Mike Feasey, Relationship Director at Secure Trust Bank Real Estate Finance, looks back on an eventful year for housing developers and discusses why more must be done to recognise the important role SMEs can play in helping the government meet its target of delivering 300,000 homes per year.
It would be an understatement to suggest that last year was anything less than a whirlwind for the property development sector. With an early election bringing a change of residency at Number 10, a host of new policies have since been rolled out to inject confidence back into an industry in need of direction and support.
In recent times, several obstacles have threatened to derail developers' efforts to get their projects over the line. Be it rising costs, supply chain disruptions or delays to the approvals process, whoever held a majority in the House of Commons after 4 July would face the monumental task of resolving a longstanding debate about solutions to the housing crisis.
Complexity, delays and too many cooks
Riddled with a number of challenges, housing was understandably a major focal point in the build-up to the general election. The truth, however, is that developments of all shapes and sizes were facing similar issues, particularly complexity surrounding the planning application process.
It's no secret that planning applications have taken far too long for many years. Not knowing how, let alone when, they would be reviewed is something that developers have grown all too familiar with, and has dissuaded many from doing business in the UK altogether despite the availability of property development finance.
This could be attributed to understaffed and overwhelmed local authorities' planning departments, which were in desperate need of support to clear a backlog of applications. Back in October 2023, Labour pledged to recruit hundreds of extra planners in a 'sprint' to agree on new plans. This would reduce the strain on SME developers waiting for live projects with contractors to receive the go-ahead.
Besides the drawn-out process, there was also much confusion around who held the final say on developments being given the green light to proceed It even reached the point of borderline spats between housing ministers and local councils over a disagreement on whether a planning application should be granted. Was this a case of too many cooks in the kitchen?
It was clear at the time a systematic overhaul of the planning system was needed to solve the housing and development crisis. Such a challenge lay at the feet of a new government, and in their first few months in office a number of initiatives were launched to bring about change.
A new horizon?
September brought the New Homes Accelerator programme, which promised to unblock and accelerate the delivery of more than 200 delayed large-scale housing developments by leveraging government resources and fostering collaboration between local authorities and developers.
The unlocking of government resources was welcomed at the time, as it would undoubtedly aid the delivery of up to 300,000 homes. That being said, SME developers were still waiting to hear more about immediate solutions to the aforementioned barriers still inherent in the planning determination process, regardless of a project's size, before sourcing property finance.
In October, the first budget from a Labour chancellor in a decade and a half was announced. This included several measures aimed at boosting housebuilding and making homeownership more accessible.
The Autumn Budget saw Labour commit an additional £5bn to its housebuilding programme to facilitate the building of 300,000 homes per year until 2030. Rachel Reeves also committed £3bn of additional support for SME developers and the build-to-rent sector to support the private housing market. The promise of funding was undoubtedly welcome news, but it could still be argued that the proposed housing targets remain unreachable without a much smoother planning process.
To combat this, the government also pledged £46m to hire 300 graduates and apprentices for council planning teams to help accelerate large sites that were 'stuck in the system'. While 300 may not be enough to solve the longstanding issue of under resourced departments, this was undeniably a step in the right direction.
The effectiveness of these initiatives heavily depends on their implementation over the coming months, if not years, along with the broader economic context.
New year, new outlook?
So, what can we expect from the housing market over the year that lies ahead? Thankfully, the housing market is gradually stabilising along with other major industries, such as construction. A recent industry report published by Glenigan forecast a 13-15% growth in the private housing sector over the next two years as more sites get up and running and delays to the approvals process are eliminated. With the rate of mortgage approvals comfortably above the previous 12-month average, developers might finally be able to look towards a positive future for housebuilding.
If the government is to succeed in its aim of building 300,000 new homes per year, however, there remains work to be done. Most importantly, it must deliver sufficient support to SME developers, many of which have carried significant financial burdens over the past few years. It's likely that the impact of last year's Autumn Budget will not be felt until post-2026. Before then, continued commitment to a systematic overhaul of the planning system is simply a must.
As experienced development finance lenders, Secure Trust Bank has a longstanding record of working with developers when unforeseen circumstances arise and is on hand to provide the necessary guidance and risk assessment.
Visit Secure Trust Bank Real Estate Finance for more information, or its dedicated finance for property development area.