London’s housing market is facing significant challenges, with rising costs, slowing sales, and a drop in new housing starts. House prices have already fallen by 5%, with another 4% drop expected, and when adjusted for inflation, prices have effectively fallen by 20%. With new build sales down by 37%, and construction starts dropping by 60%, the pipeline for new housing is shrinking at a time when demand is still high, particularly for affordable homes.
The government has ambitious plans to boost affordable and social housing, but the question remains: how can this be achieved when the housing market is stagnating and large developers are hesitant to start new projects? One of the answers may lie in small developers—those who focus on smaller sites of 20 units or even less.
The Broader Housing Context: A Market Under Pressure
With planning applications down by 70%, the obstacles facing developers are significant. The end of the Help to Buy scheme has dampened demand for new builds, and domestic buyers are shifting away from smaller, new-build flats in favour of larger, second-hand properties. The typical first-time buyer, now 33 years old and needing a deposit of £500,000, is more likely to opt for a larger, established home rather than a new-build, one-bedroom flat.
Meanwhile, the supply of new homes is shrinking. Large developers are scaling back due to uncertainty and viability challenges, and the pipeline of new projects is drying up. This combination of factors is putting the government’s housing targets at risk, particularly in terms of delivering affordable and social housing.
The Role of Small Developers: A Missed Opportunity?
At Unagru Architecture Urbanism, we believe that small developers could play a crucial role in solving London’s housing crisis. Small-scale projects, typically 30-40 units, offer a unique opportunity to deliver housing that is both affordable and innovative. These smaller sites can often be developed faster and with more flexibility than larger projects, particularly when it comes to infill developments or smaller, underutilised plots of land.
But despite their potential, small developers are often left out of the broader conversation about housing reform. We believe that this is a missed opportunity, and several key questions need to be addressed in order to unlock the full potential of small developments.
Key Questions for Unlocking Small Development Potential
1. Should there be a fast-track planning service for small sites?
One of the biggest challenges facing small developers is the planning process. With planning applications down by 70%, it’s clear that the system is not working efficiently, particularly for smaller projects. We believe there should be a fast-track planning service for small sites, enabling quicker approvals and faster delivery of new homes.
This would benefit not only developers but also local communities, as small sites are often well-suited for infill developments, which can add housing units without requiring large-scale regeneration projects. A streamlined planning process could unlock these sites, helping to alleviate the housing shortage without sacrificing quality.
2. Should Section 106 be adjusted to maximise housing delivery on small sites?
Section 106 agreements, which require developers to contribute to affordable housing or community infrastructure, can often be a financial burden for small developers. While these contributions are essential for funding affordable housing, they can make smaller projects financially unviable.
Could Section 106 be adjusted for small developers? Rather than focusing purely on financial contributions, the policy could be more flexible, allowing developers to contribute in different ways—such as through off-site contributions or by partnering with housing associations to deliver affordable homes.
3. Quantity AND quality?
In the rush to meet housing targets, there is a risk that quality will be sacrificed for the sake of quantity. While it’s important to deliver more homes, we believe that small developments offer a unique opportunity to prioritise high-quality, well-designed housing that meets the needs of the community. Smaller sites could benefit from a simplified regulatory and approval process in exchange for more attention to design quality and innovation.
4. Should small developments be a testing ground for higher quality standards?
Currently, there is a lack of scrutiny over the quality of development on small sites. In many cases, there are no qualifications required of builders, and very few checks are in place to ensure the quality of construction. This is a missed opportunity to raise standards across the industry.
We believe that small developments, particularly those with 2-3 units and 9-10 unit projects, could serve as testing grounds for minimum quality certifications for both developers and contractors. By implementing higher standards on small sites, we can begin to build a cohort of new actors in the built environment who are capable of delivering high-quality, affordable housing on a larger scale. This bottom-up approach could help address the skills gap and ensure that the industry evolves in a way that prioritises quality.
5. Should we consider closer ties with the European Union to address the skills shortage?
One of the most pressing issues facing the construction industry is the skills shortage. With Brexit limiting access to skilled workers from the European Union, the construction sector is struggling to fill key roles, driving up costs and slowing down projects. Given this challenge, it may be time to consider closer ties with the EU to ease restrictions on labour movement and help fill the gaps in the workforce.
Addressing the skills shortage is crucial for both large and small developments, ensuring that projects can proceed without unnecessary delays or compromises in quality.
Conclusion: Small Developers, Big Impact
The housing crisis in London is a complex problem that will require bold solutions. While large-scale developments will always play a central role, small developers must also be part of the equation. These smaller projects, which focus on high-quality, community-driven housing, have the potential to meet the needs of younger, middle-class buyers in a way that larger developments cannot.
At Unagru Architecture Urbanism, we are committed to advocating for the role of small developers in solving London’s housing crisis. By fast-tracking planning, adjusting Section 106 agreements, and focusing on quality over quantity, we believe that small developers can unlock new opportunities for growth and innovation in the housing market.
The time has come to ensure that small sites are not just part of the conversation but a central part of the solution.
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