Homes England is to pilot selling parcels of land for SMEs to build new homes in the Southeast and the Midlands.

Housing and levelling up secretary Michael Gove announced the initiative earlier this week in a statement to parliament outlining his plans for long-term housing.

“We are determined to support SME housebuilders who play such a vital role in our communities,” he said.

The Federation of Master Builders described the move as a positive development.

FMB policy head Jeremy Gray said: “The principle of breaking up large sites into smaller plots is a step in the right direction and something we have been calling on the government to introduce.”

He said it would allow smaller local housebuilders to develop during the later phases of a project and would ensure the overall development was diverse in design.

“This is good for the consumer as it provides them with a choice of housing and helps boost workloads for local house builders, who struggle with finding suitable small sites.”

National Federation of Builders, NFB, policy and market insight head Rico Wojtulewicz said that at present the pilot was to sell small plots but hoped it would extend to the division of larger sites.

Brokers Hank Zarihs Associates said development finance lenders were confident that the pilots would be a success and lead to the sale of smaller plots nationwide.

Clear definition needed for an SME developer

Mr Wojtulewicz said the only ‘fly in the ointment’ was the lack of a clear-cut SME housebuilder definition.

“We, and others, are currently working with Homes England for an SME definition. For example, a builder constructing 20 homes a year may have 70 staff, or high turnover as they are part of a group, and the Government deems them a medium-sized business.”

He added that a developer delivering more than 100 homes annually fell into the same medium-sized category as a firm developing up to 1000 homes a year.

Mr Gove also wants local authorities to stop setting higher community infrastructure levies, CILs, for sites of less than ten homes because affordable housing is not required.

“This is not within the spirit of the government’s policy on small sites.”

He said he would be updating guidance on this to “make it clear” that councils should consider the impact of CIL on SME developers.

However, Mr Wojtulewicz said unless the government made it mandatory for local authorities not to raise CIL contributions, he doubted whether they would follow the guidance.

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