Procurement · 6 March 2017

Small property developers suffer most from lack of competition

Small property developers
Just ten per cent of new homes are built by small property developers 

The government’s failure to diversify the UK house-building market has put 80 per cent of  small property developers out of business since the last housing boom in 2007, according to new research.

The report, by property finance platform LendInvest, outlined a blueprint that seeks to influence government policy and support small property developers in Britain.

The study revealed that only one in ten houses are now built by small property developers, while 25,000 new homes would be built every year if “market plurality” returned to the same levels as 2007.

Recommendations in the report to support small property developers included a direct quota of public land designated to smaller firms alongside simplified tax processes to help owners reinvest capital into business development.

The report also pushed for greater funding provision from state-backed bodies such as the British Business Bank (BBB) and the Homes & Communities Agency to “accelerate” funding for small property developers.

The government’s recent housing white paper set out its plans to use independent building companies to fix Britain’s housing shortage, with a Home Building Fund worth £3bn now available to smaller firms.

LendInvest claimed that the Housing & Communities Agency would need to lend £56m a month to achieve this target by March 2021, while the BBB had yet to allocate any funds to small property developers whatsoever.

Christian Faes, CEO of LendInvest, labelled the number of failed companies since 2007 as an “appalling statistic”.

“It’s meant less employment, less entrepreneurialism and fewer new homes on British streets where large-scale housebuilders didn’t pick up the slack,” he said in a statement.

Faes added that government needed to give small property developers the same way opportunities as new companies in other UK industries.

“If we’re going to encourage people to forge careers in property, they need to know that their businesses will be treated the same as startups and scale ups in other productive sectors. Failing that, we risk losing another generation of property entrepreneurs,” he concluded.

The study was supported by the Home Builders Federation (HBF), the organisation representing private sector developers, and director of external affairs John Slaughter acknowledged the imbalance in the allocation of land available for building houses.

Slaughter said: “Housing supply has increased 52 per cent in the last three years, but the majority of that has come from larger companies and we need to implement measures that can help get small businesses building more too if we are to fully address our national housing requirements.”

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Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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