Accelerating home building - incentives and penalties to speed up housing delivery: consultation

2 Options

The time is right to have an open conversation about the challenges of housing delivery, and for all stakeholders to work together to achieve change.

Having taken into account previous research and current data, we have considered a range of potential incentives and penalties which could be deployed to overcome current barriers to housing delivery:

Option 1: Introduce fiscal measures to tackle inactivity or slow build-out.

Option 2: Monitor build-out rates and intervene where these are unreasonably slow.

Option 3: Reduce procedural time and costs for SME developers.

Option 4: Diversify the housing outputs from deliverable land.

These options are set out below, together with an outline evaluation of their potential deliverability and impact.

Option 1: Introduce fiscal measures to tackle inactivity or slow build-out

Fiscal measures can be used to intervene in the market, to stimulate or speed up delivery where build-out is not progressing at pace.

Relief or supplements to taxes, such as the Scottish Building Safety Levy (SBSL) or Land and Buildings Transaction Tax (LBTT), could be introduced. Offering exemption and/or variation in rates could act as an incentive, in that those charges would be levied either in full or at a higher level unless development is built out to an agreed timeframe. Such measures would also require implementation of a framework to monitor build-out rates.

Other fiscal options could reduce the potential regulatory burden for local authorities. For example, charging Council Tax on all properties in a project after securing planning permission and/or commencing development, whether or not they have been built.

There are also examples from across the UK and Ireland of fiscal measures that act as penalties to influence change.

England

The UK Government has consulted on the introduction of a “Delayed Homes Penalty” where development is significantly behind scheduled delivery. The overall aim would be to incentivise development at pace.

• The Penalty would apply to sites over a threshold size and only where there is evidence of a developer falling substantially behind a build-out schedule, pre-agreed with the local planning authority.
• Agreement and monitoring of build-out rates would need to be aligned to new transparency measures.
• If a site falls substantially behind the pre-agreed build-out schedule in a given year (to 90% or less of the agreed delivery), then the developer would be required to justify the slower build-out rate to the planning authority. If this cannot be shown to have been caused by an “external factor” – such as unusually severe weather, or unexpected site issues – the developer could become liable for the Delayed Homes Penalty.
• The relevant external factors would be nationally set out in guidance and could be informed by those already used in contracts between Homes England and developers under the “build lease” model.
• If the Delayed Homes Penalty was applied, the relevant party (developer or landowner) would be charged for each home behind the pre-agreed build-out schedule. Penalties could be based on a percentage of the house price, or via reference to local Council Tax rates, given the loss of income that a local authority incurs when homes are not built and occupied at the expected rate. It was not proposed that this would be applied via the Council Tax system itself.

Ireland

In Ireland, measures have already been introduced in legislation with the goal of tackling an under-supply of housing. The Vacant Site Levy, introduced in 2015, sanctioned holding of land with potential for redevelopment. Local authorities were empowered to raise local taxes (initially 3% of market value, rising to 7%) on sites identified on a register. Sites which had been vacant for 12 months or more and which exceeded 0.05 hectares were within scope of the tax. There were challenges with the implementation of the Levy, including the time and resource required from local authorities for administration.

The 2021 Finance Act in Ireland introduced a taxation measure for sites allocated for housing development – the Residential Zoned Land Tax. This tax replaces the Vacant Land Levy. Its purpose is to activate land which already has planning permission and to deter hoarding of land. Implementation began from 1 February 2025, based on a map which was finalised on 31 January 2025. The key features of the approach are:

• All local authorities are required to identify land which is subject to the tax, including zoned land where there is no clear time for delivery.
• Exemptions to the tax include land requiring significant remediation, with archaeological remains, land to be used for infrastructure or facilities, derelict land, or land required for the operation of a business. Land must also be serviced by a range of defined infrastructure to be included.
• Landowners can also apply for deferral for a year after planning permission has been granted.
• An online portal sets out the areas affected and landowners had opportunities to comment on the inclusion of their land as the maps were prepared. This has involved significant investment of time to assemble the sites which will be subject to the tax.
• The legislation will be reviewed annually to allow for iteration based on learning.
• The tax has been set at 3% of market value and rebates are available where development commences.
• A key advantage of this approach is that it distinguishes between landowners and developers, with former being liable for charges, and therefore viewing this as a driver to move land with permission into the hands of delivery partners.

