Industry Intel

Why the planning system is failing UK's SME Developers

SME Developers have always played an important role in the UK’s real estate sector with the ability to be more flexible, innovative, and responsive than their larger counterparts.

They often have the agility to identify and develop smaller sites, often brownfield locations, in turn contributing to Urban Regeneration and the efficient use of land. Through this, they help in diversifying housing supply by offering a range of options from affordable housing to niche market segments.

SME developers are those that typically contribute anywhere between 1 and 1,000 homes per year to the UK housing stock. Over the years, they have played a vital role in helping aspiring homeowners realise their dreams. However, their contribution to the UK’s housing stock has declined: according to the House of Lords Report ‘Meeting housing demand’, in 1988 SME House Builders were responsible for 39% of homes but in 2020 that figure stood at only 10%.

Despite their importance, the planning system in the UK is hindering their ability to contribute effectively to sustainable development.

The UK’s planning system is renowned for its complex regulatory framework, characterised by intricate regulations, policies, and local plans. The difficulty in navigating these leads to prolonged approval processes, uncertainty, and increased costs. This is followed by resource constraints, unlike larger developers, SME’s often lack the resources to manage the paperwork intensive and time-consuming planning process. Due to this, SME’s may have to utilise (at great expense) planning consultants, architects and legal advisors thus further affecting the financial viability of the proposed scheme.

As it stands, the current planning system’s effectiveness is heavily reliant on Local Authorities’ discretion. The controlled locally planning system is notoriously slow, with applications often taking years until they reach the committee stage. These inconsistent practices and varying interpretations of planning policies across different regions can create confusion, further hindering SME Developers from making informed decisions.

The final major hurdle includes affordable housing, infrastructure, and community contributions. Affordable housing is a crucial to any sustainable development, but these obligations can be challenging to meet especially on smaller schemes involving tighter margins. On top of this there is often a requirement to contribute to local infrastructure and community facilities where there is a lack of clear guidance and transparency. These can lead to disputes and financial burdens which derail projects or deter developers from pursuing the opportunity in the first place.

Potential solutions have been put forward involving a substantial overhaul of the planning process. These include simplified regulations, streamlined procedures, and the incorporation of digital tools can make the system more accessible and user-friendly for SME developers.

Establishing dedicated support services specifically aimed at SME developers can alleviate the burden of navigating the complex planning landscape. These services could provide guidance, templates, and even subsidies to assist SMEs in their endeavours.

Encouraging collaboration and knowledge exchange among local authorities can help harmonise planning practices across regions. Standardised guidelines and clear expectations would empower SME developers to navigate the system with greater confidence. Further to this, Authorities could explore flexible mechanisms for fulfilling affordable housing requirements. This might involve permitting alternative contributions, such as supporting local housing initiatives or partnering with housing associations.

Implementing these solutions could unlock the immense value that these developers bring to our communities. A collaborative effort between policymakers, local authorities, and the development industry is essential to create a planning system that empowers SME developers to thrive and contribute to a more vibrant and sustainable urban future.

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