Three ways Government could help ease burden on small property developers: Mark Manning
Small and medium-sized independent property developers build unique, attractive and well-thought-out housing developments across our region, creating a variety of housing.
However, the planning process and financing systems are making it increasingly challenging for this group, leading to growing pressure and reduced profit margins, with some even going bust. Here are the key things I think the Government needs to introduce to help smaller-sized developers not only survive, but thrive.
Financial funding and initiatives. Big developers are in the fortunate position of having significant access to cash, favourable borrowing rates and support from banks and lenders due to their large size and profitability. However, smaller developers don’t always have the same access, and often have to pay higher borrowing rates.
To help ease this burden and create a more level playing field, the Government should find ways to provide access to funds for smaller developers with preferential or subsidised rates and better terms. This would enable them to more affordably borrow the cash they need to unlock the smaller, more difficult sites that larger developers aren’t interested in.
The Government could also provide incentives to existing lenders to encourage them to provide smaller developers with access to lower borrowing rates and more flexible payment terms.
Other helpful things that could be considered, include providing incentives and tax breaks for developers who build more sustainable, unique and innovative homes, which many smaller developers do. This would help these developers to create homes that will help to achieve the UK’s zero carbon commitments.
Planning. The current planning process is complex and takes forever, and this causes particular problems for smaller developers for whom speed of turnaround can be critical in making a development work.
Streamlining and simplifying the planning process would enable small and medium-sized developers to develop sites much more quickly and keep their cash moving.
An overhaul of the whole planning system will take time. To enable things to improve quickly for smaller developers, the Government could bring in new rules to enable local authorities to fast-track planning approvals on smaller development sites.
A national cooperative for small and medium sized developers. As well as paying higher borrowing costs, smaller developers also face higher costs when it comes to buying materials and machinery, as they can’t benefit from the cost savings that are offered when buying at bulk scale like bigger developers do.
One way of alleviating this would be for the Government to work with an organisation like the House Building Federation to create a national housing development cooperative for small and medium-sized developers to join. This would encourage collaboration across the sector.
There are several successful developer cooperatives operating within the social housing sector, and the way these work could be replicated within the private sector to help small and medium developers operate more successfully and profitably.
The Government has set a target to build 1.5m homes in this parliament, and developers of all sizes are key to achieving this. Having a mix of developers who can create diverse housing is really important, and the Government must step up now to ensure we don’t lose more of the smaller ones.
Mark Manning is managing director of Manning Stainton estate agents