Small and Medium-sized House Builders — [Mr Lawrence Robertson in the Chair]

– in Westminster Hall at 11:27 am on 10 May 2023.

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[Mr Lawrence Robertson in the Chair]

Photo of Andrew Lewer Andrew Lewer Conservative, Northampton South 2:30, 10 May 2023

I beg to move,

That this House
has considered the future of small and medium-sized housebuilders.

It is a pleasure to serve under your chairmanship, Mr Robertson. I am particularly pleased that this debate has been granted, as it is on a subject that I have had an interest in for a long time. It is 20 years ago this week that I first became an elected Conservative politician. Throughout that time, housing has been central to my work. I spent 12 years on a planning committee, was the director of a housing association, led a county council, and held a strategic planning role on a regional assembly. Even during my time as an MEP, I served as the co-ordinator on the Committee on Regional Development.

Since my election as MP for Northampton South in 2017, housing has become ever more central to my work. In my maiden speech, I referred to my predecessor, Michael Morris, now Lord Naseby, who is still my friend, and to his 1974 maiden speech, which also had much content about Northampton and its housing issues. Locally, I am close to Northamptonshire Partnership Homes and its excellent and recently retired chief executive, Mike Kay. I was pleased to cut the ribbon on several of its developments.

For the vast majority of my time in Westminster, I have been a member of the Housing, Communities and Local Government Committee, as I wish it was still called. I am chairman of the all-party parliamentary group for the private rented sector and, most relevantly to this debate, I am founder and chairman of the APPG for small and medium-sized enterprises house builders, which has well over 200 industry members.

Unsurprisingly, I strongly believe that SME house builders can play an incredibly important role in addressing the dual problem of housing accessibility and affordability across the United Kingdom. Many of us recognise those problems, which are particularly acute for those aged under 40. A recent study by Lloyds bank illustrated the depth of the problem that younger people face when buying a house. In 1989, 51% of 25 to 34-year-olds owned a house—a high point—but that figure plummeted to 28% in 2019. It is not the focus of the debate, but the impact of migration on that cannot be ignored. In the last two decades, around 8 million people have been added to the population of the UK by immigration alone. That represents about four fifths of population growth. A new home needs to be built every five minutes if we are to keep up. As a political class, that is on us. Whether we approved of it or, like me, did not, does not matter. It is a fact.

No matter how much we would love things to stay the same, and no matter how much we do not want more houses in our constituency because we have persuaded ourselves that it is special, that cannot be. No one policy prescription or sector alone can remedy the alarming decline in home ownership, but all Members of Parliament should be concerned about generational disparity. From my party’s point of view, if one good thing comes out of last week’s election, it should be any complacency being struck out; a huge increase in house building must be a priority.

As a Conservative, I feel very strongly about the UK being a property-owning democracy. It worries me deeply that, for many young people, home ownership is increasingly out of reach. I do not believe that any one policy prescription can arrest the trend; home ownership is declining for a great many reasons, and meaningfully addressing those would take much longer than the time allotted for this debate. However, in my role as chairman of the APPG for SME house builders, and as a member of the Select Committee, I want to talk about how the SME house building sector can play its part in changing things for the better.

The Home Builders Federation reports that the SME house building sector delivered about 22,000 homes in 2020. Those are typically smaller developments built on trickier sites, be they awkwardly shaped and accessed ex-industrial sites, repurposed and extended buildings in towns and villages, or small, sustainable urban extensions. The SME house building sector tends to go where the volume house builders cannot. During my many years on a planning committee, I saw, just as many of us will see now, that SME developments often faced significantly reduced community objection. The cry of many is, “Brownfield first.” Whatever we may think of that policy ambition, SME house builders are delivering brownfield site housing up and down the country day in, day out. Many of the objections that people raise through the planning process relate to the scale of development proposals. “We do not want hundreds of houses here” is a refrain familiar to many of us, I am sure. All too often, people do not get the infrastructure to go with those large developments, and we can then see why opposition to development is not pure nimbyism; we need to be fair to people about that.

The SME sector of the house building industry delivers on more difficult sites, and in a way that elicits significantly less vocal objection than some of the volume house builders do. It delivered 39% of all homes built in England in the late 1980s, yet barely manages 10% of our annual housing completions 40 years later. I want to talk about why that is, and what the sector and the Government can do to arrest that decline.

The APPG has identified three significant issues facing SME house builders in the UK today. I am sure that there are many more, but addressing these three would put the industry in a much better place. The first is the cost of materials. The APPG has been working with partners on cost-of-material issues; it is clear that they have been particularly acute in this inflationary period. Of course, this is not the only sector struggling because of inflation, but SME house builders typically have smaller cash reserves than volume house builders, so they feel material costs much more keenly. There has been a de-globalisation impact too, as supply chains reaching into the far east get less reliable. That gives rise to a whole other debate on resilience, reshoring and not exporting our emissions so that we can pretend that they are lower.

Many cost pressures are a function of our wider economic challenges, but I want to hold up one example of what a business based in Northampton is doing to try to lessen the impact of material costs on SME house builders. Travis Perkins has for many years engaged with the SME house building sector, both as a member of the APPG and, much more broadly, in its role as a major supplier of building materials for the industry. I was delighted to see that, earlier this year, Travis Perkins launched an escrow agreement with Close Brothers Property Finance to support SME house builders. The initiative means that SME house builders can access building supplies and materials directly, without often lengthy pre-approval checks. That tackles one of the major challenges faced by SMEs when setting up special purpose vehicles on their developments. Travis Perkins is confident that the move significantly reduces financial risks for SME house builders, increases their supply chain stability, and reduces time spent managing cash flow. That is the kind of innovative thinking that we need to help manage the cost-of-materials issue, and I encourage other material suppliers to take inspiration from that.

The second big issue I will touch on is finance. The APPG has just submitted a call for evidence on access to finance for SME house builders, and we will invite right hon. and hon. Members to the launch of our report. I will not talk about everything in the report, but one of its clear themes is Land Registry delays. A number of developers have written to the APPG to raise concerns about extreme delays in the Land Registry’s process for recording changes of ownership of properties. Although that might seem relatively inconsequential, smaller SME house builders often obtain finance for their next development by borrowing against what is in their asset book. I have heard of cases of SME developers being more than a year into developing a well funded and successful development, but then finding themselves unable to borrow against it because the Land Registry had not recorded the fact that they bought the land years previously. I hope the Minister will look into that. Delays by state bodies that affect access to private finance are very troubling to me, and I implore the Government to address that.

Another significant barrier facing SMEs in this country is access to labour. The home building industry is a major employer in the UK; the planning, design and delivery of new homes directly or indirectly supports an estimated 800,000 people. However, the industry is facing a major skills shortage due to increased demand for housing, an ageing workforce and a severe loss of skills, particularly in the last recession. A January 2022 report from the House of Lords Built Environment Committee highlighted that 53% of SME builders were struggling to recruit carpenters, and 47% said the same about bricklayers. A report by the Federation of Master Builders found that between January and March 2023, 41% of its members had difficulty recruiting carpenters, and that bricklayers and general labours were also particularly difficult to recruit. Those are great jobs. They are well paid and give people great opportunities to be enterprising and plot their own course in life.

