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31/05/2017

Report: Small builders call for urgent stimuli to survive

Words: Laura Edgar
Construction: iStock

Three housing reports were published within days of each other recently. Two focused on the reliance of volume house builders, while the other highlighted a perceived lack of support for small builders.

The House of Commons’ Communities and Local Government (CLG) committee concluded that the government must end the dominance of big housebuilders if it is to fix the UK’s broken housing market.

The Public Accounts Committee (PAC) accused the government of being too dependent on private developers to meet housing demand despite acknowledging England’s broken housing market in the housing white paper.

In Housing: State of the Nation, the PAC noted that the human costs of the housing crisis are emphasised by the “growing problem” of homelessness. The number of families in temporary accommodation has risen from 50,000 in 2011-12 to 72,000 in 2015-16.

Even if the government meets its target to build a million homes (depending on the election result), the PAC said the Department for Communities and Local Government (DCLG) acknowledges that it will not meet the actual level of housing need, “therefore problems of affordability and homelessness are likely to persist for years to come”.

“Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high-volume developers, driven by commercial self-interest and with little incentive to build any quicker"

In Capacity in the Homebuilding Industry, the CLG committee advises the government to support small and medium-sized builders to ensure a competitive market, proposals for which featured in the housing white paper.

It also called for improved access to land and finance for smaller builders, with the government reducing the risk for them by preparing sites for development by providing infrastructure and planning permissions.


Challenges to growth

The National House Building Council Foundation’s report Small House Builders and Developers: Current Challenges to Growth, suggests that:

  • 38% said a ‘sluggish, costly and inconsistent’ planning process poses a challenge to their business.
  • The lack of available land at a suitable price has become a more acute problem for small builders with 37% identifying it as their most serious obstacle for growth.
  • Although still a major concern for 20%, availability of finance has improved in the past two years, with more small builders obtaining finance from banks or private sources.

Small builders in decline

“The housing market is broken, we are simply not building enough homes,” said committee chair Clive Betts. “Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high-volume developers, driven by commercial self-interest and with little incentive to build any quicker.

“If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end,” he added.

Increasing the number of small sites – as detailed in the housing white paper – will support small and medium-sized builders but they “must not come at the expense of developer contributions that provide necessary community infrastructure”, said the CLG committee.

RTPI head of policy Richard Blyth told the CLG committee that it is often harder to provide infrastructure if there are a number of smaller sites rather than one big site. “I am not convinced that the Community Infrastructure Levy is terribly effective at filling those gaps. On the large sites there have been some very impressive deliveries of infrastructure, which have come as a consequence of economies of scale.”

Blyth also illustrated the scale of recent reductions in resources in local authority planning departments – something the RTPI has been campaigning to increase.

The report says reduced resources in planning departments are a factor in many of the other challenges indentified, such as the prioritising of larger sites over multiple small sites, the time taken to process planning applications and the time taken to negotiate with developers.

The RTPI identifies the issue as being less of a skills gap, and more of a capacity gap, and says in most cases, “local planning services are surviving on the goodwill and professional integrity of the officers, but this may not be sustainable”.

While the calls for, and measures to support small and medium-sized builders are numerous – Brian Berry, CEO at the Federation of Master Builders, for one, has been vocal on the subject – a report by the National House Building Council (NHBC) Foundation suggests that small firms are being driven away from housebuilding because of delays and rising costs in the planning system.

Small House Builders and Developers: Current Challenges to Growth notes that a third of those surveyed (nearly 500 firms who build fewer than 10 homes a year) have waited over a year for planning permission from a local authority while 80 per cent report a significant hike in planning-related fees in the past two years.

Land prices

The report also says the lack of available land at suitable prices has become more of a problem for small builders– 37 per cent identify it as a serious obstacle to growth. In February’s housing white paper the government announced that it wants to bring forth more small sites that are more easily accessible to smaller firms.

"Increasing complexity, time taken to achieve a decision, and the unpredictability and inconsistency within the planning process are slowing the delivery of new homes and causing companies to leave this market"

Neil Smith, head of research and innovation at NHBC, said: “While the planning process is recognised as a necessary control, small housebuilders and developers continue to express considerable frustration with it. The increasing complexity, time taken to achieve a decision, and the unpredictability and inconsistency within the planning process are slowing the delivery of new homes and, in some cases, causing companies to leave this market.”

Smith said that greater certainty and more standardised approaches, clarity concerning the fees and tariffs and a more responsive service from planning departments “would increase predictability and significantly help to speed up the process, thereby increasing the number of homes built”.

The RTPI, said Blyth, has “long argued” that more needs to be done to support small to medium-sized builders.

“We must get them building again if we are to tackle this nation’s housing shortage, and under-resourced planning departments is one of the issues. There are also many other ways in which small and medium-sized builders could be given more work, such as building homes for councils, housing associations and even central government, without the need for planning permissions.”

Small and large sites should work together, said Blyth.


Recommendations from the CLG committee in Capacity in the Homebuilding Industry 

 

  • The government, working with developers and local authorities, must ensure that data collected by local authorities on the development pipeline is more thorough and reliable. It must show how many planning permissions have been granted and what stage they are at, as well as who owns the land, when the permissions will be built out, and any reasons for delay. This should be done by autumn 2017.
  • Councils should be required to demonstrate that the additional income from the increased fees has been used to accelerate housing and other developments, and to publish this information on their website to give developers assurance that the additional costs can be justified. The proposed second 20 per cent increase should incentivise all aspects of planning, not just the processing of applications.
  • The committee wants the government to ensure that in its response to the community infrastructure levy review, it considers the appropriateness of homes built using permitted development rights not contributing to local services, infrastructure or affordable housing.
  • Local authorities must show a commitment to the planning function and ensure there are incentives and support in place for employees who are seeking further training and formal planning qualifications, such as those facilitated by the RTPI.

More information can be found here:

Laura Edgar is senior reporter for The Planner

PICTURE CREDIT | ISTOCK

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