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Scotland’s housing market faces a deepening crisis as supply constraints, driven by strict planning policies and rising costs, continue to stall new developments, according to new research by Savills.
The housing emergency, declared in May 2024, has sparked concerns over land availability, slowing approvals, and limited financial viability—issues exacerbated by National Planning Framework 4 (NPF4).
Faisal Choudhry, Savills residential research director in Scotland, said: “The combination of planning restrictions, development costs, and policy uncertainty is creating a perfect storm. Even though demand remains strong, the ability to deliver new homes has never been more challenging.”
The NPF4 guidelines (policy restrictions choking land supply), designed to protect strategic land use, have inadvertently curtailed housing delivery by restricting development to allocated sites only. Local authorities now face outdated local plans, with no immediate replacements, leaving developers unable to progress new applications.
“The planning system is simply not adapting fast enough to Scotland’s housing emergency,” explained Choudhry. “Many viable sites are stuck in limbo, and developers are struggling to secure new land.”
Even windfall sites, historically used to boost supply, have largely been blocked due to NPF4 rules. However, pressure from the housing emergency has led to some exceptions, with sites approved in West Lothian and Falkirk.
The impact of these constraints is clear: housing completions fell by -7% in 2024, with social housing delivery plummeting by -22% due to budget cuts. The private sector saw a marginal decline, but 20 of Scotland’s 32 local authorities recorded annual drops.
Meanwhile, major development applications fell from 97 in 2022/23 to just 77 in 2023/24, pushing Scotland further away from its housing targets.
Even when planning approvals are secured, financial pressures mean many sites remain undeveloped. UK-wide build costs have soared by 14% in three years, outpacing Scottish house price growth (4%).
“Increases in planning gain requirements and labour shortages are making many sites unviable,” notes Choudhry. “Without clear financial support, developers—especially SMEs—are finding it impossible to deliver new homes.”
Despite government efforts to accelerate development, including hiring new planners and reviewing stalled sites, NPF4 restrictions remain a major roadblock.
According to Choudhry, “Unless Scotland treats the housing emergency as a material planning consideration, developers will continue to struggle to bring land forward.”
Policy adjustments, financial support for SMEs, and relaxation of planning constraints could unlock vital land and boost supply.
“Without urgent intervention, Scotland’s housing market risks deepening shortages, leaving buyers with limited choices and escalating prices”.
Ben Brough of Savills added: “To support the viability of future housing developments, local authorities would do well to take a more realistic and pragmatic view of Planning Gain contributions. While infrastructure and community benefits are essential, rigid financial demands risk making many projects unfeasible. A balanced approach—one that aligns contributions with economic realities—will allow housebuilders to play their part in delivering the essential new homes Scotland needs.”
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