As well as being on the Levelling Up, Housing and Communities Committee, I sit on the Education Committee. There is renewed interest in the skills agenda, notably spearheaded by the Minister for Skills, Apprenticeships and Higher Education, my right hon. Friend Robert Halfon. I hope he will listen to the sector and providers and work with DLUHC, which is crucial to success, not just because of its housing role but because of its devolution responsibilities. It is key that there be no sector skills gaps, or unnecessary barriers to entry into skilled vocations along the further education learning route.

The growing labour issue coincides with decreasing numbers of apprentices being employed by SME builders: 80% of responders to the Close Brothers report based in the north said that the supply and cost of labour is a major barrier to increasing housing supply. Just 50% said the same last year. At the same time, the number of respondents based in the north who are hiring apprentices dropped from 88% in 2021 to 48% in 2022, yet seven in 10 contractors’ apprentices are trained by SMEs. That makes up 90% of training capacity, according to the Construction Industry Training Board. That is important, because housing stock is desperately needed in this country to meet demand. To put the challenges in wider context, according to the Federation of Master Builders, SME builders could deliver up to 65,000 homes by 2025, compared with 12,000 in 2021, given the right conditions.

I turn to the big one: planning. I know colleagues are very nervous about planning—likely even more so after last week’s local election results—but it would be entirely remiss of me to discuss SME house builders without discussing the one issue they raise with me more than any other: the planning system. According to Close Brothers, 93% of SME developers regard planning as a barrier to their growth. I know that the politics of planning extend well beyond this debate, and I appreciate that a great many arguments about planning reform have been made in this place and across the country over the past few years. I do not seek to wholly reignite that debate today, but I am already on the record as having said this in the House, so I will say it again: given our system for house building, removing the binding national housing targets is a mistake. When the history of this Government is written, that mistake will loom larger than it already does.

A different way was available—perhaps not entirely via zonal planning, but we could have gone some way towards the zonal planning system reset proposed by my right hon. Friend Robert Jenrick in his time as Secretary of State for Housing, Communities and Local Government. That will come to be seen as a great lost opportunity. Not least among its potential benefits was its simplicity, and a reduction in the curse of 21st-century British life—process. The advantage of such a change to SME house builders, disproportionately affected by process as they are, could have been significant.

A top example of the curse of process is the restrictions placed on housing delivery by Natural England in respect of nutrient neutrality, water neutrality and recreational impact zones. Those are already holding up the delivery of 150,000 new homes, according to the Home Builders Federation. Phenomenally complex regulatory requirements disproportionately disadvantage SMEs. They do not have comprehensive process departments, in-house lawyers or administrators filling a floor—or, these days, working from home. It was an argument for leaving the EU that it could make us more nimble and not over-regulated; over-regulation always favours the bigger players and entrenches their non-productive bureaucratic advantages. Our becoming nimbler and less regulated has not happened yet; it needs to.

I am certain that conversations around zonal planning, housing targets and local plan compulsion will continue long after I end this speech, but I thought it important to touch on two potentially new points that Members may find illuminating. The first relates to the regular feedback I receive from SME house builders on their interactions with local authority planning departments. On a number of occasions, I have had troubling conversations with SME developers in which they told me that they have faced great difficulty with planning officers in authorities across the country, despite their schemes being small and relatively uncontroversial. I have spoken to people from across the industry in town planning, planning law and property public affairs, and this pattern of planning officer difficulty is demonstrated in many local authorities, regardless of party control or council type.

I have come to understand that this difficulty might well be related to planning officer case load. As one town planner recently explained to me, although a 20-unit brownfield scheme developed by an SME is likely to require less work than a 400-unit green-belt development led by a volume house builder, it will not require 20 times less work. The resourcing of planning departments, coupled with five-year land supply targets, means that it is more logical for many planning officers to devote their attention to large schemes promoted by volume house builders than it is for them to support SMEs through the planning process. For a planning officer, the pain and controversy of a 400-unit greenfield scheme can be severe, but once it is done, their housing target for the whole year might be met, which would never be possible if they devoted their attention to smaller, bespoke SME developments. That is why I think DLUHC needs to look again at the planning process—not to change it fundamentally at this late stage in a Parliament, but to see if anything can be done to make smaller-scale applications less onerous for both developers and planning officers. However, that is not just a job for Government.

Local authorities already have significant planning powers that they could use to ease the passage of schemes promoted by SME house builders. I was interested to read about one such proposal earlier this year: local authorities across England were encouraged to take inspiration from work that the Greater London Authority had undertaken through its Small Sites, Small Builders scheme, and to start granting outline permission for brownfield sites before they sold them to SME developers for redevelopment. If a local authority awards outline planning permission for a site before it is disposed of, it becomes, at the stroke of a pen, much easier for SME house builders to secure development finance. It also significantly reduces the risk of rejection by a planning committee.

A variant of that approach could also help the cause of the visionary work of the Bacon review, which is the culmination of countless years of expertise on the part of my good hon. Friend Mr Bacon. It is a blueprint for advancing SME house builders, housing numbers, and individual freedom and liberty. The Government commissioned the review and promised that they would act on its recommendation. Perhaps the Minister could update us on progress in on that.

The SME house building sector can be a real asset for the United Kingdom. It is full of creative, resourceful people who, more often than not, deliver a high-quality product on harder-to-develop sites. The sector faces real challenges, so it needs a Department and a Government who are open to ideas, especially ones that can be implemented quickly. My hon. Friend John Penrose has ideas for eminently SME-friendly ways to remove planning restraints, including by building up more than out, and by adding a storey or two to existing housing. It would add to volume, producing a quick boost to the SME sector, avoid overbearing the development sector, and protect greenfield all in one. I look forward to working with him to progress those ideas with the Department.

I have proposed similar ideas through amendments to the Levelling-up and Regeneration Bill. Over the last year, with the support of almost 50 organisations including Barratt Homes, G15, Optivo, the National Housing Federation and a range of SME and industry leaders, I have worked with key stakeholders to shape a small sites planning policy, which could redefine the fortunes of the sector. Through simple tweaks to the national planning policy framework, it would not only streamline the planning process, but also allow developers to deliver more affordable housing. The small sites policy could lead to over 1.6 million more homes being built on under-utilised sites across the country, helping SME house builders to thrive and regain their position in the housing market. From levelling up to housing delivery and enterprise, we believe that the policy could contribute to a virtuous circle that helps the Government to meet a number of their economic and social targets. I look forward to the Minister’s update on the indication the Secretary of State gave on the Floor of the House that my small site policy proposals would be taken on board in future.

The growth of and support for the SME house building sector are key to arresting the decline in home ownership among younger people. The sector requires our time and support, and the APPG does good work trying to support it. Lots of colleagues get what we are trying to do. I have named some, and I could name many more from across this House, including my right hon. Friend Mr Clarke, and my hon. Friends the Members for Dover (Mrs Elphicke), and for Walsall North (Eddie Hughes). I also sincerely thank those who have attended today’s debate.

