Small and medium-sized property developers (SMEs) play a crucial role in tackling the UK’s housing shortage. They’re the ones creating high-quality, locally focused projects that large national builders often ignore. But despite their importance, many SME developers are finding it harder than ever to survive in today’s complicated and expensive planning and development system.
According to the latest State of Play 2025/26 report by the Home Builders Federation (HBF) and Close Brothers Property Finance, the situation is getting tougher. The biggest problem? The planning system. Endless delays, red tape, and inconsistent decisions mean projects can be stuck in limbo for months—or even years—before a single brick is laid.
Rising Costs and Uncertain Viability
Every part of the process is getting more expensive. Land prices are often too unrealistic, materials cost more, and skilled workers are increasingly hard to find. Wage inflation and supply issues—made worse by global disruption—have added more pressure to already stretched budgets. For smaller developers working on tighter margins, this can make or break a project.
Regulation Overload
New regulations designed to improve safety and sustainability are well-intentioned, but they often hit SMEs hardest. Rules like the Building Safety Levy and Biodiversity Net Gain all come with extra costs and complex compliance requirements. Large developers can afford whole teams to manage this red tape—but smaller firms simply can’t, leaving them at a disadvantage.
Infrastructure Delays
Even when planning permission is finally approved, another hurdle awaits: connecting new homes to essential infrastructure. Wastewater and power connections are often delayed, and utility adoption processes can drag on endlessly. These bottlenecks can halt projects, frustrate buyers, and damage SME credibility.
Confidence and the Future
It’s no surprise that confidence among small developers is slipping. The HBF reports that 97% of SME builders believe current conditions are holding back their growth. Yet, the potential is huge—if the barriers were lifted, SMEs estimate they could deliver an extra 100,000 homes each year, boosting output by more than 50%.
What Needs to Change
To unlock this potential, the industry needs urgent reform. Planning processes must be simplified, access to finance improved, and infrastructure coordination made faster and clearer. The rules and red tape that strangle smaller builders need to be cut back so they can focus on what they do best—building quality homes.
SMEs are ready to build. The real question is: will the system let them?
