It was cheering to see Sir Edward Lister say that it is a priority for government to see more property SMEs play an active role in housebuilding.
Yet despite warm words, subsequent actions by government continue to be wide of the mark.
Incentivising - or even ‘requiring’ as Lister suggested - large companies that buy development sites to include smaller developers in their schemes is a commendable initiative. Only bold measures like this will address the disparity of opportunity between the property giants and disadvantaged smaller players for whom access to land remains a critical barrier to entry.
But it is still not enough to put the onus on corporates to increase market plurality. Not only is land inaccessible, so too is finance for many prospective, promising developers. Alternative lenders are bridging the gap, but the Home and Communities Agency has a solution at its fingertips that could disrupt the status quo.
The HCA’s £3bn Home Builders Fund was launched to get more SMEs building but little has been deployed since its 2016 launch. Our estimation is that actual distribution must be well below the £56m the fund needs to lend every month to meet its commitment to finance 25,000 new homes by 2021.
Helping SMEs prosper
The 2016 Tailored Review of the HCA recommended that the agency made use of intermediaries to get the funds out. Working with alternative lenders would do just that, yet the HCA is understood to have only formalised one intermediary arrangement to date.
Lister was quite right when he remarked that “small enterprises become medium-sized enterprises and medium-sized enterprises become large companies”.
But recent history is proving this to be very rare. There are five times fewer SME developers now than during the last housebuilding boom.
We are in danger of forgetting what a prospering SME ecosystem looks like - yet the HCA has a tool to set that right. And our industry is ready to help them put it into action.
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