National Islands Plan

Housing

Throughout the engagements that have informed the development of this Plan, access to affordable housing has emerged as one of the most deeply felt priorities among island communities, especially younger residents^[17]. This is consistent with the results of the 2023 Scottish Islands Survey, which highlighted concerns around the availability, affordability and variety of housing on islands. It is also one of the key themes highlighted by the Scottish Human Rights Commission report on life in the Highlands and Islands^[18].

Well-planned housing provision is a foundation for our objective to promote population retention and attraction on Scotland’s islands.

The Scottish Government works closely with local authorities in support of their statutory requirements, including the development of Local Housing Strategies (LHS), and we have produced guidance encouraging broad community engagement to ensure the best outcomes when creating or improving places.

We fully recognise the impact that housing pressures can have on island communities, many of whom are deeply concerned about their present and future resilience. The national housing emergency declared by the Scottish Government in May 2024 reflects and includes the challenges experienced by many of our islands.

Our Rural and Islands Housing Action Plan (RIHAP, 2023) recognises that delivering homes on islands is often more complex and costly than in other parts of Scotland and highlights the generational impact that even a small number of homes of the right kind, in the right places can have in supporting long-term sustainability. Supporting the delivery of more homes in rural and island areas is also one of the key objectives of the Housing Emergency Action Plan (HEAP, 2025).

The RIHAP underpins the Scottish Government’s ambition to ensure at least 10% of its 110,000 affordable housing target is delivered in rural and island communities by 2032. Our ambition has been supported by place-based investments and wide-ranging collaboration with island partners – from local authorities and Registered Social Landlords to development trusts. Between April 2016 and March 2025, we have invested in the delivery of 1,448 affordable homes across island communities.

While building new homes remains crucial, making the best use of the existing housing stock can also play a major role in addressing pressures. We are working with partners to bring more empty properties back into use, and have taken measures to help local authorities strike the right balance between second homes, short-term lets and permanent housing.

Housing investments can generate significant multiplier effects, with demand set to grow further as our islands take a driving role in the expansion of economic sectors such as renewable energy and aquaculture. Through this National Islands Plan, we will build on ongoing efforts to improve access to affordable housing on islands, injecting further momentum into the pursuit of the objectives set out in the RIHAP, HEAP and our long-term Housing to 2040 Strategy. This will give residents greater choice to stay, and encourage others to move to or return to their island. It will also help businesses recruit and retain staff, while assisting key workers in finding good and secure housing or accommodation.

Key Island Housing Statistics

• 59,411 – Total number of dwellings on Scottish islands, which represents 2% of all dwellings in Scotland^[19].
• £180,000 – Median residential property price in 2024-25, with prices ranging from a median of £138,000 in Shetland Outer Islands to £240,000 for Highland Islands^[20].
• +30% – Increase in median house prices on islands between 2018-2023, compared to +23% over the same period in mainland Scotland^[21].
• 1,295 – Affordable homes delivered on islands from April 2016 to March 2024 with £146 million support from the Scottish Government’s Affordable Housing Supply Programme.
• 17% – Percentage of Scotland’s second homes located on islands.
• 4,041 – Total number of vacant dwellings.

Local Housing Strategies and Housing Need and Demand Assessments

Scotland’s local authorities are required to develop a LHS every five years to set out their priorities and plans for the delivery of housing and related services. Consultation is a central component in this process, with local authorities expected to engage widely with communities and partners to inform content and outcomes for their LHS.

As a statutory document, the LHS should be developed in line with Scottish Government guidance, ensuring the specific needs of diverse communities are properly reflected.

The Housing Need and Demand Assessment (HNDA) forms a key part of the LHS process and supports local authorities with gathering robust, locally-relevant evidence – including location, type, size and tenures required to address present and future housing needs. Island stakeholders have highlighted concerns that HNDAs do not provide sufficient granularity to capture location-specific requirements.

HNDA guidance recognises that data relating to island areas may present issues due to smaller population sizes. In response, it enables additional flexibility in the use of locally-sourced evidence. However, concerns remain about the extent to which the needs of individual islands – or locations within an island – are considered through the housing strategy process.

The Scottish Government will publish updated guidance for local authorities in relation to both LHS and HNDAs.

