"Tackling longstanding planning bottlenecks, as well as wider issues such as viability, infrastructure delays and rising demand-side pressures, is essential if SMEs are to confidently invest in future land and labour supply"
- Neil Jefferson - Home Builders Federation
Small and medium-sized (SME) housebuilders could boost new housing supply by 100,000 homes a year if current barriers to building were lifted, according to new research from the Home Builders Federation (HBF).
The State of Play 2025/26 report, published today (4 November) by Close Brothers Property Finance, HBF and Travis Perkins, found that SMEs could increase home delivery by an average of 56% with the right policy support. Respondents said such backing could allow SME firms to contribute a third of the government’s 300,000-home annual target.
However, the study highlights that an unfavourable tax and regulatory environment is worsening the housing shortage. Almost all (97%) of SMEs surveyed said these issues are constraining growth.
The report identifies persistent challenges for smaller developers, including:
94% citing planning permission and conditions as a “major issue”
89% pointing to local authority capacity constraints
66% reporting local or political opposition to developments
Financial pressures were also noted as a key concern, with 64% referring to cumulative viability pressures and 58% citing difficulties obtaining offers for section 106 affordable homes. Meanwhile, 55% said biodiversity net gain regulations and 54% named the Building Safety Levy as significant obstacles.
Although government introduced measures in May to assist housebuilders, the report indicates that long-standing issues remain unresolved, including skills shortages, support for first-time buyers and the cumulative impact of regulation.
“Despite government’s positive early policy moves, the reality for many businesses remains bleak, therefore confidence has taken a nosedive, with almost nine out of ten SMEs less optimistic than they were prior to the general election,” said HBF.
Land and infrastructure costs continue to limit delivery for many. 54% of SMEs reported being affected by land prices, 39% by land availability and 49% by utilities costs and timescales. While supply chain challenges remain, they appear to have less impact, with 43% citing labour or supply costs and 41% highlighting the cost of materials as major barriers. Two-thirds (67%) said the supply chain and materials availability affected growth, but only one in ten described this as a major concern.
Affordability issues also weigh heavily on the market. 84% of respondents cited first-time buyer affordability as a key constraint, reinforcing what HBF described as the need for a government-backed equity loan scheme to support buyers and stimulate demand.
The report further notes that:
65% find securing bids for Section 106 affordable housing a hurdle in planning.
55% support exempting schemes of fewer than 50 units from affordable housing requirements to maintain site viability.
52% believe simplifying and reducing the cost of planning would deliver the most benefit.
Other priorities for SMEs include:
Increasing small site availability through local plans (31%)
Easing Community Infrastructure Levy (CIL) and section 106 obligations (30%)
Providing targeted support for first-time buyers (19%)
Reducing regulatory burdens (19%)
Addressing issues in the Section 106 affordable housing market (19%)
Limiting the impact of the Building Safety Levy on SMEs
“Despite recent government interventions, the operating environment for SME home builders remains overly complex, costly and slow, stifling growth and deterring new entrants to the market," comments HBF CEO, Neil Jefferson.
He added, “As housing delivery targets face growing scrutiny, policymakers must prioritise meaningful reform that truly supports smaller developers,” Jefferson explained. “Tackling longstanding planning bottlenecks, as well as wider issues such as viability, infrastructure delays and rising demand-side pressures, is essential if SMEs are to confidently invest in future land and labour supply."
“Without real change, SME home builders will remain at a disadvantage, unable to absorb mounting delays and costs and undermining the government’s ambition to create a diverse, competitive and resilient housing market.”