Several hon. Members:

rose—

Photo of Laurence Robertson Laurence Robertson Conservative, Tewkesbury

I need to start the Front-Bench speeches at 3.28 pm, so perhaps colleagues could be mindful of that.

Photo of Tim Farron Tim Farron Liberal Democrat Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Lords Spokesperson (Communities and Local Government) 2:52, 10 May 2023

It is a pleasure to serve under your chairmanship, Mr Robertson. I sincerely congratulate and thank Andrew Lewer for introducing the debate, which is of such importance. Many of us prefer SME house builders because of the relationships they have with the communities in which they build, creating local employment and having a sense of—dare I say it?—ownership and responsibility to those developments for the generations that follow.

As of April this year, our communities in the lakes and dales have been served by the Westmorland and Furness unitary authority; before that, South Lakeland District Council covered all of my constituency. I am proud to say that over the last few years, working with local developers and housing associations, we have built well over 1,500 new genuinely affordable social rented properties. I disagree slightly with the hon. Gentleman about the role of planning. My sense is that if we are very specific about the housing we need, we are more likely to get it, whereas if we are more lax and give more freedom, people tend to hold out for a sunny day and seek the biggest possible dividend.

There was a lot of debate during last week’s local elections—it is an ongoing debate—about whether and where one should build houses. One reason that planning authorities are often suspicious of developers, large and small, is their concern about what will happen to the properties once they have been built. Will they be lifted? Will they be affordable? Will they remain part of the housing stock for the community for long? Among the reasons why developments are rejected, and why there is sometimes a less than positive attitude towards developers, is a fear that those developers may not be all that signed up to what happens to the homes and their tenure after they have been built. That is particularly relevant in the Lake district, the Yorkshire dales and other parts of Cumbria.

In the national parks, planning rules allow us to be pretty clear that everything that is built is affordable—and, by the way, we do not have a problem building houses. Developers know what is on the table. They know what the game is: if they want to build, they must build affordably; if they do not want to build, off they go and try their luck somewhere else. Outside the national parks, we have the issue that the local authority has to negotiate the proportion of a new development that will be affordable. That proportion is often no more than 30%—and even then, “affordable” is often a stretch.

In a community like ours, we can build as many executive four or five-bedroom houses as we like—there will always be demand for them—but my concern is that we should build for need rather than demand. I encourage developers to be on our side in campaigning for the houses that we need, rather than those that will just turn a profit. In my community, the average house price is 12 times the average annual salary; the average person is therefore snookered when it comes to buying their own home. All the Government’s packages may help a little at the fringes, but they do not help 99.9% of the people who are unable to afford their own home.

In my constituency, there are roughly 6,000 people on the social housing waiting list. There are about 7,000—we do not know exactly, because there is no formal record—second homes. We have an awful lot of homes that are not used for the purpose for which they were built. The last few years have seen the collapse of the long-term rented sector—both new and older properties—in into the short-term private sector. In one 12-month period during the pandemic, there was a 32% increase in the number of properties in South Lakeland moving from long-term rented to short-term rented. The number has increased further since.

Let me provide a quick snapshot of the market in Cumbria at the moment. As I speak, there are 8,384 short-term rented properties and 232 long-term rented properties available. By the way, 75% of those short-term rented properties are on Airbnb. There are 36 times more short-term rented properties than long-term rented properties. The collapse of the long-term sector into the short-term sector has decimated our local populations, with people and their children literally evicted from the homes and communities that they were brought up in. There has been a Lakeland clearances, effectively, over the last two or three years. That is miserable for those families and utterly damaging to our local economy and society.

Some 83% of hospitality and tourism businesses in Cumbria report severe difficulty getting enough staff. Why? Because there is nowhere for them to live any more. On top of that, one of the reasons why up to a third of the beds in our hospitals are blocked is that there are not enough care workers to provide the packages to get people out of hospitals to be cared for in the community. Our hospitals are clogged up, A&E is clogged up and ambulances are dangerously late as a result. All that is a consequence of the fact that the housing stock built by large and small developers, including new homes, is not being used for the purpose for which it was built.

My plea to the small and medium-sized developers—to developers of all kinds—is that I want them to care as much as I do about what happens to their homes after they have been built. Our communities are the absolute, definitive opposite of nimbys. I can show hon. Members leaflets that I have delivered in most of the wards in my constituency where we actively campaign for homes to be built. Grasmere, Hawkshead, Ambleside and Coniston all have developments that were built as a direct result of local campaigns for homes. We are the antithesis of the nimby, but we want the homes that we need, not the homes that businesses think they can make a killing out of.

I want the Government to make, and I would love developers to support, changes to the law in three areas. First—the Government are looking at this, and I encourage them to crack on with it and do it well—we must change planning law so that short-term lets are a separate category of planning use from long-term residential accommodation. That would mean that we could have a minimum number of homes in our communities that are lived in long term, so that people of all ages and backgrounds can live in the lakes and dales.

The second change, which the Government are not planning to make, is the introduction of a planning category for second homes—boltholes for people who live somewhere else. It is nice for them to able to do that, and of course in a free society they are entitled to a second home. However, if their right to a second home clashes with my constituents’ right to a first home, I know whose side I am on. I want to ensure that there is a planning law that allows us to put a limit on the number of second homes in communities. The Government have so far resisted that, and I encourage them to change their mind.

Thirdly, we should give councils and national parks the power to build council houses and ensure that they remain in the social sector, and the power, through planning, to enforce 100% affordability in those new developments.

My message to developers is that without them we would not have new homes, so I am grateful to them and I want to support them, but they would get more yeses through the planning system if they showed us that they care what happens to the homes once they have built them. If they show that they care, back the campaigns that I have just called for and join us in lobbying the Government to change the law in order to ensure that new homes remain affordable for local people in places such as the lakes and the dales, then they will find planning committees much more likely to say yes.

Photo of Peter Aldous Peter Aldous Conservative, Waveney 3:00, 10 May 2023

It is a pleasure to speak under your chairmanship, Mr Robertson. I congratulate the Backbench Business Committee on granting this debate, and my hon. Friend Andrew Lewer on securing and leading it.

Before I came to this place, for 27 years I practised as a chartered surveyor in Suffolk and Norfolk. Much of my work focused on the small and medium-sized house building sector, helping to secure planning permissions for sites and then selling them. Today, my interaction with the sector is less direct, although the conclusion I have reached is that it is now in a far less healthy state than it was. Some might say it is fighting for its very survival, and everyone in every area is far worse off for that.

It is important to highlight the advantages of a vibrant SME house building sector. Those businesses not only build much-needed homes, but do so with ingenuity, providing well-designed and bespoke properties, often on sites that present construction challenges that larger house builders shy away from. As they are deeply embedded in the local communities where they live, they have a sense of pride in the homes they build, which enhances the local street scene. They also have a significant positive impact on the local economy. They employ apprentices, engage architects, buy from local builders’ merchants and work with other local businesses such as electricians, plumbers and landscape gardeners.

