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16/01/2017

Report: Helping SME builders could boost housing delivery

Words: Laura Edgar
Brick laying / Shutterstock_462881611

The number of SME builders has reduced by approximately 80 per cent over the last 25 years, according to a new report by the Home Builders Federation (HBF).

If their numbers were to return to 2007 levels, 25,000 additional homes could be built a year, the report claims.

The HBF, the representative for the house building industry, said the report highlights the challenges faced by SME builders* looking to increase output.

The report, Reversing the decline of small housebuilders, is based on interviews and discussions with smaller members of the HBF.

It notes that through the 1960s and 70s, small companies could set up, grow quickly and established themselves as “significant” contributors to local economies. By 1988, more than 12,000 SMEs were building new homes.

However, now the number is much lower and between 2007 and 2009, one-third of small companies ceased building homes.

Indeed, Steve Morgan CBE, chairman at house builder Redrow, founded in 1974, wrote in the foreword that establishing a home building company from scratch today “would be almost inconceivable”.

The report states that barriers to entry and growth in the industry are many and varied, with small and medium-sized firms sharing many of the frustrations experienced by larger, national companies. Others are more specific to SME builders.

The availability of suitable housing sites and the “constant struggle” to secure a planning consent that can be implemented through a planning process “beset by delays and bureaucracy” creates delays and costs that impact on the ability for SME builders to grow, according to the report.

Despite banks increasing lending to SMEs generally, the Reversing the decline of small housebuilders suggests “little has improved” since the recovery from the financial crash in 2008.

Stewart Baseley executive chairman at the HBF, said: “While housing output has increased significantly in recent years, the vast majority of the increases have come from larger companies. The number of smaller builders has collapsed over recent decades with few new entrants to the market able to grow to any size.

“If government wants to see continued increases in supply it is imperative it enables SME builders to play their part. Removing the barriers for SME builders could result in tens of thousands of desperately needed additional homes being built and boost economies up and down the country.”

In response, it lays out a number of recommendations for the government, including:

 Introducing a presumption in favour of residential development on appropriate brownfield sites rather than a continued reliance on public sector-led solutions through brownfilend registers or overly restrictive planning use regulation.

  • Increasing the ‘buffer’ required in fiver year land supplies: Local plans effectively set an upper limit on housing supply in an area through five-year land supplies. By planning for a ‘buffer’ of 20 per cent additional dwellings over and above the minimum it is far more likely that housing need will be met.

  • Planning for a wider range of sites within local plans.

  • A new phased planning application fee schedule: This would in total, see revenues for local planning authorities increase which would incentivise good performance and timely decision-making and discharge of conditions.

  • Lifting barrier for builders to access government support enjoyed by SMEs in other sectors.

  • Earlier participation of highways authorities in pre-planning discussions.

Richard Blyth, head of policy at the RTPI, said: “There are a number of ways we can support SMEs, including breaking up large sites so that a wide range of providers can deliver on them; and direct commissioning of building from housing associations and councils. On planning conditions, a balance needs to be struck between providing the right level of quality assurance and not unnecessarily stalling good development. The sharing of best practice is the best way to achieve this.”

The report can be found here (pdf).

* An SME builder is, according to the National House Building Council, a small- and medium-sized company that builds fewer than 500 properties per year.

Image credit | Shuttershock

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