Minister of State for Housing and Planning, Matthew Pennycook, has pledged to reform national planning policy in a bid to diversify who builds homes, making Sadiq Khan’s London Growth Plan highly to deliver over 377,000 new dwellings achievable.
By Zahra Jawad
Pennycook made a statement on June 2, promising that the government would achieve its ambitious housebuilding targets by making the housing market more competitive.
In the attempt to hasten the production of new homes, the government pledges to allocate funds of up to £100m of the £700m extension to the Home Building Fund announced in December to introduce SME Accelerator Loans, providing SMEs with the tools needed to break into the market.
Currently, the share of homes delivered by SMEs has drastically reduced since the 1980s. The Home Builders Federation reports that the number of SME housebuilders has fallen by 85% since the 80s, and by 2020 only 10% of SME firms deliver new homes. In London, the share of new homes built by SMEs fell from approximately 25% in 1998 to less than 5% by 2017.
The barriers of entry driving SMEs out of housing delivery have included high regulatory and upfront costs along with complex planning processes riddled with delays that have often perceived a bias toward larger developers.
Survey data from the Home Builders Federation reported that 3% of SMEs cite delays in securing planning permission as a major barrier to growth, with the problem being that local departments and authorities are under-resourced to process the large mounds of paperwork that come with the process.
However, the new Planning Reform Working Paper on Site Thresholds proposal changes the way planning rules apply based on the size of the housing development. Whilst the additional funding mentioned above is a welcomed step, the proposal paper outlines a graduated planning system.
Qualified planning officers will be granted the power to directly approve small housing applications for developments of up to nine homes, streamlining the decision-making process. For SMEs, this means less waiting time and reduced financial risk during planning limbo.
Other developments would see the eased Biodiversity Net Gain (BNG) for SMEs. The BNG government policy states that developers must leave the natural environment in a better state than before, which includes a minimum 10% net gain in biodiversity.
For smaller enterprises, the compliance costs of meeting biodiversity requirements place a significant financial strain on SMEs, particularly in consultancy and regulatory expenses.
By easing these rules, the reform could save thousands in ecological fees, speed up planning applications, and make small, urban, or low-impact plots more financially viable.
The plans outlined by Labour fall in line with the mayor’s growth plan, whose ten-year commitment includes reversing the post-pandemic decline in housebuilding to deliver genuinely affordable homes across the city.
The commitment will allow smaller developers to take on mid-sized sites across London boroughs like Lewisham, Barking and Camden that are often ignored by larger developers, directly contributing toward community-based housing.
The announcement of the pilot Small Sites Aggregator programme includes the London Borough of Lewisham, which would identify and package fragmented plots of underused land for SMEs to develop on.
With Lewisham ranked among the 20% most deprived local authorities in England, the government’s Small Sites Aggregator pilot offers a strategic opportunity to unlock underused land, empower local SMEs, and deliver much-needed homes.
By aligning national planning reform with the London Growth Plan’s ambition, Labour’s SME-driven housing strategy offers the tools to unlock land, mobilise smaller developers, and accelerate delivery in areas that need it most.
