Leading land agents Aston Mead have accused the government of sidelining small and medium-sized enterprises (SMEs) in the battle to build more homes.
The company says that whilst the larger developers are currently delivering the fastest increase in output ever recorded, SME developers are being left behind, with many struggling to survive.
Aston Mead Land & Planning Director Adam Hesse explained: “It’s no surprise that 80% of SME developers have gone out of business in the past thirty years. The triple whammy of funding problems, a tortuous planning process and lack of suitable sites has really hit them hard. Consequently, the big companies have been able to dominate the market – in 1960, the top 10 housebuilders accounted for only 9% of all new homes; today it’s over 50%.”
Adam Hesse says that at the moment, funding is the real bugbear for SME developers. He explains: “Whilst the extra £1.5bn added to the £3bn Home Building Fund announced last year was very welcome, the money is taking time to trickle through and the means of getting hold of it are laborious and complicated. Most SMEs building fewer than 100-150 homes per year are now reliant on project finance agreed on a site-by-site basis. This is inefficient for both lender and borrower, with hefty extra fees for entry, exit and legal agreements.
“But the truth is that our outdated planning system also leaves a lot to be desired. There seems to be a presumption against new construction in this country unless a very good reason can be found to allow it – whereas in reality, it should be the other way around. While big companies can mitigate risk across dozens of sites, small firms encountering delays on just one or two of them may make the difference between company survival or going under.”
Ultimately, Adam Hesse says that a balanced mix between larger developers and smaller companies is necessary for the future success of the sector. He adds: “SMEs are better placed to unlock the potential of smaller sites which larger developers wouldn’t want and would otherwise be left vacant. What’s more, SMEs hold smaller cash balances and so are motivated to turnover sites quickly. SMEs are also vital in increasing investment and jobs which are sensitive to the needs of local communities.
“In every other sector – whether it’s technology, retail, travel or finance – it has been the nimble and hungry start-ups who have provided the ideas and talent which have driven growth. But the construction industry is almost unique in being dominated by companies which were established over 40 years ago.
“We need the government to improve access to land and finance for smaller builders, and prepare sites for development by providing the necessary infrastructure. The planning system needs to stop being politically motivated, and the length of appeals needs to be halved from what currently takes more than six months to a maximum of three – perhaps by re-employing retired planning officers to work part time and sit on panels, in order to fast track applications that have previously been turned down.
“Until then, this country will remain over-reliant on a small number of high-volume developers, who are driven by commercial self-interest and with little incentive to build any more quickly than they are at present.”