Empowering SMEs is the key to boosting England’s housing numbers

It is no coincidence that, back in 1988, when SMEs built almost 40% of all new homes in the country, England managed to deliver 202,000 new dwellings – more than at any point for two generations, writes Patrick Hickey of MAKE NW. This level of housebuilding, achieved with a buoyant SME sector, remains unbeaten for more than 40 years.

By 2017, the proportion of new homes being delivered by SMEs had dropped to just 12%. And by 2020, it fell further still to 10%, according to the Home Builders Federation.

Analysis by the HBF shows that, if SMEs were still delivering the same proportion of homes as they did in 1988, they would have delivered an additional 62,552 homes last year alone.

SMEs are nimble and efficient. SME developers operate on finer margins and are often quicker to build out schemes and deliver new homes.

While large developers focus on strategic land and big sites, SMEs are the ones unlocking the smaller, often trickier, opportunities that can rapidly bring new homes to market.

If the government and councils are serious about reaching ambitious new housing targets, isn’t it time we started championing SME developers again?

Unlocking sites that larger developers cannot

Our recent experience working with PIC Homes and Trafford Council to deliver 84 new homes in Sale, illustrates the ability for SMEs to unlock opportunities that others cannot.

Two previous larger developers had been unable to progress the site, despite planning approval originally being secured in 2021. Stalled development meant a prime central site remained dormant while local residents lost opportunities to buy and rent much-needed homes, a quarter of which are to be affordable.

Through a collaborative effort between MAKE NW, PIC Homes, and the wider design team, we:

• Re-engineered the scheme to improve financial viability without compromising design quality
• Enhanced energy performance by increasing the amount of rooftop solar PV and improving the fabric efficiency of the homes
• Optimised site layouts to deliver better value for money for both the developer and future residents
• Closed the viability gap — a critical barrier Place North West has rightly highlighted in their Mind the Gap campaign, so that building could begin

These changes allowed the project to move forward and resecure planning consent, with construction due to commence imminently. We now look forward to supporting PIC Homes in bringing these 84 high-quality, energy-efficient homes to life.

SMEs drive innovation, local economic growth — and supply resilience

Beyond simply delivering homes, SMEs play a crucial role in driving innovation and boosting the local economy through:

• Agility and innovation: SMEs can pivot quickly to adopt new building technologies, drive forward energy-efficient designs, and respond to local market needs
• Local supply chains: They anchor and strengthen regional supply chains, creating multipliers for local businesses and jobs
• Expertise: SMEs have the ability to bring experienced company directors closer to the detail and adopt a more hands on approach to problem solving
• Risk tolerance: They are willing to take on complex, brownfield, and constrained sites that larger volume developers often overlook

Analysis by former Ministry of Housing, Communities and Local Government economist Chris Walker shows every 10,000 homes built by SME housebuilders supports:

• £2.4bn in economic output, at least half of which is net additional
• 18,000 net additional jobs across the construction industry and supply chains

Scaling up SME delivery could yield £12.9bn in gross value added and nearly 200,000 jobs — a transformational impact on national productivity and prosperity.

How do we enable SMEs to build more homes?

There is no single solution, but clear interventions could make a big difference:

• Planning reform: Streamline planning for small sites, cut delay and risk, and create a dedicated “small sites route to consent.”
• Funding and finance: Unlock more affordable finance options for SME housebuilders and support lenders to back viable smaller schemes
• Land allocation: Local plans should explicitly allocate more small sites suitable for SME delivery
• Championing SME developers: Government, councils, and the sector itself need to better champion the role of SMEs in solving the housing crisis and showcase the extra economic impact SMEs deliver in jobs and GVA

At MAKE NW, we believe there is an opportunity to create a national SME Developer Day — to bring together policymakers, financiers, SMEs, the supply chain and councils to address barriers that prevent SMEs from unlocking more sites and showcase success stories and lessons learned.

Standing together: MAKE NW and the Viability Gap Campaign

As part of our ongoing commitment, MAKE NW is proud to have signed Place North West’s Viability Gap campaign.

We believe closing the viability gap is critical for enabling SME developers to build the homes the country needs. The recent decline in planning approvals for developments of nine units or fewer — down almost 2,000 on the previous year — is a worrying trend.

Only 9% of homes delivered now come from small local builders. We must reverse this trajectory if we want to rebuild a truly diverse and resilient housing sector.

The housing challenge England faces is immense.

If we want a new era of housebuilding success, we must get serious about supporting SME developers.

The enormous value that entrepreneurial SMEs can bring is clear — unlocking sites, enhancing viability, improving quality, and accelerating delivery.

SMEs aren’t just part of the solution to improving housing delivery — they are the key to it.

• Patrick Hickey is a director at MAKE NW