93% of SMEs surveyed by the Home Builders Federation (HBF) cite delays in securing planning permission as a major barrier to growth
Planning permission delays and underresourced Local Authority planning departments are severely impacting SME house builders, the HBF has found.
Carried out by the HBF, Close Brothers Property Finance and Travis Perkins plc found that these were the key issues facing SME house builders for the fourth consecutive year.
Both factors have severely impeded SME’s ability to deliver much-needed housing stock and have been compounded by rapidly increasing associated costs.
Other issues hindering SMEs growth include:
- Nine out of 10 (91%) say planning departments in local authorities are under-resourced, which is hindering the growth of SME home builders.
- 46% of SME developers say the cost of obtaining planning permission has risen by over 30% in the past three years – even before December’s planning fee rises were introduced.
- Almost three-quarters (72%) claim interest rate rises have been a major obstacle in the past year.
- Just 13% think the Government’s current approach to housing and planning was positive for first-time buyers (down from 39% in 2022).
14 consecutive interest rate hikes have stifled markets
Rowland Thomas, managing director, Close Brothers Property Finance, comments: “Navigating an under-resourced planning system continues to present the greatest challenge to SMEs, who unlike larger housebuilders aren’t in a position to direct capital into new projects when there are delays.
“To make matters worse, there are now increased planning application fees to contend with. One would hope that the extra revenue these generate will be used to boost resources, but as the money won’t be ringfenced there is sadly no guarantee.”
“The major change in the fiscal environment has also been a blow to the sector. Consecutive interest rate rises have not only impacted construction and labour costs, but also stifled mortgage liquidity and buyer demand. Thankfully rates appear to have reached their peak in the current cycle and there is growing confidence that rate cuts may be as soon as Q2 this year.”
The policy surrounding planning has become more challenging
Proposals to abolish mandatory housing targets were confirmed by the Government before Christmas, a decision that 80% of survey respondents said would be a barrier to growth as, it will likely lead to more Local Authorities withdrawing their Local Plans (over 60 have already done so) and further delay and confusion for all parties.
SME home builders have also faced more than four years of uncertainty over the nutrient neutrality issue that is currently holding up around 150,000 desperately needed new homes despite the negligible impact on river quality their occupation would have; whilst demand remains constrained as a result of high interest rates and the lack of a government support scheme for first time buyers.
However, supply, costs and labour are becoming more accessible
On a more optimistic note, the number of SMEs citing the supply and/or costs of building materials as a major barrier to growth dropped significantly in the past year, from 79% to 42%, indicating global supply chains have largely recovered following the Covid-19 pandemic and war in Ukraine.
The cost and supply of labour is similarly perceived by fewer SMEs as a major barrier to growth than last year (41%, down from 64%), suggesting a softening in the labour market.
