Local Planning Authority delays in securing planning permission or discharging conditions were identified as a key barrier to growth by 93% of SME housebuilder respondents
A survey from the Home Builders Federation on the challenges facing SME housebuilders has found that labour shortages, inefficient planning processes and rocketing material costs are causing significant concerns.
The survey expands on previous research conducted by Home Builders Federation, Close Brothers Property Finance and Travis Perkins exploring the impact of the pandemic on small and medium enterprise (SME) house builders.
The latest survey assessed a wider set of challenges facing SME housebuilders, such as mortgage availability, economic uncertainty, rising costs and various new Government levies and regulations.
Problems stemming from LPAS were a key concern
Anecdotal comments from respondents indicated they considered the current state of the planning process to be the “worst it’s ever been”.
93% of SME housebuilders cited delays in securing planning permission or discharging conditions as a major barrier to growth.
92% said the lack of resources in Local Planning Authorities(LPAs) also impacted growth -and has reportedly increased since 2021 (90%).
The report found that the similarity of results to 2021’s findings was indicative of “a lack of progress by the Government and LPAs in tackling these issues.”
Across all regions of England and Wales surveyed, developers felt that planning constraints were one of the top barriers to growth.
76% felt that staff and resource shortages in LPAs were a major constraint.
The removal of housebuilding targets was met with criticism
SME housebuilders also voiced their concerns about proposed stripping of housebuilding targets from Local Authorities, believing that instead of creating a less restricted market, it will remove the bare minimum standards (that many Local Authorities are struggling to deliver already).
If Local Authorities can’t meet their housing demand with targets set, there is no way they are going to do it with the targets removed,” one respondent said. “Levelling up is all well and good, but the greatest demand for housing is in the south-east and therefore that is where the greatest provision of new homes should be. Housebuilders would not build new homes if they couldn’t sell them.”
And another, more succinctly: “Do not remove housing numbers targets from local authorities.”
When respondents were asked if they were satisfied that the Government’s approach to planning and housing was positive for SME housebuilders, 92% said no.
Costs have risen across the board for SME housebuilders
When asked whether the cost of obtaining implementable planning permission had changed in the past three years, 91% of respondents believed the cost had increased, with nearly half(48%) agreeing that it had risen by 11- 30%.
79% of respondents identified the supply and cost of materials as a major barrier to increasing housing delivery over the next 12 months, up slightly from 78% last year, and from 20% in 2020.
SMEs are often more vulnerable to economic changes, as they do not have multiple projects to rely on for income when one project stalls, as larger enterprises would.
Similarly to this, SMEs lack the resources to buy in bulk and cannot stockpile to be more resistant to price increases and supply shortages.
House price inflation softens some fiscal impact of rising costs, but as it is not consistent across regions, many developers cannot rely on this in the long or even short-term.
Recruitment and apprenticeships are floundering
Just under 60% of survey respondents reported difficulties in recruiting for site-based roles over the last 12 months.
The top five roles most difficult to hire for were:
- Management/professional (55%)
- Brickwork (53%)
- General labour (40%)
- Carpentry/joinery (36%)
- Plastering (26%)
Recruitment for plumbing and finishing trades was significantly more difficult for smaller SMEs than larger ones, and the North of England reported particular struggles with supply and cost of labour, increasing by 30% on last year’s figures, whilst the number of hired apprentices almost halved.
Nationally, there was a drop in the popularity of apprentices, with 50% employing apprentices, down from just under 60% employing apprentices in 2021.
SMEs train and employ a large proportion of the industry’s apprenticeship workforce but face numerous issues in the funding and retention of apprenticeships.
Larger SMEs are more likely to employ apprentices than their smaller counterparts
100% of developers who build between 76-100 units hire apprentices followed by 79% of developers that build more than 101 units per annum.
On the other hand, smaller developers (building between 1-10 and 11-25 units per annum) employ the least number of apprentices, with only 10% and 23% respectively.
“The role of SMEs in the housebuilding industry has consistently been underestimated and often ignored when it comes to policy and planning. The reality, however, is that SMEs play a vitally important role in the creation of a healthy housing market,”said Rowland Thomas, managing director of Close Brothers Property Finance.
“As well as the regional economic benefits from employment and supply chains, they are pivotal in bringing new innovation and talent into the industry, with apprentices comprising around 19% of an SME’s workforce – just under 1 in 5 employees. SMEs also develop smaller, often more challenging, development sites on disused land, maximising the use of land across the country.”
Top suggestions from SME housebuilders for government action include:
- Ensure planning departments are adequately resourced and funded.
- Bring forward a greater number of small sites in Local Development Plans.
- Simplify the planning process for small sites.
- Make Local Planning Authorities more accountable for poor service/delays.
- Depoliticise the planning process.
- Increase the affordable housing threshold.
- Resolve the nutrient and water neutrality issues.
- Make development finance easier to access on terms that allow builders to recycle
their equity more quickly. - Introduce Level 2 T-Level style qualifications for routes into home building.
- Ensure existing apprenticeship schemes and FE courses have a greater emphasis
on practical skills. - Work with CITB and the Department for Education (DfE) to ensure CITB’s remit
covers all skills necessary to the home building industry, particularly in the
transition period towards the Future Homes Standard when green skills are ever
more important. - Provide sufficient support on an ongoing basis through CITB and otherwise to
help SMEs manage apprenticeships and so optimise apprenticeship recruitment.
SME housebuilders are encouraged to take part in the next round of surveys
You can read the full findings of the State of Play: Challenges and Opportunities Facing SME Home Builders report here.
Smaller developers are encouraged to fill out the next round of surveys, which can be found here.
