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.

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.”

The report identifies viability as the single biggest barrier to delivery, with rising build costs, infrastructure requirements and inflexible planning obligations undermining development across both greenfield and urban sites. In many cases, 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.”

Planning pressures and policy friction

Alongside viability, the planning system itself is a growing part of the challenge. 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.”

Urban sites are facing additional headwinds. High construction costs, skills shortages and policy requirements are limiting developer appetite, particularly for flatted schemes, with urban land values falling by more than 10% annually to Q1 2026.

A call for pragmatic, delivery-focused solutions

Despite the challenges, Savills stresses that the solutions are within reach but require a more proactive and flexible approach from both 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
• Faster planning decisions, particularly on allocated and brownfield sites
• Targeted infrastructure funding, remediation support and patient capital
• 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.”

Opportunities remain but action is critical

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, improving investor confidence. However, wider viability challenges continue to constrain delivery across all tenures. Savills believes that while Scotland is not destined for long-term under-delivery, the window for intervention is narrowing.

The proposed creation of a national delivery body, More Homes Scotland, alongside targeted funding initiatives, provides some cause for optimism. However, Savills 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.

According to Savills, 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.

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 a healthy demand for when new launches do occur, when priced at an acceptable level. The introduction of the First Homes Fund is one that we welcome and we hope will provide a much-needed stimulus to a market that has had many challenges over the last couple of 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.”