Thousands of homes will be built faster on smaller sites across the country as complex planning rules are streamlined, onerous regulatory burdens eased, and financial firepower is provided to SME builders.

The current system makes it far too difficult for smaller builders to get spades in the ground – with a small site of 10 homes jumping through the same planning hurdles as one with 100 or more.

Smaller firms, which provide local jobs and train eight out of 10 construction apprentices, have seen their market share shrink since the 1980s, when SME builders delivered 40% of the country’s homes.

Today’s changes will help turn this around, driving up competition across the sector and helping deliver the Plan for Change milestone of 1.5 million homes, so more working families and young people can achieve the dream of homeownership.

Today’s proposals include:

• Faster decisions for small sites: Minor developments of up to nine homes will benefit from streamlined planning and eased Biodiversity Net Gain (BNG) requirements, with faster decisions being taken by expert planning officers, not planning committees;
• A new ‘medium site’ category: Sites between ten to 49 homes will face simpler rules and fewer costs – including a proposed exemption from the Building Safety Levy and simplified BNG rules, making it easier to deliver biodiverse habitats on these sites, delivering a win-win for nature and development;
• More land and financing options for SMEs: Homes England will release more of its land exclusively to SMEs, and a new National Housing Delivery Fund to be confirmed at the spending review will support long-term finance options, such as revolving credit facilities and lending alliances.
• A new pilot to unlock small sites for SMEs: the Small Sites Aggregator will bring together small brownfield sites that would otherwise not have been developed, and attract private investment to build new social rent homes and address temporary accommodation challenges. Building on a model developed by Lloyds Banking Group’s Social Housing Initiative, the Small Sites Aggregator will be trialled this year with input from Bristol, Sheffield and the London Borough of Lewisham and with the support of their regional authorities. This will help tackle the housing shortage, address unviable small plots of land, and create local jobs supporting the government’s Plan for Change.

Deputy Prime Minister and Housing Secretary, Angela Rayner said:

“Smaller housebuilders must be the bedrock of our Plan for Change to build 1.5 million homes and fix the housing crisis we’ve inherited – and get working people on the housing ladder.

“For decades the status quo has failed them and it’s time to level the playing field.

“Today we’re taking urgent action to make the system simpler, fairer and more cost effective, so smaller housebuilders can play a crucial role in our journey to get Britain building.”

Full details are being set out today for the modernising of planning committees – ensuring elected councillors focus on the most significant proposals and larger developments rather than small-scale projects or niche technical details, while more faster decisions are made by expert trained planners.

Under these plans, once a development has been agreed in principle technical details won’t keep going back and forth to committees – accelerating housebuilding and saving council planning departments time and money.

Further support announced today for local builders includes:

• £100 million in SME Accelerator Loans to help smaller firms to grow and invest using part of the £700 million extension to the Home Building Fund announced in December.
• £10 million for councils to fund more specialists to speed up environmental assessments, getting spades in the ground faster.
• A £1.2 million PropTech Innovation Fund to support innovation in small site delivery, for example through use of new data tools.

It comes as the government unveiled its plans to train up to 120,000 new apprentices, including within construction – ensuring the industry has what it needs to get building.

The wide-ranging package for SMEs today builds on the government’s planning overhaul so far, with the new National Planning Policy Framework alone expected to drive housebuilding to its highest level in over 40 years and add £6.8 billion to the economy by 2030.

INDUSTRY RESPONSE

Jeremy Gray, Head of External Affairs at the FMB said: “This is a big change for the planning system and one that acknowledges the hardships faced by SME house builders over the last few decades, which have resulted in their decline. The UK’s small house builders stand ready to deliver the homes Britain needs, but the planning system has stifled their growth. The FMB has long called for reform to the planning system to support SMEs, and so the decision to streamline requirements on sites of up to nine homes, alongside faster decision making is a positive step. The medium site designation will also be welcomed as it reduces planning hurdles, enabling small house builders to scale up their businesses.”

Gray continued: “However, the small site allocation in local plans will need revisiting to fully realise the potential of small house builders. Local planning authorities will also require further investment to ensure that the system has capacity. We know from the FMB’s 2024 Housebuilders’ Survey that communication with planning officers is a major hindrance to building new homes. We look forward to working with Government on these proposals to ensure that the nation’s micro and SME house builders can thrive.”

Robbie Calvert, RTPI’s (Royal Town Planning Institute) Head of Policy and Public Affairs, said: “The Government’s proposed reforms have the potential to unlock thousands of homes on smaller sites and energise a part of the sector that plays a vital role in local economies.

