Planning delays and rising costs crippling SME housebuilders

The most comprehensive survey of Small and Medium Enterprise (SME) housebuilders, conducted by Close Brothers Property Finance, the Home Builders Federation (HBF) and Travis Perkins has found:

• Securing and processing planning permission to the point where construction work can start is the major barrier to growth according to 93% of SME developers
  
• The availability of land is a major issue for 52% of SME builders 76% believe Local Authority staffing shortages are the main cause of delays in the process
  
• Rising material (99%) and energy (88%) costs are a major concern for companies
  
• Over two-thirds are impacted by the ‘nutrients’ issue that is restricting development in more than a quarter of England’s local authority areas
  
• 92% of SMEs are unhappy with the Government’s current approach on housing
  

The SME State of Play Report, now in its third iteration, has shone a light on the delays and escalating costs associated with the planning system which are putting businesses at risk and preventing SMEs playing their part in building the homes the country needs.

The report comes as the industry faces a range of acute challenges that threaten to reverse the big increases in housing supply delivered over the past decade. Delays to the processing of planning applications; a moratorium on housing delivery in a quarter of local authority areas due to pollution of rivers caused by agricultural practices; a growing regulatory burden and increasing cost base; and an economic environment within which consumers are struggling to buy are all increasingly threatening the delivery of new homes.

The survey shows that small builders are already looking ahead to the impact that will be caused by the Government’s proposals for a new Building Safety Levy. 4 in 10 SME home builders predict the Levy on all new homes, on which the Government consulted between December and February, will be a barrier to future housing delivery. SME builders, the number of which has plummeted over recent decades, are particularly struggling to overcome the growing number of constraints to development. 92% of those polled say they do not feel the government’s approach to planning or housing was positive, and call on Ministers to take action if it is to avoid seeing supply levels fall.

Rowland Thomas, Managing Director, Close Brothers Property Finance, comments: “The role of SMEs in the housebuilding industry has consistently been underestimated and often ignored when it comes to policy and planning. The reality, however, is that SMEs play a vitally important role in the creation of a healthy housing market and the consistent erosion of confidence in the Government’s approach to planning, especially for SMEs and first-time buyers, gives great cause for concern.

"As we welcome in the sixth Housing Minister in just 12 months, we must look to the current planning consultation for solutions from Whitehall and we are grateful, alongside our partners, to have been contributing to that with the aim of finally finding a workable resolution.”

Stewart Baseley, Executive Chairman of the Home Builders Federation adds: “SME builders in particular are struggling to overcome the growing constraints to housing delivery. The planning process is grinding to a halt and regulatory costs are rising, whilst the nutrient issue has put the brakes on sites across a quarter of the country. SME house builders are a major employer and have a key role to play if we are to meet our housing needs, but their numbers have plummeted in recent years. If we are to avoid losing even more businesses amidst a drop in supply, Government must take action now to create an environment within which SME builders can operate.”

Kieran Griffin, Managing Director, Travis Perkins, comments: “The results of the survey have reinforced what we already knew in terms of the challenges we have faced over the last 12 months. There is not a construction business in the country which hasn’t faced significant challenges in terms of increased costs and supply chain issues. Collectively, as an industry, we have been navigating unchartered territory, with major global events significantly impacting prices and availability of a range of materials. At Travis Perkins, we pride ourselves in forging strong relationships with our SME housebuilding clients, which are built over many years. While these have indeed been tested over this challenging period, these relationships are built on strong foundations, and we have continued to work closely with our clients to find solutions.”