Small and medium-sized home builders in the United Kingdom could deliver 100,000 new homes per year if the government addresses the tax and regulatory barriers holding back their growth.
This is according to the Home Builders Federation (HBF)’s latest State of Play report, which surveyed SME home builders across the country and found that regulatory and tax barriers are exacerbating the housing crisis in the UK.
97% of respondents said that this environment was holding back the growth of the sector, with the report projecting that if the government took action to address regulatory and tax hurdles, SMEs could improve the number of new homes they build every year to 100,000.
This would mark an increase of 56% over the roughly 63,000 homes the sector currently delivers per year, and it would also allow SME home builders alone to achieve a third of the government’s target of 300,000 new homes annually.
The report found that confidence in the SME home building sector is bleak, with 9 out of 10 businesses surveyed less optimistic than they were before the current government was elected.
94% of SME builders cite securing planning permission or discharging conditions as a major issue inhibiting their growth, and 89% view Local Authority capacity as a significant constraint.
The report suggests that despite the government’s ambitious goals, the obstacles faced in the home building sector are longstanding and difficult to overcome, with everything from delays in planning to affordability for first-time buyers smothering the growth of the sector in the UK.
Affordability issues and support for first-time buyers
The vast majority of SME home builders (84%) said affordability of potential buyers is a key concern, which the HBF said reinforces the need for government to help more people onto the housing ladder and stimulate demand for new houses.
Key recommendations proposed in the State of Play report include providing support for first-time buyers to help them get on the housing ladder.
This could include the introduction of a new equity loan scheme by government, similar to Help to Buy, where the government would provide buyers with an interest-free equity loan to help them afford their first home.
Respondents also showed support for changes to Stamp Duty to help induce more demand in the housing market and encourage home building.
The key recommendation in the report, however, was reducing the cost of and complexity of the planning system – an intervention supported by 52% of all respondents.
The organisation noted that the Planning & Infrastructure Bill which promises positive reforms to address some of these issues, continues to pass through Parliament and leaves bottlenecks and obstacles unresolved, inhibiting housing delivery.
“Despite recent Government interventions, the operating environment for SME home builders remains overly complex, costly, and slow, stifling growth and deterring new entrants to the market,” said Home Builders Federation chief executive Neil Jefferson.
“Tackling longstanding planning bottlenecks – as well as wider issues such as viability, infrastructure delays and rising demand-side pressures – is essential if SMEs are to confidently invest in future land and labour supply.”
“Without real change, SME home builders will remain at a disadvantage, unable to absorb mounting delays and costs, and undermining the Government’s ambition to create a diverse, competitive and resilient housing market.”
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