Wales

The Welsh Government is exploring options for introducing a vacant land tax following a wider programme of public engagement on tax reform. The purpose of the tax would be to incentivise delivery of new housing on land identified as suitable for development. Welsh Government research into stalled sites, published in March 2020, considered the potential of taxation as a policy lever to bring forward development in response to housing need. The Welsh Government is currently engaging with the UK Government to seek competence for the Senedd to introduce a tax of this nature. On completion of this, the policy framework for the tax would be developed with stakeholders, and subject to consultation.

What would need to change?

No powers exist for similar schemes in Scotland at present and devolved scope for taxation is limited.

Mechanisms to financially stimulate faster build-out rates could include:

• Applying a relief or supplement to taxes such as the Scottish Building Safety Levy (SBSL) or Land and Buildings Transaction Tax (LBTT) where development is, or is not, built out to an agreed timeframe.
• Applying a tax on land which is allocated in LDPs, but which has not been brought forward in a planning application as per the programming submitted when the LDP and its Delivery Programme were being prepared. Consideration will need to be given to sites where there is no clear route to delivery or commitment to programming.
• Applying a tax on sites which have planning permission, but where there is no activity on site or progress is evidenced to be unreasonably slow.

Creating a new tax would bring challenges such as calculating the value to which the tax would apply. Further, a tax cannot be adjusted on a case by case basis to achieve a policy objective. The need for a tax to apply consistently and equitably has potential to exacerbate challenges associated with an individual parcel of land that is within scope of the tax.

Our priority is to stimulate build-out rather than raise revenue. A tax, rather than a penalty (as per the UK Government Delayed Homes Penalty), may be more conducive to this as there is a process for new tax development while a penalty would require associated obligations to be put in place.

There is potential for income from any such tax to be recycled and used to fund infrastructure and other interventions to de-risk sites, improve viability and therefore speed up build-out. A successful outcome however, would not be measured by income generated but by the rate at which build-out is accelerated, and a wider availability of appropriate development sites to delivery partners.

Deliverability and impact

These options would take some time to develop further and implement through legislative change.

The Scottish Government has powers to introduce a local tax through primary legislation. Responsibility for implementing and administering a local tax would lie with local authorities, and revenues must be used for local authority expenditure. We would need to work closely with local authorities and CoSLA if there were to be agreement to take this option forward. To introduce a new national tax, additional competence must be obtained from the UK Government and Parliament, meaning that this approach could take longer to implement than a local tax.

As noted above, there would be complexities associated with legislation.

Local authorities would play a key role in implementation of such a measure in their capacity both as planning authorities and tax authorities. The effectiveness of any new measures would depend on further collaborative investment in skills and capacity, clear legislative provisions and significant, detailed supporting guidance and advice.

Other potential consequences include:

• Liability that planning permission would impose on landowners.
• Potential for blight arising from allocation in LDPs.
• Potential requirements for the land to be purchased by the authority where an owner is unwilling or unable to comply.
• Possibility of requiring consent from a landowner for a third party to allocate their land in an LDP, or to apply for planning permission on their land.
• Possibility of disincentivising landowners from bringing forward sites for inclusion in LDPs or for planning permission.

With reference to the above any approach would require careful design to avoid unintended consequences.

Consultation Questions

Question 1: Could fiscal incentives offering relief to other charges help to accelerate build-out rates? Yes/No/Unsure. Please explain your answer.

(a) Which charges / taxes / levies could the incentives be applied to? Please explain your answer.

(b) Should relief be in the form of full exemptions or variable rates? Full exemptions / variable rates. Please explain your answer.

(c) Could a tax impact differently on different types of land owners? Please explain your answer.

(d) Please provide any evidence of how fiscal measures linked to other charges would impact development finance to influence build-out rates.

Question 2: Should we introduce a tax on sites which have been allocated for residential development and/or have permission for homes, but are not being built out as expected, as set out in option 1? Yes/No/Unsure. Please explain your answer.

