Reading: SME builders are 'key to achieving new homes target'

Small and medium-sized housebuilders hold the key to helping Reading achieve its target of building more new homes each year but risk being squeezed out under current plans, a property law expert has claimed.

Derek Ching, partner in the housebuilding and development team at Thames Valley firm Boyes Turner, was speaking after Reading council’s plans to increase its new homes target to almost 16,000 by the end of 2036 were approved by the government inspector.

The property lawyer said that developments by small and medium (SME) housebuilders were estimated to have contributed at least 25% of new homes historically and the new targets would rely on that continuing.

But Ching warned that council stipulations that all developments of more than 10 homes will be expected to be zero carbon and that all developments will have to include an element of affordable housing (or contribute financially) could adversely affect smaller developers and lead to the town falling short of its target.

He said the council risked losing the benefit of smaller developers progressing their schemes more quickly than larger developers, which would help to keep the council on target to reach its goal, with a knock-on effect on house prices in the area.

Both the zero carbon targets and these additional affordable housing requirements are additional requirements for Reading which are running ahead of current national housing policy.

“It feels like sometimes officials are focussing on a number of key headline schemes which will of course bring large numbers of homes to Reading but there’s a real risk that, in doing so, it makes it harder for smaller developers to play their part,” Ching said.

“The target can only be achieved if all parts of the homebuilding developer sector are able to play their part. Zero carbon targets put Reading in the forefront of the evolution of such policies and it is of course important that the housebuilding sector plays its part in helping the UK achieve its net zero targets.

“However, increasing regulation will lead to significant review of construction costs and environmental performance generally. Inevitably, there will be increased oversight to ensure that, for example, the zero carbon target is achieved, which in turn means more work for developers to ensure that the appropriate data is collated and then supplied.

“Whilst larger developers may have the resources available to address the zero carbon targets and the reporting this will involve, SME developers will need to review carefully how to manage these requirements. The administrative and financial burden of aiming for zero carbon seems easier to manage within a large corporate environment.

“There’s a real risk that some smaller developers face being squeezed out, with a knock-on effect on Reading’s ability to achieve its targets. Officials need to look at how they can ensure builders of all sizes can continue to develop the homes that the town needs.”

Ching said it was yet to be seen whether the added costs would find their way into higher prices for new homes or in the alternative, act as a limit on land values of any sites that become available for development.

“A vibrant SME development sector is essential. Without the contribution made by small sites, estimated to be 25% of the total, the result may be greater pressure for higher numbers of units within the larger schemes or a greater number of larger schemes.

That could lead to a greater risk of Reading falling short in delivery of housing numbers.  Undershooting the new targets will threaten to bolster house prices and exacerbate the affordability problem that Reading has been struggling to address.”