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Industry Insights

Why the UK's housing market needs SME builders

It’s no secret that the UK is suffering a housing crisis with delivery falling at around half of what is needed. In 2014, the overall demand was 240,000 whilst the actual delivery for the year was only 112,400.

As the numbers above suggest, there is a strong market need for these homes and the housing market has the potential to be a significant driver of growth in the UK, ultimately kickstarting the country’s economy.

Following what has been a long-term declining trend, the housing shortage is now at crisis point with the government stepping in in an attempt to turn things around.

As outlined in the 2015 Autumn Statement and Spending Review, plans include 400,000 new homes, a doubling of the housing budget, and a wider roll-out of the Right-to-Buy initiative, amongst other things.

It is hoped that the proposed reforms will make the planning system quicker and simpler, thereby encouraging and enabling small and medium-sized building businesses to get back into the marketplace.

The current government has announced their commitment to creating 200,000 starter homes over the next 5 years, unlocking £1.2billion of funding to go towards the building of 30,000 new starter homes and around 30,000 market homes.

They aim to combat the long-standing issues of the availability, accessibility, and affordability of land with proposals which outline the release of publicly-owned unused, underused, or brownfield land with planning permission already in place. It is hoped that this access to disused and under-occupied land will mean that SME builders can get involved and start building without any delays.

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Whilst the proposed plans will kickstart regeneration across the UK house building market, something more needs to be done in order to ensure sustainability.

The increased access to land and removal of the barrier of seeking planning permission will unlock a range of potential positive social and environmental benefits, through skills and training and job opportunities, nationwide.

One of the biggest challenges currently faced by small and medium-sized house builders is access to land. If this barrier could be removed, then more of these smaller businesses could re-enter the market and deliver much-needed, high-quality homes.

When the economy crashed in 2008, and due to the subsequent recession, smaller builders were pushed out of the market and have since struggled to regain their place. However, these small and medium-sized builders are the very businesses we need to be encouraging to help tackle the housing crisis as the larger, national house builders aren’t managing to meet - never mind exceed - current demand.

The next step is for us to help unlock finance for housebuilders through non-bank sources. Bypassing the banks means that we can try alternative routes such as co-investment between the government and alternative finance solutions, including private equity investments which would provide the equity and debt required to move projects forward.

However, the unlocking of land and finance is only the beginning to what can be done in this space. The potential for positive social and environmental impact is huge.

Global design, engineering, and management consulting company, Arcadis recently produced a report entitled, “Solving the Housing Crisis: The Big Idea”, in which they proposed a new National Housing Service delivery agency. Independent of the government, the agency would be given control of housing strategy in the UK and would deliver on a number of fronts.

In fact, the report claims that the proposals would generate 97,500 new jobs and 80,000 trainee placements over a 30-year period alongside £1.3trillion in GDP growth and £38billion of investment returns to the taxpayer.

The real estate sector was recently found to be the "single most popular sector" in a report published by industry leaders Nesta. Find out more by downloading your free copy:

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