Pre-packaged planning permissions for small sites would help SMEs

Reducing planning risk by making decisions more predictable and quicker would benefit SME housebuilders, the House of Lord's built environment committee has concluded.

In its Meeting Housing Demand report released this week the committee has urged councils to support SME builders by creating a speedy planning process.

"The government should work with local planning authorities to create a fast-track planning process for SMEs," said the report.

It recommends a ‘master developer' model, where larger sites are built by different housebuilders helping SMEs bid for more secure developments. Councils and Homes England should be required to increase the percentage of homes built by SMEs on larger sites, said the report.

"Local authorities should support SME housebuilders to navigate the planning process," it said.

In his evidence, to the cross-party committee, last November housing minister Christopher Pincher said the current planning reforms were looking at making the rules more predictable.

"This would encourage SMEs to get into the marketplace to develop. They do not have the bandwidth to wait around for a long time, which the present system tends to encourage."

The committee, chaired by Baroness Neville-Rolfe, has said this could be addressed by having ‘pre-packaged' planning permissions for small sites and providing a fast-track for SMEs.

More SMEs in the market would boost housing supply

The report wants to see the trend of diminishing SME housebuilders reversed and has stressed their importance for fostering diversity and quality. Savills research shows 39 per cent of homes were delivered by SMEs in 1988 compared with just ten per cent in 2020.

The Home Builders Federation, HBF, has calculated that returning to the number of home builders operational in 2007 could help boost housing supply by 25,000 homes per year.

The Federation of Master Builders chief executive Brian Berry said the government had to reverse decades of decline by listening to smaller local housebuilders.

"More needs to be done to increase land availability, such as identifying small, underutilised sites in local plans. Fast-tracking applications from small builders would make a real difference, as would addressing skills shortages," he said.

Lack of finance was highlighted as another barrier for SME housebuilders who need fast sales turnaround to get cash to build again. The HBF has called for government guarantees to enable loan-to-cost ratios of up to 80 per cent.

Property finance brokers Hank Zarihs Associates said this would help lenders approve more construction loans to the smaller housebuilder.