New independent research findings have unveiled an alarming reduction in the small and medium (SME) home building sector in Scotland.

According to a report published today by representative body Homes for Scotland (HFS), the proportion of new homes sold by those building between 3 and 49 homes per annum has fallen from around 40 per cent in 2017 to 20 per cent in 2023.

In the context of what is now a national housing emergency and at a time when 28 per cent of Scottish households (693,000) are in some form of housing need, HFS Chief Executive Jane Wood said: "This research fills a significant data gap and is essential if we are to develop evidence-based policy to effectively address the housing emergency. Given the vital role which SME home builders have to play in Scotland’s housing ecosystem, it shows alarming reductions in terms of market share and the number of companies which have been dissolved. This clearly has capacity implications for the delivery of much-needed new homes of all tenures.

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"Our research found that SME home builders are key to unlocking the brownfield sites which the Scottish Government has said it wants to prioritise. Our data also reveals their importance in delivering housing in rural and remote areas.

"SME home builders have particular challenges in relation to the viability of their operations, not least in relation to economies of scale, ever increasing regulation and the upfront costs associated with residential development. Above all, however, the planning and consenting systems are having a hugely detrimental impact, especially in relation to the speed of processing and resourcing. This is a hugely frustrating state of affairs."

Recommendations for national and local governments to act upon to support the SME home building sector include:

• The undertaking of an urgent cross-portfolio review to identify, consider and remove SME burdens and challenges

• Proportionate planning practices that actively support SMEs

• New innovative funding streams and partnerships to remediate and unlock sites

• The implementation of an SME home builder impact assessment relating to policy proposals and changes

• The creation of a focused delivery vehicle to unlock more small sites

Wood continued: "This report shows that before the financial crisis, SMEs were delivering 3,000 more new homes each year than they are now. A return to this level could support an additional 13,200 jobs.

"The social and economic imperatives are clear to see. If parties and politicians of all persuasions and local authorities are genuinely serious about addressing the housing emergency, they must now act to introduce the reform that is required to improve to support home building if we are to meet the needs and aspirations of those living across the entirety of the country. HFS and its members are absolutely committed to working with them to achieve this."