Protecting small builders can solve the UK’s housing crisis

When the Second World War ended, the UK turned to its builders with a task no less urgent than the war effort: rebuild the nation. Homes had been bombed, slums blighted industrial towns, and millions lived in overcrowded conditions.

It was not today’s corporate giants but small and medium-sized enterprises –  family firms, regional builders, local trades – that became the backbone of post-war Britain.

The planning settlement of 1947, forged by Clement Attlee’s Labour government, created a national framework light enough to let builders get on with the job. In the 1950s, Harold Macmillan, as housing minister, presided over the construction of 300,000 homes a year, a feat unimaginable today, because thousands of SMEs were operating at their peak.

By the 1960s and 70s, Britain had a thriving ecosystem of small builders. Many of the corporate names we now know, including Berkeley (1976), Redrow (1974), and Persimmon (1972), began life as modest firms and flourished into larger ones.

Land was relatively affordable, local banks lent willingly, and planning – while never perfect – had not yet ossified into today’s labyrinth. The postwar peak in housing delivery coincided with the peak of SME participation, a lesson we should have held on to.

1988-90: the turning point

In 1987, Britain reached its highest net housing supply since the war. Just a year later, SME output peaked. Then the tide turned. Interest rates soared to 15%, the market crashed, and the lifeblood of small builders – credit – dried up.

The cyclical pain would have eased. What did not ease was regulation. Michael Heseltine’s 1990 Town and Country Planning Act, presented as modernisation, became a structural break. It consolidated decades of law but dramatically increased procedural demands.

Local plans had to be more detailed, applications front-loaded with evidential requirements, and environmental studies paid for before a spade hit the ground. Large developers coped; small firms, forced to shoulder crippling upfront costs, staggered. Many never recovered.

The age of policy layering

This was the beginning of policy layering. Every government since has promised simplification, but almost none has cleared away what came before. Reform has been piled upon reform until the system resembles a bureaucratic lasagne.

Labour’s 2004 Planning and Compulsory Purchase Act aimed at coherence but shifted emphasis to vast “strategic” sites, locking SMEs out of the land pipeline. David Cameron’s coalition trumpeted Eric Pickles’ 2012 National Planning Policy Framework as a radical pruning, cut from thousands of pages to 50, yet the front-loaded burden remained, and local authorities, desperate to hit numbers, allocated mega-sites deliverable only by plcs.

Paralysis and roulette

For SMEs, the effects have been catastrophic. Before 1990, they delivered nearly 40% of Britain’s homes; today, just 10%. Between 2007 and 2009 alone, during the financial crash, more than a third of builders vanished.

The survivors face a process that is paralysing and arbitrary. Paralysing, because the average application drags on for up to 60 weeks – almost five times the statutory limit. Arbitrary, because one in four small-site proposals requires two or three successive applications. As SMEs put it, this is Russian-roulette planning: one unlucky refusal can bankrupt a firm.

Meanwhile, costs are grotesque. Pocket Living’s 2025 report The Road to a Proportionate System found compliance now adds an estimated £60,000 per home for an SME compared to a major developer.

From backbone to fossil

The small builder, once the engine of local delivery, has been fossilised beneath the weight of our own laws. Where there should be thousands of firms building tens of thousands of homes, we have a graveyard of lost capacity.

The tragedy is not merely economic. It is cultural. SMEs build differently. They know their towns, work with local trades, and deliver modest infill schemes that stitch into the fabric of communities. These are precisely the homes we need, and precisely the homes our system now frustrates.

A system in need of surgery

There are glimmers of recognition. The proposed £16bn National Housing Bank, exemptions from levies for SME sites, and promises of 13-week determinations are welcome. They show that the government sees the challenge. But none of these tackle the deeper problem: decades of policy layering that have left the system bloated, inconsistent, and paralysing for small builders.

The Road to a Proportionate System sets out nine new ideas to support an SME revival:

• Introducing standardised planning obligations
• Creating “brownfield passports” to unlock predictable intensification
• Making planning fees and validation requirements proportionate to scheme size
• Exempting smaller developments from costly viability testing
• Reforming biodiversity net gain so that it works for modest schemes
• Giving high street renewal projects a presumption in favour
• Improving access to mortgages through market reform
• Redefining what counts as a “medium-sized” site in London

Yet ideas alone are not enough: they need an overarching vehicle to bring them forward at pace and scale. That vehicle is the national development management policies). NDMPs are nationally set rules for common planning issues, that apply everywhere in England and sit above local plans. By replacing duplication with a single, consistent rulebook, they can cut through the layers of policy that currently smother SMEs.

This is what makes NDMPs indispensable. They are not another policy layer but the only credible mechanism to deliver reform quickly and coherently. In principle, all nine SME-focused proposals could be embedded within NDMPs tomorrow. Without them, the government has few practical tools to turn ambition into delivery.

Crucially, NDMPs avoid the delays of primary legislation. They can be enacted after consultation, unlike a new planning Bill which could take years. For SMEs already on the brink, such delays are the difference between revival and extinction.

If the government is serious about reviving small builders, it must seize NDMPs as the vehicle to strip back the policy lasagne and restore a clear, proportionate framework. History is unambiguous: when SMEs thrived, Britain built at scale.