The SME house building sector could deliver an additional 20,000 homes per year if their access to finance was improved, putting a significant dent in the UK’s housing supply requirements, according to the Federation of Master Builders (FMB).
In its Budget submission, the FMB has called on the Chancellor George Osborne to improve access to finance for SME house builders, which have consistently cited this as their primary barrier to building more new homes.
Estimates by FMB members suggest that output from SME house builders would increase by as much as 100% if the loan to project value ratios on offer were improved to 80% from a standard 60%. Based on recent housing statistics, this could equate to almost 20,000 new homes being built, making a significant impact on the supply side gap in the UK housing market.
Brian Berry, chief executive of the FMB, said: “Conservative Ministers have been incredibly successful in improving access to mortgage finance and reviving demand in the housing market, but access to finance for those in the business of supplying new homes has remained extremely difficult. There remains a reluctance by many banks to lend to SME house builders to help finance small housing developments.”
Berry concluded: “Given how far behind demand we are, this issue is just one part of a much wider solution. However, 20,000 homes is a significant number. SMEs clearly have a big part to play in solving the housing crisis, but they need a financial environment which empowers them as it has done in the past. Given that our members identified access to finance as the primary barrier they face when trying to build more new homes, this measure could do wonders to help our industry.”
As part of the FMB’s submission to the Chancellor, it has also called on Government to designate existing homes as a national infrastructure priority. Necessary measures include the reduction of VAT on housing renovation and repair from 20% to 5% and utilising carbon taxes to fund energy efficiency improvements.