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16 November 2017

Support needed to strengthen shaky foundations for small housebuilders

The Federation of Small Businesses (FSB) is calling on the Chancellor to spark a small housebuilders boom in his autumn budget later this month (22nd November) to help solve the UK’s housing crisis.

Despite Government efforts to diversify the housing market, many existing smaller housebuilders are still finding it hard to grow, while new entrants are finding themselves locked out of the market altogether. The latest stats show that the proportion of new homes built by small house-builders has fallen to just one in eight.

Recent research from the Federation of Master Builders (FMB) demonstrates that two of the biggest challenges facing smaller housebuilders are access to finance and access to land [1].

A two-way approach needs to be applied by Government. Firstly, access to finance must be improved to allow small housebuilders to buy service and get planning consent for their own sites. Secondly, local authorities must use the planning system to ensure a supply of serviced sites with planning consent that small builders can build straightaway.

FSB is calling on the Chancellor to extend the £3bn Home Building Fund, announced in last year’s Autumn Statement. The fund, aimed at supporting smaller firms access finance has been well received and an extension would help unlock the housing market further.

FSB also calls on the government to deliver on its promise to exempt sites of ten units or less from affordable housing contributions and to ensure that local authorities do not simply increase Community Infrastructure Levy (CIL) contributions on these sites to negate the government's intention.

Additionally, Government should ensure the CIL takes better account of the higher costs of building small developments. The levy, and the way it is applied by local authorities, is preventing smaller housebuilders from taking on otherwise viable projects.

FSB National Chairman, Mike Cherry, said: “There is no denying that the UK’s housing market is in a state of arrested development and is in desperate need of a stimulus.

“Small housebuilders have huge potential to play this role if they are given the keys to do so. The Chancellor can set a clear statement of intent for housing by introducing measures that support smaller housebuilders and enable them to activate the housing market in this month’s budget.

“Extending the Home Building Fund is a key example of an effective lever Government can pull to break down one of the major barriers faced by smaller firms trying to enter the housing market – access to finance.

“The current approach to the CIL is inflexible with councils not considering the size of the proposed project when deciding how to set the levy. This is leading to smaller housebuilders being overburdened with unaffordable costs.

“These positive measures will help smaller housebuilders deliver the houses we need in the places we need. This will create jobs and stimulate growth in the housing market.”