At a time when we need to be boosting economic growth, there is an urgent need for a vibrant local SME house building sector right across the UK. Against that backdrop, it is concerning that the sector is not in rude health. In March, a report commissioned by the House Builders Federation, in partnership with Close Brothers Property Finance and Travis Perkins, found that planning delays and rising costs are crippling SME house builders. The conclusions are stark. Securing planning permission is the major barrier to growth. Those house builders cannot find sites. Local authority staffing shortages are exacerbating the problem. Rising material and energy costs are also a major concern. As we have heard, more than two thirds of the house builders are impacted by the nutrient issue, which has stricken development in over a quarter of local authority areas in England.

Finally, the sector as a whole is unhappy with the Government’s current approach on housing. The SME housing sector in the north Suffolk and Waveney area is still there, but it is dwindling. The faces are getting older and more wrinkled, and there are fewer new entrants, with many put off by the three barriers of planning, access to finance, and the legal complexities and bureaucracy associated with running a building company.

On a daily basis, my inbox is full of emails from people looking for a home in which they can live securely and comfortably. I liaise with the local council, which invariably does its best to assist. However, local councils are not magicians. They cannot conjure houses out of nowhere. It is in that context that we urgently need to revive the SME house building sector.

That brings me to the solutions. I have several suggestions. First, we must ensure that there are sufficient sites available for SME house builders. There is a concern that the abandoning of targets for local areas could lead to a reduction in the number of sites coming forward for development. Although it is early days, it should be noted that the number of housing projects granted planning permission in the last quarter of 2022 fell below 3,000 for the first time since that dataset was started in 2006. The number of projects for which planning approval was obtained in the whole of 2022 was under 12,500, compared with 21,000 in 2017. That situation needs to be monitored closely, to ensure that there is not an unintended and undesirable consequence of this change in national planning policy.

Secondly, we must ensure that local planning authorities are functioning properly. That is not a criticism of planning officers, who invariably do a good job in difficult circumstances. We must ensure that planning departments are properly resourced and adequately staffed. The planning process must become more streamlined, and we must ensure that suitable sites are made available for SME house builders. In recent years, there has been a move towards developing large garden village-type developments on the edge of towns. Although they have the advantage, from a strategic planning perspective, of being better able to provide the necessary supporting infrastructure, they do result in SME house builders effectively being excluded from the market.

My third point is that, in many respects, one of the solutions to the problem is already there in the form of Homes England, which has the ability to make sites available and to provide development finance through the levelling-up home building fund. Will the Minister undertake to provide Homes England with the resources to increase its work in those two areas, which are major obstacles that confront SME house builders? There is also a need to encourage high street banks to be more responsive and sympathetic to their house builder clients. There may be a role for the British Business Bank to promote such an approach.

My final point is perhaps a left-field suggestion: the zero rating of VAT for conversion and refurbishment work, so as to put such projects on a level playing field with new build. It strikes me that that could solve two problems at the same time: the slow demise of the SME house building sector, which is the subject of this debate; and the decline of our high streets and town centres, which need revitalising and where there is an opportunity to reuse millions of square feet of accommodation, often above shops, right across the country. SME house builders will often start their careers doing conversion work before moving on to new build. This idea could encourage more people into the sector. I ask the Government to give it full consideration.

We have a housing crisis in this country. SME house builders on their own will not solve it, but in the current situation, with the sector in gradual decline, we are seriously restricted in our ability to provide all people with a place that they can call home. We must also have in mind the enormous benefits that a vibrant SME house building sector can bring to local economies. We must set out a route map for the sector, which provides people with the opportunity, in the first instance, to start a business, and then to progress it and perhaps move on to become a regional company and then, if they want to, a national house builder.

Photo of Siobhain McDonagh Siobhain McDonagh Labour, Mitcham and Morden 3:09, 10 May 2023

It is a pleasure to serve under your chairmanship, Mr Robertson. I thank Andrew Lewer for securing a debate about such an important issue, and it is good to see the housing Minister in her place today.

I have taken part in a lot of Westminster Hall debates about housing under this Government and spoken to a lot of different housing Ministers over the past decade—14, to be precise. Since 2013, we have had the former Member for Hertford and Stortford, Mark Prisk, who lasted 13 months; and the former Member for Keighley, Kris Hopkins, who lasted 10. Impressively, Brandon Lewis served a whole 24 months. The former Member for Croydon Central, Gavin Barwell, lasted 10 months; Sir Alok Sharma, six months; Dominic Raab, six months; Kit Malthouse, 12 months; Esther McVey, six months; Christopher Pincher an unprecedented 23 months; Stuart Andrew, four months—back to normal business—Mr Jones, nearly two months; Lee Rowley, nearly two months; and Lucy Frazer, three months. I welcome Rachel Maclean to her role. She is already a veteran housing Minister compared to those on that list.

I am making the point that the Government cannot possibly expect to deal with a housing crisis while constantly churning through housing Ministers. How can they possibly run the country’s plans to build housing and meet targets if there is a new housing Minister, on average, every nine months? When we debate the important question of why small and medium-sized house builders are struggling, a reasonable person might think it had something to do with the fact that we have had 14 housing Ministers in 10 years.

I am having a great deal of fun doing this, as you can tell, Mr Robertson, but I want to be more constructive. In other words, I believe we should be taking on the big house-building monopolies. At the heart of why small and medium-sized building firms are struggling is that they cannot compete with a few huge firms that have the scale and monopoly power to keep them out of the market. The eight largest house builders build more than 50% of all the new homes in the country, and the latest research suggests that small builders now produce just 10%. That was not always the case. In the 1980s, small firms were responsible for around two thirds of new homes, but since 2007, the number of small and medium-sized house builders has halved.

The picture is similar in the housing association sector. Some 20% of housing associations account for 95% of all registered housing stock in the country. The top housing associations, known as the G15, dominate the London property scene and build one in four of all new homes in London. They house 10% of London’s population—that is one in 10 people in all homes, not just the rental market. The problem is that giant firms can buy land and sit on the asset for a number of years, whereas smaller firms do not have the funds for that and are much more likely to go out and get planning permission quickly so they can develop. To encourage those kinds of firms, we need to prevent the few large developers from dominating the market. We need to give smaller firms the planning support and access to finance that will give them a chance to compete.

Much is being said about the green belt, but not all green belt is green. I do not mean the genuine rolling fields, ancient woodland or areas of substantial natural beauty. I am talking about the car washes, the waste plants and the scrubland that no one would ever dream of calling green. There are 19,334 hectares of unbuilt green belt land within a 10-minute walk of a London train station, where there is enough space for 1 million new homes. We should be building affordable, good-quality homes on the land. Our best national estimates show that around 1.6 million households are waiting for social housing. Over the past 40 years, the overall social housing stock has declined by 1.4 million homes. We have a shortage of homes in this country and we cannot afford to prevent developments on land that is not really green.

Previous speakers have already referred to housing targets. We all remember when the target of 300,000 new homes was scrapped. The Government gave in and scrapped mandatory house building targets for local authorities. It is incredibly important to bring them back, and I am glad that the Labour Front Benchers have committed to doing just that.