(a) Should this apply to allocated sites, sites with permission, or both? Allocated sites/Sites with permission/Both. Please explain your answer.

(b) How should the tax be calculated? Please explain your answer.

(c) Who should be required to pay the tax? Please explain your answer.

(d) Should the tax operate as a local or a national tax? Local tax/national tax. Please explain your answer.

(e) How should any income be used? Please explain your answer.

(f) Please provide any evidence of how a tax connected to sites allocated or permitted not being built out would influence build-out rates.

Option 2: Monitor build-out rates and intervene where these are unreasonably slow

The CMA suggested a more interventionist approach to define and enforce progress on delivering development on sites. A “use it or lose it” approach to planning consent could be taken to stimulate delivery.

In England, the Levelling-up and Regeneration Act 2023 introduced provisions for this:

• Section 111 of the Act amends the Town and Country Planning Act 1990 to introduce development commencement notices to be provided by the developer, with powers for planning authorities to serve notices to require the information to be provided.
• Section 112 covers completion notices, which can be served by planning authorities where they are of the opinion that the development will not be completed within a reasonable period. A deadline for completion can be set, at least 12 months from the serving of the notice. Notices are served on the owner/occupier of the land, and any other persons materially affected. Provisions are also made for appealing against any notice. Where developers do not complete their development in a reasonable time, the planning permission will cease.
• Section 113 provides a power to decline to determine applications made by those who the planning authority considers to be developing an earlier development at an unreasonably slow pace, taking into account the relevant commencement and completion notices.
• Section 114 includes a requirement for an annual development progress report by developers to planning authorities.

The UK Government has consulted on the technical detail for implementing these provisions.

In 2021 the UK Housing, Communities and Local Government Select Committee proposed an alternative approach: Work on site should commence within 18 months of planning conditions being discharged. If work did not then progress to the satisfaction of the planning authority, then the planning permission could be revoked. This proposal was not taken forward.

What would need to change?

In Scotland, developers are already required to submit notices of initiation and completion of developments to planning authorities. Planning permission lapses if a development is not commenced within the specified period. Planning authorities can also serve a completion notice:

• When a development has been commenced but has not been completed within the period when the permission would otherwise have lapsed. Or,
• When the authority is of the opinion that the development will not be completed within a reasonable period.

The recipient of the notice (owner or occupier of the land) can object to the notice. Where there are objections, the notice has to be confirmed by the Scottish Ministers to have effect, and the process for this was streamlined by the Planning (Scotland) Act 2019.

Notices of initiation and completion can be a useful tool for planning authorities in pursuing the delivery of development or in clarifying the likelihood of future development. They could also improve understanding of constraints applying to other sites in the area, potentially freeing them up for permission and development.

Current use of this tool in Scotland appears to be very limited, however. There may be scope to encourage greater use of existing powers, for example through guidance.

Current powers also have limitations:

• Completion notices only apply to the part of the development which has not been delivered and there is therefore a risk of leaving a site half finished.
• Serving a notice on a developer will not overcome all barriers to delivery, for example, the ability to fund a development.

The core purpose and preferred outcome of the completion notice is to achieve completion, rather than to remove consent – to “use it” rather than to “lose it”.

Legislation could be brought forward to take existing provisions further and extend authorities’ powers to proactively manage the pipeline of deliverable housing land. Additional measures could include:

• Extending reporting requirements, to require a build-out statement/ schedule and annual reporting of development progress (a “development progress report”) to planning authorities. This could support preparation, or review of housing land audits and LDP delivery programmes.
• Linking these powers to cease planning permissions after an agreed or national fixed deadline, or where the planning authority considers progress to be unreasonable.

Deliverability and impact

Views vary on the potential effectiveness of completion notices in stimulating build-out of sites. Given the range of barriers to development delivery such as development costs, site complexities and infrastructure provision, reasonable-ness may be a difficult test to meet.

Primary and/or secondary legislation would be required if we were to introduce similar provisions to those in the Levelling-up and Regeneration Act, as outlined above. Any such proposals for Scotland would therefore take some time to introduce. A number of questions would require further consideration, including:

• Who should be penalised for non-compliance, the landowner or the developer?
• How should a change of ownership be handled, for example with regard to enforcement?
• Would there be a need for owners to consent to the submission of planning applications, given subsequent liabilities?
• Compliance with human rights legislation.

