The Home Builders Federation (HBF) and Quantum Development Finance used analysis from Lichfields to articulate the challenges smaller construction firms face.

Last year, only 17,000 homes on sites ranging from three to nine units were approved which was down from the average of 35,000.

Overall, the proportion of total planning permissions granted on sites of 150 units or fewer has fallen from nearly 20% in 2008 to nearer 6% today.

Delays in planning permission frameworks are contributing to these problems with the report finding that 94% of all applications miss the statutory determination deadline.

In addition to these delays, the report has found that small sites face average planning fees and obligations of around £2m per site.

A lack of standardisation around Section 106 agreements is part of the root cause of problems, with this often leading to protracted negotiations and legal delays.

•   The Finance Professional Show 2024: The Video
•   'Kite-flying only adds to the confusion': Why urgency and clarity are crucial for housing targets
•   Stalled developments put 8,500 affordable homes at risk

While the HBF has welcomed the government’s recent efforts to support SME builders but is using the report to highlight the need for local authority planning issues to be better tackled.

This would include more funding, exempting smaller sites from the Building Safety Levy and the introduction of adoptable standards and templates for Section 106 agreements.

“While the government wants to assist SMEs, the barriers our members are facing are substantial, and needs intervention to reverse the trends of declining small site approvals we are seeing,” said Neil Jefferson, CEO at the HBF.

“If we are to deliver new housing at the levels the government is aspiring to, it is critical that developments and businesses of all sizes are supported and that SMEs are given the opportunity to grow.”

Oliver Thompson, CEO at Quantum added: “This report highlights the implications of the current planning process and illustrates that the system now demands a level of financial resilience that disadvantages SME housebuilders.”

“If we’re serious about fixing the housing crisis, we must fix the system and ensure SME housebuilders are supported.”