartile income pressures, with Perth City Centre ranked the highest at fourth with both a lower quartile income (£23,440) and average income (£43,733) below the Perth and Kinross benchmark. % of House Completions 2019- 2023 Rating % of Effective Land Supply Rating % of approved SHIP completions 2024 - 2029 Rating Comrie 0% 3 1% 3 0% 4 Crieff 4% 2 10% 2 6% 2 North Eastern 0% 4 0% 4 0% 4 Perth City Centre 40% 1 32% 1 36% 1 Perth and Kinross 100% 100% 100% Land Supply & completions Hotspot Area
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 31 Comrie hotspot has the highest average (£52,453) and lower quartile (£28,748) incomes and is ranked lowest in both categories with Crieff ranked second which means some households may find it easier to access the housing market to meet their housing needs. Analysis of the scoring outcomes demonstrates that households in the Perth City Centre hotpsot and North Eastern Hotspot have a higher proportion of households which may have difficulty accessing housing options in the private housing market sector as a result of income pressures. 3.5 Housing Market Pressures Housing market pressures across Perth and Kinross can be measured by analysing the volume and turnover of house sales in each HMA and hotspot area as well as the extent of pressure associated with market inward migration. Over the last three years, on average there has been 3,176 house sales completed per annum across the Perth and Kinross area, providing a market turnover rate of 7%. At an overall level, containment is higher than in-ward migration with 59% of sales being made to local households and 41% of transactions made to households out with the area. Graph 3.5: Housing Market Profile % Volume of House Sales Housing market sales volumes vary across each of Perth and Kinross housing market and hotspot area. Graph 3.5 shows that the highest volume of sales is in the Greater Perth HMA (52% or 1,667) with Perth City Centre hotspot located within the Greater Perth HMA having the greatest volume of sales of the four hotspots (33% or 1,039 transactions). The Eastern HMA had the lowest volume of transactions (14% or 441 transactions). The lowest levels of transactions are in the hotspot areas of North Eastern, located within the Eastern HMA, where almost negligible transactions were recorded at 0.5% (14 transactions) and Comrie at 1% (28 transactions). This is despite Comrie being located with the Strathearn housing market area which had the second highest volume of HMA house sales (16% or 508 transactions). Lower Quartile Income Rank Average Income Rank Comrie £28,748 1 £52,453 1 Crieff £28,099 2 £51,021 2 North Eastern £27,713 3 £50,122 3 Perth City Centre £23,440 4 £43,733 4 Perth and Kinross £22,662 £48,888 Hotspot Income Profiles
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 32 Graph 3.6 below illustrates significant diversity in the level of market containment across each of the Perth and Kinross HMAs and hotspots. The HMAs with the highest number of sales made to local households is the Greater Perth HMA (69%) and the Eastern HMA (57%). The Perth City Centre hotspot has the highest level of contained household sales (75%) of the four hotspot areas followed by Crieff hotspot (56%). In migration is highest in Kinross HMA with just 38% of sales made to people currently living in the area followed by Highland HMA with 43%. The North Eastern hotspot has the highest volume of sales to households living out with the area (61%) followed by Comrie hotspot (54%). Graph 3.6: Housing Market Profile % Containment and Migration Using the scoring dashboard, housing market pressure outcomes were ranked for both house sale volumes and market containment levels for each Perth and Kinross hotspot area. The hotspots of North Eastern and Comrie are ranked as having the highest housing market pressures in terms of low house sales volumes at 14 sales and 28 sales respectively. Perth City Centre hotspot ranks the lowest housing market pressures due to the high sale volumes. The hotspot areas of North Eastern and Comrie were ranked as having the greatest hotspot pressures in relation to inward migration. The levels of inward migration experienced by local households from purchasers moving into the area suggest there is significant competition between local and Volume of House Sales Volume of House Sales (%) Rank Comrie 28 1% 3 Crieff 201 6% 2 North Eastern 14 0% 4 Perth City Centre 1039 33% 1 Perth and Kinross 3176 100% % of P&K Containment Rank % of Migration (External) Rank Comrie 46% 2 54% 3 Crieff 56% 3 44% 2 North Eastern 39% 4 61% 4 Perth City Centre 75% 1 25% 1 Perth and Kinross 59% 41% Hotspot Housing Market Profile Hotspot Housing Market Profile
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 33 incoming households. Crieff hotspot experiences the lowest pressures in terms of market volumes and to some extent this pressure may be relieved by a higher proportion of sales made to households already living in the area than North Eastern and Comrie. The final indicator to consider when assessing market pressures across Perth and Kinross is average house price levels. Using transactions data from the Register of Scotland, Graph 3.7 below shows that the average house price in Perth and Kinross in 2022/23 was £274,907. Graph 3.7 Average, Mean and Lower Quartile House Prices The average house price varies considerably when comparing each HMA and hotspot area to the Perth and Kinross average. Highest average house prices are in Highland HMA at £327,130 and Strathearn HMA at £313,241. In the hotspot areas the highest house price is in Comrie at £359,268 followed closely by North Eastern at £354,616. It is worth noting that these hotspots also have the highest and third highest average income profiles respectively in Perth and Kinross which may to some extent support house price inflation given the relative low volume of market housing and sales in these areas. In comparison, average house prices are lower than the Perth and Kinross average in the Eastern HMA (£228,176) and Greater Perth HMA (£242,468). In the hotspot areas house prices are below the Perth and Kinross average in Perth City Centre (£205,533) which is ranked as having the lowest housing market pressures of the four proposed areas. Lower than average house prices in these areas does not necessarily mean they are more affordable to local households as these areas also have average incomes which are significantly below the Perth and Kinross average of £48,888. More detailed analysis of housing affordability pressures is outlined in Section 3.6 below. 3.6 Housing Affordability Pressures To understand the extent to which housing affordability pressures may enable or limit access to the housing market in each HMA and hotspot, analysis was undertaken of the proportion of households who can afford lower quartile house prices (market entry housing), as well as average house prices, at a 30% income to rent benchmark. Across Perth and Kinross, 54% of households cannot afford market entry housing and 82% cannot afford average house prices. Graph 3.8 below highlights variations across the five HMAs, with Highland HMA and Strathearn HMA having the highest proportion of households who cannot afford market entry housing at 62% and 59% respectively. Access to and the affordability of the housing