“However, we must be clear, we can only support the proposed delegation reforms if they are accompanied by the establishment of a Chief Planning Officer in every planning authority. These reforms propose a significant change to how our system works, and without strong, accountable leadership and oversight, risk undermining the integrity of the planning process.

“The decision to exempt small sites from Biodiversity Net Gain (BNG) requirements is a sensible approach given the severe lack of resourcing and ecological skills available to local authorities. However, we expect the government to develop long-term solutions to ensure nature is protected and enhanced by the planning system without starving the country of the economic growth it needs.”

Chris Leadbetter, Partner at Global Law Firm Clyde & Co comments: “This marks a step in the right direction to meet its building goals, and the UK Government’s measures to relax the rules for smaller building companies may help alleviate some of the pressures to boost the supply of new houses amid the growing affordability crisis. However, greater clarity is still needed about where the line will be drawn in categorising small developers. If we want the regulation to deliver meaningful benefits, sector engagement will be essential to help guide this.

“Regulation is not the only obstacle limiting housing supply, and there are many other issues that should be considered when it comes to unlocking growth. Planning reforms are another major issue impacting the drive to increase the number of new homes being built, but this is already being looked at by the Government.

“Yet labour shortages and materials costs are all contributing to the increased cost of land development, and these are not currently under review. If the Government is realistic about building 1.5 million new homes in England by 2029 and ‘get Britain building’, these issues must also be taken into account and addressed.”

CEO of Lloyds Banking Group, Charlie Nunn said: “We strongly welcome the government’s announcement today that it will pilot the Small Sites Aggregator in Bristol, Sheffield and Lewisham.

“Through the Social Housing Initiative, we’re proud to have helped ignite this innovation in housing development and finance – unlocking the small, brownfield sites in our communities which are lying empty yet have immense potential to provide good quality homes in our towns and cities.

“This exciting partnership between the public and private sectors will increase investment at pace into the new, genuinely affordable homes that are needed across the UK.”

CEO of Pocket Living, Paul Rickard said: “For the first time in many years, we’re seeing clear signals that an administration recognises the critical role SME housebuilders play in tackling the housing crisis. We’re delighted to see several of the recommendations we’ve worked with the Government on reflected in today’s announcements.

“SMEs can be disproportionately affected by policy and support targeted specifically at SMEs will help to reverse the decline of our sector, help level the playing field, and once again make SMEs the backbone for high quality local housing delivery across the nation.”

Chief Executive of Greencore Homes, Jon Di Stefano said: “Simplifying the planning process and introducing more targeted land and funding opportunities for SME housebuilders should have a transformative effect for housing delivery, not just in terms of volume but quality and sustainability too.

“As someone that has made the jump from a larger housebuilder to an SME, I have seen firsthand how attracting diversity of scale to the housebuilding industry creates more innovation and a broader mix of tenures. Like many smaller developers, Greencore wants to build more and we are passionate about increasing delivery of our low energy, low carbon homes which are quicker to build, healthier for people to live in and designed with nature and wildlife in mind.

“Unfortunately, delays in the planning process have slowed down how quickly we can deliver these homes to date. We fully support these measures that will unlock smaller sites and help SME housebuilders to flourish and play their part in increasing housing delivery to meet the government’s targets.”

Chief Executive of the National Federation of Builders, Richard Beresford said: “In 2018, NFB helped write the NPPF policies on small and medium sized sites and since that time, lobbied for a ‘Medium’ sized definition of between ten and 50 homes. We are incredibly grateful to the government for considering our recommendation because SMEs don’t just deliver organic growth on infill, brownfield and within communities, but are the competition, workforce capacity and innovation that keeps housebuilding and construction industry healthy.

“Governments have always spoken strongly about helping SME builders but action has been thin on the ground. By acknowledging that many SMEs build on sites of between ten and 50, the ‘Medium’ sized site definition creates an opportunity to help them directly. This is the strategic step that SMEs desperately needed, and we thank the government for working with and listening to industry.”

Managing Director of Kingswood House, Paul Jones said: “As an SME house builder who started in 2009 by delivering four homes a year, we have managed to grow to deliver nearly 150 homes a year in 2025-6. Our growth has been supported by Homes England and the Home Building Fund which has been instrumental in helping us to achieve this.

“We are really pleased to see this Government realising the importance of SME housebuilders in the industry. The barriers to entry for SME house builders are incredibly challenging and often impossible to overcome.

These much needed changes will really help us and other SME house builders to deliver to our full potential, which in turn will help the government to achieve their target of 1.5m new homes in the next four years.”