Through refreshed Local Housing Strategy guidance for local authorities, we will introduce robust requirements about the distinct housing needs of island communities. In addition, refreshed guidance on Housing Need and Demand Assessments will include strengthened focus on localised housing needs and working in partnership with local communities.

Delivering More Homes

The Affordable Housing Supply Programme (AHSP) is the Scottish Government’s primary mechanism for delivering affordable homes. It is aligned with our Housing to 2040 Strategy and has “the right homes in the right places” as one of its underpinning principles. The AHSP comprises homes for social rent, Mid-Market Rent and Low-cost Home Ownership.

Homes can take various forms including new builds, renovation projects, conversions, and off-the shelf purchases of both new and existing properties.

To complement the broader AHSP and provide targeted support for small-scale developments in rural and island areas, in 2016 we established the demand-led Rural and Islands Housing Fund (RIHF). The Fund has an existing budget of up to £30 million and is open to eligible community organisations, development trusts, private landowners and developers. The 2025-26 Programme for Government announced the extension of the RIHF to new applications until March 2028. Through this Plan, we are reaffirming our commitment to the Fund, increasing investment to up to £37 million.

Between April 2016 and March 2025, the Scottish Government invested over £172.9 million through the AHSP to deliver 1,448 affordable homes across island areas. Between April 2016 and March 2025, 97 homes were built under the RIHF, representing 37% of all properties funded through that programme.

Island community organisations and other prospective applicants to the RIHF have highlighted challenges with pre-development costs – those preliminary expenditures incurred to evaluate the feasibility of a site or project prior to obtaining the necessary permissions. The RIHF initially provided a capped funding contribution of £10,000 per project, later increased to up to £15,000 per project in 2021. Through this Plan, we now increase this support further, to up to £20,000 per project.

An additional £25 million from the AHSP budget has been allocated between April 2023 and March 2028 to the Rural Affordable Homes for Key Workers Fund, aimed at tackling housing challenges that affect the recruitment of key workers in rural and island communities. The Fund enables local authorities and registered social landlords to purchase properties, with each authority defining key workers according to local priorities. To date, 41 homes have been approved through the Fund, 22 of which are on islands. Ministers have written to all local authorities encouraging further projects where there is identified need.

We will support the delivery of affordable homes across island communities by increasing available investment through the Rural and Island Housing Fund to £37 million to March 2028 and by raising feasibility support to up to £20,000 per project.

We will encourage communities to come forward to local authorities and Registered Social Landlords with project proposals for the Rural Affordable Homes for Key Workers Fund where opportunities are identified.

The HEAP includes a commitment to investing up to £4.9 billion in affordable homes across Scotland between April 2026 and March 2030, demonstrating the Scottish Government’s continued determination to achieve our 110,000 affordable homes target by 2032. Our multi-year funding commitment will help to boost sector confidence, leverage private investment and support increased delivery momentum, including for small and medium-sized enterprises (SMEs).

In addition, in September 2025 Scottish Ministers wrote to planning authorities to emphasise the importance of proportionality in the planning system for SME housebuilders. Going forward, we will consult on measures to accelerate build out of housing sites, inviting views on potential fiscal and legislative measures to increase volume of delivery and support SMEs.

Through the 2025-26 Programme for Government, we committed to implementing the Housing Investment Taskforce’s recommendations to strengthen investors’ confidence and promote new mixed partnerships in support of affordable housing projects. This includes working with the Scottish National Investment Bank to attract private capital into housing developments, with the Scottish Government undertaking market testing to gauge demand for support with infrastructure costs. We have also committed to exempting Build to Rent and Mid-Market Rent properties from Rent Control provisions, while providing local authorities and Registered Social Landlords with funding certainty on a multi-year basis.

Subject to parliamentary approval, we will exempt all island developments from the proposed Scottish Building Safety Levy.

We will work to increase the volume of private funding enabling the delivery of housing developments on islands, supporting the role of SME housebuilders. This will include close partnerships with developers, public bodies and the Scottish National Investment Bank.

We will work with partners, including the Scottish National Investment Bank, to develop a pipeline of investment opportunities supporting the delivery of more homes on islands and build delivery capacity. This will include consideration of the role of multi-site delivery structures.

