Housing crisis will worsen without small building firms

For two thirds of SME house builders, a lack of available and viable land is the biggest barrier to delivering more homes, a frustratingly predictable insight from the FMB’s latest annual House Builders’ Survey.

For a multitude of reasons, local authorities tend to identify large sites for development – pieces of land that can only be built on by large house builders. This is squeezing out smaller developers and 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.

There are further planning issues that beset SME builders. Currently, a 300 home application will need to satisfy largely the same criteria as a three home application, placing a disproportionate workload on the much smaller shoulders of an SME. These firms are then forced to hire expensive consultants in order to deal with the huge backlog of compliance and paperwork. The burden of information requirements can consequently be crippling to a smaller firm, often being the difference between the viability and non-viability of a project.

And unfortunately, this burden doesn’t seem to be easing. 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. Our survey shows that the primary cause of unnecessary delays is the planning process, with the under-resourcing of planning departments widely believed by business owners to be the main problem.

What’s critical is that the key messages from this assessment of the sector’s health are heard, as now more than ever, SME house builders need to be seen as a key component of the Government’s housing strategy, not a mere support act for the larger developers. I’ve had positive meetings with politicians from all sides of the political spectrum, making the case for greater Governmental support for smaller firms. These meetings have reinforced my belief that there is a growing consensus on the need to reinvigorate the SME house building market.

Obviously there is no single solution to bringing SMEs back to prominence within the wider sector – the causes behind the decline of the local house builder are too numerous and complex. However, unless we start to address some of the fundamental issues that crop up repeatedly, we’re going to see smaller businesses continue to struggle, which will inevitably hinder the Government’s ability to solve the housing crisis.

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