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It is no doubt that the industry has faced a number of challenges in recent years, including COVID 19, Brexit, Nutrient Neutrality, a focus on Biodiversity alongside the ongoing Planning issues.
The State of Play report released by HBF, takes on the views of Close Brother Property Finance and Travis Perkins to shine a light on the challenges faced by Housebuilders, including the ongoing skills shortages and rising costs of mortgages and borrowing rates.
Is Planning still an issue?
The contribution that SME developers bring in order to grow our economy and deliver high quality homes to communities is often overlooked and the delay in planning is the main hurdle for 93% of them, followed by a lack of resources in Local Planning Authorities.
This is evident with 91% of local planning authorities state being under-resourced four consecutive years.
Unlike larger developers who will generally have multiple sites going at once, if planning for a smaller housebuilder gets delayed it has a bigger impact on the business as a whole and this is clear to see through the dramatic a drop in homes being delivered by SME’S, from 40% in 1988 to just 10% of all homes built in 2020.
% of respondents who agree delays in securing planning permission or discharging conditions are a major barrier
% of respondents who agree that a lack of resources in Local Planning Authorities (LPAs) are a major barrier
97% of respondents to the HBF’s report also stated a raise in the costs, by at least 11%, involved with obtaining planning permission. Other constraints include general red tape, uncertainty with political decisions, highway approvals and legal services required to complete the necessary S106 agreements.
Rowland Thomas, Managing Director of Close Brothers Property Finance, said: “Navigating an under-resourced planning system continues to present the greatest challenge to SMEs, who unlike larger housebuilders aren’t in a position to direct capital into new projects when there are delays.
To make matters worse, there are now increased planning application fees to contend with. One would hope that the extra revenue these generate will be used to boost resources, but as the money won’t be ringfenced there is sadly no guarantee.”
Other challenges SME’s are currently facing
Nutrient and Water Neutrality
Nutrient Neutrality still remains as another major obstacle, holding up around 150,000 homes and a further 40,000 being held up by water neutrality rules.
Research completed by HBF reveals that occupants of new homes are the least contributing factor to the legislation, emitting less than 1% of the nutrient emission (nitrogen and phosphorus), compared to agriculture producing 70% into our rivers and existing housing emitting 30% through our sewage system.
Even though housebuilders are required to pay new infrastructure charges and connection fees totalling £1bn alone in the past three years, water companies are still pumping sewage into our rivers and water system.
The affects of a skills shortage
The skills shortage hasn’t just affected the Construction, but the country as a whole. Housebuilders and Main Contracting companies play a crucial role in providing training, apprenticeships and vast employment opportunities.
However, the availability of labour has posed a significant challenge for home construction, especially for small and medium-sized (SME) builders in recent years.
The percentage of respondents citing labour supply as a major obstacle has decreased from 64% in 2022 to 41%, this decline might be influenced by emerging issues taking precedence rather than a substantial improvement.
Stewart Baseley, HBF’s Executive Chairman, commented: “The housebuilding industry faces some major barriers to delivery and all indicators now show sharp falls in supply. SMEs in particular are unable to manage the delays caused by the collapsing of the planning system and the lack of capacity in planning departments.
The increasingly onerous policy and regulatory environment has seen the number of SME builders plummet in recent years, and we urgently need to see a reversal of the anti-development approach by government or more companies will disappear. SMEs are vital to the industry’s ability to deliver the homes we need and play a vital role in training and communities across the country.”
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