These provisions could, at least in principle, reduce the time spent by planning authorities on determining applications for homes which are not going to be delivered. However, increased time and resource may be required to more actively manage completion rates, and administer fuller reporting and associated enforcement measures.

Consultation Question

Question 3: Should we bring forward powers for reporting on development progress and powers to intervene where it is considered to be unreasonably slow, as set out in option 2? Yes/No/Unsure. Please explain your answer.

(a) Should this include creating a legal framework for reporting on development progress? Yes/No/Unsure. Please explain your answer.

(b) Should there be a power for planning permission to be revoked, without compensation being payable, where reporting demonstrates that progress is unreasonably slow? Yes/No/Unsure. Please explain your answer.

(c) How would the pace of development be set and agreed – for example how would reasonable-ness be measured? Please explain your answer.

(d) Please provide any evidence of how reporting on development progress would influence build-out rates.

Option 3: Reduce procedural time and costs for SME developers

The cost of building has gone up, and feedback from industry has told us that this has impacted on the ability of SME developers in particular to bring projects forward to delivery.

These costs include acquiring necessary consents through the planning system and associated consenting systems. Timescales and levels of information required at the pre-development stage therefore contribute to development costs. The processes in place to support good placemaking can be complex, and planning applications are decided on the basis of the merit of the proposals, not who the applicant is. As a result, processes can create a barrier for SMEs in particular.

The Housing Investment Task Force set out recommendations to support investment in new homes, including fast-tracking decisions. Simplifying requirements for small development sites could help to de-risk sites which are of more interest to smaller scale developers.

The UK Government consulted in May 2025 on reforming site thresholds. The aim of this was to simplify planning requirements for the smallest sites and to extend this to medium sized sites, with a view to targeting benefits on SME developers. The consultation distinguishes between medium-sized, small sites and very small sites, and proposes a new rules based approach to the latter, as well as template design codes and digital tools. It also proposes more consistent delegation of decisions. A new “medium” category of 10-49 homes is exempt from simplified biodiversity net gain rules and the Building Safety Levy. The impact of these measures has yet to be seen in practice.

What would need to change?

A culture of proportionality in the planning system brings benefits across all sectors and will particularly assist in minimising risks for smaller companies in progressing development. Work carried out by the Proportionality of Assessment Short Life Working Group looked at ways to avoid unnecessary costs and delays, which have particular potential to impact the viability of proposals on smaller sites.

To some extent in Scotland, national planning policy in NPF4 already includes varying requirements. For example, Policy 3 on biodiversity differentiates between information required for householder, local and major applications. The vast majority of applications are also already delegated to officers for decisions.

There is potential to use legislation to further refine the development hierarchy in order to draw out the specific circumstances in which the planning process for smaller sites could be varied.

Within this hierarchy, on smaller sites a range of measures could be deployed. For example:

• Building a process through legislation for fast-tracking applications on smaller sites.
• Reviewing and further rationalising requirements in NPF4 for smaller sites to allow developers to bring forward applications more quickly and at a lower cost. Alternatively, a rules-based policy could sit alongside NPF4, setting out a simplified set of policy tests for very small and small sites to meet.
• Advice could be provided on planning application information requirements, setting clearer and more streamlined expectations nationally.

This option has connections to Option 4 on diversifying output from larger housing sites.

Deliverability and impact

This option would take some time to develop further and implement through legislative change.

Creating more categories in the hierarchy of development would open the possibility of a variety of tailored policy and guidance approaches for smaller sites, as outlined above.

The vast majority of applications are also already delegated to officers for decisions. Impact would likely therefore be dependent on changes in information requirements for smaller sites, driven by policy changes that would also need to be consulted upon and impact assessed.

Consultation Question

Question 4: Should we bring forward legislation to amend the development hierarchy, to enable us to introduce more streamlined planning processes on planning applications for smaller sites, as outlined in option 3? Yes/No/Unsure. Please explain your answer.

(a) How many categories should be defined by the development hierarchy, and what size of development should these cover? For example, four categories that define major, medium, small and very small developments?

