The biggest barriers for small housebuilders

In spite of industry-wide recognition that SME housebuilders are crucial to solving the housing crisis, they continue to be neglected by policy makers.

Policy makers need to recognise that all housebuilders are not the same, the National Federation of Builders (NFB) recently said. Volume house builders can fall back on land banks and they also have easy access to markets and other forms of finance. Because SME house builders do not enjoy this level of support, they have gone from making up two thirds of the entire sector in the 1990s to just one third in the present day.

The NFB believes that, in order to build more homes, we must look more closely at the barriers to SME involvement and to the contribution they can make. SME house builders build high-quality homes more quickly because they develop small and infill sites, deemed not economically viable by volume house builders.

However, two thirds of SME house builders are struggling to identify land for development, according to new research from the Federation of Master Builders (FMB).

For the second year in a row, the FMB’s annual House Builders’ Survey has shown a lack of available and viable land as the biggest barrier to SMEs delivering more new homes.

Two-thirds of SME house builders cite a ‘lack of available and viable land’ as the biggest barrier to increasing numbers

Half of SMEs see the planning system and difficulties accessing finance as other serious challenges

40% believe the construction skills crisis is now presenting a major impediment to building more homes

The under-resourcing of local authority planning departments is the most important cause of delays in the planning process

A high proportion of SMEs believe that consumer demand for new homes remains resilient, even in the wake of Brexit

Brian Berry, Chief Executive of the FMB, said, “The biggest challenge facing SME house builders is the planning process. Councils need to find a way of allocating and granting planning permission for more small sites. The current focus on large sites is squeezing out smaller developers, which is reducing competition in the housing market at a time when we need more, not less, choice. The limited supply of opportunities for small scale development is one of a number of key structural constraints that has seen the number of homes built by SMEs decline from around two thirds in the late 1980s to less than a quarter today.

“It is absurd that the planning system treats a 300 home application in largely the same way it treats a three home application. While the Government has attempted to remove red tape in its drive to increase the number of homes being built, it would appear that its reforms have yet to make a difference. 95% of SME house builders report that the information demands being placed on them during the planning application process have either increased or remain as bad as they were before. Our survey shows that the primary cause of unnecessary delays is the planning process, with the under-resourcing of planning departments being the most important concern.”

Paul Bogle said, “If we’re to support a realistic approach to building more homes, particularly ones that are affordable, we must create greater diversity in the house building market. New entrants need to be supported and experienced SMEs which have scaled back since the recession. We also need to give greater flexibility to local authorities and housing associations to build homes for purchase that are affordable in the sense that the person in the street understands affordable.”

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