Challenges facing small housing developers: survey

4. Government changes

This chapter addresses the following research question:

• What actions/changes do small developers think are needed to improve their output?

Respondents were asked to make suggestions for actions that would improve their organisation's output that could be undertaken by the UK Government, the Scottish Government, local government, the building industry, and other relevant stakeholders. Not all respondents clearly differentiated between the different levels of levels of government in their responses.

Suggested changes – UK Government

Although all 57 respondents answered the question about the actions required by the UK Government to improve their organisation's output, most suggested actions that were within the remit of either the Scottish Government or local government. These have been analysed in the relevant sections. Many of these actions related to planning procedures, building regulations, Scottish Water, and apprenticeship schemes.

For example, one respondent called for the UK Government to extend some its own Help to Buy initiatives to Scotland. Another respondent called for the UK Government to allocate funding to support the delivery of affordable housing via the Barnett settlement. It appears that there may be a high level of uncertainty amongst SME housing developers as to which levels of government are responsible for different policy areas.

Fourteen respondents suggested actions that could be undertaken by the UK Government within the existing devolution settlement. Eight mentioned or alluded to Brexit in their response, with the numbers who made each suggestion included in brackets:

• Resolve Brexit to reduce economic uncertainty (5).
• Remain in the European Union (2).
• Try to stop suppliers from inflating prices of materials due to Brexit (1).

Six respondents suggested that the UK Government could take action on finance, such as the regulation of banks. Of these, one respondent called for the UK Government to 'compel the high street banks to be more positive and progressive in providing reasonable (interest level) loans to house building SMEs'. Another specifically called for the regulation of business-to-business lending to provide greater protection to borrowers.

Two respondents called for lower taxes, one of which specifically mentioned corporation take. One further response said that the UK Government should avoid unnecessary changes in regulatory requirements for small businesses and to minimise uncertainty in economic outlook.

Six respondents explicitly stated that there was nothing that the UK Government could do to improve their organisation's output.

Suggested changes – Scottish Government

The vast majority of respondents suggested actions that they believed would help to improve their organisation's output that could be undertaken by the Scottish Government. Although some respondents made these suggestions under the questions about either the UK Government or local government rather than the Scottish Government, they have been included here.

Planning

The largest number of suggested solutions that could be implemented by the Scottish Government related to the planning system, with 29 respondents calling for changes to the planning system at a Scottish Government level. Of those who made specific suggestions the majority sought changes to the planning system, the numbers who made each suggestion are included in brackets:

• Introduce measures to streamline the planning process (9).
• Introduce measures to speed up the planning process (7).
• Make the planning process more consistent across Scotland (5).
• Fast-track the planning process for small developers (3).
• Increase central funding for planning and building control departments (2).
• Lower planning costs to reflect higher build costs (1).
• Greater independence for local authorities in the planning process (1).

Finance and Funding

Eighteen respondents made suggestions for Scottish Government action that related to funding or finance. Some called for 'better development finance' or 'support on finance' without making specific suggestions. Beyond this, responses tended to fit into one of two categories: more public sector funding to small and medium developers or making development finance more accessible to small and medium developers.

One respondent suggested reviewing state aid rules to allow more funding for private developers working on town centre projects and expensive comprehensive rehabilitation projects. Another respondent called for the extension of funding for affordable housing beyond 2021. A respondent called for the introduction of more new-build finance packages. Another called for development funding to be accessible via a simplified process for small developers. Two respondents called for the establishment of a Scottish central bank that would provide low-cost development finance.

Regulations

Nine respondents referred to government regulations in their response. Of these, three suggested that building regulations were too onerous. According to one respondent:

"Regulations, building standards now gone steps too far. Costs to achieve the standards are killing development. Sale values do not reflect the increased costs incurred."

Two respondents suggested that there needed to be more regulation of local councils. One of these respondents said that there should be the same standards across all regions and that local authorities should not be able to interpret the standards themselves.

Utilities and Infrastructure

Twenty respondents said that the Scottish Government should take action to improve utilities and/or infrastructure. Of these, eight respondents specifically mentioned Scottish Water. A further five respondents also highlighted Scottish Water amongst their suggested actions for local government.

According to one respondent:

"Speed up planning and warrant procedures and sit down with utility companies, especially Scottish Water. There is no point in telling us they can help deliver more homes when Scottish Water continually deny or reduce planning applications due to lack of capacity. Invest in the required infrastructure."

One respondent said that Scottish Water should be made to find a solution to the 'rainwater problem'. Another said that their approach was inconsistent and decision-making processes took too long. One suggested that Scottish Water could provide a capacity map to show where developments may have problems.