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 34 market is even more challenging when average house prices are taken into account. The majority of households (more than three out of four) cannot afford average house prices across all of the HMAs in Perth and Kinross ranging from 73% in Greater Perth to 83% in the Highland HMA. In comparison 52% of households in the Greater Perth HMA, and 57% in both the Eastern HMA and Kinross HMA can afford market entry housing. Graph 3.8 % Housing Market Affordability Home Ownership Graph 3.8 also highlights variations across the four hotspot areas, with North Eastern and Comrie comprising 74% and 65% of households unable to afford market entry housing (respectively), while 55% of households in Crieff cannot afford market entry housing. In comparison, a higher proportion of households in Perth City Centre hotspot can afford market entry housing at 56%. Access and the affordability of the housing market is even more challenging in the three hotspot areas of North Eastern, Comrie and Crieff when average house prices are taken into account with 90%, 82% and 84% of households respectively being unable to afford average house prices. Further analysis of house price to income ratios provides a greater understanding of barriers to housing market access in each HMA and hotspot. Graph 3.9 below shows that the average mortgage multiplier in Perth and Kinross is 5.62, which means that households will require to spend 5.62 times the average annual income to purchase a house at the average price in 2022/23. The multiplier slightly improves at 4.70 for the Perth City Centre hotspot area. The Perth and Kinross ratio is higher for lower quartile incomes and market entry house prices at 6.86, but slightly lower for the hotspot areas of Perth City Centre at 5.0 and Crieff 5.69.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 35 Graph 3.9 Lower Quartile and Average House Price to Income Ratios Analysis across HMAs suggests that the average house price to income ratio varies from 5.84 in Eastern HMA to 10.49 in Kinross HMA. At market entry levels the variation is greater across the five HMAs, with Kinross HMA the highest at 11.37 and Eastern HMA the lowest at 6.67. However within the Eastern HMA, the North Eastern hotspot has the highest average to house price ratio (7.08) and highest market entry to lower quartile income ratio (9.2). The Perth City Centre hotspot has the lowest average house price to income ratio (4.70) and market entry house prices to income ratio (5.0). Comrie has the second highest house price to income ratio for both lower quartile and average house prices at 7.05 and 6.85 respectively. Using the scoring dashboard, housing affordability pressures were ranked for each hotspot on basis of house price to income ratios and housing affordability benchmarks, using a 30% income to rent benchmark. North Eastern has the highest affordability pressures with 74% of households and 90% of households unable to affordable market entry and average house prices respectively. Comrie hotspot also experiences similar pressures and is ranked at third with 68% of households and 82% of households being unable to afford market entry and average house prices. The Perth City Centre hotspot experiences comparatively lower levels of pressure both in terms of market access and affordability outcomes despite lower than average household incomes in this Ratio: Lower Quartile House price to LQ Income Rank Ratio: Average House price to Average Income Rank Comrie 7.04 3 6.85 3 Crieff 5.69 2 5.61 2 North Eastern 9.20 4 7.08 4 Perth City Centre 5.00 1 4.70 1 Perth and Kinross 6.86 5.62 % Households who cannot afford LQ Price (30%) Rank % Households who cannot afford Average Price (30%) Rank Comrie 65% 3 82% 2 Crieff 55% 2 84% 3 North Eastern 74% 4 90% 4 Perth City Centre 44% 1 74% 1 Perth and Kinross 54% 82% Housing Market Area/Hotspot Housing Market Area/Hotspot Housing Market Access & Affordability Housing Market Access & Affordability
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 36 area, presumably eased by below average housing costs. In contrast, the analysis suggests that the North Eastern hotspot experiences the greatest pressure in relation to market affordability and access, despite higher income profiles, followed by the Comrie hotspot. Households in these hotspots are therefore spending higher proportions of their income to meet the costs of the market. The Crieff hotspot has lower housing access pressures but greater affordability issues at average house prices and is ranked second lowest. Whilst the scoring dashboard suggests a need for more housing market options across all the Perth and Kinross hotspots, housing market affordability pressures are most pronounced in the North Eastern hotspot and Comrie hotspot. This is particularly problematic in the North Eastern hotspot due to the higher than average proportion of short term lets and ineffective stock, limited housing options in the social and market rented sector for those in housing need, with evidence than high in migration to these areas could also be fueling house prices given the low volume of sales. In Comrie there is a slightly higher percentage of ineffective stock than the Perth and Kinross benchmark, however housing market affordability will also be problematic given the dominance of home ownership in the area, the high level of incomes and in migration to the area, which in turn could be pushing housing market prices up, and the very limited alternative housing options available for those seeking housing. 3.7 Private Rented Sector Pressures Private rented sector housing can frequently be the default tenure for households who cannot afford to access home ownership but who also cannot access social housing. Dashboard analysis reveals that the proportion of PRS stock in each HMA and hotspot area and rental values vary considerably on an area basis. Graph 3.10 demonstrates that there are 10,991 private rented dwellings across Perth and Kinross, with a high proportion (60%) located in Greater Perth HMA, offering 6,611 dwellings in total. Strathearn HMA and Eastern HMA have the second largest proportion of PRS dwellings out of the five HMAs, 13% each, representing 1401 and 1377 properties respectively. Kinross HMA has the lowest proportion of private rented stock (4%) 458 dwellings. The Perth City Centre hotspot, located within the Greater Perth HMA has the greatest proportion of private rented dwellings (41% and 4,544 dwellings) of the four hotspots, while both North Eastern and Comrie have the lowest proportions (1%) representing 129 dwellings and 97 dwellings respectively. Graph 3.10: % PRS Dwellings per HMA and hotspot The average PRS rent in Perth and Kinross is £812 per calendar month with the margin between the average Local Housing Allowance rate (£744) coming in at £68. Average PRS rents in the
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 37 HMAs range from £789 Greater Perth to £868 in Strathearn. Average rents are slightly lower in the hotspot areas ranging from £764 in Perth City Centre to £823 in Comrie and Crieff which are both located within the Strathearn HMA which overall has the highest average rents. When comparing average rents to the average Local Housing Allowance (LHA) across Perth and Kinross, rental values for all HMAs and hotspot areas are higher than the average LHA rate. The difference between the average PRS rents and the LHA rate ranges from a shortfall of £20 per week in the Perth City hotspot to £74 in North Eastern and £79 in Crieff and Comrie. This suggest that there will be difficulties in some households accessing the private rented sector in the hotspots of Crieff, Comrie and North Eastern due to the shortfall between the LHA and average rents. Table 3.1: Margin between PRS average rent values and the Local Housing Allowance rate by HMA Housing affordability in the PRS is assessed by testing a range of income to rent ratios (the proportion of household income to be devoted to housing costs) to assess the risks associated with housing induced poverty in the sector. Graph 3.11 below shows PRS rent affordability for each of the Perth and Kinross HMAs and hotspots against the LHA rate and the average PRS rental value. In Perth and Kinross, 36% of households cannot afford the average rent at the LHA rate unless subsidy is provided and 44% cannot afford full market rents. This varies from 27% of households who cannot afford LHS rents in Kinross HMA to 40% in Eastern HMA. A greater proportion of households within each hotspot cannot afford LHA rents ranging from 31% in North Eastern to 42% in Perth City Centre. Housing Market Area LHA Rate LHA/PRS Margin Ave PRS Rents Eastern £744 -£57 £801 Greater Perth £744 -£45 £789 Highland £744 -£106 £850 Kinross £744 -£91 £835 Strathearn £744 -£124 £868 Comrie £744 -£79 £823 Crieff £744 -£79 £823 North Eastern 744.21 -£74 818.3395 Perth City Centre £744 -£20 £764 Perth and Kinross £744 -£68 £812
