Housing White Paper: Why Small Is Beautiful

8 February 2017

Most of the MSM’s reporting on the Housing White Paper, published yesterday (Tuesday 6th), has concentrated on the Conservative’s apparent reverse from its goal to create a ‘nation of homeowners’. Now the Government is encouraging the growth of the private rented sector (PRS) in order to help solve the housing shortage crisis.

The development of the PRS is exciting news, because it will help drive change in the housing sector. Rather than using traditional construction methods to build and sell homes one-by-one, the PRS financial model benefits from speedier construction. Offsite manufacturing techniques will be an attractive proposition, enabling whole developments to be completed swiftly and rented out to bring in returns for the investors.

However, it was the Government’s ambitions to bring back more small and medium-sized housebuilders to the party that caught the attention. If successful, this is good news for a number of reasons.

The White Paper illustrates how the structure of the house building industry has changed over the past decade. In 2008, 28% of homes were delivered by small builders, 40% by medium-sized firms and 31% by the big boys. Today the main players build 59% of homes with small players contributing just 12% and medium ones 29%.

According to the Home Builders Federation (HBF), this trend goes back further with the number of SME housebuilders falling by 80% over the past 25 years.

The reasons for the demise of the small housebuilder are several: insufficient access to land because local plans focus on big plots, lack of funding, and the challenges of the planning and regulatory system. The White Paper promises ways to tackle these issues, the most crucial of which is changing the planning process so that more small sites are brought forward for development by SMEs.

Getting more small players building should help create some of the new homes that the Government wants the industry to build. An SME’s business model relies on building and selling homes as quickly as possible which should mean there are more homes on the market. Smaller firms have also proved themselves more likely to innovate, having the flexibility and agility to change when compared to large organisations.

There will be benefits for the wider community too. SMEs are more likely to use local suppliers, including some of the smaller manufacturers who make and supply Eurocell windows and doors. This is good news for local supply chains and local economies and creates a virtuous circle of jobs, demand for housing and supply of housing.