(b) What are your views on, and do you have any evidence relevant to whether creating more categories in the development hierarchy might have an overall effect of speeding up or slowing down build-out of housing?

(c) What are your views on whether we should review and rationalise policy requirements for smaller housing sites, or introduce a new rules based policy for smaller housing sites?

(d) Do you think that further advice on planning application information requirements would support faster delivery of housing on smaller sites? Yes/No/Unsure. Please explain your answer.

(e) Do you think there are any further options that creating more categories in the development hierarchy might open up, further to those outlined in option 3? Yes/No /Unsure. Please explain your answer.

(f) Do you think that this measure would have any particular benefits for SME housebuilders? Yes/No/Unsure. Please explain your answer.

Option 4: Diversify outputs from deliverable land

The Letwin Report responded to analysis of build-out in England which concluded that “the homogeneity of the types and tenures of the homes on offer on [large] sites, and the limits on the rate at which the market will absorb such homogenous products are the fundamental drivers of the slow rate of build-out”. The report proposes that by creating a mix of homes and tenures on larger sites, targeted at a variety of preferences and affordability levels, the rate at which these sites are built out could be accelerated.

The UK Government, as part of a package of measures in its Speeding Up Build Out consultation, proposed setting thresholds for larger developments, above which development would be required to be mixed tenure. This would require housebuilders to work in delivery partnerships on larger sites, creating resilience to market changes. The UK Government consulted on what the site threshold would be, ranging from 500 units to 1500 units.

NPF4 already encourages a mix of housing types and this is reflected in guidance for LDPs. NPF4 policy 16 requires LDPs across all areas to take account of diverse needs and delivery models. Policy 16 also gives support to proposals for new homes that improve affordability and choice by being adaptable to changing and diverse needs, and which address identified gaps in provision.

It is existing practice in some cases for larger sites to be delivered by a range of partners offering a range of housing types. MCAs provide a vehicle for planning authorities to take the lead in masterplanning and proactively consenting larger sites, and working collaboratively with a range of delivery partners to implement them. There is scope to take this practice further, with particular reference to alternative models of delivery such as build-to-rent, off-site construction, and custom build.

What would need to change?

There may be scope to develop existing NPF4 requirements further to shape how sites are appraised and selected for allocation in LDPs, and how delivery expectations are then specified. The goal would be to ensure that new LDPs allocate sites to accommodate as wide a range as possible of sizes, types and tenures of development. This could be implemented through new guidance, sharing of good practice and continued collaboration with industry and wider stakeholders.

Linked to Option 3, creating further categories in the development hierarchy, we could legislate to require sites above a fixed threshold to offer a diversity of housing types and tenures. This would likely require a combination of primary and secondary legislation.

If a threshold approach were to be taken, as in England, it would need to reflect differing circumstances across Scotland.

Deliverability and impact

Promoting increased diversity in the types and tenures of housing provided on larger sites would be attractive to a wider range of people looking for homes, thereby improving the rate at which available homes are taken up (sold / rented). This has potential to increase the rate of output, by having an impact on industry decisions about the pace of housing delivery.

There may be limits to the level of impact that this intervention would have given other drivers of commercial decisions, including the wider market and economic context, the cost and availability of labour and materials, and the need for continuing innovation by industry.

Guidance and sharing of good practice could be prepared in a fairly short timescale. It would be important to avoid creating new requirements for the LDP preparation process that could trigger delays to the adoption of these plans.

Creating requirements for sites above a threshold size to include a range of housing sizes, types and tenures (for example, build to rent, purpose built student accommodation, low cost home ownership) would require legislation. This option would therefore take some time to implement.

Consultation Question

Question 5: Do you think that encouraging more diverse housing outputs across the pipeline of deliverable housing land would increase the pace of build-out? Yes/No/Unsure. Please explain your answer.

(a) Should we use legislation to require a diversity of housing types and tenures on sites above a certain threshold? Yes/No/Unsure. Please explain your answer.

(b) Do you think that this measure would have any particular benefits for SME housebuilders? Yes/No/Unsure. Please explain your answer.

(c) Please provide any evidence of how increasing diversity would influence build-out rates.