Low delivery of housing is at risk of becoming entrenched and undermining initiatives such as the new £100m fund to help first-time buyers.
Rising build costs and inflexible planning obligations mean that even sites with planning permission are no longer progressing because they cannot generate sufficient value to move forward.
New analysis from Savills shows that housing completions fell by 13% in 2025 to just 17,336 homes – the second lowest annual total since 2016 – highlighting a growing gap between housing need and delivery.
The slowdown comes despite a slight recovery in planning applications, pointing to a fundamental issue: sites are entering the system but are increasingly unable to progress to construction.
Developers are now operating in what Savills describes as the most challenging conditions in decades. Under National Planning Framework 4 (NPF4), non-allocated sites continue to face significant barriers to securing planning permission – even in areas with clear and urgent housing need.
At the same time, delays to Local Development Plans – many not expected before 2030 – are placing increasing pressure on a shrinking pipeline of allocated, deliverable land.
The proposed creation of a national delivery body, More Homes Scotland, alongside targeted funding initiatives, provides some cause for optimism, says the report. However, it warns that without decisive action to address viability and planning barriers, Scotland’s housing shortfall will continue to grow – at a time when new homes are needed more than ever.
Savills says the Scottish Government’s recently introduced £100 million First Homes Fund, offering up to £10,000 support for first-time buyers, is a welcome step in supporting demand.
However, without a corresponding increase in supply, measures such as this risk being constrained by a lack of available homes.
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.”
Ben Brough, head of development at Savills Scotland, added: “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, the planning system itself is a growing part of the challenge, says the report. While NPF4 has set out clear long-term ambitions, its implementation is creating delays and uncertainty at a critical time.
Requirements linked to design, infrastructure, climate mitigation and the ‘Town Centre First’ principle are increasing complexity, while decision-making times 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.
“A more flexible and proportionate approach to decision-making, particularly on viable and deliverable sites, will be essential if we are to accelerate housing delivery.”
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