FMB House Builders’ Survey 2024 report highlights barriers to new homes

The annual FMB House Builders’ survey, now in its eleventh year, focuses specifically on micro, small and medium-sized (MSME) housebuilders in England. In fact, 60% of respondents said they typically build one-unit sites and for 54%, housebuilding is just one part of the work they carry out. The survey covers a range of topics including the barriers that MSME housebuilders are experiencing, perceptions of buyer demand, costs and financing and workforce and skills.

Constraints on housebuilding

Through its annual survey, the FMB asks MSME housebuilders about the factors that are constraining their ability to build. In this year’s report ‘the planning system’ was identified by more than three-quarters (76%) of respondents as a barrier. This is significantly higher than in 2023 when 55% selected this as one of the main constraints. Respondents were asked to rate the importance of different possible causes of delay in the planning process with a score of 0 (completely unimportant) to 5 (extremely important). Respondents rated ‘inadequate resourcing of planning departments’ as one of the most important factors with an average score of 3.82, followed by ‘inadequate communication by planning officers’ (3.58) and information requirements’ (3.54). It is worth noting that the government has said it is committed to reforming the planning process to make it easier for housebuilders.

Land was also found to be a major factor in constraining housebuilding, with ‘lack of viable land’ and ‘lack of available land’ identified by 61% and 57% of respondents respectively. As the report notes, MSME housebuilders often work on sites that fall outside of the local plans. They also lack the negotiating power of larger housebuilders to obtain land at a financially viable price. One of the issues for MSME housebuilders highlighted by the survey is the lack of small sites for development, with 71% saying that the number of small site opportunities is decreasing. This is despite the National Planning Policy Framework (NPPF), which since 2018, has required local authorities to identify enough small sites to accommodate at least 10% of their housing requirement. Half of the respondents to the FMB survey indicated that this policy is not driving an increase in opportunities.

However, there were also some positive indications from the survey. The proportion of respondents identifying ‘restricted mortgage availability’ as a constraint was 33%, down from 51% in the 2023 survey. There was also a small reduction in the number of businesses citing material costs – 37% down from 43% in 2023 – reflecting the general trend of easing price inflation. Similarly, a shortage in skilled workers is also less of a constraint than in the previous year, with 26% selecting this as an issue in 2024 compared with 34% in 2023.

Workforce and Skills

The survey also reveals that most MSME housebuilders will be maintaining the size of their on-site workforce (50%) or growing their workforce (24%). Just 13% said they would be decreasing their on-site workforce. These numbers were very similar to the previous year – 24% to increase and 12% to decrease. However, there was a higher percentage stating that they don’t know if there will be a change in workforce, 13% in 2024 compared with 7% in 2023.

Despite only 26% of respondents saying that a shortage of skilled workers is constraining housebuilding, 53% indicated that they struggle to hire enough site-based to meet their workload.

Other key findings – costs, demand and the future of housebuilding

Among the important findings of the FMB survey is that 93% of MSME housebuilders indicated that it has become more expensive to building homes in the past year. Of these respondents, 44% said it was around 10% more expensive with 32% indicating around a 20% increase in costs.

When asked to rate buyer demand from 0 to 5, with 5 being very high demand, the average score was 2.68. This is a significant increase from the previous year’s figure of 1.99 but nowhere near the recent peak in 2021 of 3.86. However, it seems housebuilders are confident of a continued increase in demand with the average predicted score for one year’s time being 2.81 and 3.24 for two years’ time. This would put it on a par with the more consistent perceived demand levels recorded in 2015 (3.31), 2016 (3.35) and 2017 (3.26).

Finally, when asked about their level of awareness of the Future Homes Standard, set to be introduced in 2025, the majority (66%) said they were aware. However, this leaves a third of MSME housebuilders who are either unaware (26%) or don’t know (8%).

It has been another challenging year for housebuilders in general, and particularly for smaller businesses who do not have the resources or influence of national housebuilders. However, there is cause for optimism as we enter 2025 due to encouraging signs of material costs easing, demand increasing and a commitment from the government to reform the planning process.