I often recycle a bad joke about small housing developers. Some of these developers are actually quite tall and the housing is often normal sized, it’s the companies that are small etc. It never succeeds in raising… Following the FMB/LGA report and the HBF report, another part of the housing alphabet soup, the NHBC Foundation, have produced a report on the SME housing development sector. Surely there’s a joke about weak foundations there somewhere? You can download a copy if you register here.
Anyway, it’s a solid piece of research that confirms with some survey evidence lots of things that have been well-aired already. – not least by the HBF, CLG Select Committee and the FMB). However, there’s also lots of interesting detail and survey evidence in the report. Based on quite a large number of respondents (approx. 450), some interesting findings came out:
- Almost 60% of the companies surveyed develop one site at a time and therefore being able to predict and plan for continuity of projects and workloads is critical to their success.
- Most SMEs are long established companies. 56% have been trading for over 20 years, while only 10% have been in business for five years or less.
- A lot of them are small building contractors who do other stuff apart from developing houses.. Most respondents both acquire the land and undertake or manage the building work: 87% described themselves as ‘developers and builders’; just 13% identified themselves as ‘developers only’.
- They face a complex set of risks…
Small house builders and developers, particularly those building 1–2 homes a year, find that they struggle to provide the continuity of development operations and employment needed to maintain sub-contractor relationships. Larger companies are likely to be able to offer greater continuity. A total of 59% in the online survey said that they build one site at a time, while looking for the next site as they are doing so. Failure to have the next site ‘shovel ready’ increases the risk of construction gaps, lost supplier and partner relationships and erosion of any retained workforce.
- Planning is accepted as necessary but it increases risk and costs. The length of time from the pre-application discussions to discharge of conditions and authorisation to start on site was over 7 months for more than half of recent developments, and for one-third it was in excess of a year
- They’ve emerged before and I’d heard rumblings about the perceived poor service provided by utilities and telecoms companies. This came out and the requirement to pay council tax on completion of the build is unpopular.
- The Builders Finance Fund had a positive effect on the business of 1% of respondents.