FMB finds planning process and lack of land hindering SME builders

Two thirds of small and medium-sized builders (SMEs) are struggling to find land for new developments, according to new research from the Federation of Master Builders (FMB).

For a second consecutive year, the FMB’s annual Housebuilders’ survey has cited a ‘lack of available and viable land’ as the biggest hindrance to delivering much-needed new homes in the UK.

The survey highlighted that 39% of SME builders believe that a crisis in finding enough workers with construction skills is also presenting a major barrier to building more homes, up from 27% in 2015 and that half of SMEs believe the planning system and difficulties in unlocking finance are also major challenges for the industry.

In the 1980’s SME builders, defined as those building 500 or less new homes a year, delivered around two-thirds of new homes but this has fallen to just 26% now and down from 44% before the financial crisis in 2008, with the difficulty in accessing finance one of the key reasons.

The builders also think that the under-resourcing of local authority planning departments is the most important cause of delays in the planning process.

However, a high proportion of SMEs think that demand for new homes remains resilient, even after the Brexit vote.

The FMB said the 108 firms responding to its survey had reported that demand from buyers had weakened over the past year, but that they expected it to pick up again over the next 12 months.

Brian Berry, Chief Executive of the FMB, said: “The biggest challenge facing SME house builders is the planning process. Councils need to find a way of allocating and granting planning permission for more small 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 SMEs decline from around two thirds in the late 1980s to less than a quarter today.”

The FMB said that councils were focusing too much on allocating developments to large builders when creating plans and that more resources need to be allocated to smaller firms.

Berry continued: “It is absurd that the planning system treats a 300 home application in largely the same way 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.”

Many SMEs will be awaiting the Government’s Autumn Statement this year due to be delivered on 23 November in the hope that reforms will be introduced.

Berry concluded: “SME house builders must be seen as a key component of the Government’s housing strategy. This means a renewed focus on granting planning permission to small sites.

“At the same time, the Government needs to press ahead with its proposed planning reforms, including a presumption in favour of small scale development.

“Planning departments also need to be adequately resourced so that they have the capacity to engage more closely with SME house builders and ensure planning applications are processed through the system as speedily and efficiently as they can be.”