Unlocking potential - how supporting SME housebuilders can drive UK’s housing growth

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Graham Kauders

Commercial Director, EDAROTH , London, UK contact form

As leading figures from the housing and property sectors gather in Leeds for the start of this year’s UKREiiF event, Graham Kauders from social and affordable housing developer EDAROTH, calls for more support for SMEs to help drive the UK’s housing growth.

The housebuilding industry has faced significant challenges in recent years, largely driven by political and economic instability. Rising interest rates, increasing supply chain costs, and supply side affordability challenges have all created substantial obstacles to growth.

For small and medium sized enterprises (SMEs) in particular, these difficulties have been keenly felt.

Recent statistics paint a bleak picture: SMEs now account for just 10% of new homes, a sharp decline from 40% in the 1980s. This significant drop highlights the struggles SMEs have faced over the past four decades. In 2025, SMEs are confronted with a rapidly changing landscape that presents both new challenges and new opportunities.

For the government to meet its target of delivering 370,000 new homes annually, it must take a close look at how these homes will be delivered. Relying solely on large-scale developers, who lack the capacity to develop smaller sites, will not be enough.

A revival of the SME housebuilding sector is essential. By focusing on small-scale sites, SMEs can contribute significantly to meeting local housing need, in addition to the efforts of major builders.

While there are reasons to be optimistic, delivering on that optimism will require overcoming several hurdles. According to the Home Builders Federation’s “State of Play” report from December 2024, planning remains one of the biggest barriers for SME housebuilders.

The report revealed three key findings:

A staggering 94% of SMEs identified planning delays as a major challenge, with 51% waiting more than a year for planning permission
Under-resourced planning authorities were the second-largest barrier, with 90% of respondents citing it as a significant obstacle
Political and/or local opposition was also a notable issue, with 78% of respondents highlighting it as an increasing challenge in recent years

The under-resourcing of local planning authorities is no surprise to anyone familiar with the industry. Planning delays have had a severe impact on SMEs, who often have substantial capital tied up in developments awaiting approval. Unlike large developers, SMEs face greater difficulty maintaining cash flow between projects, putting them at risk of stagnation or even closure.

The government’s “Planning and Infrastructure Bill,” currently moving through parliament, aims to address some of these issues by speeding up the planning process and removing unnecessary barriers to development.

This is a positive step, aligning with the government’s wider goal of delivering 1.5 million new homes within this parliamentary term through reforms to the National Planning Policy Framework. Supporting SMEs through a more streamlined planning process will help them improve cash flow, increase output, and unlock more opportunities for small-scale developments.

Another major challenge for SMEs is securing the capital needed for growth. Many traditional lenders and government agencies, such as Homes England, perceive SMEs as risky investments due to economic uncertainties and the lengthy planning approval process. However, recent announcements indicate that the government is taking steps to address this challenge:

A boost to the Homes Building Fund, offering up to £700m for SMEs
A £3bn expansion of housing guarantees, including £2bn for the ENABLE Build Programme
An increased funding alliance between Homes England and Invest & Fund, which now provides development loans of up to £4m from a £47.5m fund

While these developments are promising, SMEs often lack the financial expertise to navigate what can be a confusing and complex funding environment. To unlock their potential, the funding application process needs to be streamlined, and additional support should be provided to help SME developers access these funds.

The current planning system requires all sites, regardless of size, to follow the same process. This often leads to under-resourced planning departments focusing on larger schemes, leaving smaller brownfield sites, often developed by SMEs, overlooked.

By focusing on small brownfield sites SMEs have the potential to significantly increase housing delivery across the UK. Access to the government’s £68 million brownfield fund, distributed through local authorities, will be critical in unlocking the value of these smaller sites at scale.

For too long, the housing industry has been overly reliant on major housebuilders. While they play an essential role, it’s time to explore innovative solutions that go beyond traditional approaches. Policy measures to support growth could include:

SME quotas: Introducing regional and local authority quotas for small site developments allocated to SME developers, with favourable payment terms to provide pipeline certainty.
Presumption in favour: Creating a presumption in favour of affordable housing on brownfield land that meets local planning standards will streamline and speed up the planning process. This will provide SMEs increased funding certainty and quicker financial returns.
Simplified funding: Simplifying the funding application process and providing better support for SMEs will help unlock their potential to contribute to the government’s housing goals.

So, while SMEs still face significant barriers, progress is being made. However, more needs to be done to speed up planning processes, improve access to funding, and land opportunities. Achieving the government’s housing targets will require collaboration between policymakers, financial institutions, and the housing industry.

By creating an environment in which SMEs can thrive, innovate, and grow, they can play a crucial role in delivering the high-quality homes that local communities need, ultimately supporting the government’s ambitions to meet the housing challenge.

This article was first published on Housing Today on 19th May 2025.

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Unlocking potential - how supporting SME housebuilders can drive UK’s housing growth

Graham Kauders

As leading figures from the housing and property sectors gather in Leeds for the start of this year’s UKREiiF event, Graham Kauders from social and affordable housing developer EDAROTH, calls for more support for SMEs to help drive the UK’s housing growth.

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