Small and medium-sized home builders say they are being ‘increasingly squeezed out’ by larger developers, and removing tax and regulatory barriers could increase home delivery by 56% – the equivalent of around 35,000 new homes a year.
The findings, published in the latest State of Play Report from Close Brothers Property Finance, the Home Builders Federation (HBF) and Travis Perkins, highlight the pressures facing SME home builders, from rising costs and increasing complexity to ongoing planning delays and regulatory pressures.
Based on a survey of 225 SME home builders, the report suggests ‘systemic and long-standing issues remain unresolved’, despite the government announcing a package of measures to support SME developers earlier this year.
Delays in the planning process, a lack of support for first-time buyers, skills shortages, and the cumulative burden of regulation all contribute to a lack of progress in homebuilding, the report claims.
Despite recent government interventions, the operating environment for SME home builders remains overly complex, costly and slow, stifling growth and deterring new entrants to the market’, said Neil Jefferson, chief executive of the HBF.
“As housing delivery targets face growing scrutiny, policymakers must prioritise meaningful reform that truly supports smaller developers. Tackling longstanding planning bottlenecks – as well as wider issues such as viability, infrastructure delays and rising demand-side pressures – is essential if SMEs are to confidently invest in future land and labour supply.
“Without real change, SME home builders will remain at a disadvantage, unable to absorb mounting delays and costs, and undermining the government’s ambition to create a diverse, competitive and resilient housing market.”
Business taxation and the regulatory environment were the major barriers to business growth, cited by 97% of respondents. Planning delays leading to mounting costs and delays that disproportionately affect smaller businesses came a close second, with 94% of respondents saying they were the major barrier to housing delivery. Local authority capacity was cited as a major constraint by 89% of SME builders.
Affordability issues, particularly among first-time buyers, are also a key concern (84%), which the report says reinforces support for the reintroduction of a government-backed equity loan programme to help more people onto the housing ladder and stimulate market demand.
With the right policy support, SMEs believe they could increase housing delivery by 56% a year on average – equivalent to an extra 35,000 homes annually.
The report calls for government to adopt its recommendations to deliver 60,000 additional homes, with 52% of respondents viewing reducing the cost of and complexity of the planning system as the most important measure. Increasing the availability of small sites through local plans (31%), easing CIL and S106 obligations (30%), and providing targeted support for first-time buyers, such as a new equity loan scheme (19%), were also highlighted as key priorities.
The report also calls for measures to reduce regulatory burdens (19%), address challenges in the Section 106 Affordable Housing market (19%) and limit the impact of the Building Safety Levy on SMEs.
‘The State of Play report highlights not just the challenges facing SME housebuilders but also the significant untapped potential within the sector’, said Phil Hooper, chief executive officer at Close Brothers Property Finance.
“If the government is serious about boosting housing supply, there must be a renewed focus on removing the disproportionate burdens on SMEs and helping them to deliver the high-quality homes that are so needed in this country.”
But despite the challenges faced by SMEs, Ben Todd, managing director at Travis Perkins, believes there are reasons ‘for cautious optimism’.
He added:
“The government has set an ambitious target of 1.5 million homes and has begun to introduce reforms that will directly address SME concerns – streamline planning for small sites, change biodiversity rules, and focus more strongly on land release and financing. If these measures are implemented with urgency and consistency, they could make a genuine difference.”
