The FMB’s Brian Berry considers the state of the housebuilding industry as the new year begins in a time of national crisis, and what the Government needs to do to ensure its recovery.
What a year 2020 was. I applaud the resilience of SME builders during one of the toughest years on record. And we know that sadly, we are not out of the wood yet. The Chancellor announced at the Spending Review that this year is set to be a very difficult one economically, and that we will not see signs of recovery until 2022.
This economic analysis chimes with the findings of the FMB House Builders’ Survey 2020, which saw members predicting that buyer demand would only start growing from 2022. Of those surveyed, 16 per cent said that they would not recover pre-coronavirus activity levels until at least 2022.
Government interventions to support the housing industry during the second lockdown, including the Stamp Duty Land Tax holiday, have proved successful, with anecdotal evidence from members suggesting that the market has been buoyant since September. Clarity of messaging, including the joint letter to the housing industry signed by the Secretary of State for Housing, Communities and Local Government, the Federation of Master Builders and the Home Builders Federation, has also addressed business concerns about the impact of the ongoing economic uncertainty on construction. Notwithstanding this, access to materials and lower workforce productivity continue to hamper output.
Ahead of the Spending Review, the FMB called on the Government to place local builders at the heart of their plans to “build, build, build” our way to recovery. SME housebuilders build high-quality, beautiful and sustainable homes in each community across the country. However, the proportion of SMEs actually building has been in decline since the late 1980s. This is due to a range of disproportionate barriers that these firms come up against compared to the volume housebuilders. They include planning delays, a lack of available and suitable sites, the construction skills shortage, and expensive financial products.
Speaking to the Government’s ambition to increase the number of SMEs building homes, as set out in Planning for the Future, and Homes England’s strategic objective to support diversification, much more needs to be done to remove these barriers.
I was therefore pleased to welcome the Chancellor’s announcement of the National Home Building Fund, a multi-year commitment of extra funding which will provide greater long-term confidence to SMEs. I am pleased to see the Government placing their money where their mouth is, especially as I know that builders have been struggling more and more to acquire finance at an affordable price. The next steps will be for the FMB to work with Homes England to ensure that the fund is as accessible as possible to small businesses.
While the Chancellor referenced the Government’s proposed reforms to the planning system, he missed an opportunity to address the single biggest barrier that SMEs face daily. Bottlenecks and slow decision making in under-resourced local authority planning departments are putting the brakes on development. Local authorities need urgent up-front additional funding to help them make faster determinations on small sites. It is not unusual for our association’s members to report waiting a year for a determination on a non-controversial application. Meanwhile, according to Planning for the Future, spending on planning per person has declined by 60 per cent. This is unacceptable and urgent action is needed.
We need to go further to tackle the housing crisis, and we need to go further to tackle climate change. That a ‘green recovery’ only featured briefly in the Chancellor’s speech cannot be right, at a time when we need to urgently invest in job creation in emerging green sectors. With unemployment forecast to rise to 7.7 per cent in 2021, a well-supported SME housing sector would create employment across the country.
We also need to focus on adapting our existing homes so that they are greener and more resilient to climate change. I was disappointed by the lack of commitment to a long-term national energy efficiency retrofit strategy that would be the key to achieving this step-change in the industry. But this has to be a challenge we all set the Government going into 2021. The future can be brighter, but it will take bold action.