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 38 Graph 3.11 PRS Market Rent Affordability Just over 44% of households in Perth and Kinross cannot afford the cost of the average PRS rent. The proportion of households who cannot afford ranges from 42% in Greater Perth HMA to 47% in Strathearn HMA. In the hotspot areas, the affordability of average PRS rents range from 41% in Perth City Centre to 44% in Comrie, Crieff and North Eastern. This difference between the HMAs and the hotspots is likely to be related to the higher average incomes in the hotspot areas. The PRS pressures for each hotspot area were ranked in terms of (i) average PRS rental values, (ii) households who cannot afford the LHA and (iii) households who cannot afford average PRS rents at a 30% income to rent ratio. Crieff and Comrie are ranked the highest in terms of average PRS rents due (£823) with North Eastern ranked second with average PRS rents just slightly lower (£818). Perth City Centre is ranked the lowest with average market rents at £764. The affordability of the LHA rate is lowest in the North Eastern hotspot (31%) with Perth City hotspot experiencing the greatest pressures (46%) and ranked fourth. Average PRS Rents Rank % Households who cannot afford LHA (30%) Rank % Households who cannot afford Average PRS rent (30%) Rank Eastern £801 3 40% 8 43% 3 Greater Perth £789 2 38% 6 42% 2 Highland £850 8 34% 3 46% 8 Kinross £835 7 27% 1 45% 7 Strathearn £868 9 34% 3 47% 9 Comrie £823 5 36% 5 44% 4 Crieff £823 5 38% 6 44% 6 North Eastern £818 4 31% 2 44% 5 Perth City Centre £764 1 42% 9 41% 1 Perth and Kinross £812 36% 44% PRS Market Rent
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 39 However, the hotspot rankings for PRS affordability are different to LHA affordability rankings, with Comrie, Crieff and North Eastern ranked with the highest pressures (44%), while Perth City Centre has slightly lower pressure (41%). Analysis of PRS affordability pressures suggests that average PRS rents are least affordable in the hotspot areas of Comrie, Crieff and North Eastern while average PRS affordability is more positive in Perth City Centre. LHA rents are least affordable for households living in Perth City Centre and Crieff. This could suggest a need to deliver a wider range of social and below market rent options in these areas, given the higher levels of private rented stock when compared to Comrie and North Eastern. Given the very low number of market rents and market rented dwellings in the hotspots of Comrie and North Eastern, the findings suggest that there may be a need to develop more intermediate models, with consideration given to short term let controls to encourage more market rented dwellings. 3.8 Social Housing Pressures Analysis of social housing pressures across Perth and Kinross takes into account stock availability, demand and the turnover of properties. Table 3.2 overleaf shows that there are 12,828 homes in the social rented sector in Perth and Kinross, accounting for 17% of all dwellings which is lower than the national average at 24%. The proportion of the total social rented stock varies significantly across Housing Market Areas from 64% in Greater Perth to just 4% in Kinross. The proportion of total social housing stock in the proposed hotspots also varies with Perth City Centre having the highest proportion (38%) followed by Crieff (5%). The North Eastern hotspot has only 6 social rent dwellings therefore having very minimal housing options for households who are unable to meet their housing needs in the rented market or housing market. Table 3.2: Social Housing Stock Profile by Council and RSL dwellings A Common Housing Register (CHR) operates in Perth and Kinross consisting of the Council, Caledonia Housing Association, Hillcrest Homes and Kingdom Housing Association. The Perth and Kinross CHR has been used to determine the total number of social housing applications. Overall, demand for social rented housing in Perth and Kinross is high with 2,735 live applicants expressing demand for social rented housing. See Graph 3.12 below. Social Housing in Perth & Kinross Eastern Greater Perth Highland Kinross Strathearn Perth and Kinross Comrie Crieff North Eastern Perth City Centre Total Perth and Kinross Council Dwellings 1202 5191 421 362 784 7960 70 373 6 3909 Total RSL dwellings 524 3043 437 203 661 4868 92 252 0 1002 Total Social Housing Stock 1726 8234 858 565 1445 12828 162 625 6 4911 Total % Social Housing Stock 13% 64% 7% 4% 11% 100% 1% 5% 0% 38% % Perth and Kinross Council Stock 70% 63% 49% 64% 54% 62% 43% 60% 100% 80% % RSL Stock 30% 37% 51% 36% 46% 38% 57% 40% 0% 20%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 40 Graph 3.12: Proportion of Perth and Kinross CHR Applications by HMA Demand for social housing from Perth and Kinross CHR applicants is highest in the Greater Perth HMA by a significant margin, accounting for 63% (1,718) of all applications. Demand for social rented housing is lowest in the Kinross HMA which accounts for only 4% (115) of applicants. Demand for social housing also varies across the Perth and Kinross hotspot areas with 48% (1,302) of CHR applicants from Perth City Centre, 6% (168) from Crieff, 1% (18) from Comrie and less than 0.5% (10) of applications from North Eastern. Table 3.3: Perth and Kinross CHR housing applications In comparative terms, Table 3.4 overleaf demonstrates that the turnover of social housing to meet expressed demand is relatively low. Between the period 2018 to 2020 an annual average of 693 tenancies (excluding one bedroom shared tenancies) became available to let across Perth and Kinross which means just over 5% of the social housing stock becomes available every year. The highest proportion of lets (63%) are in Greater Perth HMA with the lowest proportion (4%) in the Kinross HMA. The number of lets per annum available in the hot spots areas varies considerably, with Perth City Centre seeing the greatest number of lets with a total of 87 dwellings (13%) while 18 dwellings (6%) became available in Crieff, 2 dwellings in Comrie and none in North Eastern. The very limited social rented options in Crieff, Comrie and North Eastern, means that it is very unlikely applicants in housing need will meet their accommodation needs. This could increase their risk of presenting as homeless to the Council or having to move to another area. Social Housing in Perth & Kinross Eastern Greater Perth Highland Kinross Strathearn Perth and Kinross Total CHR Applicants 408 1718 165 115 329 2735 % of Waiting List Applicant 15% 63% 6% 4% 12% 100% Social Housing in Perth & Kinross Comrie Crieff North Eastern Perth City Centre Total CHR Applicants 18 168 10 1302 % of Waiting List Applicant 1% 6% 0% 48%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 41 Table 3.4: 3-year average turnover of Social Housing The considerable pressures in the turnover of social tenancies by size should also be noted in the hotspot areas. Only five three bedroom properties became available Perth City Centre, with 2 dwellings in Crieff and no turnover in the Comrie or North Eastern hotspots. There was no turnover of larger dwelling with four or more bedrooms within any of the hotspot areas. It can therefore be concluded that there are very limited social housing options available for households needing three or more bedroom to meet their housing needs in the hotspot areas. Using data on the number of CHR waiting list applicants and turnover, the ratio of applicants to available social tenancies can be calculated. Across Perth and Kinross there are 3.82 applicants for every available social tenancy. Pressure ratios across HMAs are relatively consistent with the Perth and Kinross benchmark ranging from 3.19 applicants per let in Eastern HMA to 4.67 in Highland HMA. Across the four hotspot areas, pressure ratios are significantly higher due to lack of social housing or lets becoming available. Comrie has the lowest ratio with 8 applicants for every property that becomes available, however this is still more than double the Perth and Kinross average. Crieff has 9 applicants while Perth City Centre has 14 applicants which is higher than the pressure for its HMA of Greater Perth. The other hotspot outlier is North Eastern where no properties became available to let, however it should be noted that there are only 6 social rent dwellings in this hotspot. Further analysis was undertaken of the ratio of applicants to available lets for one bedroom and three bedroom properties. Graph 3.13 below shows that across Perth and Kinross the HMAs and hotspots areas the ratio of applications to available lets is lower than the average for all bedrooms while the ratios are higher for three bedrooms. Across the hotspot areas the ratio is highest for three bedroom properties in Perth City Centre at almost 31 applicants to every 3 bedroom property that becomes available for let. Social Housing in Perth & Kinross Eastern Greater Perth Highland Kinross Strathearn Perth and Kinross Total Turnover 1 bedroom 44 200 17 11 39 311 Total Turnover 2 bedroom 63 174 8 10 39 293 Total Turnover 3 bedroom 17 42 10 5 10 84 Total Turnover 4+ Bedroom 1 3 0 0 1 4 Total 125 418 35 27 88 693 % of Turnover 18% 60% 5% 4% 13% 100% Social Housing in Perth & Kinross Comrie Crieff North Eastern Perth City Centre Total Turnover 1 bedroom 1 11 0 46 Total Turnover 2 bedroom 1 6 0 36 Total Turnover 3 bedroom 0 2 0 5 Total Turnover 4+ Bedroom 0 0 0 0 Total 2 18 0 87 % of Turnover 0% 3% 0% 13%
