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 2017 House Builders' Survey (PDF, 2MB).
Some of the key findings of the 2017 Survey are:
- 'Lack of available and viable land’ was the most commonly cited barrier to increasing output (62% of respondents) for the third year in a row.
- In second place as barriers to increasing output came ‘lack of finance to the company’ (54%) and third was ‘the planning system’ (49%).
- The percentage of respondents citing a shortage of skilled workers as a major barrier to growth rose again to 42% and when asked to look ahead over the next three years this rose to 49%, overtaking planning which fell slightly to 45%.
- Asked to rate current lending conditions to SMEs for residential property development from zero to five, the average score was 1.63; this is down slightly from 1.85 last year, the first fall in this measure since the question was first asked in 2013.
- 17% of respondents reported improved lending conditions over the past year, but 14% report deteriorated lending conditions; 69% report no change.
- 45% of respondents stated that they were involved in sites which were stalled for financial reasons; this was up from 35% last year.
- ‘Fees charged on new or existing loans' was rated as the most significant finance-related barrier ahead of ‘limitations on business overdraft facilities’ and 'poor loan to asset value ratios' which have been the greater causes of concern in previous years.
- 49% 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, Community Infrastructure Levy (CIL) or other obligations.
- The average score given for current buyer demand in the housing market (out of 5) was 3.26; this compared to an average score of 3.39 which this year’s respondents gave when asked to assess buyer demand one year ago.