The Government might think that they are keeping nimbys happy and protecting local authorities, but I would like to give them some advice. They are betting current political support against the future. Current estimates suggest that only a third of the children born today will ever become homeowners. The English housing survey says that the proportion of homeowners aged 45 to 54 fell from 74% in 2009-10 to 65% in 2021-22, and it is estimated to fall to 30% in the year 2070. For young people aged 25 to 34, home ownership has fallen from 70% in the mid-1990s to 40% today.

We must deal with land bankers. In 2019, the FTSE 100 house building companies were sitting on land banks of more than 300,000 plots between them. If we add the FTSE 350 house building companies, the collective land bank was a staggering 470,068 plots, and yet those companies completed just 86,685 homes in the previous year. Where is the punitive or preventive action to prevent this from happening? It is not the small and medium-sized firms that are doing this. Barratt Homes is Britain’s biggest land banker, and as of 2020, Barratt owned 80,324 land bank plots. Second on the list is Taylor Wimpey, which owns 77,000 land bank plots, and third is Persimmon, with 67,205.

I do not blame Barratt or Taylor Wimpey or Persimmon. I blame the Government for creating an environment where it pays to leave land empty and undeveloped. The job of a private property developer is to make money. That is what we expect of a private business. The job of the Government is to ensure that the houses that are needed are built.

Let me turn to Help to Buy. I did think, “Dear God” when I read that the Government might be thinking of bringing back Help to Buy, which they sold to us as an equity loan to help first-time buyers get cash together to get on the housing ladder. Along with so many other policies, the most well-off have benefited the most. Instead of opening up home ownership to the next generation, all the scheme has done is to speed up slightly the purchase date for people who were already likely to buy, often via family help. More people on high incomes—those earning more than £80,000—have used the Help to Buy scheme than lower earners.

The main effect of Help to Buy has been to inflate house prices and give very large bonuses to chief executives. The best example is, of course, Jeff Fairburn of Persimmon, who got a bonus of more than £100 million when the company’s sales had been 50% financed by Help to Buy, or the British taxpayer.

Whatever we have been doing as policymakers, it is clearly not working. Home ownership is lower than it was in 2003. On the current trajectory, it is unlikely to increase. Since the Conservatives came into power, 800,000 fewer households under 45 own their home, and nearly 1 million more people are renting. Fewer than 7,000 social homes were built in England last year, and 1.6 million households are waiting for social housing. Over the past 40 years, the overall social housing stock has declined by 1.4 million homes.

Big numbers often mean very little, but I will talk about my borough of Merton, which is a small, outer London authority. In the last year, we have had 72 two-bed, 34 three-bed and two four-bed properties to let, with 10,000 families on the waiting list. That tells me that we are not building enough new homes or doing enough to encourage new developments. The dominance of huge building firms, and the decline of small and medium-sized builders, is part of that story. We need to do something different, and we need to do it now.

Photo of Natalie Elphicke Natalie Elphicke Conservative, Dover 3:20, 10 May 2023

It is a pleasure to serve under your chairmanship, Mr Robertson, and I thank my hon. Friend Andrew Lewer for securing the debate. I know him to be very knowledgeable on this subject, as we have heard today.

The biggest obstacles to the delivery of available housing with planning permission are Natural England, the Department for Environment, Food and Rural Affairs and the issue of nutrient neutrality. The Home Builders Federation has said that nutrient neutrality is responsible for the putting on hold of at least 120,000 new homes with planning permission in more than 74 local authorities, with an estimated 41,000 more homes not coming forward every year. Two thirds of SME builders have said that nutrient neutrality will be a barrier to increasing housing delivery over the next 12 months, so I share the grave concerns expressed by many in the industry about the practicality of the Government’s proposed approach to tackling this issue.

The basis for nutrient neutrality is fundamentally flawed, first, because the causes of high nutrient levels in rivers are agricultural run-off, the pumping of sewage into rivers and the failure of water companies over many years to upgrade their infrastructure to tackle the problem. Secondly, the contribution of new homes to the problem is very small in comparison with other causes, but the impact on building the homes our country needs is huge. Thirdly, new homes are more environmentally friendly and sustainable than old homes. New homes are more water efficient, so they can help to address these sorts of problems. There is absolutely no need to ban them. For Natural England to ban new homes is like the Department for Transport banning or taxing electric cars because of concerns about air pollution caused by dirty old lorries and smoky diesels. It is the wrong target and the wrong policy. It undermines rather than supporting important environmental objectives, it undermines growth and it undermines the Government’s housing targets.

Added to the Natural England fiasco is the fact that DEFRA now plans to let water companies decide whether developments can go ahead at all and whether to connect to new developments. Research has demonstrated time and again that smaller house builders find it hardest to get water and other utilities connected, compared with the larger house builders. Areas with historical underinvestment in water connections are more likely to be in regional markets where SMEs can thrive. There is, therefore, a concern that the approach to nutrient licences and permissions, and the reversal of the current legal requirement for water companies to connect where requested, will favour larger builders over smaller ones, and more affluent areas over less affluent ones. It could be yet another barrier for the SME house builder, because although big companies can focus on land and sites outside the affected areas, an SME is more than likely to be focused on its local area and will not have that option. In effect, we are shutting down its entire business.

Let us be clear: DEFRA’s actions damage all housing delivery, and we cannot have one Department undermining the effectiveness and delivery of another. I ask the Minister whether we can meet urgently to discuss this issue further.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I am grateful to my hon. Friend for raising the subject of nutrient neutrality. I have a constituent who is a small house builder, as were his father and grandfather. He runs a business and employs people, and he has done so for many years. He went bust during the crash in the late noughties—2009 or 2010—but he is back on his feet and building more houses. He came to see me last February to talk about the fact that despite having spent £750,000 of his own money on building a road under a section 106 obligation, which he had met, he has been told that he cannot finish his work. Is that not the problem? Do we not need to be supporting such people?

Photo of Natalie Elphicke Natalie Elphicke Conservative, Dover

My hon. Friend is absolutely right to say that we need to support SME house builders.

In addition to the problems with planning, it is very difficult for smaller builders to grow, so I will end my remarks by looking at growth. Very often, the discussion around small and large house builders can divide one against the other—we have heard elements of that today. As with the supermarkets and the village shop, we need a range, not one or the other. We need all players in the market. Policy in this area must provide more support to SMEs. It must also make sure that we have the transition, growth, productivity, ambition and delivery that allow an SME to become a larger player.

In my discussions with the late Tony Pidgley of Berkeley Homes, we often discussed the nature of the house building market. Tony started his company in 1976, building and selling just four homes. He often said to me that it would be near impossible for him to achieve such a level of success today—to go from having a single site and a handful of homes to being a massive house building giant. We need to reflect on that and ensure that policies support the building up and transition of smaller to larger companies, and the successful reshaping of larger to less large where that is appropriate for a business. I hope the Minister will address that.

It is vital that we once again make the positive case for appropriate housing in our communities, to support regional jobs and skills through SMEs, and to provide more environmentally sustainable homes to sustain better life, education, health and happiness outcomes for all of our constituents. Housing can be a real force for good. We must do more to support smaller builders.

