Finance · 8 February 2017

Government boosts funding for small house builders

It is hoped 25,000 new homes will be built by small businesses by 2020
It is hoped 25,000 new homes will be built by small businesses by 2020

Small independent building companies will gain access to a £3bn fund to build thousands of new homes, following the release of the government’s latest housing white paper.

The Home Building Fund will be made available to small and community-led builders, custom building contractors and regeneration specialists, as well as some larger firms.

It is hoped loans made available via the fund will result in over 25,000 new homes being built by small businesses by 2020, and around 225,000 in the longer-term.

The fund is one of several measures put forward in the white paper to diversify the UK house-building market. According to latest government figures, 60 per cent of new homes in the UK are currently built by just ten large companies.

The white paper also revealed the government’s intention to build one million new homes in total in the UK by 2020, a large proportion of which it said should be built by smaller firms.

Welcoming the news, Federation of Small Businesses (FSB) national chairman, Mike Cherry, said: “This is a much-needed boost for small house builders and will create thousands of new jobs.

“We’re pleased to see government taking steps to make it easier for small house builders to compete to help solve the housing crisis.”

At present, the UK is building new homes at a rate of roughly 150,000 a year – well below the estimated 250,000 a year some experts have said the country needs.

Commenting on the white paper, chief executive of the Federation of Master Builder’s – the UK’s building association – Brian Berry, said: “In too many places, the approach to planning for new homes has come to be focused almost entirely on large sites and large scale delivery.

“This has slowed down the delivery of homes, and has helped shape an uncompetitive house building industry and an unresponsive supply of housing – this has to end.”

As part of the government’s plan, local councils will have greater responsibility to report “realistically” on the demand for housing in their area, updating Westminster every five years, and introduce housing development projects based on their findings.

As such, councils will have greater power to set national planning rates, and Cherry warned government to ensure small house building firms are protected.

Cherry concluded: “The construction industry is arguably one of the toughest sectors for late payments and many are already struggling to compete as they face steep increases in labour costs.”

Light at the end of the tunnel for embattled construction sector

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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