Case Study – Eday Partnership, Orkney

Eday Partnership acquired eight acres of land with several buildings, including two empty houses, aiming to develop affordable rented housing. Due to poor conditions and high restoration costs, the Board opted to demolish the houses and build two modern, energy-efficient bungalows designed to suit the environment and take advantage of the views. Eday Partnership were awarded £320,000 through the Scottish Government’s RIHF in summer 2023. Financial support from Orkney Islands Council, Highlands and Islands Enterprise as well as a loan and the Partnership’s own resources completed the funding package. The new homes were completed in May 2025.

Separately, with support from the Scottish Land Fund, Eday Partnership acquired a two-bedroom house with outbuildings and land. A full refurbishment is underway to create a three-bedroom home, with additional support from the RIHF. Completion is expected by spring 2026, with the property also offered for long-term affordable rent.

Second Homes, Empty Homes and Short-Term Lets

Although islands account for 2% of Scotland’s total dwellings, they contain 17% of the nation’s second homes^[22]. Analyses at data zone level suggest that the proportion of second homes ranges widely between islands, from less than 4% in much of Shetland Mainland to peaks of over 20% on Coll, Tiree, Colonsay, Jura and parts of Bute^[23].

A high concentration of second homes can reduce the availability of permanent housing and inflate prices through additional demand, making it harder – especially for younger people or those with limited means – to find the homes they need. We have also heard, however, that second homes and short-term lets can be important for the local economy and especially the hospitality sector.

Although there are numerous and sometimes complex factors that can lead to a property remaining vacant, empty homes often have the effect of increasing pressures and eroding affordability. The percentage of long-term empty dwellings in island areas is generally higher than the Scottish average, with a peak of 8% on Shetland’s Outer Islands^[24].

We have equipped local authorities with additional tools and powers to maximise an effective use of the existing housing stock and strike a balance that supports communities’ needs and aspirations. This includes discretionary powers for local authorities to set council tax premiums on second homes and the ability to designate short-term let control areas. Through the Housing (Scotland) Act 2025, we have delivered on the 2025-26 Programme for Government commitment to remove the cap on the level of council tax premium that can be applied to second and long-term empty homes, meaning local authorities will have the power to charge more than double the standard rate of council tax.

At a national level, we have increased the rate of the Additional Dwelling Supplement from 6% to 8%, helping first time buyers and home movers compete with second home buyers and buy-to-let investors.

Our investment of £3.7 million in the Scottish Empty Homes Partnership has returned almost 13,000 homes back into use as safe and secure housing since 2010. Building on this success, we are investing a record £2 million through the Partnership to help local authorities reduce the numbers of privately owned long-term empty homes.

The Scottish Government is also working with lenders and rural housing bodies to encourage greater and more consistent use of rural housing burdens, which retain properties within local communities through a right of pre-emption.

We will engage with island local authorities to monitor the implementation of short-term let regulations and review initiatives to reduce the number of empty homes, identifying opportunities to share good practice.

We will provide match funding through the Scottish Empty Homes Partnership to support Empty Homes Officer roles within Orkney Islands Council and the Highland Council. We will explore similar opportunities with other island local authorities.

We will deliver additional funding for the continuation of the Argyll & Bute Empty Homes and Key Worker Housing project as part of a financial package for local initiatives aimed at returning empty homes into use.

Subject to parliamentary approval, we will remove the 100% limit on the level of council tax premium that can be applied to second and long-term empty homes.

Planning and Land

We recognise the resourcing challenges faced by planning authorities and understand the importance of strong performance in statutory planning processes to address the housing emergency and unlock wider economic opportunities. To assist, Scottish Ministers have established a National Planning Hub tasked with providing surge capacity and helping authorities deliver planning determinations more efficiently.

Work is underway with all island local authorities to understand the kind of support they require, with a view to strengthening delivery capacity and realising development opportunities that reflect local needs. For instance, we have allocated funding for a flood risk assessment and data collection to support investment and housing development in Kirkwall.

The National Planning Framework 4 (NPF4) provides explicit and positive support for the delivery of more high-quality, affordable and sustainable homes in rural and island areas.

In consultation with planning authorities and building standards verifiers, we will explore the development of island home templates that meet the needs of island communities.

Working with partners, including public bodies, landowners and the Scottish National Investment Bank, we will explore opportunities to unlock land to support the delivery of more homes on islands.