OakNorth director warns of mounting challenges for small builders in Yorkshire’s housing market
Yorkshire’s housing market is showing tentative signs of renewed life, but a raft of stubborn challenges -from planning delays to regulatory costs - continues to hold back small-scale housebuilding across the region, according to a Yorkshire finance specialist.
Speaking to Property Post, James Espley, director at OakNorth, which specialises in funding SME developers, offered a frank assessment of 2025 so far: a year that was meant to mark a turning point, but has instead delivered more of the same.
“I would say, in terms of, has 2025 worked out as expected? Probably no,” he says. “Everybody was getting a little bit more confident about building and development in particular…but for whatever reason, that hasn’t really materialised.”
Despite early optimism following political promises to boost housebuilding, Mr Espley believes little of substance has changed. “Certainly with respect to the government's position on planning and building new houses, nothing really visible seems to have happened to make that so.”
Instead, he describes a year that got off to a slow start before gradually picking up after spring. “We saw a quiet first quarter of 2025 and then it sort of really kicked into life just after the Easter holidays,” he says. “Since then, we've approved quite a number of deals and quite a few on the development side.”
So far this year, OakNorth has approved around £75m in new deals - a notable rebound on 2024. “It’s better than last year,” Mr Espley confirms. “Last year was a very quiet year, so this year is probably 50 per cent better than that.”
OakNorth's current pipeline includes a number of projects across Yorkshire and the wider north, including an aparthotel in Harrogate.
There are also schemes to come in Sheffield, Scarborough, and Newcastle, with Scarborough in particular flagged as ‘an interesting, quirky one’ in the industrial sector.
The Sheffield deal, meanwhile, involves flexible office space, part of a growing trend that OakNorth is increasingly backing. “Alternative sectors like apart-hotels, serviced offices, and flexible workspace are becoming more and more popular,” Mr Espley adds.
While residential development remains a core part of OakNorth’s portfolio,Mr Espley notes a noticeable shift in momentum towards commercial schemes.
“Residential development is probably still finding quite a lot of obstacles in their work in terms of bringing schemes forward,” he says. “Planning is still very tough, and new building regulations just put smart costs onto the schemes.”
He points to environmental and sustainability requirements, which, while well-intentioned, continue to hit profit. “Everything just seems to sort of hit the bottom line for a small residential development,” he says.
While large housebuilders continue to move forward – buoyed by access to corporate finance - smaller players are under significant strain.
Small and medium-sized housebuilders, once the backbone of the UK housing market, are increasingly being squeezed out.
“(They’re) one of the most important parts of the residential development sector,” Mr Espley says. “You get these kind of developers producing smaller, more bespoke, more character schemes - better quality schemes - not just your typical large estates.”
He adds: “There's been a contraction in the number of those around…it is frustrating, and it's those ones that are probably finding it most difficult still because of all the extra regulations and requirements and the fact that interest rates have been so high.”
According to the Home Builders Federation, in the 1980s, SMEs delivered around 40 per cent of the UK’s new homes. Today, that figure is closer to 12 per cent.
Realistically, Mr Espley fears that trend may continue. “Everything seems to make it more difficult to build. Those are the ones who find that the extra cost is not something they can just swallow,” he says.
As uncertainty persists, some developers are pressing pause.
“What we tend to find a lot in property…is that they just mothball the schemes, or just hold on and wait to see if things improve in terms of interest rates and costs,” Mr Espley explains. “We spend a lot of time putting out quotes to people… then things go quiet for a while.”
But interest rate cuts - however modest - have proven a stimulus. “Whenever we see a bit of a drop, you tend to get a little spike in activity,” he says. “People just think, well, if we don’t do something, we’re not making any money at all, so we might as well get cracking now.”
Looking ahead to the final quarter of the year, Espley expects that trend to continue. “As we kick into September and into the autumn, it usually does pick up quite significantly again,” he says.