Housing has a crucial role in supporting sustainable and inclusive economic and community development and population growth in all parts of the Highlands and Islands, according to a new report.

Given the complex interplay of factors required to address the challenges of housing development, Highlands and Islands Enterprise (HIE) undertook research to better understand the market failure, and consider what needs to be in place to address it.

The report, entitled ‘Stimulating Housing Development in the Highlands and Islands’, was compiled following extensive consultation with the region’s seven local authorities, other public and private housing providers and key stakeholders.

The study found that effective partnership working and a holistic ‘place based’ approach to housing provision in the Highlands and Islands could better respond to current community needs and aspirations for development in the future.

Housing supply and affordability are crucial factors in enabling growing businesses to recruit and retain employees. In many areas, business development and expansion are adversely affected by the lack of affordable accommodation for workers.

The study was carried out for HIE by Ipsos Mori in partnership with the Indigo House Group. It suggests the process of assessing housing need is based on past trends, rather than reflecting community aspirations to reverse these.

Private sector housing completions tend to be close to urban centres, with far less activity in the more rural or fragile areas. Affordability of private sector housing is also a considerable issue, particularly in more fragile areas and popular tourism destinations with higher numbers of second homes. Young people in particular can face additional challenges in forming homes in these areas, facing higher average house prices and lower average incomes.

The short and decreasing supply of appropriate land was highlighted as a major constraint in more rural areas. The associated risks and costs to enable viable development are often too great for developers to progress without intervention. In these areas, community-led activity is often the catalyst for new housing but the processes can be complex and time consuming, and resources of support organisations are spread thinly.

The Scottish Government is committing a record level of resources focused on increasing affordable housing supply, researchers observed. In outlining the scale of the gap between housing need, demand and supply, the report indicates the need for more, or different, positive action and intervention across tenures.

While the Rural Housing and Islands Funds, the Self-build Loan Fund and Croft House Grant scheme are directed towards smaller rural and remote communities, new interventions around infrastructure appear to be focused on strategic and larger sites in urban areas, the report notes.

Douglas Cowan, HIE’s director of strengthening communities, said: “The issue of housing is constantly being raised in relation to different aspects of regional development, and has been for many years. There is of course no easy fix, with complex challenges such as access to land, transportation costs, infrastructure, skills and labour supply.

“This report is extremely useful in providing more in-depth understanding of where the key challenges lie, and informing discussion on what might be done to strengthen the approach. It is clear from the study that changing the way housing is planned and developed in the region could potentially be a huge boost to both business and community growth.

“We fully appreciate there is a lot happening in the region to address some of the challenges facing housing, with local authorities and housing associations in particular playing key roles. To that end we are sharing this report with our partners, particularly through Community Planning Partnerships, with a view to us all working together to seek to address some of the issues raised.”