Small and medium-sized home builders across the UK warn that the current tax and regulatory environment is exacerbating the housing shortage, with 97% saying it’s holding back business growth.
However, if these barriers are addressed, SME builders could boost the supply of new homes by 100,000 a year.
The findings in the the State of Play report 2024/25 report 2024/25, published today, produced by Close Brothers Property Finance, the Home Builders Federation (HBF) and Travis Perkins, highlight the real pressures facing SME home builders, from rising costs and increasing complexity to ongoing planning delays and regulatory pressures.
Despite Government’s positive early policy moves, the reality for many businesses remains bleak; therefore, confidence has taken a nosedive, with almost 9 out of 10 SMEs less optimistic than they were prior to the General Election.
Now in its sixth iteration, the State of Play report finds:
- 97% say business taxation and the regulatory environment are barriers to the growth of their business in the next 12 months.
- Financial pressures were a big barrier, with 64% citing cumulative viability pressures and 58% citing difficulties obtaining offers for S106 Affordable Homes.
- Regulatory and political challenges remain significant barriers; 66% report local or political opposition, 55% Biodiversity Net Gain and 54% the Building Safety Levy.
- 94% of SME builders cite securing planning permission or discharging conditions as a major issue.
- 89% of SME builders view Local Authority capacity as a major constraint
- Land and infrastructure issues also continue to limit delivery, with 54% citing land prices, 39% citing land availability, and 49% the costs/timescales for utilities provision.
- Construction and supply challenges are notable but viewed to have less impact with 43% citing labour/supply costs and 41% cost of materials as major barriers to growth. While 67% of respondents said the supply chain and materials availability were a barrier to growth, only 10% said it was a major barrier.
Based on a comprehensive survey of SME home builders, the research finds that, despite Government announcing a package of measures to support SME developers earlier this year, systemic and long-standing issues remain unresolved, including delays in the planning process, support for first-time buyers, skills shortages, and the cumulative burden of regulation.
Yet, with the right policy support, SMEs believe they could increase housing delivery by 56% a year on average - equivalent to an extra 35,000 homes annually. This would increase the contribution delivered by SME home builders to a total of 100,000 homes a year - a third of Government’s 300,000 homes target.
Affordability constraints, particularly among first-time buyers, are a key concern for SMEs (84%), reinforcing support for the reintroduction of a Government-backed equity loan programme to help more people onto the housing ladder and stimulate market demand.
A further challenge for SMEs is the difficulty in securing suitable bids from Registered Providers of Section 106 Affordable Housing, which has been impacted by financial pressures across the sector. Just under two-thirds (65%) of survey respondents said that the issue presented a barrier in the planning process, and 58% reported that it was a major barrier to growth. To help smaller sites remain viable, more than half (55%) support exempting schemes with fewer than 50 units from Affordable Housing requirements.
Following promising action to address longstanding challenges in the planning process, the Planning & Infrastructure Bill continues to pass through Parliament. Meanwhile, bottlenecks in the process persist, leading to mounting costs and delays that disproportionately impact smaller businesses, with 94% of SMEs citing delays in securing planning permission as a major barrier to housing delivery.
The report calls for Government to adopt its recommendations to unlock the delivery of 60,000 additional homes, with 52% of respondents viewing reducing the cost of and complexity of the planning process as the most important measure. Increasing the availability of small sites through local plans (31%), easing CIL and S106 obligations (30%), and providing targeted support for first-time buyers, such as a new equity loan scheme (19%), were also highlighted as key priorities.
Additionally, the report calls for measures to reduce regulatory burdens (19%), address challenges in the Section 106 Affordable Housing market (19%) and limit the impact of the Building Safety Levy on SMEs.
