Lack of land and lending is blocking new homes being built by smaller builders, survey shows
A lack of available small sites and a lack of finance are the two top barriers for small to medium sized home builders being able to increase the number of houses they can deliver, new research has found.
Over half of small house builders, some 54%, say accessing finance is a major barrier to their ability to build more homes, up from 50% in 2016, according to the survey from the Federation of Master Builders (FMB).
A lack of available and viable land is the most commonly cited barrier with 62% saying it prevents them from increasing output and 54% believe that the number of small opportunities for small site development are decreasing;
The research also found that 42% of smaller house builders said that a shortage of skilled workers is a major barrier to their ability to build more new homes, and this rises to half 49% when asked to look ahead over the next three years;
Indeed, one in three small house builders that employ workers from the European Union believe the end of free movement will be a major constraint on their ability to build more homes;
Meanwhile 49% of small builders view the planning system as a major constraint on their ability to grow and ‘inadequate resourcing of planning departments’ was again rated as the most significant cause of delay in the planning application process.
‘Almost a decade after the financial crisis, access to finance for small house builders is getting worse instead of better. The results of the FMB House Builders’ Survey suggest a slight worsening in the problems these firms face in accessing the finance they need to build,’ said Brian Berry, chief executive of the FMB.
‘Assessments of lending conditions to SME developers were down slightly from 2016, the first fall in this measure since 2013. Small house builders express generally positive views of some recent Government initiatives in this area, such as the Home Building Fund, but we clearly need to double down on these efforts to make sure that SMEs have access to the finance they need to build Britain out of its housing crisis,’ he pointed out.
‘Our research also affirms just how vital it is that the Government acts on key proposals in the Housing White Paper, published earlier this year and designed to increase the opportunities for smaller scale development. Nearly two thirds of SMEs say that the lack of available and viable land is a major barrier to increasing output, the most commonly-cited barrier for the third year in a row,’ he explained.
‘More worryingly still, over half say that the number of available small sites is, if anything, decreasing. The White Paper quite rightly emphasises the need to diversify the house building sector so it is less reliant on a small number of large house builders. In order to do this, we need the Government to make good on its proposals to improve the availability of small sites and speed-up the planning process for small sites,’ he added.
Barry also explained that as half of small house builders think that over the next three years, skills shortages will act as a major constraint on their ability to grow, this concern is now beginning to overtake more typical frustrations such as the planning system.
‘If we get it wrong, Brexit and the end of free movement could further exacerbate the skills shortages we already have,’ he said, adding that the survey showed that a third of SME house builders currently employ EU workers and this rises to 70% in London and the South East.
‘The potential impact of post-Brexit immigration changes is therefore a cause for concern among small house builders. That’s why it’s so important that the Government introduces a transitionary period that allows the UK house building sector to gradually wean itself off high levels of EU labour,’ Barry concluded.