The Federation of Master Builders (FMB) represents the sort of smaller-sized building firms that are being increasingly squeezed out of the house-building market just as the government is pushing for more homes to be built.
According to the LSE report, Supporting SME Housebuilders: Challenges and Opportunities, small house-builders will not be able to increase their market share from their current 10% unless a series of barriers are removed.
The report sets out how SME house-builders are crucial for local expertise and flexibility in smaller or complex projects overlooked by larger developers. They also score strongly in the development of awkward sites, such as repurposed industrial buildings, and for their strong community connections. Along with this, their lower volumes generally means higher build quality.
However, they are less able than the volume house-builders to negotiate the planning system, with its delays and fragmentation. It is harder for them to secure finance and land, and they don’t always have the resources to meet onerous environmental and conservation requirements.
Christine Whitehead, emeritus professor of housing economics at the LSE and one of the report’s authors, said: “SME house-builders are equipped with unique skills and local expertise, with many wanting to expand their businesses. But to leverage their impact on the market they must overcome barriers, many of which disproportionately impact smaller house-builders compared to larger developers. SMEs can deliver high quality products, and they reportedly want to play more of a role in greening homes and the self-build market, which all offer opportunities for growth. While smaller house-builders clearly could play more of a role in the market by providing homes to match local need, boost the local economy and build upon unused land, to name a few, they are held back by an environment that offers up too many barriers for growth.”
FMB chief executive Brian Berry said: “The research recognises the value that small house builders can bring to the housing market in terms of greater consumer choice and quality. The UK has an unusual housing market structure compared to other developed nations, with a high reliance on a small number of volume house builders. The housing minister, Mathew Pennycook MP, says he wants to diversify the housing market and restore the number of smaller house-builders to the market, but to achieve this aim many hurdles need to be overcome. One of the biggest barriers is the failure of local authorities to allocate sufficient small sites for development in their local plans – something that was notably overlooked in the government’s changes to the planning system announced last week.”
Berry continued: “The research reveals that the housing market cannot be relied upon to readjust to deliver the type of SME housing output seen in the 1980s, when they accounted for 40% of all new homes. Government intervention is needed if we are to have a more diverse housing market. This includes the introduction of government backed low-interest loans and more affordable funding options. The research also highlights the current skills crisis calling for a greater focus on apprenticeships, training, and pathway for school leavers.”
