Small housebuilders will not be able to grow their market share and contribute to the Government’s ambitious housebuilding targets unless a series of key barriers are removed to meet the Housing Minister’s aim to diversify the market.
This is the finding of a new report, ‘Supporting SME Housebuilders: Challenges and Opportunities’, commissioned by the Federation of Master Builders (FMB) from the London School of Economics and Political Science (LSE). It makes a series of recommendations for the Government to make “targeted interventions to create a level playing field between SMEs and larger builders, and address critical barriers to unlock SME potential, leading to increased housing variety, sustainable practices, and innovation.” Measures proposed include low-interest loans, apprenticeship schemes, and reduced costs.
Brian Berry, Chief Executive of the FMB said: “The UK has an unusual housing market structure compared to other developed nations, with a high reliance on a small number of volume house builders. The Housing Minister, Mathew Pennycook MP, says he wants to diversify the housing market and restore the number of smaller house builders to the market, but to achieve this aim many hurdles need to be overcome. One of the biggest barriers is the failure of local authorities to allocate sufficient small sites for development in their Local Plans – something that was notably overlooked in the Government’s changes to the planning system announced last week.”
Christine Whitehead, Emeritus Professor of Housing Economics at the LSE and one of the report’s authors said: “To leverage SME’s impact on the market they must overcome barriers, many of which disproportionately impact smaller house builders compared to larger developers. They are held back by an environment that offers up too many barriers for growth.”
Berry continued: “The research reveals that the housing market cannot be relied upon to readjust to deliver the type of SME housing output seen in the 1980’s, when they accounted for 40% of all new homes. Government intervention is needed if we are to have a more diverse housing market.” The research also highlights the current skills crisis calling for a greater focus on apprenticeships, training, and pathway for school leavers.”
The LSE research has key findings on the benefits SMEs bring, including:
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- Local expertise and flexibility in smaller or complex projects overlooked by larger developers.
- Development of awkward sites (e.g., ex-industrial land, repurposed buildings).
- Strong community connections and focus on quality.
However it also targets barrier including the planning system (“Delays, complexity, fragmented processes, and lack of local authority (LA) resources, and a perceived bias towards larger developers”) and the Land Market (“Difficulty accessing suitable and affordable land”), as well as insufficient access to affordable funding and high upfront costs, shortages in skilled labour and rising material costs, and regulatory burdens related to environmental and heritage preservation.
Recommendations for Change in the report included:
- Planning System:
- Streamlining processes and identifying more SME-suitable land.
- Reducing regulatory complexity and planning fees.
- Finance:
- Government-backed low-interest loans and more affordable funding options.
- Skills Development:
- Greater focus on apprenticeships, training, and pathways for school leavers.
- Support Mechanisms:
- Partnerships between SMEs and larger developers to enhance competitiveness.
- Improved support for sustainable building practices and reduced development costs.