The North is changing; the economy is being transformed by new industries, including a new Sky technology hub in Leeds and BBC media city in Salford, a re-emergence of manufacturing, and new opportunities. With this comes a greater demand for high quality, affordable housing. A recent IPPR North study found there is a long-term need for 263,168 homes in the north-west of England alone, with not nearly enough brownfield land available to meet that requirement.
It is crucial for the long-term prosperity of the north, and the success of the Northern Powerhouse, that universities can retain talent, and businesses can attract it. For businesses based in the North, recruitment is increasingly a struggle due to a lack of housing. By improving housing stock for existing and potential residents, any infrastructural investment by the government, local or national, can be multiplied. Without adequate housing, efforts to create bustling micro- economies could be undermined.
The presence of small and medium- sized (SME) housebuilders in the northern housing sector has been diminished recently with the growth of large-scale developers. According to the Home Builder’s Federation (HBF), increasing the number of SME builders to the levels found in 2007 could result in an extra 25,000 homes being built per year. Large builders are unable to build out the thousands of smaller sites which, put together, provide substantial land for new homes.
SMEs can prove more enterprising; analysis by Savills and Hometrack shows that SME builders are incentivised to sustain output, which may be due to their limited cash balances, in contrast to larger developers who possess the capital to allow them to sit on land and delay projects. Productivity across all sectors has grown by over 50 per cent since 1994, whilst construction has remained stagnant, and the lack of smaller, more flexible challenger developers has only served to worsen this state of affairs.
Zorin Finance has a history in housing development itself, and therefore we understand the market more than the average financial institution. We have been supporting SME housebuilders with our unique products, lending up to 90 per cent of the cost of a total project, compared to banks who will typically lend up to 65 per cent, allowing SMEs to use less of their limited equity to secure sites, and spread it over multiple projects.
There are some helpful steps that policymakers could take to support SME housebuilders, and the lenders backing them, to have a greater stake in the northern housing market and unlock more homes. Government should reintroduce a de facto presumption in favour of development on smaller brownfield sites that lie within existing residential areas. This would prime many parcels of small land for development by SME housebuilders, which would be of little interest to larger developers.
HBF recommends reversing the 2010 reclassification of garden land as greenfield, to make available vital brownfield land for SME builders, which was previously essential for their survival, and Zorin supports these recommendations. Developing a site possessing 10 units or less exempts developers from certain requirements such as local infrastructure contributions; by increasing this limit to 25 units, the potential profit for SMEs would be maximised considerably.
Finally, it would be encouraging for lenders to see SME developers prioritised for contracts, and to know our support for smaller enterprises is matched by local and national government.