Photo of Laurence Robertson Laurence Robertson Conservative, Tewkesbury

We need to leave two minutes at the end for the mover of the motion to wind up, so we have up to 10 minutes now. I call Chris Stephens.

Photo of Chris Stephens Chris Stephens Shadow SNP Spokesperson (Levelling Up) 3:26, 10 May 2023

It is a pleasure to see you in the Chair, Mr Robertson. I congratulate Andrew Lewer on securing this debate. I note that he chairs the APPG for SME house builders, and I look forward to its report. He touched on some of the issues, but I look forward to the report being published so that it can create a wider discussion around the issues facing SME house builders. The hon. Gentleman set up the APPG in reaction to the UK Government’s goal of delivering 300,000 houses a year.

Another issue that will be familiar to the hon. Gentleman and others, and which it is useful to mention as background, is cash holdings. Cash holdings have a greater significance for SMEs than they do for larger house builders, because they represent a much higher proportion of a company’s equity. As a result, SMEs have greater exposure in the early stages of development. The costs associated with land purchase, infrastructure and groundworks must all be funded before the developer can see some balancing of the debt from sales revenue. SMEs do not have the financial firepower of the volume builders, and often they cannot acquire even small sites to put into a land bank because any funding so committed does not earn an immediate return.

Scotland is leading the way in delivering affordable social housing across the UK, and Scotland supports SMEs. We must recognise that the increased cost of finance from interest rate rises following the crashing of the economy is particularly troubling for the cash flow of SMEs and house builders. There are wider challenges, and the context has to be considered, but the UK is one of the few major economies—including Russia, incidentally —to shrink in 2023. Wages next year are projected to be the lowest since 2006, and the inflation rate was the worst in the G7 last year.

There are also problems in relation to Brexit and the resulting lack of business investment. The knock-on financing issues and mortgage price increases have consequences for house buyers and builders alike. Other issues must be raised on behalf of not just SME house builders, but SMEs across the board. Research by the Federation of Small Businesses has shown that more than half of SMEs across the UK suffer crippling cash-flow issues as a result of the late payment of invoices. The figures show that over 18 months to two years, almost half a million businesses went bust because of that very issue.

Last year, the Federation of Small Businesses warned that one in 10 Scottish firms had reported that late payment was threatening the viability of their businesses. With the increased cost of credit, through higher interest rates, the effective cost of late payments is higher than ever.

I note that my hon. Friend Douglas Chapman recently hosted a roundtable here in Westminster with accountants to tackle the issue of late payment, because at present the UK Government’s voluntary prompt payment code recommends that SMEs are paid within 30 days but we need to see more being done in practice, rather than small firms having to wait 60, 90 or even 120 days for payment from big firms. I hope that the Minister can tell us what discussions she has had with her colleagues to ensure that SMEs—not just SME house builders, but SMEs across the board—are being assisted, and that she can also say what action the Government are taking to ensure that SMEs do not suffer from late payments.

Despite the challenges of austerity, Scotland’s five-year, £3.5 billion commitment on the affordable housing supply programme remains. There will always be peaks and troughs of investment as we move towards that goal. The Scottish Government have put in £752 million of investment for 2023-24, which represents progress towards meeting the £3.5 billion pledge. In the most challenging Budget settlements that we have had, the Scottish Government are providing £13.5 billion in the 2023-24 local government finance settlement, supporting local authorities and communities to meet their housing needs and homelessness targets.

Scotland continues to be a good place to buy a first home, with the average first-time buyer spending around £100,000 less for a property than in England. That situation will be familiar to those us who are elected as Members of Parliament, when we arrive here and look at the property prices in London as we try to rent somewhere. We walk past an estate agent and see what we would consider to be a premiership transfer fee, but in actual fact it is the price of the property. That scenario will be familiar to those of us who are Members of Parliament from outwith London; it is one of the challenges that faces us when we arrive here.

The latest statistics show that 22,905 new build homes were completed in Scotland in the year ending September 2022, providing people in all sectors with warm and secure homes. Scotland has also led the way in delivering affordable housing and social housing across the UK, with more than 118,000 homes being delivered since 2007.

As Tim Farron said in his remarks, it is also important that it is the right type of housing that is delivered. It is important that what is built is affordable, is for social rent and is in affordable home ownership. I can tell him that of the 50,000 affordable homes completed in Scotland, 69% are for social rent, 12% for affordable rent and 19% for affordable home ownership.

In conclusion, Scotland has a good story to tell. We have to ensure that the challenges that house builders have faced through the pandemic and in the current economic situation are met, and that we also demonstrate and learn from Scotland’s collaborative approach to its housing partnerships, social landlords, local authorities, community bodies and construction sector developers.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government) 3:33, 10 May 2023

It is a pleasure, Mr Robertson, to serve with you in the Chair. I congratulate Andrew Lewer on securing this important debate and I commend him for the thoughtful remarks with which he opened it. I also thank the hon. Members for Waveney (Peter Aldous), for Dover (Mrs Elphicke), and for Westmorland and Lonsdale (Tim Farron), as well as my hon. Friend Siobhain McDonagh, for participating in this afternoon’s debate.

As has been noted several times during the debate, including by the hon. Member for Northampton South himself, the decline of small and medium-sized house builders is a long-term trend that is widely recognised as having a negative impact on the supply, location, quality and design of new homes across the country. There is broad agreement, both on the barriers that SMEs face and on the fact that more must be done to support them and increase competition in the house building market.

Members on both sides of the House have been ruminating for years—certainly for the eight years that I have been here—about the predicament facing SME house builders and about the fact that the progressive consolidation that has occurred at the top of the market and the consequent over-reliance on an alarmingly small number of developers are themselves symptoms of a broken housing market. However, relatively little progress has been made in recent years in arresting the decline of SME house builders and diversifying the industry more generally—for example, by markedly expanding the self-build, custom-build and community-led housing sectors. Opposition Members would argue that the lack of progress reflects at least in part the limited nature of the Government’s interventions. Although we readily acknowledge that they have introduced various initiatives to support SME house builders—including the development finance provided through the levelling up home building fund, which the Minister may point to in her response—taken in the round they have been somewhat piecemeal.

The fact is that the Government could do more in the short to medium term to tackle the various constraints facing SME house builders. The Department could direct Homes England to give even greater weight to quality over cost in development appraisal to increase the chances of SME house builders winning bids, or it could consider extending strategic partnership funding to select SME house builders to assist them in aligning affordable sales with output, rather than forcing them all through the continuous market engagement route.

Given that access to land is a key barrier facing SME house builders, the national planning policy framework could be amended to ensure there is a clear expectation on local planning authorities to demonstrate which sites under 1 hectare within their boundaries will be allocated for development to ensure that their 10% requirement is met. That would provide a firmer basis for SME house builders to invest in and build on those sites. The Government could explore replicating across England London’s Small Sites Small Builders programme, which makes it easier for public land owners to dispose of small sites and match them with SME house builders. The hon. Member for Northampton South rightly pointed to that scheme. Given the challenges that SME house builders face, particularly at present, I hope the Minister will not merely recite past measures but will tell us about further measures that the Government are exploring to support them.

