Scotland’s housing emergency is being exacerbated by a sharp decline in new home delivery, as a “perfect storm” of planning constraints, rising costs and viability challenges continues to stall development across the country.
New analysis from Savills reveals that housing completions fell by 13% in 2025 to just 17,336 homes, marking the second lowest annual total since 2016. The figures underline a widening gap between housing demand and supply, despite a modest recovery in planning applications.
The data points to a deeper structural issue: while more sites are entering the planning system, an increasing number are failing to progress to construction.
Developers are now operating in what Savills describes as the most challenging conditions in decades. Under the National Planning Framework 4 (NPF4), non-allocated sites continue to face significant barriers to securing planning permission, even in areas where housing need is acute.
Delays to Local Development Plans, many of which are not expected to be in place until 2030, are further compounding the issue by placing pressure on a diminishing pipeline of deliverable land.
Faisal Choudhry, Head of Residential Research in Scotland at Savills, said: “Scotland is facing a clear mismatch between housing need and delivery. Completions have fallen sharply at a time when demand remains strong and the country is officially in a housing emergency.
“The pipeline is becoming increasingly constrained, and without meaningful intervention, there is a real risk that under-delivery becomes entrenched over the coming years.”
Savills identifies viability as the single biggest barrier to delivery. Rising build costs, infrastructure requirements and inflexible planning obligations are undermining development across both greenfield and urban sites.
In many instances, even sites with planning permission are no longer progressing because they cannot generate sufficient value to move forward.
Ben Brough, Head of Development at Savills Scotland, said: “We are increasingly seeing consented sites stall because the numbers simply don’t stack up. The combination of build cost inflation, abnormal costs and fixed policy requirements is creating a viability gap that is too large to bridge.
“Without flexibility, fewer sites will come forward, and those that do will take longer to deliver – which only adds to the supply challenge.”
Alongside viability concerns, the planning system itself is adding further strain. While NPF4 sets out long-term ambitions, its implementation is creating delays and uncertainty at a critical moment.
Requirements linked to design, infrastructure, climate mitigation and the ‘Town Centre First’ principle are increasing complexity, while decision-making timelines remain slow.
Alastair Wood, Head of Planning at Savills Scotland, said: “The ambition behind NPF4 is clear, but in practice the system is struggling to respond at the pace required to address Scotland’s housing emergency.
“The lack of up-to-date Local Development Plans, combined with increased policy complexity, is leading to delays and uncertainty, particularly for sites that could contribute to housing supply in the short term.”
Urban developments are facing additional headwinds, with high construction costs, skills shortages and policy requirements dampening developer appetite. This is particularly evident in flatted schemes, where urban land values have fallen by more than 10% year-on-year to Q1 2026.
Despite the challenges, Savills maintains that solutions are within reach, provided there is a more flexible and collaborative approach between the public and private sectors.
Key recommendations include greater flexibility on affordable housing and developer contributions where viability is constrained, reintroducing a presumption in favour of sustainable development on non-allocated land, and accelerating planning decisions on allocated and brownfield sites.
The report also highlights the need for targeted infrastructure funding, remediation support, patient capital, and wider use of Masterplan Consent Areas to unlock SME-led development.
Ben Brough added: “This isn’t about lowering standards, it’s about making sure homes actually get built. A more collaborative approach between local authorities and developers can unlock sites that are currently stalled and help get delivery moving again.”
Build to Rent (BTR) is emerging as a relative bright spot, with the Housing (Scotland) Act 2025 confirming the sector will be exempt from rent controls, boosting investor confidence. However, broader viability issues continue to constrain delivery across all tenures.
Savills suggests Scotland is not destined for long-term under-delivery, but warns that the window for intervention is narrowing.
The proposed creation of a national delivery body, More Homes Scotland, alongside targeted funding initiatives, offers some optimism. However, without decisive action to address planning and viability barriers, the housing shortfall is expected to deepen.
The Scottish Government’s £100 million First Homes Fund – offering up to £10,000 support for first-time buyers — has been welcomed as a demand-side measure. Yet, Savills cautions that without a corresponding increase in supply, its impact may be limited.
Carole Mackie, Head of Residential Development Sales at Savills Scotland, said: “Despite the shortages in supply, what we are seeing in the new homes market is healthy demand when new launches do occur, particularly when priced at an acceptable level.
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“The introduction of the First Homes Fund is one we welcome, and we hope it will provide a much-needed stimulus to a market that has faced significant challenges in recent years.”
Faisal Choudhry concluded: “There is still strong underlying demand for housing across Scotland, and the industry is ready to deliver. But we need a system that prioritises deliverability and reflects the realities of today’s market.
“With the right interventions – and a willingness to take a pragmatic approach – Scotland can turn planning permissions into completed homes. The opportunity is there, but action is needed now.”
