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How can the UK reverse the decline in number of small housebuilders?

Thanks to market dominance by a group of major and bigger players, the UK has seen its small housebuilder demographic fall by 80% in a single generation.

Small and medium-sized housebuilders, defined as firms that produce 100 units or less every year, have fallen in number from over 12,000 in the mid-1980s to approximately 2,400 today. 

During a recent roundtable discussion at the Conservative conference in Manchester, the reasons for this stark reduction in the number of small housebuilders was discussed, along with potential solutions for supporting a more mixed economy of builders. 

LendInvest co-founder and Chief Executive Christian Faes said that small housebuilders have less access to the initiatives offered to entrepreneurs in other industries. Housebuilding startups are unable to raise capital through the Enterprise Investment Scheme, and the British Business Bank has yet to support non-bank lenders aimed at the property sector. Changes to Capital Gains Tax and Stamp Duty placed additional burdens on small developers and landlords responsible for refurbishing homes for the private rental market. 

Federation of Master Builders Chief Executive Brian Berry said that the primary obstacles to FMB members were: 

  • Limited access to land and finance 
  • The planning system cost and complexity 
  • Limited labour supply 

Another challenge affecting a number of small housebuilders was that local authorities often elected to release land in parcels that were too big for them to develop. Richard Blakeway, the Policy Exchange Chief Housing and Urban Regeneration Adviser, recalled that as Deputy Mayor of London for Housing it was more difficult for him to release a three-acre land plot than a larger one. 

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Tom Bloxham, chairman of Manchester developer Urban Splash, said that during the time he had been heading his company, the planning system had grown too expensive and complex for small developers to navigate. He pointed out that his first planning consent during the early 1990s had cost £2000 and would likely cost £200,000 today. 

Chief Executive Marc Vlessing of the developer Pocket Living said that the difficulties faced by developers were partly due to the country’s planning requirements were not prescriptive enough. Unlike countries like the Netherlands, there were too many grey areas. 

The group agreed that for small housebuilders to become competitive, changes would be required across numerous areas. It argued that if councils and landowners acted as master developers, they could choose to make openings available for a number of small housebuilders through partnerships that addressed specific needs, such as rural housing. 

To take advantage of such opportunities, small housebuilders would need better access to financing, given the fact that many bankers had stopped funding small property developers. Removing obstacles in the UK tax incentive system, which puts property companies at a disadvantage, would also help these firms raise the money needed to work on development projects. 

Panellists argued that above all, Britain needed to decide that it valued its smaller property developers and housebuilders enough to create conditions in which they could thrive and challenge the current industry leaders. 

Specialists in Construction Insurance

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