However—there is a however—as welcome as any further measures would be, targeted interventions are likely to make a difference only at the margins. The fundamental dynamics of the system as currently constituted make it almost impossible for SME house builders to thrive and grow. A slow and somewhat uncertain planning system, high land prices and a persistently volatile housing market combine to disadvantage SME house builders and advantage mainstream volume builders with deep pockets, extensive project portfolios and large development site pipelines. In boom years, SME house builders struggle to compete with the volume developers and their speculative business model. In hard times, many simply go bust, with the net result that with every successive downturn, the industry as a whole becomes more homogenous. That is why recent developments are so concerning.

There is broad agreement that the UK has entered another housing market downturn, sparked by what looks likely to be a prolonged period of high inflation and high interest rates. That downturn will manifest itself in a variety of ways, but it will almost certainly include a softening of house prices and a consequential slowdown of house building. On top of that, as several hon. Members said, decisions made by successive Conservative Administrations over recent years will exacerbate the slowdown. The period of sustained planning policy uncertainty since the publication of the 2020 “Planning for the future” White Paper and the chilling effect of the proposed revisions to the NPPF on local plan preparation and the planning consent pipeline have combined to further suppress house building rates.

Faced with the end of Help to Buy, softening house prices and rising construction, material and labour costs, many of the volume house builders are already retrenching and mothballing sites. With higher profits, lower levels of debt and substantial cash reserves, they are arguably far better placed than they have ever been to weather the downturn and wait for house prices to recover. SME house builders are in a much more vulnerable position. We face the real prospect that the gloomy economic outlook and the sharp rise in the base rate and borrowing costs will further entrench the dominance of the small number of volume house builders. A Government that are serious about not only arresting but reversing the structural decline of SME house builders will need to confront the fundamental reasons why the housing market, as currently constituted, makes things so difficult for them to compete. In our view, that ultimately means Government being prepared to accept greater responsibility for development outcomes and ultimately being prepared to deploy the unique powers available to them to ensure that quality place making and long-term value creation—in other words, a stewardship approach to development—become the norm, not the exception. It means, for example, far greater use of the master development model to de-risk large sites and sell phases or parcels on them in a way that creates far more opportunities for SME house builders.

Those SME house builders desperately need those opportunities and, as a country, we need a greater focus on doing what is necessary to provide them, not just because of the contribution that SME house builders make to our economy and communities, in all the ways spoken about by the hon. Member for Waveney, but because—as the hon. Member for Northampton South said—we will never be able to build the volume of houses we need across England without a thriving and sustainable SME house-building sector.

If we are to avoid a further decline in their number over the coming years, SME house builders require greater support now, and Labour encourages the Government to give serious consideration to further short-term measures that can help them weather the downturn. We are also clear that if we are to reverse rather than just arrest the structural decline of SME house builders over recent decades, tinkering around the edges will not be enough. I agree with my hon. Friend the Member for Mitcham and Morden: we absolutely need to do something different. What is ultimately required is a Government that not only accept that SME house builders will never thrive in the current broken housing market, but that are willing to reform it to create the conditions in which they can. That is precisely what Labour intends to do if the British people give us the chance to serve after the next general election.

Photo of Rachel Maclean Rachel Maclean The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities) 3:41, 10 May 2023

It is a great pleasure to serve with you in the Chair, Mr Robertson. I thank my hon. Friend Andrew Lewer who, in his customary fashion, has delivered an excellent and incredibly comprehensive speech. It was measured and balanced. He reflected his considerable expertise and experience across his many years, both in this place and elsewhere, serving his constituents and this industry. We are all fortunate to have the benefit of his experience.

I welcome the debate and the opportunity to talk about these vital issues, on which I think there is actually more agreement than disagreement. That is not always the case in this place. I look forward to reading the report of the APPG—I thank my hon. Friend the Member for Northampton South for his work on that—and the recommendations on SME finance. I know that it will have taken considerable work to pull together the views of 200 people, and I for one will be looking at that with great interest. I thank all other hon. Members, and I will come to their remarks before I finish speaking.

The Government fully recognise the importance of SME house builders, and we are committed to ensuring that SMEs survive and thrive. We all share that objective. In case of any doubt, I will confirm that we support this critical part of the housing market and set out what we are doing to help SMEs now and in the future. We know and recognise that our thousands of small and medium-sized house builders are one of the driving forces for our mission as a Government: levelling up the whole country. They play a vital role; they build out the majority of smaller sites; they make an important contribution to new supply; and they help to densify urban areas. They supply the workforce and subcontracted labour for larger firms, and deliver a sizeable amount of the training.

They also help to diversify the market by raising competition and ensuring that consumers have choice. They are important in delivering self-commissioned homes. I will come on to speak about some of that work—it is good to see my hon. Friend Mr Bacon in his place. We therefore support the expansion of the self and custom-build and community-led sectors. Recognising that important role, we helped the construction industry to make it through the choppy waters of the pandemic, but we now want to help them thrive into the future.

We have talked about how the number of small house builders is trending in the wrong direction. They used to account for as much as 40% of new homes in 1988 and, unfortunately, their market share has declined considerably. It is a challenging time, and this debate has highlighted the sheer range of challenges they face, from navigating the planning system and a lack of available and viable land to finance and materials shortages. There are longer term challenges, such as accessing labour with the right skills and the transition to net zero. SMEs are particularly vulnerable to demand shocks. Their lower financial resilience and access to capital means that costs, delays and uncertainties associated with the planning system can inhibit their businesses. We want SMEs to play their part in the long-term supply of housing and operate in a competitive and healthy market.

We all know the challenges, but what are the solutions? I will touch on a few things we are doing now and will do in the future. On access to finance, we have put in place a range of financial measures to support SMEs and encourage systematic change in the lending environment. To make it easier to access development finance, we extended our commitment to funding SMEs through the levelling-up home building fund, which provides an additional £1.5 billion in development finance to SMEs and will help them to deliver 42,000 homes. The vast majority of that money has been spent outside of London and the south-east.

The fund follows the success of the over £2 billion in development finance that was made available under the home building fund, which is expected to deliver over 60,000 homes when all the works have been completed. It has involved over 400 projects across the country and has helped SMEs to enter the house building sector, grow their businesses and deliver more homes. Our support does not stop there. Our £1 billion ENABLE Build guarantee scheme has increased the amount of borrowing available to SME house builders. So far the Department has guaranteed nearly £350 million in loans to SME house builders, increasing the amount and variety of lending available to the sector.

My hon. Friend Andrew Lewer highlighted that delays from state bodies are hindering access to finance. I am also very concerned about that, and I would be happy to work with him on any specific issues he has heard of and tackle them directly. He also mentioned the Land Registry, which despite unprecedented demand has continued to deliver essential services. We recognise that speed of service is a top priority. This is being addressed urgently through a combination of recruitment, training, tactical deployment and automation. The Land Registry is working with partners across the market to enable digital conveyancing and co-create a simpler, paperless and quicker process for buying and selling property that will benefit home owners across England and Wales.

