Can LBTT Revenue Solve Scotland's Housing Crisis? Exploring Investment Strategies

It is hard to go anywhere without hearing people talk about the national housing emergency announced by the Scottish Government a couple of weeks ago. There is no doubt that a collective program of collaboration across government, planning, house builders and the private rental sector is required to address the housing shortage across the country.
All solutions to the crisis will require significant investment, but where can the Scottish Government generate the funding required to address this issue?

Perhaps one option would be to look at using some of the funding that is generated by Scotland’s Land and Buildings Transaction Tax (LBTT), which raised £623.1 million in the 12 months leading up to April 2024, slightly up from £620.1 million the previous year. 
This includes £194.5 million from the Additional Dwelling Supplement (ADS) on second homes and investment properties.  This is based on the current ADS rate of 6% in Scotland versus 3% in England.

Properties valued over £325,001, taxed at 10%, contribute significantly to this revenue, compared to a 10% rate on properties over £925,001 in England. 
So, allocating LBTT revenue to build new social and affordable housing could alleviate the housing shortage and gain public support. 

A £3 billion investment over five years, along with greater collaboration with the private rental sector and easing planning restrictions, could significantly boost the housing sector. 
While LBTT is a substantial revenue source for the Scottish Government, its high rates may deter future investments and migration. The higher level of ADS also could be viewed by many as a barrier to investing in the Private Rental Sector in Scotland, however there is no doubt that investment would help ease the current shortage of rental stock coming to the market.  
Aligning property taxes with the rest of the UK or demonstrating reinvestment into housing infrastructure could sustain market demand and enhance public perception.  Creative and cooperative approaches are essential for resolving Scotland's housing challenges and ensuring the long-term health of its property market.

Despite the higher tax burden, the Scottish housing market remains robust, with property prices rising by 4.4% from March 2023 to February 2024, outpacing growth in England and Wales. 
The rental market is also performing well, with annual increases of up to 12% for some properties that are coming onto the market.  The recent relaxation on the rent freeze now also allows landlords who have seen rents for existing tenancies capped at 3%, now get these closer to the market level.  For a medium to longer-term investment, bricks and mortar are still an attractive option for many.