Last week, Homes for Scotland (HFS) published a report revealing a concerning 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 positive 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% in 2017 to less than 20% in 2023. This decline comes at a time when Scotland is grappling with a national housing emergency, with 693,000 (28%) Scottish households in some form of housing need.

The sharp reduction in market share for SMEs together with a significant increase in the number of dissolutions pose significant challenges to our capacity to deliver the many thousands of much-needed new homes of all tenures that are required right across the country.

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.

However, they face unique challenges that threaten their viability. 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. This is a hugely frustrating state of affairs that urgently needs to be addressed.

In our report, we outline several recommendations for national and local governments to support the SME home building sector effectively. These include a comprehensive review to identify and remove the burdens and challenges faced by SMEs and the implementation of planning practices that actively support them, as well as the development of new funding mechanisms and partnerships to remediate and 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.

The decline of SME home builders is not just about numbers; it’s about the loss of local businesses and employers who contribute significantly to the diversity of new housing delivered and positively impact local economies across Scotland.

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.