One of the consequences of increasingly difficult viability conditions is that they do not affect every part of the market equally. Larger organisations are often better able to absorb uncertainty, spread risk across multiple sites and devote significant resources to navigating planning, regulation and compliance. Smaller developers rarely have those advantages, which is one reason the gradual decline of SME housebuilders concerns me so much.
The argument for smaller builders is sometimes presented as a nostalgic one, as though the objective is simply to recreate a housing market that existed decades ago. I do not really see it that way. What concerns me is the gradual loss of diversity within the development ecosystem, because diversity is one of the things that makes housing markets resilient.
Different builders bring forward different sites. They pursue different business models, work at different scales and often deliver different types of housing. Some specialise in urban infill, some work on smaller brownfield sites and some bring forward schemes that larger organisations simply ignore. If we lose that diversity, we lose far more than the companies themselves.
The largest housebuilders perform an important role, and this is not an argument against them. They build large numbers of homes and possess the resources to deliver major sites. The difficulty is that large organisations inevitably gravitate towards opportunities that suit their scale and business model. There are many smaller sites, awkward sites and marginal opportunities that simply do not attract their attention, not because they lack potential but because they are too small to justify the resource required.
A healthy housing market should contain different providers, different forms of capital, different tenures and different approaches to development. If we rely upon a relatively small number of large organisations, we inevitably end up with a narrower range of outcomes.
One of the things I find particularly frustrating is that the planning system often treats everybody in exactly the same way. A relatively small development may be expected to navigate many of the same requirements, reports, assessments and regulatory processes as a much larger scheme. The information burden has increased significantly over time, and larger organisations are simply better equipped to absorb it.
If you are a large developer, you can employ specialists, consultants and in-house teams to deal with increasingly complex requirements. If you are a smaller developer, every additional report, assessment or regulatory hurdle represents another cost, another delay and another risk. The system gradually becomes less proportionate because it asks the same questions regardless of the scale of the project.
In many ways, regulation increasingly favours larger players. That may not be the intention, but it can become the outcome. Bigger organisations can grind their way through the complexity because they possess the resources to do so. Smaller organisations often cannot. The result is a gradual narrowing of the market, where fewer participants remain capable of operating successfully.
The viability debate is therefore not simply about whether individual schemes work. It is also about who remains willing and able to participate in the market at all. If the economics become sufficiently difficult, smaller operators disappear first, and once that diversity has been lost it becomes very difficult to rebuild.
Read the series
Part 1: We Talk About Housing, But Rarely About Viability
Part 2: We Have Rationed The System To Death
Part 3: The Conflation Of Terrible Things
Part 4: Why Smaller Builders Matter
Part 5: Building A Better System