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 42 Graph 3.13 Social Housing Ratio of Waiting List to Turnover Turning to affordability pressures in the social housing sector, Graph 3.14 highlights the proportion of social housing tenants who cannot afford social rents without subsidy using a 30% income to rent ratio. Across Perth and Kinross 10% of households cannot afford Council rents and 15% cannot afford RSL rents without reliance on subsidy. There are variations in social rent affordability across HMAs, with affordability issues greatest in Eastern HMA and Greater Perth HMA with 11% and 10% respectively unable to afford Council rents and 17% and 15% respectively being unable to afford RSLs rents. This pattern is similar for the hotspot area of North Eastern located within the Eastern HMA, with the highest proportion of households who cannot afford Council rent (12%) and RSL rent (18%) without the need for subsidy. Graph 3.14 Social Housing Affordability
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 43 The social housing pressures for each hotspot area were ranked in terms of (i) waiting list to turnover by bedroom size (ii) households who cannot afford average Council and RSL rents at a 30% income to rent ratio. Perth City ranked the greatest pressures in relation to total waiting lists, which is expected given its urban context, while North Eastern ranked the lowest. However, North Eastern ranked the greatest social housing pressures due to having no stock turnover (given its small proportion of social housing). Perth City Centre also has high demand for social housing with significant pressure for 3 bedroom dwellings with a ratio of 31 applicants to every 3 bedroom property let. Turning to social rent affordability pressures, North Eastern ranked the highest with 12% of households unable to afford Council rents and 18% unable to afford RSL rents. Affordability pressures in the social rented sector were the least in Crieff with 94% of households able to afford Council rents and 84% able to afford RLS rents. 3.9 Overall Housing Pressures by Housing Market Area The housing pressures dashboard has been assembled to profile and align a range of indicators in each Housing Market Area and hotspot to demonstrate whether local housing system imbalances are evident and there is evidence for the need for short term let controls. Assembling a range of indicators from tenure diversity to market operation, inward migration, ineffective stock and short terms lets; allows evidence of the extent and nature of housing system pressures and the need for short term lets controls across HMAs and proposed hotspot areas to be considered. To ensure that a specific focus on short term lets pressures was achieved, six indicators were selected with weightings applied to those indicators which focused most on this issue. The short term let indicators selected, were as follows: 1. Housing options diversity (owner occupation, market rent and social rent) 2. Percentage of short terms lets as a proportion of housing stock 3. Percentage of total ineffective stock (short term lets, second homes and ineffective stock) as a proportion of total housing stock 4. Private sector housing market affordability
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 44 5. Private rented sector market affordability 6. Percentage of inward migration for house sale transactions. A maximum weighting of 10 was applied to indicators 2 and 3 by the Project Steering Group as those which offer the most direct housing pressure measures of issues caused by short terms lets and ineffective stock. The housing options diversity (indicator 1) and the proportion of households who cannot afford market rents, often a default option for those who cannot access social housing (indicator 5), and the proportion who cannot afford market housing (Indicator 4) received a weighting of 5 (assuming that price inflation and affordability can be indicators of short term let impacts). Indicator 6, % of inward migration was given a weighting of 3 as a measure of market competition in each hotspot area. For each indicator, dashboard rankings were used to score pressure on a scale of 1 to 4, with 4 suggesting high pressure and a score of 1 low pressure. Without applying a weighting, overall housing market pressure is ranked the highest in the North Eastern Hotspot, which scores a total of 23 points, followed by Comrie with 15 points. The Crieff hotspot scores a close third with 14 points. Without weighting, Perth City hotspot is ranked as experiencing the lowest housing pressure with a score of 6. With the weightings applied to each hotspot score, again the overall housing pressure is highest in the North Eastern hotspot with 147 points. Whilst income levels are above average in North Eastern, house prices are also high rendering this the least affordable hotspot in meeting the average house price. PRS affordability was ranked third highest for North Eastern, therefore making it difficult for households to access as an alternative housing options if they cannot afford market housing. Furthermore, ineffective housing stock is exacerbating housing options diversity in North Eastern with a higher percentage of ineffective stock, meaning there is lower available market housing or private rented stock available. There are also very limited social rented options in the area with only 6 properties. The demand for market housing for local residents is further exacerbated with higher inward migration absorbing house sales in the area. With the weighting applied to the six indicators Comrie (99) scores higher than Crieff (88). This can be attributed to Comrie’s higher proportion of short term lets and ineffective stock along with greater inward migration pressures from house sales. Comrie has slightly lower pressures in terms of tenure diversification however, the volume of housing options available across all tenures is Comrie Hotspot Crieff Hotspot North Eastern Hotspot Perth City Centre Hotspot Mark Mark Mark Mark 1 Housing Options Diversity 5 2 3 4 1 2 % of Short Term Lets 10 3 2 4 1 3 % of Total Ineffective Stock 10 3 2 4 1 4 Housing Market Affordability (Ave 30%) 5 2 3 4 1 5 PRS Affordability (Ave 30%) 5 2 2 3 1 6 % of inward migration 3 3 2 4 1 TOTAL 15 14 23 6 Housing Pressure Indicator Weighting
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 45 relatively low in terms of turnover, volume of sales and new supply making it difficult for households to access housing options in the area. Comrie does score lower for the housing market and market rent indicators, which can be associated with having slightly higher income levels. However, it has the highest average house price at £359,614 and the same average rents as Crieff at £823 pa. Whilst the Crieff hotspot area scored the second lowest total score when weighting is applied to each of the indicators, this was only 13 points behind Comrie. Crieff has greater housing options pressures due to higher owner occupation and lower social rented housing. However, Crieff has lower housing pressures associated with ineffective housing stock with 1% of homes classified as short term lets and lower level of ineffective stock than Comrie. Housing market affordability pressures are higher in Crieff which may be attributed to lower incomes meaning these households may find it harder to access the housing market. This is despite Crieff having a higher volume of sales and new supply across the housing sector when compared with North Eastern and Comrie. Crieff’s weighted score for inward migration was also lower due to having lower levels than North Eastern and Comrie. Finally, Perth City Centre hotspot has the lowest overall weighted housing pressure score of 38 scoring the lowest across each of the 6 indicators. Perth City Centre has the lowest rate of short term lets and ineffective stock as well as a better diversity of housing options. Due to lower average market house prices and average market rents, more households are able to afford market housing options and there is lower pressure from house sale inward migration. Therefore, there is no clear evidence that Perth City Centre would benefit from the Council pursuing an application for a Short-term Let Control Area to assist in relieving housing pressure and improving housing system operation. However, the area does have housing pressures in relation to demand for affordable housing due to lower average and lower quartile incomes which can be further evidenced in the high demand for social housing and low turnover.