Small and medium-sized home builders (SMEs) have called for urgent support to help unlock the delivery of 100,000 homes a year, according to the State of Play report 2025/26 from Close Brothers Property Finance (CBPF), the Home Builders Federation (HBF) and Travis Perkins.
SMEs said removing current barriers would allow them to increase output by over half.
Nearly all firms surveyed said tax and regulation were holding back growth, with 97% reporting that the current environment was stopping them from expanding.
The report set out the main issues facing SMEs, including rising costs, more complex rules, planning delays and mounting regulation.
Despite some steps taken by the Government, most SMEs reported that confidence was low, with almost nine out of 10 less optimistic than before the General Election.
Financial pressures were a major concern, with 64% citing the impact of viability pressures and 58% struggling to get offers for S106 affordable homes.
Political and regulatory issues remained a problem, including local opposition, biodiversity net gain and the building safety levy.
Securing planning permission was a key issue for 94% of SMEs, who said it caused delays. Local authority capacity was also a constraint for 89%.
Land and infrastructure challenges were noted, with 54% citing land prices, 39% land availability and 49% the costs or timescales of utilities.
Construction and supply chain difficulties were reported by 43% for labour and supply costs, and 41% for materials, though only 10% saw materials supply as a major barrier.
The survey found that even though the Government announced support for SME developers earlier this year, problems such as planning delays, lack of support for first-time buyers (FTBs), skills shortages and the burden of regulation remain.
Most SMEs said they could increase delivery by 56% a year if these issues were tackled, equivalent to 35,000 extra homes.
This would bring the total delivered by SMEs to 100,000 homes a year, a third of the Government’s overall target.
Affordability issues for FTBs were a concern for 84% of respondents, with many supporting a new Government-backed equity loan scheme.
Securing bids from registered providers for Section 106 affordable housing was also difficult, with 65% saying it was a barrier in planning and 58% calling it a major barrier to growth.
Over half backed exempting schemes with under 50 units from affordable housing rules to keep small sites viable.
Delays in the planning process continue, with 94% of SMEs saying planning permission was a major barrier to delivery.
The report called for Government action to unlock 60,000 extra homes, with 52% saying reducing the cost and complexity of planning was the top priority.
Other key issues included more small sites in local plans, easing CIL and S106 rules, and targeted support for FTBs.
Cutting regulation, fixing the Section 106 affordable housing market and limiting the building safety levy’s impact on SMEs were also noted as important.
Neil Jefferson, CEO of the HBF, said: “Despite recent Government interventions, the operating environment for SME home builders remains overly complex, costly, and slow, stifling growth and deterring new entrants to the market.
“As housing delivery targets face growing scrutiny, policymakers must prioritise meaningful reform that truly supports smaller developers.
“Tackling longstanding planning bottlenecks – as well as wider issues such as viability, infrastructure delays and rising demand-side pressures – is essential if SMEs are to confidently invest in future land and labour supply.”
Jefferson added: “Without real change, SME home builders will remain at a disadvantage, unable to absorb mounting delays and costs, and undermining the Government’s ambition to create a diverse, competitive and resilient housing market.”
Phil Hooper, CEO at Close Brothers Property Finance, said: “The State of Play report highlights not just the challenges facing SME housebuilders but also the significant untapped potential within the sector.
“If the Government is serious about boosting housing supply, there must be a renewed focus on removing the disproportionate burdens on SMEs and helping them to deliver the high-quality homes that are so needed in this country.”
Ben Todd, managing director at Travis Perkins Managed Services, said: “Despite the challenges SMEs face, there are reasons for cautious optimism in the medium term.
“The Government has set an ambitious target of 1.5 million homes and has begun to introduce reforms that will directly address SME concerns – streamline planning for small sites, change biodiversity rules, and focus more strongly on land release and financing. If these measures are implemented with urgency and consistency, they could make a genuine difference.”
