Challenges facing small housing developers: survey

3. Obstacles

This chapter addresses the following two questions:

• What are the current obstacles to small developers building homes?
• How do small developers envisage the obstacles changing (improving, getting worse) over the next five years?

Obstacles – all

Respondents were asked to choose, from a list provided, up to three of the biggest obstacles to building they had experienced over the last three years, then to mention any other obstacles. Whilst all 57 respondents answered the first part of the question, only 45 gave an answer to the second part. Respondents were then asked to predict the top three obstacles that they expected to face in the following five years. The results are set out in Table 3.1 below.

Table 3.1: Obstacles to building in the previous three years and expectations for the following five years

Obstacles	Last three years		Next five years
	Top three[5]	Any others	Total	Top three
Time lost waiting for infrastructure provision	36	10	46	32
Unable to obtain planning consent for development	33	10	43	35
Cost of meeting infrastructure and S75 obligations	23	9	32	22
Unable to buy or obtain an option on land	9	18	27	10
Time lost negotiating S75s	12	12	24	9
Lack of skills	10	12	22	17
Lack of development finance	16	5	21	13
Cost of development finance	10	10	20	9
Lack of mortgage finance for customers	3	9	12	7
No desire to build more homes (already busy)	2	1	3	1
Other	7	8	15	4
Totals	57	45	57	57

Infrastructure obstacles

The most common obstacle experienced by respondents during the past three years was the time lost waiting for infrastructure provision. A further ten respondents chose it as one of the other obstacles that they had experienced during the past three years, indicating that 46 respondents had experienced this as an obstacle during the past three years.

Difficulties with S75s were also common; 32 respondents answered that during the past three years, the cost of meeting infrastructure and S75 obligations had been an obstacle, with 23 respondents choosing it as one of their top three obstacles. In addition, 24 respondents answered that the time lost negotiating S75s had been an obstacle, with 12 including it as one of their top three obstacles.

The top three obstacles to building that respondents expected to face over the next five years were broadly similar, with 32 respondents answering the time lost waiting for infrastructure provision, 22 respondents answering the cost of meeting infrastructure and S75 obligations, and nine answering the time lost negotiating S75s.

Planning obstacles

Table 3.1 above indicates that a majority of respondents felt that the inability to obtain planning consent for development was one of their three biggest obstacles during the past three years, and a further ten indicated that it had been an obstacle for them during the past three years. This was also the most common obstacle that respondents expected to face during the next five years, with 35 out of 57 respondents indicating that this was one of their top three expected obstacles.

Financial obstacles

The question prompted respondents with a number of different potential financial obstacles. Table 3.1 indicates that the most common financial obstacle cited during the past three years was the lack of development finance, with 16 respondents choosing it as one of their three biggest obstacles, and a further five indicating that it had also been an obstacle. Whilst a similar number (20 compared to 21) indicated that the cost of development finance had been an obstacle for them overall, fewer respondents (ten compared to 16) included it amongst one of their three biggest obstacles. Twelve respondents overall cited the lack of mortgage finance for customers as an obstacle to building during the past three years, though only three included it as one of their three biggest obstacles.

Fewer respondents expected the lack of development finance and the cost of development to be among their three biggest obstacles over the next five years than had experienced them during the past three years. However, more respondents (seven compared to three) expected the lack of mortgage finance for customers to be one of their three biggest obstacles during the next five years than had experienced it over the past three years.

It was anticipated that a significant proportion of respondents were likely to have had difficulties with S75s. The survey asked those who had chosen at least one of the options relating to S75s to explain in their own words what those difficulties were. The responses were classified as shown in Table 3.2 below.

Table 3.2: Infrastructure (S75) issues

Obstacles	Number of respondents
Difficulties and delays with agreements/consents/sign off/local authorities/bureaucracy/technical approval and providers	20
Costs too high/costs unrealistic/unviable	15
Delays/difficulties with utilities	6

* Totals will not match bases as responses may be coded in more than one category

The majority of respondents (20 out of 36) with S75 issues referred to difficulties or delays with the process of S75 agreements, often relating to bureaucracy. Fifteen respondents said that the costs related to S75s were too high, unrealistic or unviable in their area. Six respondents mentioned delays or difficulties with utilities provision. Some direct quotations illustrate this problem clearly.

On the subject of bureaucratic difficulties, one respondent said:

"Getting agreement from various authority departments as to what is necessary, and how much we should pay, is time consuming and interest sapping."

Another respondent drew attention to the difficulties posed by S75 fees:

"Our latest development (currently at planning) has been quoted as £7,800 per plot for S75 fees. The planned sale value for these homes varied between £150k-£185k. To try and lose 4.2%-5.5% on these is impossible, so the sale prices of the houses will have to rise. This means potentially taking longer to sell and buyers having to raise higher mortgages."

One respondent mentioned difficulties with both processes and costs:

"The procedures and costs are burdensome for small developers, the RCC (Road Construction Consent) only lasts 3 years but in remote rural areas it takes well over 3 years to fill a development and complete the roads. The imposition of Developer Contributions also adds to the prices of new homes and slows down the annual sales."

Another respondent described difficulties with utilities that relate to S75s:

"We have experienced real difficulties in receiving Scottish Water technical approval. This has cost us thousands of pounds in delays to complete our developments. Out of all of the utility companies, Scottish Water are the worst without question.

They take a ridiculous amount of time to engage, then making very slow progress of applications and processing approvals. Whilst many large scale house builders have the benefit of a direct contact in Scottish Water, we the small house builders get nothing like that and have to rely on being dealt with in the system."

Lack of Skills

Ten respondents indicated that a lack of skills had been one of their three biggest obstacles to building during the past three years, with a further 12 listing it as one of the other obstacles that they had faced. In terms of the next five years, seventeen respondents indicated that they expected a lack of skills to be one of their three biggest obstacles; a small increase from the past three years.

Respondents who indicated that they had experienced or expected to experience a lack of skills were then asked to state in their own words which skills they had found to be or expected to be lacking. The results are set out in Table 3.3 below.

Table 3.3: Skills found to be lacking in the past 3 years and expected to be lacking in the next 5 years

Skills	Past	Future
Bricklayers	12	7
All Trades	7	8
Joiners	7	4
Ground-workers	4	1
Plumbers	3	2
Electricians	2	2
Rough-casters	1	1
Painters/Decorators	1	1
Labourers	1	1
Ceramic tilers	1	1
Planners	1	1

* Totals will not match bases as responses may be coded in more than one category

The most common skills shortage was bricklayers, with more than half of the 17 respondents who answered this question saying that they had experienced a shortage of bricklayers during the past three years. Further to this, seven respondents said that they had experienced a shortage of all trades during the past three years, and eight said that they expected to experience a shortage of all trades during the next five years. Seven respondents had also experienced a shortage of joiners.

The next most frequently mentioned skills shortage was joiners, with seven respondents experiencing a shortage of joiners during the past three years, and four respondents expecting to experience a shortage of joiners during the next five years.

Summary

The majority of respondents had experienced difficulties with obtaining planning consent for development during the previous three years and expected this to be the case during the next five years.

The majority of respondents had experienced difficulties with infrastructure during the past five years. These included the time lost negotiating S75s, the cost of meeting infrastructure and S75 obligations, and the time lost waiting for infrastructure provision.

Fewer respondents expected to experience financial obstacles, such as the lack of development finance or the cost of development finance, over the next five years than had experienced them over the past three years.

More than one in three respondents had experienced a lack of skills during the past three years. The most common skills shortage reported was bricklayers, followed by joiners.