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Fewer SMEs means more unaffordable housing

Rico Wojtulewicz, Head of Housing and Planning Policy | National Federation of Builders

5 min read Partner content

Rico Wojtulewicz, policy advisor for the House Builders Association (HBA), comments on the latest figures on homeownership  in Britain and argues that SME house builders can play a vital role in building a better Britain.


The Housing Headwind, a report by the Resolution Foundation, found that homeownership dropped to its lowest levels since the 1980s. Some regions such as Greater Manchester saw a 15.8% drop since 2003.

The report points out that housing costs have absorbed wage increases, thus making living costs altogether unaffordable. This worrying trend has not resulted in decreasing or stabilising rents, but saw house prices rise exponentially and diversity of property stifled.

Worsening housing affordability

The report also shows housing affordability constantly decreasing from 2003, with the recession of 2007-2008 significantly worsening the problem.

The House Builders Association (HBA) would argue that this trend coincided with the shrinking of the SME house building sector.

SMEs once built the majority of our homes. They were our collaborative partners and kept the housing market competitive. Yet, in 2016, their market share is below 30% with the sector shrinking by 60% since 2003. For HBA members, the affordability crisis comes from a lack of appreciation for the role of SME house builders, with both central and local government failing to understand the mechanisms for sustainable delivery.

Consequences of decreasing SME house builders

There are three consequences to SME house builders losing more than a third of their market share: more unaffordable housing, fewer available skilled construction workers, and supply overtaking demand. However, there is a fourth important consequence affecting local communities: a lack of diversity in properties.

In London, the majority of completed homes are one and two-bedroom flats – with many traditional houses now converted into flats. And where London leads, Manchester, Birmingham and Liverpool follow. Families are being outpriced away from cities.
The lack of diversity in properties being built has caused rents to spiral out of proportion and investor-led developments rise in number. It has unleashed opportunities for large developers because land prices are based on unit output, not on community need.

Effects of budget cuts

Central Government cuts have certainly played their part. Many under-resourced local authorities are struggling to concentrate on readily deliverable small sites and infill.

Therefore, they try to meet their targets through large but ‘slow-to-deliver’ sites. In the meantime, house prices keep on rising.

Local authorities

Local authorities are under a lot of pressure to properly resource departments, and the Government should acknowledge this challenge. Local authorities should shoulder some responsibility for creating this imbalance.

Refusing to recognise that SME house builders are local experts has further worsened any underfunding from central Government.

A case study: Hall Bros

NFB member and Coventry developer Hall Bros has been building rented homes for 40 years. Its business model concentrates on retirement and key worker rented housing, with a focus on supporting local employment and training. And yet it has struggled to obtain planning permission over the last decade, despite operating in an area of deprivation and housing need.

Hall Bros is not a non-profit developer, but you could be forgiven for thinking it had strong charity ties. In partnership with the local community, Hall Bros knows the local rents, the local community and its specific needs.

That is why it rents some properties at social rent, making a loss on those units. On a recent project, it made sure the residential care facility included rooms for carers to stay overnight. Though not part of the original plan, Hall Bros offered its design expertise to directly reduce the financial burden on the NHS.

This local expertise once extended to housing estates too. Hall Bros, alongside other builders, was entrusted with planning and delivering a housing estate that local people wanted.

But does this added value even resonate with decision-makers? Is their affordability challenge only about planning gains and paper numbers?

Building a better Britain

Similar stories are not uncommon. At least, they were not when SMEs were part of the community solution, and not seen as part of the output challenge.

Local authorities need to reassess what homes they want and how to deliver them. They cannot simply look to the Government to solve all of their problems. They must consider how valuable local employment is to their economy and understand the advantages to having local people being able to afford local homes.

SMEs are versatile operators and can build different types of homes. They are also connected to their local communities in a way that local councils will never be.

The HBA urges local authorities to renew those ties that once helped build our communities. They are the priceless ingredient for a sustainable local economy and they will go a long way to tackling the housing crisis.

This Government, led by Theresa May, must do more to understand how homes are delivered and what that means for local communities. As decision-makers, local authorities are already empowered to solve many local problems quickly. In housing, it is time those decisions stopped focusing just on supply and delivered the homes, opportunities and places that local communities both want and need.

That is the only way that together we are going to build a better Britain.

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