Over the past 25 years, the house-building market has become almost completely taken over by the major builders, while the number of SME builders has reduced by about 80%, the report says.
Just getting back to the number operating in 2007 could produce an additional 25,000 homes a year, the HBF suggests, but this first requires removal of some of the finance, planning, and red tape barriers that prevent smaller firms from playing a bigger part.
HBF executive chairman Stewart Baseley said: “Whilst housing output has increased significantly in recent years, the vast majority of the increases have come from larger companies. The number of smaller builders has collapsed over recent decades with few new entrants to the market able to grow to any size.
“If government wants to see continued increases in supply it is imperative it enables SME builders to play their part. Removing the barriers for SME builders could result in tens of thousands of desperately needed additional homes being built and boost economies up and down the country.”
The report’s foreword, written by Redrow founder Steve Morgan, explains how he grew his fledgling business into a national publicly listed builder. “Young entrepreneurs like myself, Tony Pidgley, and Lawrie Barratt before us, were able to start fledgling home building companies from scratch and build them into national builders – something that would be almost inconceivable today,” he says.
Throughout the 1960s and ’70s small companies could set up, grow quickly and establish themselves as significant contributors to local economies. This meant that by 1988 more than 12,000 SMEs were building new homes. Today however the number of SME builders has dwindled, with very few new entrants able to secure a foothold and even many established businesses unable to grow.
The report sets out the numerous barriers facing SME builders, including three main areas where red tape can be particularly harmful for SMEs’ prospects: highways, water and land registration, all of which can cause significant delay and uncertainty around costs.
The financial situation has also not improved only much since the 2008 crash, the report says.
The report, called Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes, suggests a number of steps government could take to help including:
- tackling specific planning problems that disproportionately affect the business environment for SMEs, including the lack of smaller sites and the impact of pre-commencement conditions
- the creation of a new Help to Build scheme to help extend sustainable lending to smaller companies
- lift barriers for builders to access tax incentives and other support enjoyed by SMEs in other sectors
- provide technical and planning advice services for fledgling businesses
- seize the opportunity of Brexit to reform EU regulation reducing the risk and complexity associated with building new homes.