In February, our deputy CEO, Andrew Evans, took the stage at the Place North West event The Role of SME Housebuilders in Delivering the Nation’s Housing. It was a timely discussion about the role of small and medium-sized housebuilders in tackling the UK’s housing crisis, what their challenges are and what we can do to help them. With Labour committing to delivering 1.5 million homes over the next five years, we need to utilise all available resources and that means ensuring that SME housebuilders have the support they need to play their part.

At VM Finance, we’re passionate about helping SMEs step up and deliver their vision with heart. We believe wholeheartedly in the power of SME housebuilders and developers; that’s why we take such pride in building long-lasting relationships with them, helping them to leave lasting legacies across their real estate portfolios.  

In this thought piece, we wanted to share some opinions on why SME developers are so important, the challenges they face, and what we can do to help them build more homes more effectively. 

The benefits of SME developers

SME developers play a critical role in the UK housing sector, bringing flexibility, local knowledge, and a level of design flair and craftsmanship that the big housebuilders often cannot match. 

What’s more, research from Savills has recently outlined just how important small sites – the bread and butter of SME developers – are to hitting the housing crisis.

Here are just some of the reasons they’re so vital:

Local knowledge & community focus 

Unlike volume housebuilders, SME developers tend to build locally, meaning they have a strong understanding of community needs. They are more likely to engage with local stakeholders, tailor homes to fit into existing settings and contribute positively to placemaking.

Bespoke & high-quality homes

Larger housebuilders operate on a model of mass production, whereas SMEs can deliver smaller-scale, bespoke developments that prioritise quality over quantity. This allows for more diverse, well-designed, and better-integrated housing solutions.

Market differentiation

There is a growing demand for unique homes that don’t conform to the typical new-build estate aesthetic. SMEs have the flexibility to deliver one-off, architecturally interesting homes that cater to buyers seeking something different from the standard semi-detached box.

Agility on complex sites

SMEs often take on the challenging infill and brownfield sites that large developers ignore. They can work creatively with constrained plots, repurposing awkward land parcels into viable housing solutions. However, this ability is still dependent on financial viability and a supportive planning system.

Boosting local economies & skills

SME developers create jobs locally, supporting regional supply chains and tradespeople. They’re key to maintaining and developing the UK’s construction skills base, which is critical in an era of labour shortages.

Challenges facing SME developers

Despite their many advantages, SME developers face significant barriers that hinder their ability to deliver homes at scale. At the conference in February, much of the conversation was dedicated to discussing how these challenges can be overcome. 

Addressing these challenges is the perennial sticky wicket, but if we can do it, we will empower SMEs to contribute meaningfully to Labour’s 1.5 million homes target.

So what are the challenges?

The planning system

The UK’s planning process is notoriously slow, unpredictable, and bureaucratic. SMEs do not have the financial muscle to land bank sites and sit on planning applications for years. The system often favours large developers who can afford the lengthy process, creating an uneven playing field.

Thankfully, there are movements to change this already. Whatever the changes are, they have to be fit for all and empower not just the big housebuilders but SMEs too.

Pipeline uncertainty

For SME developers to plan and invest in future projects, they need a predictable pipeline of opportunities. Therein lies the rub. The disjointed nature of the industry, combined with planning delays, makes it difficult for SMEs to operate with confidence. A lack of visibility over future projects stifles growth and discourages new entrants into the sector.

Access to finance

While there are lenders, including ourselves, who support SME developers, access to development finance remains a challenge for some. Traditional lenders often have stringent requirements that SMEs struggle to meet, leading to cash flow issues that prevent them from scaling their businesses.

This is one of the reasons we like to build long-term relationships with our clients. When we find a good fit and productive working relationship, we can provide peace of mind by going on their development journey with them long term.

Land availability

Prime development land is often snapped up by large housebuilders, leaving SMEs to compete for scraps or overpriced plots. Without access to viable land at fair prices, their ability to deliver homes remains constrained.

How can we help SMEs overcome these challenges?

If we’re serious about increasing SME housing delivery, we need targeted interventions to level the playing field and unlock their potential. It’s not just about the number of homes we can help them deliver, it’s about the quality they can bring to the market.

Here are just a few things we can do to help SME housebuilders deliver more homes.

Better collaboration between LPAs and SMEs

Local planning authorities (LPAs) should actively engage with SME developers to facilitate development. One practical step would be earmarking smaller plots of land that are not of interest to big housebuilders and providing outline planning permission before offering them to SME partners. This would give SMEs a running start, reducing planning risk and uncertainty.

Creating opportunities on larger sites

When large sites are being developed by volume housebuilders, LPAs and developers could carve out designated parcels for SME builders. This would allow SMEs to deliver more specialised or unique homes within broader masterplans, adding variety and ensuring that new developments cater to a wider range of buyers.

Fast-tracking planning for SME-led schemes

A dedicated SME planning route, with simplified and accelerated processes, would remove one of the biggest barriers to delivery. For example, a presumption in favour of sustainable SME-led development on brownfield sites could unlock thousands of new homes.

Improving access to finance

Government-backed lending schemes, flexible funding structures, and more specialist lenders willing to work with SMEs would provide the financial support needed to enable growth. Alternative finance solutions, such as bridging loans or mezzanine finance, in conjunction with the provision of more traditional development products, can alaso play a role in unlocking stalled projects.

Encouraging public-private partnerships

Local authorities and housing associations could work more closely with SMEs through joint ventures, land-sharing agreements, or build-to-rent partnerships. These collaborations could help SMEs scale up their operations while meeting local housing needs.

The bottom line

SME housebuilders are going to be vital if we’re going to hit the 1.5m homes target. The UK desperately needs new homes and it can’t all come through the same route of big housebuilders delivering semis in greenfield suburbs. We need a healthy and varied approach that embraces multiple modalities. 

The diversity, innovation and high-quality craftsmanship SME housebuilders bring to the market will support local economies and deliver places people actively want to live in. To help them do that, we have to remove the obstacles holding them back.

By fixing planning delays, improving land availability, boosting collaboration, and ensuring access to finance, we can create an environment where SME developers can thrive. This is one of many keys to realising our national housing ambitions.

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At VM Finance, we’re committed to fostering long-lasting relationships with SME housebuilders and developers. Through our tailored investment and support, we help them bring their project vision to life. 

If you’re an SME housebuilder looking for financial solutions to get your next scheme off the ground, get in touch with us today.