In the past few weeks, several of Britain’s big developers have put out warnings about slowing or scaling back activity this year, owing to challenging operating and regulatory conditions.
If the big players are concerned, who at least have the large balance sheets required to ride out delays and a recession, then what does it mean for the smaller SME developer?
It would be a tragedy if SMEs exit the market as they did during previous downturns, many of which never resurfaced. A small number of volume developers shouldn’t be relied on to meet our housing delivery needs.
SMEs can offer a more locally bespoke product, variety and innovation. Smaller businesses are nimble and can focus more on the design quality and innovation of a smaller number of projects, when compared with national housebuilders working on so many projects of scale. I have done both during my career and the market needs both to tackle the housing crisis and provide a richer variety of homes – hence SMEs need more support before being eclipsed by the handful of nationals.
So, what are the hurdles at present? Access to competitive finance and material buying rates are well documented; however, perhaps the biggest challenge for an SME is the process and time others take to make the decisions needed to move forward. From banks, landowners, planning authorities and warrantee providers, to name but a few, protracted processes and decision time can risk killing an SME’s market timing and cashflow. In an ideal world, these professions need to be more nimble because unlike the bigger operators, smaller developers simply don’t have the deep pockets required to play the waiting game.
As a marker of this, the current system of processing planning applications and clearing conditions is broken and massively under-resourced, leading to delays that are already creating huge long-term problems for national housing supply. A lack of consented homes will deepen the housing crisis much further and warp the market, with only a handful of national plcs that can afford to cashflow such delays.
In an ideal world, these professions need to be more nimble because unlike the bigger operators, smaller developers simply don’t have the deep pockets required to play the waiting game.
One change could be separate and more autonomous planning officer teams – to deal with detailed reserved-matters applications and planning conditions, with less local political influence once the major decisions have been made at Local Plan policy and outline stages. This is how the process should work but it doesn’t. This structure would need major funding, but planning officers urgently need the resource, and developers may even contribute if it leads to a faster process. Some upfront investment now could lead to a much smoother process and reduced delays (meaning reduced costs) longer term.
I would also like to see more land being made available specifically for SMEs, especially from large public sector landowners, focused on longer-term community value and place, rather than just shorter-term cash. Contrary to popular opinion, this doesn’t necessarily mean a lower land payment.
BRiCS has one such model now operational with the Ministry of Defence, but it should be more actively encouraged, if not mandated, at the Department for Levelling Up, Housing and Communities and Homes England level with other public sector owners. SME developers are hungry to build, and must do so to stay in business. We just need more support and change in the right places.
Hugo Reeve is land and development director and co-founder of BRiCS Development