The need for new house building
New house building brings enormous economic and social benefits and it is widely accepted that there is a pressing need for the UK to build many more homes than it is currently doing.
The number of households in England alone is growing at the rate of over 220,000 each year, yet only 124,520 new homes were built in England in 2014/15. The last time more than 200,000 homes were built in a single year in England was in 1988.
The decline of SMEs in the house building industry
An analysis of NHBC statistics shows that in 1988, firms completing less than 500 units per annum delivered two thirds of all new homes in the UK. However, the number of small and medium sized (SME) house building firms has declined significantly since then and in 2014 only 30% of new homes were delivered by firms of this size. This trend has accelerated over the course of the economic downturn, with the number of SME house builders in operation having halved since 2007.
This represents a serious loss of capacity in the UK house building industry which must begin to be reversed if we are to start building the number of new homes we need. We need to enable growth in output among existing firms, an increase in new entrants to the industry and make better use the of the large numbers of skilled small contractors who would have the capacity.
In order to do this, we need to address the major barriers and structural constraints which continue to operate on SME house builders.
- Access to finance for small developers and new entrants
- The availability of suitable and viable small sites
- Disproportionate cost, complexity and delay in the planning system
- Excessive demands for developer contributions placed on small sites
FMB House Builders survey
The FMB conducts a yearly survey of its house builder members. Download The FMB's 2016 House Builders Survey (PDF, 970KB).
Some of the key findings of the 2016 Survey are:
- Lack of available and viable land’ was the most commonly cited barrier to increasing output (67% of respondents) for the second year in a row,
- In joint second place as barriers to increasing output came ‘lack of finance to the company’ (50%) and ‘the planning system’ (50%)
- The percentage of respondents citing a shortage of skilled workers as a major barrier to growth rose markedly from 27% last year to 39% this year
- Asked to rate current lending conditions to SMEs for residential property development from zero to five the average score was 1.85; this score has risen steadily up from 1.59 in 2015, 1.20 in 2014 and 0.95 in 2013, though the majority still give scores of 2 or less.
- 16% of respondents reported improved lending conditions, though three quarters (75%) reported no change.
- 35% of respondents stated that they were involved in sites which were stalled for financial reasons.
- ‘Poor loan to asset value ratios’ was rated as the most significant finance-related barrier just ahead of ‘limitations on business overdraft facilities’, which had been the greatest cause of concern in all previous surveys.
- 44% of respondents said that there were sites which they would otherwise be interested in but which they believed would be unviable due to likely Section 106, CIL or other obligations.
- The average score given for current buyer demand in the housing market (out of 5) was 3.35; this compared to an average score of 3.59 which this year’s respondents gave when asked to assess buyer demand one year ago.