Entrepreneur housebuilders have been crushed: We must bring them back to life

 
Christian Faes
Follow Christian
Analysts Warn Of Overheated Real Estate Market
A bigger role for smaller developers would see home construction numbers rise (Source: Getty)

It's nothing new to say that too few homes are being built in the UK. Fourteen housing ministers in the last 20 years have acknowledged it time after time, just as they have recognised that housing – or the lack thereof – is the UK’s greatest modern economic challenge.

Yet the frequency with which these individuals have passed on the baton suggests the government has a difficult task ahead in finally getting a handle on this crisis. And if we are to take meaningful action to deal with the situation, we need to analyse its root causes. Our report out this week sought to do just that.

It’s been 30 years since our last housebuilding boom. In those three decades not only has annual housebuilding output dropped by as much as 50 per cent at its worst point, but the number of small-scale housing developers has sunk by a breathtaking 80 per cent.

As the backer of small property companies – and the founder of a small business myself – this is a staggeringly disappointing statistic.

Read more: Housing white paper: Last gasp of a bust system or skeleton of a real plan

First, it has meant fewer new homes on UK streets (particularly in places where larger housebuilders aren’t incentivised or able to pick up the slack). Data from the Home Builders Federation predicts that if we were to return to the same level of market plurality as in 2007 even, we could build 25,000 more homes every year.

Not only that, the dramatic decline means less employment, less entrepreneurialism and less confidence among graduates and young professionals to choose the property sector in which to build their careers.

The HBF’s data shows that post-war housing supply growth peaked at the same time as entrepreneurial property companies were flourishing. It’s time to recognise the essential role SME property businesses that invest in, build and refurbish homes can play in a buoyant economy. If we don’t, we risk losing another generation of property entrepreneurs with a devastating impact on the country as a whole.

Read more: Let small developers reap public sector land sale potential

The UK has the highest property taxes in the developed world. That’s a showstopper in itself for many would-be developers or investors. However, it’s not just tax that policy-makers need to address to make building a small-scale property business as favourable as, or akin to, the experience in other productive sectors.

If we are to encourage new entrants to the property market, they need to know that their businesses will be treated the same as startups and scaleups in other sectors. Government policy must support the growth and viability of these businesses: intervening to increase competition, apportioning a quota of public land to small-scale SMEs, as well as mandating state-backed institutions like the British British Bank and Homes and Communities Agency to allocate more public funds to property.

Additionally, through greater coordination of efforts by the housing minister and the small business minister, we can see the emergence of a strategy for action that seeks to loosen the grip of dominant large-scale housebuilders on the land, skills and finance that smaller companies need to function well.

Read more: Nimbyism in decline as housing shortage bites

When the chancellor stands up to deliver the Spring Budget, the property market will be holding its breath. The housing white paper showed us there are no quick fixes to the housing crisis. Instead we need to stack up many incremental improvements to see meaningful change. Let’s hope the chancellor has been listening to his government’s own rhetoric and has a few of those small-scale improvements with small-scale businesses in mind in his red box tomorrow.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

Related articles