A new report published by the Home Builders Federation highlights the challenges faced by SME house builders looking to increase output and sets out a range of proposals to address the finance, planning, and red tape barriers preventing smaller firms from playing a bigger part in tackling the housing crisis.
Over the past 25 years the number of SME builders has reduced by 80%, but just getting back to the number operating in 2007 could produce an additional 25,000 homes a year.
Throughout the 1960s and 70s small companies could set up, grow quickly and establish themselves as significant contributors to local economies. This meant that by 1988 more than 12,000 SMEs were building new homes. Today however the number of SME builders has dwindled with very few new entrants able to secure a foothold and even many established businesses unable to grow. The report’s foreword, written by Redrow founder Steve Morgan explains how he grew his fledgling business into a national publicly listed builder something he says “would be almost inconceivable today.”
I could not grow Redrow into a national housebuilder today. - Stephen Peter Morgan CBE, Deputy Chairman of Redrow PLC
The barriers facing SME builders today are numerous and varied. The report is based on in-depth interviews and discussions with dozens of HBF’s smaller members and highlights access to finance, and the increasingly complex planning and regulatory systems as the biggest factors inhibiting the entrepreneurialism of smaller companies.
Even as banks have increased lending to SMEs generally, the report reveals that the situation has improved little since the recovery from the 2008 financial crash; whilst the risky and expensive process required to achieve planning permission has thwarted SMEs without the infrastructure and financial ability to navigate them.
Whilst housing supply has increased significantly in the past three years such that it has now reached the much vaunted 200k homes a year level, the vast majority of this increase has come from the largest builders. With Government keen to see numbers continuing to increase, enabling SMEs to increase output will be key.
The report suggests a number of steps Government could take to help including:
- The creation of a new Help to Build scheme to help extend sustainable lending to smaller companies
- Tackling specific planning problems that disproportionately affect the business environment for SMEs, including the lack of smaller sites and the impact of pre-commencement conditions
- Lift barriers for builders to access tax incentives and other support enjoyed by SMEs in other sectors
- Provide technical and planning advice services for fledgling businesses
- Seize the opportunity of Brexit to reform EU regulation reducing the risk and complexity associated with building new homes
Stewart Baseley executive chairman of the Home Builders Federation said "Whilst 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."