Reinvigorating SME house builders

By Noel Meredith, executive director at United Trust Bank

Reducing red tape, tackling land banking and changing the small sites classification are the keys to regenerating the SME house building sector, according to brokers.

The poll, among brokers working in development finance, has revealed the three key changes they believe would aid the regeneration of the SME house building sector.

We asked the question in their most recent Broker Sentiment Survey and brokers selected the three changes they believed would have the most positive effect on SME house builders. These are, in order of popularity:

 

1st Reduce planning red tape for smaller development sites
2nd Tackle land banking by large volume builders
3rd Increase the threshold of classification of a ‘small’ site from 10 to 20 units
4th Provide a greater choice of development finance funding
5th Reduce the cost of borrowing for SME house builders
=5th Create government-led ‘help to plan’ service providing planning support to new house builders
7th Simplify process and regulations with regard to highways on new developments
=7th Increase efforts to attract and retain workers in the construction sector
9th Introduce a phased planning application fee schedule

 

We concur with many of the changes brokers believe would help to reinvigorate the SME housebuilding sector. Time and again developers large and small tell us that their biggest frustration is with the UK’s underinvested planning system and unfortunately the challenges seem to be greater for SMEs. As well as the high cost of obtaining planning permissions, development can also be constrained by local political agendas and nimbyism which can create uncertainty for developers who need certainty when they’re expected to commit considerable capital to new building projects.

Changing the classification of a ‘small’ site to include those with up to 20 units, or at least demonstrating some flexibility to recognise when sites are clearly SME projects, would also help to alleviate the bureaucratic burden on smaller housebuilders. A ‘help to plan’ initiative supporting new, smaller housebuilders through the planning process also has some merit although we would prefer to see the whole system simplified and improved rather than committing money and resource to helping new house builders negotiate the labyrinthine system we currently endure.

Accusations of land banking levelled at national house builders were largely quashed by the recent Letwin Review although there’s some evidence that the volume builders are managing completions to meet demand rather than flood the market. It’s hard to criticise this position. However, the lack of skilled construction workers, specifically bricklayers, was seen as having a more negative impact on the UK reaching its new homes target than housebuilders acquiring sites for future development. Brexit uncertainty won’t help to fill the labour shortage and the aim is to attract and train 15,000 new bricklayers over the next five years. That’s a big ask from the industry.

There’s no question that a vibrant SME house building sector benefits the property market and the economy. SMEs often take on smaller, brownfield sites which present challenges larger volume builders have neither the specialism nor inclination to tackle. At UTB we’re keen to help smaller house builders grow their businesses and continue to support them in making a significant contribution to the UK’s new homes target.