Affordability constraints facing would-be buyers are now one of the biggest drags on new housing delivery, with 84% of SME house builders identifying the lack of dedicated support for first-time buyers as a barrier to growth.
The findings come from the SME State of Play survey, produced by Close Brothers Property Finance, the Home Builders Federation (HBF) and Travis Perkins. As the industry celebrates New Homes Week (2–8 February), which this year focuses on the theme ‘Power to Move’, the research pulls into focus the need for intervention to ensure the nation’s SMEs have the power to build and households the power to buy.
While New Homes Week aims to empower prospective buyers by highlighting the benefits of new-build homes, the research shows that affordability pressures, particularly among first-time buyers, are increasingly constraining demand and limiting the ability of SMEs to bring forward new sites. According to the survey, with the right demand-side support in place, SME developers believe they could significantly increase output, delivering up to 100,000 additional homes per year. One way this could be achieved is through the introduction of a new equity loan scheme part-funded by developers.
For SME house builders, addressing demand-side challenges is critical. Since the withdrawal of Help to Buy in 2023, there has been limited targeted support for first-time buyers. Meanwhile, the Mortgage Guarantee Scheme has failed to gain meaningful traction, accounting for just 1.4% of all residential mortgages between 2021 and 2025
The wider consequences are increasingly evident. New research from HBF shows that homeownership continues to fall, with the proportion of households owning their own home declining to 64.8% in 2024, down from 71% in 2003. For SME house builders, slower sales rates directly impact cashflow, the repayment of development loans and the ability to commence new schemes. Prolonged affordability pressures therefore risk stalling delivery, reducing housing diversity, limiting local job creation and exacerbating the UK’s housing shortage.
Phil Hooper, CEO of Close Brothers Property Finance, part of Close Brothers Group plc, said: “SME house builders are ready and willing to build, but affordability constraints are holding back both buyers and developers. The Government has made encouraging progress on planning reform, but without effective demand-side support, particularly for first-time buyers, that progress risks being undermined. Addressing affordability is critical not only for housing delivery, but for wider economic growth and local job creation.”
Neil Jefferson, Chief Executive of the Home Builders Federation, added: “SME home builders play a vital role in delivering high-quality, locally responsive housing across the country, but they are highly exposed to changes in demand. Unlocking demand is essential if we are to increase supply and reverse the long-term decline in homeownership. Without targeted demand-side support – particularly to help first-time buyers access the market - the sustainability of housing demand and long-term market stability remain under threat.”
