Delays in the planning process, the Conservative government’s anti-development approach to housing and planning policy, and difficult economic conditions have made it harder to be a small developer today than it was five years ago, say two thirds of the nation’s SME home builders.
New research finds the sheer volume of uncontracted Section 106 Affordable Housing, increasing costs, the nutrients issue and processing biodiversity net gain requirements are among top barriers to growth for SME home builders.
The insight comes as industry welcomes the Labour Government’s positive first steps to boosting housing supply with the introduction of planning changes but calls for further policy interventions to maintain the momentum and tackle the challenges facing SMEs at the sharp end of housing delivery.
The The State of Play report 2024/25 report 2024/25 published today is produced by Close Brothers Property Finance, the Home Builders Federation (HBF) and Travis Perkins and is based on the most comprehensive survey of SME home builders in the UK.
Now in its fifth iteration, the report finds:
- Over half (51%) of SME home builders report waiting over a year to obtain planning permission
- 56% of SME home builders report a 30% uplift in the cost of obtaining planning permission
- SME home builders face new challenges, such as the implementation of the Biodiversity Net Gain regime, which came into effect this year and is cited by 90% of respondents as a barrier to growth, largely because of delays getting agreement over schemes, with just 4% believing local authorities have the resources or capacity to help them achieve a 10% net gain
- Nutrient and/or water neutrality restrictions are a major barrier for almost half of SME builders (42%)
- Land availability also remains a concern with 47% of respondents citing it a major barrier
- 80% of respondents identified obtaining suitable offers for S106 Affordable Homes to be a barrier to growth
- 94% of SME home builders would like the Government to do more to support them
For the fifth consecutive year, planning continues to be the largest obstacle to delivery with delays in the system and under-resourced local authority teams cited as the major barrier by 94% and 90% of respondents respectively. Rising to third position this year is ‘Local and/or political opposition to new development’ which is now seen as a major barrier by three-quarters (78%) of respondents, up from 69% in the last report.
In addition to planning delays and local authority resourcing, the rising cost of obtaining planning permission is considered a significant risk to delivery. 56% of those who participated in the survey said that they had seen costs rise by more than 30% over the last three years (up from 46%). Despite this, over half of respondents (51%) report waiting longer than a year to obtain planning permission; just 1% of respondents had received planning permission within less than three months.
For the first time, respondents were asked how they could be supported to deliver more sustainable housing. The top response, cited by almost 60% of respondents, was ‘Homebuyer incentives’ such as a dedicated government support scheme for buyers of energy-efficient new build homes.
Despite the significant impact of the current economic environment on the housing market and mortgage affordability, it’s the first time in 60 years that there is no effective government support for homeownership. The combined impact has been felt by the nation’s SMEs with one in three stating they would like the Government to prioritise support for first-time buyers (33%).
Elsewhere, 80% of respondents identified obtaining suitable offers for S106 affordable homes to be a barrier to growth. The lack of bids for S106 units means thousands of affordable homes are uncontracted, resulting in delays to sites and risks to the housing pipeline. This is an insurmountable challenge for many SMEs that rely on having a contracted buyer for S106 units to access development finance.
The Government has made positive first steps to support home building, targeting 1.5 million new homes over the next five years, reversing the previous Government’s reforms to the NPPF and announcing plans to recruit 300 new planners. While the industry has welcomed the pace of interventions, there are many determinants on housing supply therefore action to continue alleviating the pressures on SME home builders will be fundamental if Government is to achieve its ambitious housing target in this parliament.
Phil Hooper, Chief Executive Officer of Close Brothers Property Finance says: “In the five years in which we’ve produced the State of Play report, we’ve had a global pandemic, eight housing ministers and had 14 consecutive interest rate rises. Mandatory housing targets have been scrapped and subsequently reintroduced and uncertainty about nutrient neutrality laws, which still haven’t been resolved, has held up delivery of 160,000 new homes. It’s little surprise then that two-thirds of SME home builders say it is harder to be an SME housebuilder now than it was half a decade ago. The pro-building rhetoric coming from Westminster is promising but needs to be backed up by concrete action to get Britain building again.”
Neil Jefferson, Chief Executive Officer of the Home Builders Federation, says: “SME home builders play a vital role in addressing the housing crisis, yet the mounting constraints on housing delivery in recent years have placed considerable strain on many small businesses. Recent planning changes are very positive but there are a number of determinants on housing supply and Government will need to pull additional policy levers if it is to achieve its ambitious housing target. Ensuring local authority planning departments have sufficient capacity to process applications efficiently is key. Government needs to do more to support prospective buyers, in particular young people, to access suitable mortgage finance. The supressed level of demand reduces the industry’s ability to invest in new sites and its supply chain and so accelerate the delivery of private and affordable homes. We also need solutions to the nutrients issue and for Housing Associations to be put on a firm financial footing, so they can take on the affordable housing delivered by home builders - both of which are significant barriers to SMEs in delivering much-needed homes”
Ben Todd, Managing Director, Travis Perkins Managed Services, says: "SME housebuilders provide jobs, boost the local economy, and create homes that offer safety, security, and a sense of community across the UK. This is why at Travis Perkins we’re proud to work alongside HBF and Close Brothers Property Finance to advocate for SMEs to be supported further. Reforms to the planning system, financial incentives, and targeted support for SMEs are essential to support and lay the groundwork for a housing sector that is more resilient, diverse, and capable of meeting the pressing demand for homes."
