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An analysis of companies involved in the construction of domestic buildings also shows that there has been a 45% increase in liquidations in the sector in 2023 compared to 2019.
The research showed: “Firms that have gone into liquidation are typically under five years old, with their headquarters mainly in core urban centers as well as in North and South Lanarkshire.”
SME developers deliver over a third of the housing provided in rural and remote areas. These areas are often more challenging from a logistical and market point of view. Larger housebuilders concentrate their operations in urban and accessible market areas, with little exposure to rural and remote markets. (Image: Homes for Scotland)
In the context of what is now a national housing crisis and at a time when 28% of Scottish households, some 693,000, are in some form of housing need, Jane Wood, chief executive of HFS, said: “This research fills a significant data gap and is essential if we are to develop evidence-based policy to effectively tackle the housing crisis.
“Given the vital role that SME housebuilders have to play in the Scottish housing ecosystem, it shows alarming declines in market share and the number of companies that have gone into liquidation.
“This clearly has capacity implications for the provision of much-needed new homes of all tenures.
“Our research found that SME home builders are key to unlocking the brownfield sites that the Scottish Government has said it wants to prioritise. Our data also reveals their importance in providing housing in rural and remote areas.
“SME housebuilders have particular challenges in terms of the viability of their operations, mainly in relation to economies of scale, increased regulation and the upfront costs associated with residential development.
“Above all, however, the planning and permitting systems have an extremely detrimental effect, particularly in relation to processing speed and resources. This is an extremely frustrating situation.”
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Among the recommendations for national and local governments to act on to support the SME home building sector are “undertaking an urgent cross-portfolio review to identify, consider and remove the burdens and challenges of SMEs, proportionate planning practices that actively support SMEs and new innovative funding streams. and partnerships to restore and unlock sites”.
Ms Wood also said: “This report shows that before the financial crisis, SMEs were delivering 3,000 more new homes each year than they are now. A return to this level could support an additional 13,200 jobs.
“The social and economic imperative is clear to see. If parties and politicians of all persuasions and local authorities are really serious about tackling the housing crisis, they must act now to introduce the reform needed to improve support for home building if we are to meet the needs and aspirations of those who live across the country. the whole country. HFS and its members are fully committed to working with them to achieve this.”
Hugh Fairbrother, strategic development business manager at Scottish Water, who partnered with HFS on the research, said:
“SME housebuilders are a diverse and dynamic sector, which contributes to the economic and social well-being of communities across Scotland. They face many challenges and opportunities in the current operating environment.
“The insights gathered from this research will help Scottish Water to innovate and collaborate with the industry, support the transition to a net zero economy and help SMEs unlock their potential to deliver more homes and better homes across all tenures Scotland.”
Eve McCurrich, managing director of Whiteburn Projects, this year’s HFS SMEs Home Builder of the Year, said: “SMEs are hugely important to the range of new homes being delivered across Scotland. As shown by the research, the decline in the number of SMEs is clear evidence of the loss of local housebuilders across Scotland.
“A vibrant SME culture would not only see new businesses and new jobs being created, but importantly, it would provide new homes. All these benefits would contribute positively to their local economies.
“I urge policy makers to take note of these findings, listen to what is needed to remove barriers and help support the SME sector to thrive in Scotland, delivering these benefits to everyone.”
Paul McLennan, Scottish Housing Minister, said: “This report from Homes for Scotland is a useful contribution to understanding the specific challenges faced by SMEs within the wider context of a challenging construction environment across the housing sector.
“Although we remain focused on providing 110,000 affordable homes by 2032, our capital block grant is being reduced by almost 10%, a loss of more than £1.3 billion by 2027-28. Similarly, our Financial Transactions budget – which is key to providing affordable housing – has been cut by 62%.
“We are investing almost £600 million in the affordable housing supply program in 2024-25. To ensure that this investment has the greatest possible impact, we are completing our review of this program with input from stakeholders to ensure that resources are used to the maximum. We are also working on developing specific options to attract private investment through the housing investment task force.
“We also recognize the critical role of a well-resourced planning system. The new national planning improvement champion will monitor performance, look at trends, share good practice and identify efficiency savings. We received positive feedback on our proposals in the recent Investment in Planning consultation, and will now work rapidly to support service planning by increasing resources and developing skills.”
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