HBF: Tax incentives needed for SME developers – analysis

Earlier this month United Trust Bank called on the government to radically reform the planning system to assist smaller developers and builders to play their part in tackling the housing crisis.

Now David O’Leary, policy director of the Home Builders Federation says “growth-focused” builders should also be given financial incentives to build. “While supply has risen by more than 50% in just three years the vast majority of this increase has come from large house builders,” he says.

“There is enormous potential for SMEs to deliver a large chunk of the new housing the country needs. By 2007, because of changes to the planning system, we had already experienced two decades of SME decline, but even returning to the numbers active then could yield an extra 25,000 new homes each year.”

O’Leary says too many features of the current planning and development finance practice work against smaller builders and are restricting the speed of house building.

“The lack of suitably structured development finance that supports company growth and a planning system that consistently works against the interests of small builders, makes today’s business environment extremely challenging,” he continues.

“In addition to the terms on which they secure development finance making growth difficult, small builders and new entrants face the same problems and frustrations of larger builders. The cost and complexity of the planning process and the unhealthy reliance on third party monopolies for the provision of utilities makes the development of new homes a risky business, particularly for companies without the scale to absorb delays or losses on some sites.

“Ensuring the local planning system produces suitable sites for small developers and addressing the planning and regulatory inefficiencies that disproportionately affect small companies would help to reverse the decline of small house builders. And tax incentives for growth-focused SMEs could help make major inroads into ambitious government housing targets,” he adds.

Big builder bias

Max Henderson (pictured), is managing director of family-owned developer Henderson Homes. He says pressure to meet the housing target is having an unfair impact on smaller house builders.

“In the rush to meet government targets for new homes, large volume developers are being given the green light for huge schemes with thousands of units.  Too often they are populated with off the shelf house designs that bear no consideration for the location and vernacular architecture or whether the local infrastructure and amenities can support the influx of residents.

“This is to the detriment of smaller firms, such as ours, who build developments with fewer units but that look to preserve and even enhance the character of the location.  Our smaller schemes come under greater scrutiny and are often overlooked in favour of these volume sites which provide a ‘quick fix’ to the housing shortage.

“We’d like policy to change to ensure no one location is flooded with one type of development and that policy focuses purely on the reuse of smaller sites to create infill development within the existing settlement boundaries rather than swallowing up huge swathes of our ‘green and pleasant land’,” he adds.

A report by the HBF earlier this year claimed over the past 25 years the number of SME builders has reduced by 80%, and getting back to the number operating in 2007 could produce an additional 25,000 homes a year.