The most recent Federation of Master Builders (FMB) House Builders’ Survey revealed the constraints SME’s face to increase their output of new homes, both currently and looking ahead over the next three years.
We’ve identified the top 3 constraints and how this impacts their ability to build new homes.
Top 3 barriers to building new homes
1. Land Availability
Access to land was the most commonly cited barrier to increasing output for the second year in a row with 67% of SME builders claiming that a ‘lack of available and viable land’ was the main problem facing their business.
In joint second place came ‘lack of finance to the company’ and the ‘planning system’.
2. Access to finance
Overdraft facilities have traditionally been an important source of finance for many smaller house builders. For those who work only as contractors, limitations on overdraft facilities remain the greatest cause of concern.
This year’s survey also asked respondents what changes they would like to see in the approach debt providers and financial investors take to fund housing developments. Common answers included:
- Improved loan-to-value ratios
- More realistic repayment schedules
- Speedier decision-making
- More tailored approach to providing finance that takes into account the history of the company and those involved.
3. Planning System
SME house builders are continuously being held back by the planning system causing delays to their builds and an increase costs.
‘Inadequate resourcing of planning department’ was rated as the most important cause of delay with other factors including signing off planning conditions and ‘inadequate communication by planning officers’.
Brian Berry, Chief Executive of the FMB, said, “One of the biggest challenge facing SME house builders is the planning process. Councils need to find a way of allocating and granting planning permission for smaller sites. The current focus on large sites is squeezing out smaller developers, which is reducing competition in the housing market at a time when we need more, not less, choice. The limited supply of opportunities for small scale development is one of a number of key structural constraints that has seen the number of homes built by SME’s decline from around two thirds in the late 1980s to less than a quarter today.”
“It is absurd that the planning system treats a 300 home application in largely the same way as it treats a three home application. While the Government has attempted to remove red tape in its drive to increase the number of homes being built, it would appear that its reforms have yet to make a difference. 95% of SME house builders report that the information demands being placed on them during the planning application process have either increased or remain as bad as they were before. The survey shows that the primary cause of unnecessary delays is the planning process, with the under-resourcing of planning departments being the most important concern.”
The report also showed that a shortage of skilled workers is still a major barrier for SME's.
SME’s will be eagerly awaiting the chancellor’s Autumn Statement next month, as Philip Hammond is expected to announce a housing fund specifically for smaller developers.
So watch this space for the key points from the Autumn statement to see how they will affect you.
In the meantime you can find out what the government is currently doing to tackle these issues in our blog article Government initiatives that will provide a helping hand to smaller builders.
By Olivia Catterall