Paul Turton, Head of Sales Development Finance

It’s a fact that in the late neighties small builders were responsible for 4 in 10 new homes compared to just 12% today…

…It’s a fact that between 2007 and 2009, onethird of small companies ceased building homes. And it’s a fact that returning to the number of home builders operational in 2007 could help boost housing supply by 25,000 homes a year. Over the summer, United Trust Bank (UTB) asked over 100 people working in the property finance industry what they would do to help reinvigorate the SME house building sector. It will come as no surprise that two of the top answers were to reduce planning red tape for smaller development sites and to increase the threshold of classification of a ‘small’ site from 10 to 20 units.

I agree with both suggestions whole heartedly, but I also believe the planning system needs a change in mindset with a much greater emphasis on strategies which support local house builders. Small builders typically live in the communities in which they build which means;

  • Local builders have an intimate knowledge of the streets and districts where they operate, enabling them to size and plan projects in an efficient and cost-effective manner.
  • Local builders have supply chains that will include local materials and labour, contributing to the local economy and affluence of an area.
  • Local builders are ever aware of the concerns and aspirations of their community and the push and pull of the local politics. This enables them to predict the hurdles they will face during the planning and building process.
  • Local builders know that they are only as good as their last project. Their brand, their reputation and their balance sheet are on the line each time a new scheme comes to market. That is why local developers know that they need to self-impose the highest standards in design, materials and build quality through the planning, design and building process.

It is this in-depth knowledge of the DNA of a local market which allows SME developers to mobilise and deliver sites that larger and less connected operators would deem too small or too difficult to build. Small is beautiful whether it’s the sites that are built upon or the builder who delivers them and we cannot afford to overlook small and medium sized house builders and developers operating across England and Wales when considering how to tackle housing shortages for local people.

But what can be done to stimulate growth in the number of small builders operating in our towns and cities? The fact remains that a one size fits all planning process has created a blind spot for small builders and the sites they wish to develop. This is reflected in our planning system which is over engineered. There is too much conditionality where the rules do not reflect the reality of delivering smaller sites. Furthermore, associated 106 agreements are overbearing in their demands whether social or financial, and ignore the indirect economic benefits of infill and brownfield sites.

Equally, local plans largely ignore smaller sites on both public and private property and only come forward on a case by case basis, adding to the uncertainty of what can be delivered where and at what cost.

Planners and developers need to build proper commercial relationships at a local level. There are plenty of platforms on which this can be done, whether it’s through bespoke forums or through local clubs, associations and chambers. Unfortunately, local officials can often fear that developing productive relationships with house builders might be viewed with suspicion, and fear that their professional integrity might be called into question. This must be replaced with bravery and a determination to create trust and a desire to conduct business in an open and honest manner through regular, face to face interaction. Collaborative rather than combative is the way forward. Through these relationships planners will find that they have a local private sector community who can identify small sites which can be nominated for the local plan. More of the right kind of homes in the right places is a win for the planners, the housebuilders and the local community.

All developers face a mountain of potential precommencement conditions when trying to gain permission to build. These should be restricted to a handful of essential pre-commencement with the balance marked pre-occupation so as not to drain the house builder of their resources before even starting the groundworks. Reasonable and sensible conditions are useful and protect future homeowners and the existing community but to take just one example, the pre-approval of bat boxes is not helpful to anyone least of all the bats themselves.

It also appears to me that saddling smaller developers with the responsibility of providing affordable housing is to hamstring them at a critical stage in their evolution, when they will be investing their profits in the growth of their businesses. Economies of scale should be properly reflected by
lifting the threshold at which social housing considerations come into play. Placing these requirements on the larger and more accessible sites targeted by national house builders would be much fairer. It is much easier to blend the lower margins achieved on social housing units on a 200 unit site than it is on a 12 unit site. Equally, any financial contributions liable under CIL (the Community Infrastructure Levy) should be allowed to be settled on a ‘build now, pay later’ basis when sales income can be used rather than having to pay it before a project has started and the cash to get a project off the ground may already be tight.

SME house builders could play a more significant role in delivering the UK’s new housing needs. Removing obstacles in the planning system, reducingred tape and recognising that smaller housebuilders complement national housebuilders rather than compete against them would be big steps towards reinvigorating the SME sector.