Bring back the SME housebuilders

Housing has been centre stage at the party conferences with both Labour and Conservatives vying to demonstrate that they have the solutions to tackle the housing crisis.

The Conservative’s Help to Buy scheme has been brought forward to help boost demand while Labour has stated its ambition is to double the rate of house building to 200,000.

However, Labour’s rhetoric about threatening developers with a “use it or lose” demand on land and planning consents does it no favours. No developer can be expected to build at a loss and at time when we are building fewer than half the number of homes that are required every year to meet current demand.

If we are to succeed in building the number of homes that are required the parties need to be tackling the supply side and in particular getting the SME housebuilders back into the market.

In 1988 two thirds of all new homes were built by SME housebuilders but by 2010 this had fallen to one third. This rapid decline is important because if any government is to succeed in building more homes then it will need to create a business environment that supports rather than deters SME housebuilders.

The key is to overcome three barriers to SME access to the housebuilding market.

First, is the need to increase access to finance. In a recent survey of FMB housebuilders 60% of members cited access to finance as the most key barrier to increasing the housing supply. Given that stable long term finance needs to be channeled into the housebuilding industry politicians need to be thinking about creating a separate long term finance vehicle for SME housebuilding.

In 1988 two thirds of all new homes were built by SME housebuilders but by 2010 this had fallen to one third

The second main barrier is the lack of available land for SME housebuilders. Currently, too much emphasis is placed on large sites which are complex and slow to come forward. Local authorities have a crucial role to play in acting as enablers in the development of small sites and need to be encouraged to identify and allocate a larger number of small sites so that every village, town and city can be developed. Exempting all minor developments with 10 or fewer units from Section 106 agreements and the Community Infrastructure Levy (CIL) would also be a great help.

Thirdly, the cost of making planning applications needs to be tackled if more SME housebuilders are to be encouraged to come forward. Too much expensive information is required to make an outline planning application which just adds to the up-front cost and risk. The adoption of a best practice approach based on a local authority providing a proper service level in return for a fee would help overcome this problem.

Getting the solutions in place to overcome these barriers offers the best hope of building the homes that are needed and saving our endangered SME housebuilders.

Brian Berry is chief executive of the Federation of Master Builders