The urgent need to revive Scotland’s SME home building sector - Jane Wood

Jane Wood is Chief Executive of Homes for Scotland

Last week, Homes for Scotland (HFS) published a report revealing a decline in the small and medium enterprise (SME) home building sector. A day later, the Scottish Government released its quarterly housing statistics. Neither paint a rosy picture.

Our research shows that the proportion of new homes sold by those building between three and 49 homes per year has plummeted from 40 per cent in 2017 to less than 20 per cent in 2023. This decline comes as Scotland grapples with a national housing emergency, with 693,000 Scottish households – 28 per cent – in some form of housing need. The sharp reduction in market share for SMEs plus a big increase in the number of SME housebuilders going out of business pose significant challenges to our capacity to deliver the thousands of much-needed new homes.

As well as playing a crucial role in delivering housing in rural and remote areas, our data also confirms that SME home builders are pivotal in unlocking brownfield sites – something the Scottish Government has prioritised.

SME home builders are pivotal in unlocking brownfield sites (Picture: Ian Forsyth/Getty Images)

However, they face unique challenges. These include limited economies of scale, increasing regulation and substantial upfront costs associated with residential development. The planning and consenting systems are particularly detrimental, especially regarding the speed of processing and resourcing.In our report we outline several recommendations for national and local governments to support the SME home building sector. These include a comprehensive review to identify and remove the burdens and challenges faced by SMEs and implementation of planning practices that actively support them, as well as new funding mechanisms and partnerships to unlock development sites.

In addition, we want to introduce impact assessments for policy proposals and changes to evaluate their effects on SME home builders and establish a dedicated vehicle to unlock more small sites.

Before the financial crisis, SMEs delivered 3,000 more new homes each year than they do now. Returning to this level could support an additional 13,200 jobs, highlighting the clear social and economic benefits of a thriving SME home building sector.

If we are to alleviate some of the housing capacity constraints that currently confront us, policymakers must take note of this new evidence and implement the reforms that are necessary to facilitate and encourage development rather than frustrating and delaying it.

We are committed to working with all stakeholders to achieve this. If parties and politicians at all levels are genuinely serious about addressing the housing emergency, they must act now to improve support for home building.

As Eve McCurrich, Managing Director of Whiteburn Projects (this year’s HFS SME Home Builder of the Year), noted, the report is a glaring indicator of decline. We must listen to and act on these insights if we are to ensure a diverse, vibrant and robust housing market that meets the needs of all those living in Scotland.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​

The alarming reduction in SME home builders in Scotland is a call to action. We must harness their potential to address the housing emergency, support local economies, and build the homes that Scotland desperately needs.