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Small house builders and developers: current challenges to growth

Small builders ‘frustrated’ with delays caused by planning system

Delays and rising costs in the planning system are driving small companies away from house building and slowing down attempts to tackle Britain’s housing crisis, a report claims today.

New research from NHBC Foundation shows that small builders are experiencing “deeply frustrating” delays, with a third waiting more than a year for local authority planning approval and nearly 80 per cent experiencing a significant hike in planning-related fees in the last two years.

The NHBC Foundation report ‘Small house builders and developers: current challenges to growth’ outlines the climate faced by small firms, using the experiences of almost 500 companies who typically construct less than 10 homes a year.

The report highlights the fact that the number of small firms active in house building continues to decline, accounting for just 12 per cent of market share in 2015, compared with 28% in 2008.

Earlier this year, the Government pledged “radical, lasting reform” to tackle Britain’s housing shortage, including accelerating the planning system by making it more accessible and increasing its support for small and more innovative builders.

Commenting on the report, NHBC Head of Research and Innovation Neil Smith said: “While the planning process is recognised as a necessary control, small house builders and developers continue to express considerable frustration with it. The increasing complexity, time taken to achieve a decision, and the unpredictability and inconsistency within the planning process are slowing the delivery of new homes and, in some cases, causing companies to leave this market.

“Greater certainty and more standardised approaches, clarity concerning the fees and tariffs, coupled with a more responsive service from planning departments would increase predictability and significantly help to speed up the process, thereby increasing the number of homes built.”

The report found that the lack of viable building land was also a major barrier for small house builders who raised concerns about shortage of skilled workers and a lack of interest among young people in becoming apprentices.

The main findings are:

  • Planning – More than a third (38%) said a sluggish, costly and inconsistent planning process was posing a major challenge to their business.
  • Land availability – The lack of available land at a suitable price has become a more acute problem for small builders with 37% identifying it as their most serious obstacle for growth
  • Availability of finance – Although still a major concern for 20%, this issue has improved in the last two years, with more small builders obtaining finance from banks or private sources.

Despite their concerns, the majority (58%) of small builders were optimistic about the future of the industry with two thirds anticipating an increase in the number of homes they would build over the next two years.

The report contains a number of recommendations by the NHBC Foundation for government and industry to address these barriers and help boost the small house-building sector.  These include:

  • Planning – Speed up decision making, reduce inconsistencies and provide a clear tariff system.
  • Land availability – Increase the availability of smaller sites that could accommodate up to 10 homes.

For more information and to download the publication, please click here.