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 46 4 Research Conclusions and Recommendations Perth and Kinross Council commissioned Arneil Johnston to carry out research to evidence housing system pressures to inform policy consideration of short term let control areas. To designate a short-term let control area, the Council must consider whether there are: ‘systemic material planning considerations’ across one or more areas in the local area as part of deciding whether to designate one or more control areas. A ‘systemic consideration’ includes evidencing whether there is a cumulative impact from the use of residential homes as short term lets, with indicators including a ‘lack of affordable and appropriate housing for local residents, perhaps indicated by a high share of sale volumes to, and high prices paid by, non-residents’. To achieve this, Arneil Johnston has delivered analysis and insight into the housing pressures associated with housing system operation in both HMA’s and a series of proposed short-term let ‘hot-spot areas’. This evidence builds on analysis of housing affordability by synthesising wider indicators of housing market pressure to define which hotspot areas could be recommended as a short term let control areas. 4.1 Housing Pressure Analysis Conclusions Key indicators have been selected and synthesized to evidence housing market pressure in hotspot areas relative to wider Housing Market Areas. Key indicators that short-term letting may be affecting the operation of the housing system in hot spot areas include: • % of ineffective housing stock: This indicator considers the extent to which second homes, short term lets and empty homes are limiting residential housing supply. North Eastern hotspot has the highest proportion of ineffective dwellings at 34% with the highest proportion of ineffective stock across all categories of short term lets (13%), second homes (13%) and empty homes (8%). In comparison the Eastern HMA has a lower proportion of ineffective housing stock across all categories, short term lets (2%), second homes (2%) and empty homes (4%). Comrie hotspot has the second highest proportion of ineffective stock with a higher proportion of second homes (3%) than short term lets (2%) and an even higher proportion of empty homes (4%). This is higher when compared with the Strathearn HMA short term lets (1%), second homes (2%) and empty homes (4%). In comparison Crieff and Perth City Centre have lower proportion of total ineffective stock at 7% and 4% respectively with the majority of this stock being empty rather than second homes or short term lets. • Access to the housing market: This indicator considers the evidence gathered on average and lower quartile incomes to house price ratios to assess households’ ability to access the housing market. The evidence shows that access to the housing market is challenging across Perth and Kinross. Households with average incomes require to spend almost six times (5.62) their incomes to access the housing market rising to almost 7 times (6.86) for households with lower quartile incomes. Perth City Centre is the only hotspot area significantly lower than the Perth and Kinross benchmark with households earning average incomes required to spend 4.70 times on market housing rising to 5 times for lower quartile incomes. In North Eastern and Comrie access to the housing market is extremely challenging, with North Eastern households earning average incomes requiring 7.08 times rising to 9.2 times for lower quartile, while in Comrie households with average incomes require 6.95 times rising to 7.04 for lower quartile incomes. Crieff differs slightly in that access to the housing market is similar for both average incomes and lower quartile incomes at 5.61 and 5.69 respectively. Accessibility is therefore extremely challenging at market entry level across the hotspot areas, with North Eastern and
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 47 Comrie households required to spend the highest multipliers of lower quartile incomes to access the housing market. This will add further pressures on local residents in North Eastern and Comrie looking to access the housing market already constrained by higher numbers of ineffective stock. • Inward migration of house sale purchases: Analysis of containment and inward migration of house sales provides evidence of the extent to which high in-migration of households purchasing homes from elsewhere may be inflating prices and therefore creating market access/affordability issues. In the last 2 years the average containment across Perth and Kinross was 59% with 41% in-migration. North Eastern has the highest in-migration out of the four hotspot areas (61%) followed by Comrie (54%). Crieff inward migration (44%) is just above the Perth and Kinross average (41%) while Perth City Centre is significantly lower (25%). Comparing hotspot inward migration with the relevant HMA shows that inward migration is significantly higher in North Eastern (61%) when compared to Eastern HMA (43%). Comrie’s in-migration rate is also higher (54%) than the Strathearn HMA (50%) while Crieff is lower (44%). This suggests that high in-migration levels in North Eastern and Comrie may be fueling house prices in these hot spot areas and creating housing market access issues. • Market entry affordability: Analysis of market affordability in both the private rented sector and the housing market provides evidence of households struggling to their needs in the hotspot area. Across Perth and Kinross 51% of households cannot afford market entry home ownership. In all hotspot areas, except Perth City Centre (44%), the proportion of households who cannot afford market entry level is higher than the Perth and Kinross benchmark. Market entry difficulties are greatest in North Eastern (74%), followed by Comrie (65%) and Crieff (55%). North Eastern is notably higher than the Eastern HMA where 53% of households cannot afford entry house prices. Turning to market rents, across Perth and Kinross 36% of households cannot afford LHA rate and 44% cannot afford market rents. Affordability of LHA is most challenging in the Perth City Centre hotspot area with 42% of households who cannot afford the LHA rate, whilst for market rents 44% of households in the North Eastern, Comrie and Crieff hotspot cannot afford market rents. • Completions and pipeline supply: Analysis of the 3,354 completions between 2019 and 2023 show that 40% of completions (1,337 dwelling) were in the Perth City Centre hot spot and 4% of completions (124 dwellings) in Crieff. There were 7 dwellings completed in Comrie and non in North Eastern. The Perth and Kinross Land Audit 2023 provides information on 5 year effective land supply, with 42% of supply allocated to the hotspot areas. The majority of this (32%) is in Perth City Centre followed by Crieff (10%) and Comrie (1%) with no effective land allocated for North Eastern. The Perth and Kinross Strategic Housing Investment Plan (SHIP) is projecting 1,691 affordable units to be completed between 2023/24 and 2027/28 with 42% in the hotspot areas. The majority are within the Perth City Centre (36%) with a smaller number in Crieff (6%). There are no affordable housing projects anticipated for completion in Comrie or North Eastern. Therefore, interventions will need to be considered to maximise the existing housing stock particularly in the areas of North Eastern and Comrie due to a lack of housing completions and provision for future supply in the 5 Year effective land supply and the SHIP. This could include the consideration of short term control areas as well as interventions to try and bring empty homes back into use where feasible.