One respondent made the following suggestion:

"A central coordinator contact person between developers and utilities where mains and services for each development could be uploaded on a server where they could be registered and logged with request for connection dates being accessible via an app or portal with time lines agreed in advance of each utility."

Two respondents referred to S75s. Of these, one suggested that financial contributions on S75s could be set nationally instead of varying according to local council. Another said that small developers should pay a reduced S75 contribution, and suggested that buyers could pay towards this if LBTT was reduced.

Two respondents referred to road bonds, arguing that the Scottish Government should provide a fund or insurance scheme for the provision of road bonds.

Other suggestions included that that the Scottish Government should remove the requirement for legal servitudes for all utilities, that the Scottish Government should encourage infrastructure providers to be more development-focused, that the Scottish Government should invest further in infrastructure and utilities.

Apprenticeships

Seven respondents said that the Scottish Government should take action on apprenticeships. Of these, three called for more apprenticeships, and two said that the Scottish Government should invest more in apprenticeships, with one of the latter emphasising that the net cost was currently too high for developers. One respondent said that there should be an incentive scheme for taking on more apprentices and other staff.

Linked to apprenticeships, one respondent said:

"Encourage high quality pupils to consider careers in the construction industry. At the moment, our perception is that the government encourages only those less able pupils to enter the construction industry."

Land Availability

Eight respondents said that the Scottish Government should take steps to make more land available for small and medium developers. Of those who made a specific suggestion, the numbers who made each suggestion are included in brackets:

• Reserve a percentage of land for small developers within larger allocations (3).
• Update the vacant and derelict land register (2).
• Provide more support to bring brownfield sites back into use (1).
• Introduce a 'land bank register' of land that could potentially be used for development (1).

Government initiatives

Six respondents said that the Scottish Government should make changes to the Help to Buy scheme. Five of these said that the maximum house values for the scheme should be raised, with two specifying that the price ceiling should be raised to £250,000.

One respondent said that the Scottish Government should continue the Building Scotland Fund.

Taxation

Five respondents said that the Scottish Government should take action on taxation. The numbers who made each suggestion are included in brackets:

• Reduce Land and Buildings Transaction Tax (LBTT) rates (2).
• Review LBTT rates (1).
• Reduce or abolish the 4% additional dwellings tax as it is slowing the market at the lower end (1).
• Abolish the additional dwellings tax for development properties (1).

Building Warrants

Two respondents mentioned building warrants amongst the actions that the Scottish Government could take. One called for a radical re-think of the whole building warrant process:

"I think you should look at how ships are built. Ships are built to the accepted international standards of construction, and sea trials are completed at the end to make sure that's been done. There are penalties that ensure that people adhere to the specifications. A similar process could be followed. Planning permission needs to be retained in order to protect the aesthetics of the environment, but if developers then commit to building the development to the appropriate standards of construction, it does away with the requirement of the Building Warrant. All that's being asked is that the project is built to the right standards. This is already checked by the NHBC surveyor and (depending on the contract) by the managing architect, the contacts administrator, or the bank surveyor. It would not be difficult to set up a penalty system and extend the NHBC surveyor requirement (which already proves to the buyer that their home has been built properly)."

The other respondent suggested that the Scottish Government should allow 'Self-Certification of technical matters (Site Investigations, Ecology etc.) similar to Structural Engineer SER for Building Warrant'.

Suggested changes – Local government

The vast majority of respondents made suggestions for actions that could be undertaken by local government, and most related to planning, zoning, or land availability.

Planning

The majority of respondents (36 in total) said that local government should take action on planning in order to help to improve their organisation's output. Of these, 20 said that they would like the planning process to be faster or more streamlined. The quotations below illustrate typical responses:

"Streamline planning process, the length and depth of consultations and the pre-application enquiries when trying to progress a planning application is proving to be a real obstacle when trying to secure planning consents for site."

"Speed up planning process, by focusing on planning and not ancillary services. More Building Control officers. Planning officers to be given authority and support to reject irrelevant public objections."

Six respondents called for greater resourcing or investment in planning departments. For example:

"Investment in planning departments. Funding should be ring fenced to ensure sufficient staff are employed and new staff are attracted."

One respondent complained of inconsistencies in the planning process:

"There is also the problem of inconsistencies when applying for planning permission i.e. it appears to depend on who is dealing with planning as to how the proposals are interpreted."

Two respondents commented on the general level of control exercised by planning departments. Of these, one said that the planning authorities should be 'much less dictatorial'. According to the other:

"Improve resourcing and reduce control of planning departments. They are continually re-designing well thought out, economical developments and are in a position of too much control (where they tend not to have practical, construction knowledge)."

