Report backed by major developers calls for government to help SME housebuilders

Pocket Living has proposed the government establish up to 25 Homes England SME manager roles to help small and medium-sized housebuilders deliver more homes.

These managers would “provide dedicated support, acting as a single point of contact for SMEs, ensuring clarity and efficiency in the funding process, working together to find solutions with a new Homes England tool kit”.

The report also recommends that there should be a metric within Homes England’s annual performance review that requires at least 15% of housing delivery to come from SMEs.

Published today, Pocket Living’s report titled ‘Get SMEs Building Again’ outlines a 10-point plan to “save” the SME housebuilding sector and has been endorsed by various major developers and trade bodies.

These include Barratt Developments, Berkeley Group, British Land, Clarion Housing Group, National Federation of Builders, Peabody, Southern Housing, and others.

It suggests implementing a quota of allocations for local SMEs in local plans, to ensure they continue to play a role in the housing market.

Another recommendation is that Homes England should launch an initiative offering platform-level equity investment to SMEs, using a custom set of standards to assess cost factors and risk profiles for these developers.

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These recommendations come at a time when “the situation facing SME housebuilders is increasingly grim and has never been worse”, according to Pocket Living.

There are fewer than 2,500 SME homebuilders operating in the country, down from over 12,000 in the late 1980s, according to a Home Builders Federation report published in 2017.

SMEs are responsible for only 10% of the UK’s housing output, a significant drop from the 1960s and 70s when they delivered nearly 50% of new homes.

According to the report, in London, the number of SMEs has fallen by 66% over the last two decades.

>>See also: Making SME house builders great again

To deliver an extra 50,000 brownfield homes per year, the report estimates that more than £60bn in additional capital needs to be invested in the delivery of new homes.

To fund this, the report advocates for reforming tax to allow full expensing of build costs for new homes when the money is spent, rather than when they are finally sold.

By allowing immediate expensing, this reform would foster competition and support SMEs, who often face higher financing costs.

In terms of planning reforms, the report recommends implementing a presumption in favour of development for small brownfield sites in paragraph 70 of the National Planning Policy Framework.

The report also suggests adopting New Zealand’s approach to planning, which would involve referring only the largest planning applications and making the process less political by including experts on the panel.

To make use of the 300,000 unused small sites across England and Wales, Pocket Living says there should be a national public land portal specifically for small sites aimed at SMEs.

Marc Vlessing, founder and chair, Pocket Living, said: “Ever since I co-founded and led Pocket 20 years ago, Labour has had a strong history of supporting small businesses in the UK. Their manifesto today promises to make small businesses ‘the beating heart of our economy.’

“So it’s time to use their substantial majority, heed the sector’s calls and implement these ten policy proposals, which are designed to be cost-neutral for the Treasury and should be low-hanging fruit for the Chancellor.”

Paul Rickard, managing director of Pocket Living, said: “As a sector, we are staring down the barrel of extinction, and it’s time for the government to take action before it’s too late.

He added that “without a flourishing SME housebuilding sector, there is no way the government will deliver on its promise of 1.5 million homes by the end of this term.”

David Thomas, chief executive of Barratt Developments, said: “We welcome this report and its recommendations which are a positive and creative addition to the debate on housing policy. SMEs are vital to housing delivery, and we’d encourage the Government to look at ways they can be supported alongside other providers in the sector.”