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 48 Synthesizing a number of key indicators as measures of housing pressure in each hotspot area would suggest that: • The North Eastern hotspot has the highest total weighted housing pressure score of all the hotspot areas of 147. This can be attributed to the area being ranked the highest for ineffective stock (34%), including short term lets (13%) which is considerably higher than the Perth and Kinross benchmark for short term lets (1%). The ineffective stock is also impacting negatively on housing tenure diversity with no options in the social rented sector (6 units) and lower than average levels of owner occupation (41%) compared to Perth and Kinross (62%). Access and affordability to the housing market and private rent sector is further exacerbated by North Eastern having high levels of inward migration (61%) compared to Perth and Kinross benchmark (41%). Although the area benefits from higher than the average lower quartile and average incomes it also has the second highest average house price and highest market entry prices. This suggests that higher house prices are being inflated by inward migration. Housing options challenges in relation to housing supply are further exacerbated by lack of house completions in the past and no land supply for future completions or affordable housing completions. The Eastern HMA weighted housing pressure score was lower than the North Eastern at 111, due to greater tenure diversification and less overall inward migration. • The Comrie hotspot has the second highest total weighted score of all the hot spot areas of 99 due ranking second for inward migration and second on the housing pressure indicators for higher levels of ineffective stock (10%). Although Comrie ranks lower for housing market and private rent affordability when compared with North Eastern and Crieff this could be attributed to the higher levels of income in the area. High levels of inward migration (54%) compared to the Perth and Kinross benchmark (41%), could be fueling house prices from people moving into the area which is further exacerbated by the small number of housing completions in recent years and no identified land supply for future supply. There are some similarities when comparing Comrie housing pressures with the Strathearn HMA in relation to ineffective stock and tenure diversification, however, Comrie has a higher rate of in-migration (54%) than Strathearn HMA (50%) and also higher market entry and lower quartile house prices. Strathearn also has the second highest level of house completions (14%) along with Kinross (14%) compared to zero house completions in Comrie. There is a 5-year effective land supply of 616 units in Strathearn with just 24 units in Comrie. • Crieff hotspot has a total weighted score of 86, which was just 13 points lower than Comrie with both hotspots being located within the Strathearn HMA. Crieff ranks lower for the housing pressures for ineffective stock with second homes (1%), short term lets (1%), significantly lower than both North Eastern and Comrie and lower than the Perth and Kinross benchmark. Whilst Crieff has a similar diversity of market housing options, owner occupation (65%) and PRS (15%) to the Perth and Kinross benchmark, but slightly lower levels of social rented housing (14%) compared to Perth and Kinross benchmark of 17%. Affordability is a significant challenge in the private rented sector in Crieff, with 38% unable to afford LHA rents and 44% unable to afford market rents. Affordability is also an issue at market entry and average house prices with 55% and 82% unable to afford respectively compared to the Perth and Kinross benchmarks of 44% and 71%. Crieff has lower house prices than Comrie which to some extent may be assisted by new housing completions in the last five years (124 dwellings) compared to Comrie (7 dwellings) with a substantial 5 year effective land allocation for Crieff (361 dwellings) compared with zero for Comrie. Crieff also ranks lower for in-migration (44%) when compared with Comrie (54%) but is slightly higher than the Perth and Kinross benchmark (41%). It should
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 49 also be noted that Crieff has the second highest demand for social housing in Perth and Kinross suggesting there is a need for the provision of more affordable housing in the area. • The Perth City Centre host spot has the lowest total weighted score out of the four hotspot areas at 38 and ranks the lowest for all 6 indicators. Perth City Centre is located within the Greater Perth HMA and has similar housing pressures of demand for social housing, lower income levels, and market access and affordability issues. Perth City Centre ranked lowest for levels of in-migration (25%) compared to North Eastern (61%) while short term lets and second homes make up less than 1% of the areas stock compared to North Eastern (26%). Demand for social rented housing is high with CHR applications accounting for 48% with 14 applicants waiting for every property. This compares to less than 1% of applications applying for North Eastern. Housing completions and effective land supply also help to relieve housing supply pressures with Perth City Centre accounting for 40% of recent completions across Perth and Kinross compared to none in North Eastern and Comrie. 4.2 Housing Pressure Recommendations Synthesizing a number of key indicators as measures of housing pressure in each hotspot area would suggest the need for STLCA as follows: • Hotspot area 1: North Eastern: There is clear evidence of high house price inflation caused by higher in-migration by non-residents and a very high proportion of short terms lets and overall ineffective stock. This is causing affordability issues in the housing market and the private rented sector with almost no housing options in the social housing sector. Without a short term let control intervention housing pressures will be exacerbated in the future with no effective land supply allocation or SHIP affordable housing completions allocated for North Eastern in the next 5 years. • Hotspot area 2: Comrie: There is clear evidence of high house price inflation caused by higher in-migration by non-residents and a significantly high proportion of short terms lets and overall ineffective stock. This is causing affordability issues in the housing market and the private rented sector with almost no housing options available in the social housing sector. Without a short term let control intervention these housing pressures will be exacerbated in the future due to a very limited effective land supply and no programmed delivery affordable housing completions allocated for Comrie over the next 5years. • Hotspot area 3: Crieff: There is some evidence of house price inflation and affordability pressures due to short term lets and ineffective stock. However, the housing pressures in Crieff are evident due to higher house prices, affordability and dominance of owner-occupation as a tenure. Therefore an increase in provision of affordable housing as well as market entry housing may also assist with relieving housing pressures, whilst short-term let control could ensure high residency is maintained. A short-term let control area should not be considered in Perth City Centre due to lower levels of housing pressure. Evidence of housing affordability pressures suggest a need for more market entry, social rented and intermediate housing. Perth City Centre has a very low number of short term lets and ineffective stock, with in-migration into the housing market also relatively low. Therefore a short term let control area is unlikely to have any significant impact on Perth City Centre housing pressures with no evidence that housing pressures are being caused by high volumes of sales to non-residents or ineffective stock.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 50 Although the study is focusing on the proposed hotspot areas of North Eastern, Comrie, Crieff and Perth City Centre, there is significant evidence of housing presumes caused by short term lets in the Highland HMA where none of the four hotspots are located. Highland HMA has a high proportion of ineffective dwellings (23%) with short terms lets accounting for 9% (593 dwellings). Highland HMA also has the highest housing market and access challenges out of the five HMAs with 59% of household unable to afford market entry housing and 85% unable to afford average house prices. Furthermore Highland HMA has the second highest level of in-migration (57%) with Kinross HMA having the highest (62%), the lowest rate of completions (3%) and the most limited 5- year effective land supply (6%) of all HMAs. This evidence suggests that there could be short term let hotspot areas within Highland which are inflating house prices for local residents and are being exacerbated further by a high proportion of short term lets. To determine the hotspots within the Highland HMA will require further analysis to consider if short term let control areas are required to relieve housing market pressures and increase the supply of housing in the area.
