Housing – SME homebuilders: Ministerial letter – October 2025

From: Minister for Public Finance Ivan Mckee and Cabinet Secretary for Housing Mairi Mcallan~
To: Planning authorities

Dear Colleagues

Small / Medium Enterprise (SME) Homebuilders and Development on Smaller Sites

We wrote a letter to planning stakeholders earlier this month, setting out our expectations regarding the housing emergency and the powerful enabling role our planning system has to play.  This followed our publication of the Housing Emergency Action Plan, stepping up action to lead Scotland through and out of the housing emergency.  It also followed on from the very good progress made since last November in the Planning and Housing Emergency Delivery Plan.

In the Action Plan, we indicated we would write this further Ministerial letter relating specifically to SME homebuilders. 

SME homebuilders operate across most of Scotland, but they play a particularly strong role in developing new homes needed in rural locations and on the redevelopment of brownfield sites.  Through delivering on these typically smaller sites, they support diversification of homes available and help to meet differing local needs and support strengthening of communities. 

The Scottish Government has previously stressed the importance for SMEs of ensuring planning conditions are necessary in every case and also that due consideration is given to the economic viability of proposals as they are progressed.  That point about viability has been emphasised within the Draft Developer Obligations Guidance, which recognises the potential for phased payments and an open book approach. 

A culture of proportionality in the planning system brings benefits across the sectors, and will particularly assist greatly in minimising substantial risks for smaller companies in progressing development.   Work carried out recently 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. SME housebuilders are reporting to Ministers that their experience is not one of proportionality and that this is undermining the viability of their schemes and their operations in general. This is something Ministers have committed to address.

The preparation of assessments for planning applications generally incurs consultancy fees for SMEs due to a lack on in-house expertise, therefore requirements for the information should be essential.  Timing of information being provided should also be considered carefully to support cash flow, given finance may not become available to an SME until planning permission is secured.  A Scottish Government blog published earlier this year highlights key principles and best practice identified by the Short Life Working Group, including the need to consider carefully whether, why, what and when information should be required to inform a decision.

The National Planning Hub is prioritising housing delivery and can support planning authorities with surge capacity and expertise.  This has the potential to support sites with added complexities, for example brownfield, and where knowledge may not be available in-house within an authority to progress an application more swiftly; for example archaeological expertise.  Planning authorities should email DirectorPAR@gov.scot with requests for support from the Hub.

Beyond measures which can already be taken, we will shortly issue a new public consultation on planning measures to accelerate the build out of new homes.  In the Housing Emergency Action Plan, we indicated that this will specifically cover measures for SMEs, as well as potential fiscal and legislative measures that will act as both incentives and penalties and seek to increase the volume of housing delivery.  We will publish our consultation paper later this autumn.

Work is also ongoing across Government on the wider regulatory landscape. As set out in the Programme for Government, the Scottish Government will publish an Action and Implementation Plan by the end of 2025 exploring whether there are regulatory barriers to investment and growth across 3 key sectors, including housing. This contributes to our wider commitment to foster a business environment that supports growth, including subjecting forthcoming Scottish Government regulation to scrutiny to ensure that its purpose, content, and timing have regard to potential opportunities and impacts on business and investment.  As part of this work, we will consider case studies on specific issues to help identify improvements that will support businesses, including SMEs, in housing delivery.

Ministers have made clear our objective that Scotland come through and out of the Housing Emergency. This is dependent on a facilitative planning system which is efficient and effective and in which unnecessary delays are avoided. We are grateful for your contribution to delivering this national mission.

Cabinet Secretary for Housing
MÀIRI MCALLAN

Minister for Public Finance
IVAN MCKEE

Housing – SME homebuilders: Ministerial letter – October 2025

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