BLOGS

A policy with spatial consequences

When the Scottish Government relaunched and expanded the First Homes Fund deposit support scheme, the stated ambition was straightforward: reduce the deposit barrier for first-time buyers and accelerate homeownership across Scotland's diverse housing markets.

The practical effects, however, are anything but simple. By lowering the entry cost into ownership — rather than capping purchase prices in the way England's First Homes scheme does — Scotland's approach is directing demand not just at new-build stock but at the broader resale market. That distinction matters enormously when you look at where planning pipelines sit, where viability pressures are greatest, and which local authorities are likely to see the sharpest rise in residential planning applications over the next two to three years.

REalyse planning data shows that the majority of consented residential sites across Scottish local authorities still carry significant affordable housing obligations under Section 75 agreements. The arrival of a scheme that stimulates market-rate first-time buyer demand without directly funding affordable units on-site creates a tension planning departments across Edinburgh, Glasgow, Dundee and Perth & Kinross will need to actively manage.

How deposit support changes the demand map

First-time buyer activity in Scotland has historically been concentrated in Glasgow and its commuter belt — where average sold prices have sat broadly in the £180,000–£230,000 range — and in more affordable Dundee and parts of Fife, where lower price points made unassisted purchase feasible for dual-income households on median wages.

Edinburgh is a structurally different story. Average sale prices in the capital have climbed to levels that price out most first-time buyers without equity transfers or family support, with REalyse transaction data pointing to average sold values across many inner-city postcodes well above £300,000. The First Homes Fund's deposit contribution shifts the calculus here: buyers who could qualify for a mortgage but could not accumulate the required deposit within a reasonable savings timeline now have a credible path into the market.

The spatial consequence is a broadening of competitive demand into mid-range Edinburgh neighbourhoods — areas such as Leith, Gorgie, Broxburn and the western approach corridors — that previously sat at the margin of first-time buyer affordability. REalyse active listings data indicates that stock-to-demand ratios in these corridors have tightened noticeably, with average days on market compressing and the gap between asking and achieved prices narrowing.

Beyond the cities, smaller towns with good rail connectivity — Falkirk, Livingston, Kirkcaldy, Stirling — are emerging as demand beneficiaries. For buyers priced out of Edinburgh and Glasgow even with deposit support, the 45–60 minute commute corridor offers price points that make scheme eligibility stretch further in terms of property size and quality.

Planning priorities: affordable targets under pressure

The stimulus effect of deposit support on market demand has a mirror image in planning policy: it raises questions about whether current affordable housing requirements are calibrated for the new demand environment.

Scotland's planning system, anchored by National Planning Framework 4 (adopted 2023) and administered through Local Development Plans, obliges most significant residential developments to deliver a proportion of affordable housing — typically 25% in pressured areas under Housing Land Audit frameworks, though this varies by authority and site viability.

When market demand strengthens — as schemes like the First Homes Fund are designed to achieve — developer viability assessments tend to improve, and the theoretical case for maintaining or increasing affordable contributions strengthens alongside it. In practice, planning authorities must balance that argument against the risk of choking off supply altogether, particularly on marginal brownfield sites where build costs remain stubbornly high.

REalyse analysis of planning applications across Central Scotland and the Lothians suggests that residential applications have been trending upward in postcodes proximate to First Homes Fund-eligible price bands, with a notable uptick in applications for smaller-unit developments — two- and three-bedroom flatted schemes — that align with first-time buyer preferences and scheme eligibility criteria.

For planning officers, this creates an opportunity and a challenge simultaneously: more applications mean more affordable unit delivery in aggregate, but it also means more negotiation pressure around viability, Section 75 obligations, and the risk that affordable housing requirements are diluted precisely as they become most economically justified.

The new-build gap and developer response

One structural limitation of Scotland's First Homes Fund — as compared with England's new-build-focused First Homes discount scheme — is that its applicability across the resale market reduces the direct incentive for developers to build specifically for scheme users.

In England, housebuilders have aligned product ranges, plot mixes and marketing squarely around the First Homes discount mechanism, creating a reinforcing loop between planning policy, developer output and first-time buyer demand. Scotland's broader resale eligibility means the developer response is more diffuse.

That said, REalyse development pipeline data points to a growing number of smaller-scale flatted schemes — particularly in Glasgow's southside, Dundee's waterfront fringe and Edinburgh's Granton regeneration zone — where unit sizes, price points and tenure mix are clearly calibrated for scheme-eligible buyers. These schemes are increasingly appearing in pre-application consultations with planning authorities, a signal that developers are starting to price in First Homes Fund demand even without an explicit product requirement.

The critical variable is land cost. In Edinburgh in particular, the combination of high land values, construction inflation and affordable housing obligations means that even improved demand from deposit support does not automatically translate into viable new-build delivery. REalyse viability modelling approaches suggest that in EH postcodes with high residual land values, schemes need to achieve sale prices at the upper end of fund eligibility thresholds before development stacks up — leaving a narrower margin than in Glasgow or Dundee comparators.

What comes next for Scottish housing markets

The First Homes Fund is not operating in isolation. It sits alongside Help to Buy (Scotland) provisions, the LIFT shared equity programme, and a broader Scottish Government affordable housing strategy that has set ambitious delivery targets for social and mid-market rent as well as low-cost homeownership.

The cumulative effect of layered demand-side support is to sustain transaction volumes in a market that, without intervention, would face significant affordability headwinds — particularly as mortgage rates remain structurally higher than the pre-2022 environment. REalyse rental market data reinforces the point: private rented sector yields across Scottish cities remain attractive by UK standards, creating continued competition for stock between investors and first-time buyers that deposit support alone cannot resolve.

For planning authorities, the medium-term priority is ensuring that the demand uplift generated by the scheme translates into a proportionate uplift in consented supply — not just in the most commercially attractive urban areas, but in the secondary towns and commuter settlements where scheme-eligible price points are most achievable without subsidy. Housing Land Audits across Fife, Clackmannanshire and South Lanarkshire will be an early indicator of whether local planning systems are responding to the new demand geography that the First Homes Fund is creating.

The scheme is, in the end, a market signal as much as a financial intervention. How Scotland's planning system reads and responds to that signal will determine whether it delivers lasting structural change — or simply accelerates demand into an undersupplied market.