SME Developers and the Planning System.
Post-election messaging from shadow ministers after a change of government in the UK is fascinating. The shift away from electioneering and back to policymaking is often a dramatic one. Certainly true in the case of the newly appointed opposition leader at last month‘s Conservative party conference.
While political language is obviously crafted to strike a chord, it’s not often that I hear my own words spoken by a politician of any party. But, amidst a 40 page pamphlet titled ‘Conservatism in Crisis, Rise of the Bureaucratic Class’, while addressing “the regulatory burdens that restrict housing supply”, Kemi Badenoch published a phrase very similar to one I’ve been using for some time now;
“a quasi-cartel of large housebuilders”
Not necessarily in precisely the same words, but the warning of large housebuilder monopoly is a drum I’ve been banging for a good while.
In the 1980s SMEs delivered around 40% of new homes. Now it’s closer to 10%. And the statistics don’t stop there. Pick any industry survey of SME developers over the past decade, and you’ll see a dramatic and sustained shift in confidence, finances and development rates. I won’t regurgitate the statistics here. There’s already plenty of analysis out there presenting evidence to the debate. A large section of our clients are SME developers, so it’s an issue we see, and try to navigate on their behalf, every day.
The planning system, and crucially how it’s applied, pressurises every partof an SME’s business model. It’s becoming increasingly difficult to get decision makers to see the weight of a smaller site’s benefits in a balancing exercise, and so disproportionately favours large housebuilders.
Despite the challenges, our team are still securing a significant number of permissions for SMEs, but that in no way means the challenges are over. The financial viability of a site must include the rising costs and extended timelines involved in gaining planning consent. Clients tell us that this pressure squeezes budgets, slows down delivery, and often affects the overall quality of the development, while also pushing up the market price of homes. The financial viability of a site must include the rising costs and extended timelines involved in gaining planning consent.
Proposed reforms
The proposed reforms to the NPPF would appear to be a start to addressing the imbalance, with policymakers at least recognising the barriers faced by SME developers. There’s a space, seemingly made for SMEs, specifically in the development of sites that the larger firms won’t touch; sites like complex, or smaller brownfield sites and the (yet to be defined) grey belt sites, now presented as a priority.
How that balances with Biodiversity Net Gain (BNG), Community Infrastructure Levy (CIL) and unnecessarily high costs in preparing applications (to provide the volumes of reports now required), alongside high build costs, remains to be seen.
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