Nutrient neutrality has been mentioned by a couple of speakers, most notably my hon. Friend Mrs Elphicke. We are clear that nutrient neutrality can only be an interim solution, for all the reasons that she and other Members have set out. We are committed to removing barriers to house building and releasing stalled developments as soon as possible by addressing pollution at source and boosting a supply of mitigation.

The Levelling-up and Regeneration Bill will place a new statutory duty on water companies in England to upgrade waste water treatment works in nutrient neutrality catchments by 1 April 2030. The upgrades to treatment works will address a significant source of pollution and reduce the cost of mitigation for developers. It is regrettable that we see stalled developments. That is why we have worked with the Treasury and been able to open a local nutrient mitigation fund following the spring Budget. That will unlock more housing delivery by boosting the supply of mitigation being delivered by local authorities.

I want to turn to planning reform, because that is the real meat of the issue for many Members. This is a major area of focus for us in Government. It is not an easy task, and I will not pretend that it is, but this is the whole thrust of the work that is taking place through the Levelling-up and Regeneration Bill. The impetus for the Bill is to reform planning and support SMEs to build more homes by making the planning process easier to navigate, faster and more predictable. We want it to reduce delays and costs for house builders. The national planning policy framework already includes policies to support SMEs. For example, it sets out that local planning authorities should identify land to accommodate at least 10% of their housing requirement on sites no larger than 1 hectare.

My hon. Friend the Member for Northampton South mentioned in our Public Bill Committee sessions that the existing small sites policies were not effective enough in supporting the housing objectives and that they should be strengthened to support the development of small sites, especially those that will deliver high levels of affordable housing. That is why we agreed to consult on our approach to updating the NPPF.

We invited views on how the policies could be strengthened to encourage greater use of small sites, which play a really important role in delivering gentle urban density and in supporting SME house builders. The consultation ended on 2 March. We are considering the responses that we received and we will publish an update in due course. I would be very happy to speak to my hon. Friend in more detail about some of that work. We have also recently closed our consultation on proposals to increase planning fees to help improve the performance of local planning authorities.

Planning changes will not happen overnight. We are listening and our aim is to reduce delays and costs for house builders, which disproportionately impact SMEs. That will allow SMEs to get on with doing what they do best: delivering the homes and communities that our country needs and wants.

The tone of Matthew Pennycook was constructive. There are areas on which we can find ideas from all across the House. We are already doing most of the things that he suggested. He talked about the fundamental dynamics of the housing market and the problems they cause. Those problems are precisely the reason why we are making changes through the Levelling-up and Regeneration Bill and the NPPF.

I want to talk about housing numbers. Members referenced the removal of the direct mention of housing targets. We remain committed to building 300,000 houses a year. That is a manifesto commitment, and is what we should be doing across the country. The system we had before was evidently not delivering those houses in the right places, which is why, through all the careful work that I do not have time to reference, we are making planning reforms. If the Labour party is determined to scrap those planning reforms, it will find that house building will decrease, not increase.

I thank my hon. Friend the Member for South Norfolk. He is the self-commissioned homes man, and the Government agree with him. We believe that self-commissioned homes, including those that are self, custom built and community led, are crucial in diversifying the market and delivering the homes that this country needs. We have made some great progress thanks to my hon. Friend, including through launching the £150 million Help to Buy equity loans scheme and making changes to his Self-build and Custom Housebuilding Act 2015 through the Levelling-up and Regeneration Bill, to ensure that it works better. We have established the self-commissioned homes delivery unit in Homes England, taking forward a number of his recommendations.

I thank Tim Farron. He will know that we are making those changes to planning permission and also introducing a register of short-term lets. We are consulting on those changes right now. The Government agree with him on those points.

My hon. Friend Peter Aldous highlighted a number of challenges in the sector. I thank him for bringing his considerable experience to the debate. He talked about the levelling-up homes building fund from Homes England. If he has specific ideas about how we can improve that, I would be happy to hear from him.

My hon. Friend the Member for Dover is a brilliant champion of house building and brings considerable experience to this debate, both from her previous time and her time on the Committee. I am happy to meet with her about the nutrient issue and anything else.

Siobhain McDonagh spoke about the lack of social housing and affordable housing in London. Housing in London is delivered by the Labour London Mayor. That is his responsibility. Billions of pounds of taxpayers’ money are devoted to grant funding. He is responsible for planning, for the sites that she mentioned and for releasing green-belt land, if he chooses to do so. I ask her to take her comments to him.

I thank colleagues from across the House for such a vital debate. I am pleased that we have been able to properly discuss these vital issues. Mr Robertson, I think you can see that, taken together, the measures that we are introducing will deliver a brighter future for the sector. Many of the things that I have spelt out are long-term ambitions. I am sure that Members will understand that these things do not happen overnight. We need to work with all actors across the sector. We must listen carefully to their views, which are the result of lifelong experience. I am sure that they will be the first to criticise if we introduce things in a rush. Our changes will not always be headline grabbing, but we are determined to introduce them. We want SMEs to play a major role in the house building sector and in supporting our housing objectives. We want them to be the centrepiece of our efforts to level up and diversify the market, and to bring opportunities to parts of the country that have long been deprived of them.

Photo of Andrew Lewer Andrew Lewer Conservative, Northampton South 3:54, 10 May 2023

I thank all colleagues for their contributions and the Minister for her comments. She is one of the most committed and hard-working MPs and Ministers; it is right that she has an unbelievably complex brief, because she will need all that application. I am grateful for her offer to meet and talk about self-build, the Land Registry—and perhaps unique property reference numbers within that—and the small sites work. Even if we do not meet a target of 300,000, that does not mean that having the target was not worth while.

I thank Matthew Pennycook—one report on Homes England is coming his way. I thank Chris Stephens—one report on access to finance is coming his way. My hon. Friend Mrs Elphicke covered the nutrient issue brilliantly. The contribution of Siobhain McDonagh suggested some interesting late 19th-century USA references to Standard Oil and monopolies, and that not being an anti-market mechanism but a pro-market mechanism on occasion. She had some well-made points about the green belt not being green, and there being some more potential there than some people would like.

On the contribution of my hon. Friend Peter Aldous, who discussed and suggested this debate to me, yes, Homes England and access to finance for SMEs are important. I have been urging the Government to drop VAT for conversion and existing property work as well as new builds, and I am glad that he agrees. There is a benefit for heritage. The Treasury needs to make a change, which DLUHC could work on, with regard to pension provisions for non-residential properties that could add residential properties above retail premises, so that there is some flexibility there.

Finally, Tim Farron—I can say that even more emphatically than before—made some very interesting points. One that he touched on, which is worth exploring, is the problem of having a constituency with a national park, where all the housing requirement used to be the same but it all had to be lumped into the area that was not within the national park boundaries. That is something that we could explore profitably in the future.

This was an excellent, proper debate—a discussion of issues rather than just sloganizing; we need that for an issue as complex as this one. I am delighted that we have had the debate and aired the issues so thoroughly.

Question put and agreed to.

Resolved,

That this House
has considered the future of small and medium-sized housebuilders.