SME revival is essential to reverse decline in housing output

National housebuilders are at capacity. The government and sector acknowledge this and agree that increased output from SME housebuilders is key.

However, SME housebuilder output has been in steady decline for over three decades.  

How do we fix the housing crisis?

In January, the House of Lords’ Built Environment Committee published its report on ‘Meeting housing demand’. It outlines findings from an inquiry into the level of demand for new housing and how barriers to meeting this can be overcome.

As a contributor to the committee’s report, LDS Sales Guarantees was pleased to see it highlight the decline of SME output as a significant issue, and that growing support for SME housebuilders, especially around access to finance, is one of its key recommendations. The need to remove “structural issues” that prevent SMEs from accessing finance on reasonable terms was also discussed.

Among the evidence submitted to the House of Lords inquiry was a report commissioned by LDS and delivered by Savills, which investigated the SME market and barriers to delivery. It also highlights access to development finance as a major hurdle and includes key factors such as availability of equity and debt, access to materials and labour, and the ability for SMEs to maximise their development capacity. These factors present major issues to SMEs that don’t have the resources, influence, or buying power of national housebuilders.

The Savills paper states that SMEs could bring forward tens of thousands of new homes each year, under the right conditions.

Analysis by Chris Walker, former HM Treasury and MHCLG economist, found that LDS’ Sales Guarantee’s offering provides SME housebuilders with the means to create 3-4 times more housing output than traditional financing routes. 

For example, the Savills report revealed that boosting current SME housebuilding figures by the multiples that LDS Sales Guarantees could bring, could deliver approximately 77,210 homes.

This could boost SME output by around 55,000 extra new homes and support nearly 200,000 jobs in the construction industry.

Currently, the support available to SMEs is seen as too bureaucratic and time consuming for them to engage with. The crucial element is ensuring that opportunities are fit for purpose and support the specific needs of SMEs, which need commercially transformative solutions. These must be quick and easy to obtain, with compelling, clear benefits.

Otherwise, they simply don’t have the time, resource, or energy to unlock the potential benefits.  

We warmly welcome the House of Lords’ report and were keen to share our knowledge and experience. This recognition is key, but nothing short of systematic change will reverse over three decades of SME output decline to bring more new housing forward.

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