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 51 Slide 1 : P C ST Pro ect Group : 1 th April 2 24 Managing irector Perth inross Council Short Term ets Research Study utcomes riefing
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 52 Slide 2 P C ST Research Study The Perth inross ST Research Study aims to: sing key indicators, evidence housing system pressure which could be relieved by ST control uild a short term lets affordability model to analyse affordability relative to local incomes and housing tenure efine the e tent of Short Term ets and other ineffective stock by HMA and hotspot 2 3 4 Provide recommendations on short terms control areas based on the analysis of housing market pressures Assess housing system operation in each HMA Hotspot area 1
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 53 Slide 3 P C ST Research Study Stage 2: uild an ST Affordability Model Assemble housing cost data by Sub HMA Hotspot Assemble income profile by Sub HMA Hotspot Populate housing affordability model Scenario test rent to income ratios evelop affordability benchmarks for affordable intermediate housing by Sub HMA Hotspot https: westscot.co.uk Stage 1: Profile e isting need and demand for all tenures Analyse housing list, stock and turnover data by HMA Hotspot to profile pressure Synthesi e pressure outcomes with primary research affordability analysis uild thematic data book detailing housing market pressure by Sub HMA Hotspot SH RT TERM ETS
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 54 Slide 4 P C ST Research Study There are five HMAs across Perth inross Eastern Greater Perth Highland inross Strathearn The four hotspot areas considered in the research study are North Eastern Comrie Crieff Perth City Centre
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 55 Slide 5 Household income profiles Rental market affordability Housing market affordability CAN CANN T afford by tenure Housing Affordability Model P C ST Research Study
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 56 Slide 6 Model nputs ncome profile Housing costs rent levels Customer intelligence CAC Paycheck Salary benchmark MMR rents Market rents CH Market entry sale Affordable rents enchmark: ability to meet Shared Equity sale Model Assumptions % income devoted to housing costs Rent to income ratio % market rents HA levels Rent to income ratio Equity rent ratio % equity stake Mortgage multiplier % who can cannot afford each housing tenure P C ST Research Study
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 57 Slide 7 n reality, some households will spend more than this depending on their household circumstances rental cost Rents are considered to be affordable if a household pays no more than 2 % 3 % of their income on housing costs (HN A Guidance) Most social landlords will test housing affordability using an income to rent test of 3 % and 3 % How much income should be spent on rent Housing Affordability: The latest thinking
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 58 Slide 8 P C ST Research Study 2 % Households earn less than 2 k 2 % Households earn 2 k 4 k 1% Households earn 4 k Eastern Greater Perth Highland inross Strathearn Comrie Crieff North Eastern Perth City Centre Perth and inross 1 14% 13% 11% % 11% 13% 14% % 16% 12% 1 2 k % % % 6% % % % % % % 2 2 k % % % % % % % % % % 2 3 k % % % 6% % % % % % % 3 4 k 14% 13% 13% 12% 13% 13% 13% 14% 13% 13% 4 k 12% 11% 12% 12% 12% 11% 11% 12% 11% 12% k 3 % 3 % 41% % 41% 3 % 3 % 43% 33% 3 % % 1 % 2 % 3 % 4 % % 6 % A is Title CAC PayCheck Household ncome Profile 2 23
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 59 Slide 9 The average market rent in Perth inross is 12 per month This varies from 422. for a 1 bedroom property to 23 for a 3 bed property Strathearn has the highest average market rent of all HMA s at 6 per month Crieff and Comrie have the highest average market rent of all hotspots at 23 per month P C ST Research Study
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 60 Slide 10 P C ST Research Study 22,662 ower uartile Perth inross income 2 23 21, 4 iving Wage 2 , 21 Minimum Wage 21 At 3 % income to rent, households require to earn 32,4 to afford the costs of private renting, significantly above minimum income benchmarks P C RS s RS s 1 bed RS s 2 bed Market Rents Market Rents 1 ed Market Rents 2 ed MMR (1 % HA) MMR ( % HA) MMR 1 bed (1 % HA) MMR 2 bed (1 % HA) 3 % Affordability 12, 31. 1 , 4. 14,1 1. 1 ,326.13 32,4 .6 1 , 3.1 24, 26.2 2 , 6 .2 2 ,2 . 16, 3. 3 22,33 .2 3 % Affordability 1 , . 4 12, 3.43 12, .4 13,136.6 2 , 3.3 1 ,4 . 21, 22.46 2 , 1 .66 24,23 . 14, 31. 1 ,14 . Minimum Wage 21 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . 2 , 2 . iving Wage 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . 21, 4 . . , . 1 , . 1 , . 2 , . 2 , . 3 , . 3 , . ncome Required to evote 3 % to Meet Housing Costs
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 61 Slide 11 P C ST Research Study ower quartile house prices in 2 23 Minimum annual income required to access market entry point Assumes oan to alue ( T of %) and mortgage multiplier of 3.2 times income ower quartile income in Perth inross Market entry point is out of reach for lower quartile income households in Perth and inross
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 62 P C ST Research Study Market affordability analysis reveals that households must spend over the average local income to afford the average house price. sing the Scottish Government s methodology to test market entry (benchmarking lower quartile incomes to lower quartile house prices), reveals that households must spend over their income to purchase a home in the North Eastern hotspot area and over their income in the inross HMA. This is in e cess of the typical 3.2 X s multiplier used for mortgage purposes. Home ownership is out with the reach of local households on lower incomes, which is particularly challenging given the dominance of home ownership in the area Affordability is e tremely challenging at market entry level in some HMAs
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 63 Slide 12
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 64 Slide 13 P C ST Research Study Without subsidy, % of households can afford social renting in Perth inross To afford social housing, households must earn between 12, 31 1 , 4, below lower quartile incomes at 22,662 Whilst social housing is affordable to % of households, it accounts for ust 1 % of the housing stock in Perth inross Households require to earn 32,4 to afford the cost of market rents with ust 66% able to afford Households require to earn to afford the average house price ( 2 4, ) with ust % able to afford CAN T afford P C Rents can t afford CAN T afford RS Rents can t afford CAN T afford MMR rents at 1 % HA can t afford CAN T afford Market Entry evel can t afford CAN T afford Average House Prices can t afford CAN T afford Market Rents can t afford