Two respondents called for greater consistency in planning departments with greater input from planners.

Land availability and zoning

Seven respondents identified land availability and zoning as areas on which local government could take action. Of these, three said that local government should release more land, including two that specifically called for the release of brownfield sites. One said that local government should identify more land, including smaller sites, and that less onerous conditions should be applied to smaller developments.

One respondent drew attention to the need to update vacant and derelict land registers:

"Meet to discuss the vacant and derelict land register. Update the register on an ongoing basis as current version was compiled in 2017 when a lot of the information was already out of date. Actively manage the register and take pro-active steps to bring land into use, in particular when a developer approaches the council with a plan to build social housing."

Two respondents specifically mentioned zoning. According to one respondent:

"As a small developer we face a real challenge trying to compete with larger national builders when it comes to land zoning and acquisition. Serious consideration should be given to zoning smaller land parcels to allow Small Housing Developers (SHDs) the opportunity to deliver in communities that are monopolised by bigger developers."

Suggested solutions – The industry and individual developers

Suggestions made by developers for actions that could be undertaken by the industry related to skills and training, lobbying, building standards, and a range of others.

Skills and training

Twenty-one respondents suggested that the industry should take action relating to skills and training. Of these, 11 respondents explicitly said that the industry should train more apprentices. The following responses are illustrative:

"A mandatory industry wide scheme of having 10% of the workforce employed as apprentices would go a long way to plugging the skills shortage that emerged when the industry is busy."

"Larger housebuilders should be forced to train apprentices. Reducing the training is not the answer."

Other respondents did not mention apprenticeships, but did say that the industry needed to invest in skills shortages. According to one respondent:

"The industry needs to address the potential skills shortage. The CITB (Construction Industry Training Board) should not have withdrawn from school career fairs and job fairs. The industry has to be seen as an attractive and credible industry where you can learn a skill and contribute to the built environment."

Lobbying and working with government

Five respondents said that the industry should lobby government. Within these, one respondent said that the industry should lobby local and national government to streamline the planning process for smaller sites, and another said that the industry should petition government to ensure that vacant and derelict land and vacant properties are brought back into use.

Four respondents suggests that the industry could work more with government to co-ordinate plans or to improve government understanding of the sector. One of these suggested that developers could help develop state aid rules and statutory consents, especially planning, water and sewerage consents.

Building standards

Two respondents said that the industry should introduce more stringent building standards. One of these said that the industry should create a level playing field across all sizes of house building with minimum standards for safety and quality. The other called for mandatory technical standards, such as space standards, that go beyond existing building regulations.

Suggested changes – Other relevant stakeholders

Fewer than half of respondents suggested actions that could be undertaken by other relevant stakeholders to improve their organisation's output.

Utilities

Eleven respondents suggested actions that could be undertaken by utility companies. Of these, four explicitly referred to Scottish Water. Two said that Scottish Water needed to become more customer-orientated, and one highlighted problems with surface water and existing combined systems. Another respondent argued that Scottish Water should remove some of their existing restrictions:

"Scottish Water should remove any restrictions on small sites under 25 units where an increased burden would have the minimum impact on their infrastructure. Small builders should not be paying for impact studies on networks owned by a highly profitable business that should know the capabilities of its network."

Beyond this, three respondents said that utility providers needed to increase the pace of service provision, and two respondents said that communication between different utility providers needed to improve. One also said that utility companies should have an obligation to provide temporary supplies during the building stage.

Finance

Five respondents suggested actions relating to finance that could be undertaken by other relevant stakeholders. Three of these explicitly referred to banks, and included suggestions that banks should adopt a more focused approach to lending, reduce borrowing interest rates, and be more receptive to SME loan applications.

One respondent said that mortgage providers 'should embrace novel methods of construction'. Another respondent called for easier access to funds without specifying further.

Other actions

Two respondents said that there was a general need for other relevant stakeholders to embrace a more positive attitude towards development, one said that there should be more focus on regeneration and brownfield development, and one said that other relevant stakeholders should be willing to take more risk.

Whilst this could have been included under Scottish Government actions, one respondent made the following suggestion for Scottish Environmental Protection Agency (SEPA):

"SEPA should take a more educational and partner-building approach to the industry. No-one wants to cause pollution, so offering advice and good practice while visiting sites would be a benefit."

Summary

Solutions included calls for (more) financial help, more co-ordination (of infrastructure and planning), and more co-operation between developers and those delivering planning, infrastructure and utilities. The need for action to be taken on or by Scottish Water was a recurrent theme.