LendInvest uses cookies to make our site better. By browsing you agree to our cookie policy. clear

August 25, 2016

Now more than ever, we need to back the small developer

In the context of the current housing deficit, the latest housebuilding stats aren’t great. But what does doing better look like?

The Department for Communities & Local Government published its latest figures today, which revealed that housebuilding starts in England rose 2% in Q2 compared to the previous quarter and 6% on a year-on year basis. Completions were up 7% on the previous quarter, but down 2% on last year.
For Rod Lockhart, managing director at LendInvest, the modest pace of the improvements is a concern:

“At the current rate, we will fall well short of the Government’s target of one million new homes by 2020, and fail to make inroads into the sharp housing shortage in the UK. The large housebuilders are not keen to do more, so efforts must be focused on small and medium-sized builders.”

For far too long we have looked solely to the biggest housebuilders to deliver the homes that we need in the UK. The nine biggest housebuilders deliver more than half the new homes built each year.

Small builders, who once played such a key role in adding to the housing stock, have been overlooked. Back in 1988, the number of small builders (defined as those building 100 units or fewer) stood at 12,200 in the UK. That had fallen to 5,700 by 2006, and then just 2,400 by 2014. This 80% slump has been to the detriment of both the industry and the nation at large.

A £5 billion pound opportunity?

Finally, smaller developers may have a huge opportunity to make their mark in the current housing crisis. The rumoured multi-billion pound fund currently being prepared by the government will be aimed at small- and medium-sized housebuilders. Better access to loan finance for small developers is great news and it’s about time.

“The rumoured £5 billion Home Building Fund is a good start, but finance is not the only area holding these builders back. More has to be done to reduce the complexities of the planning system and open up access to land to build on,” said Lockhart.

It’s never simple

Beyond limited access to finance, small and medium-sized developers still find it far too hard to access the land needed to develop on. A report from the Guardian last year claimed that the biggest homebuilders are currently ‘landbanking’ land which could be turned into more than 600,000 homes. If they will not build on that land, then it should be sold to smaller developers who will.

There is also an issue with skills. Would-be developers have the passion to take on the housing projects that we need to support, but they do not have the skillset and knowledge necessary to make a success of it. As an industry, it is vital that we do more to arm them with the tools they need, from helping them to accurately evaluate potential sites to guiding them through the planning system minefield.

Supporting those developers will take a more nuanced approach than simply offering them loans. With the right tools the passionate property entrepreneur will be our greatest asset.