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 65 Slide 14 P C ST Research Study
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 66 Slide 15 welling and tenure profile Housing market and affordability pressure analysis Short term lets and neffective Housing Stock Social housing pressure analysis verall pressure scores by HMA Hotspot Housing Market Pressures: What evidence do we have P C ST Research Study
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 67 Slide 16 P C ST Research Study Housing Pressure Analysis Housing Pressure Headlines: f the 6,361 dwellings in Perth inross, 1 % (12, 2 ) offer social tenancies Home ownership dominates the tenure profile at 62% (4 ,33 homes) The PRS accommodates 14% of households (1 , 1 homes) The diversity of housing options is best in: Greater Perth HMA Perth City Centre hotspot Alternative options to home ownership are e tremely limited in: inross HMA North Eastern hotspot
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 68 Slide 17 P C ST Research Study Housing Pressure Analysis Housing Pressure Headlines: ver the last year 2 year on average 3,1 6 house sales have been completed verall, the average market turnover rate is % Average containment rate is %, with in migration driving 41% of sales The level of containment per HMA Hotspot, with sales made to local households is highest in Greater Perth (6 %) Perth City Centre ( %) respectively n migration is high in inross HMA (62%) and North Eastern Hotspot (61%) Eastern Greater Perth Highland inross Strathearn Comrie Crieff North Eastern Perth City Centre Perth and inross % of P Containment % 6 % 43% 3 % % 46% 6% 3 % % % % of Migration (E ternal) 43% 31% % 62% % 4% 44% 61% 2 % 41% % 1 % 2 % 3 % 4 % % 6 % % % % of P Containment % of Migration (E ternal)
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 69 Slide 18 P C ST Research Study Housing Pressure Analysis The average PRS rent in Perth inross is 12 per calendar month The HS rate in Perth inross is 44 per calendar month HMA Private rent levels range from per month in Greater Perth, to 6 per month in Strathearn Hotspot Private rent levels range from 6 per month in Perth City Centre, to 23 per month in Crieff and Comrie
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 70 P C ST Research Study Housing Pressure Analysis There are 12, 2 homes in the social housing sector in Perth inross n average over the last 3 years, 1 tenancies have become available for letting (6% of the housing stock) The scale of the social housing sector varies significantly , HMA s 2 % in Greater Perth to % in inross, Hotspots 1 % in Perth City to 1% in North Eastern There are 2, 3 live applicants e pressing demand for Council housing in Perth inross. The ratio of applications to available lets is four applicants to every property available Ratio: Waiting ist to Turnover Ratio Waiting ist Turnover (1 bedroom) Ratio Waiting ist Turnover (3 bedroom) Eastern 3.1 2. 3.12 Greater Perth 3. 3.2 .23 Highland 4.6 3.12 1. inross 4. 6 3.62 3.3 Strathearn 3.66 2. 1 4. Comrie . 1 3. Crieff .16 3. 4 11. North Eastern . . . Perth City Centre 14.1 1 . 6 3 . 4 . . 1 . 1 . 2 . 2 . 3 . 3 . Social Housing Ratio of Waiting ist to Turnover
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 71 Slide 19 Housing Pressure Hotspot Headlines: verall housing pressure is lowest in Perth City Centre verall housing pressure is highest in North Eastern Comrie Crieff 6 North Eastern14 Perth City Centre3 Eastern HMA111 Highland HMA1 Greater Perth HMA4 inross HMA Strathearn HMA13 Housing Pressure HMA Headlines: verall housing pressure is lowest in Greater Perth verall housing pressure is highest in Highland
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 72 Slide 20
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 73 Slide 21 P C ST Research Study Weighted Score: 14 Recommendation: Short term let control area will reduce housing market pressures 34% ineffective stock of which 13% are short term lets with limited housing options Highest house prices ( 2 , ) 62% in migration % house completions in last five % yr effective land supply or SH P pro ects .2 income required for a mortgage 4% cannot afford market entry house prices
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 74 Slide 22 P C ST Research Study Weighted Score: Recommendation: Short term let control area will reduce housing market pressures 1 % ineffective stock of which 2% are short term lets with limited private rent Second highest house prices ( 2 2,4 ) 4% in migration residential units completed in the last years 1% year effective land supply SH P pro ects . 4 incomes required for a mortgage 6 % cannot afford market entry house prices
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 75 Slide 23 P C ST Research Study Weighted Score: 6 Recommendation: Short term let control area will reduce housing market pressures % ineffective stock of which 1% are short term lets with lower social housing options Third highest house prices ( 16 , ) 44% in migration 4% of house completions in last years 1 % year effective land supply 6% of SH P pro ects .6 incomes required for a mortgage % cannot afford market entry house prices
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 76 Slide 24 P C ST Research Study Weighted Score: 3 Recommendation: Short term let control area will not reduce housing market pressures 4% ineffective stock of which .2 % are short term lets. Good tenure diversity owest house prices ( 11 ,2 ) 2 % in migration 4 % of house completions in last years 32% year effective land supply 36% of SH P pro ects incomes required for a mortgage 44% cannot afford market entry housing
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Perth and Kinross Council Short Term Lets Impact Research Research Report April 2024 77 Slide 25 P C ST Research Study Weighted Score: Recommendation: Short term let control area will reduce housing market pressures 1 % ineffective stock of which 2% are short term lets with limited private rent Second highest house prices ( 2 2,4 ) 4% in migration residential units completed in the last years 1% year effective land supply SH P pro ects . 4 incomes required for a mortgage 6 % cannot afford market entry house prices