Councils should change course to boost smaller house builders, says FSB

A new report commissioned by the Federation of Small Businesses (FSB) suggests local planning authorities could inadvertently be costing small house builders millions of pounds. The FSB says that these extra costs risk blocking otherwise viable housing projects at a time when we desperately need to build new homes.

The FSB commissioned report by BCIS found that on average, smaller house building projects of 10 units or less – typical of developments run by smaller firms – had significantly higher basic building costs. The difference lifted average house building costs by 14 per cent when compared to larger developments.

The report found no evidence of councils accounting for these higher costs when stipulating the level of the Community Infrastructure Levy (CIL) – a charge that developers pay when they are granted planning permission.

BCIS calculations suggest that local authorities could be overcharging smaller house builders as much as £100,000 per project – potentially adding up to millions of pounds across the sector. This added cost acts as a significant burden to smaller house builders, and is likely to be pushing many much-needed urban brownfield housing projects beyond viability. This ultimately leads to councils missing out on any CIL payments if the project is abandoned, and further restricts the supply of desperately needed local housing.

Gordon Millward, Federation of Small Businesses regional chairman, said: “We are deeply concerned that an inflexible approach by local authorities could be preventing smaller house builders from taking on otherwise viable projects. It’s a lose-lose situation for everyone – smaller developers, local authorities and those in desperate need of local affordable housing.

“When considering whether to make use of the levy, councils should take a more flexible approach. They should consider the size of the proposed project when deciding how to set the levy, and ensure small house builders aren’t overburdened with unaffordable costs.

“This approach will help to deliver the houses we need in the places we need them. It will also support local small businesses and their suppliers which are at the heart of our local communities.”

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