Small housebuilders cannot play their pivotal part in solving the UK’s housing crisis unless they’re given better access to flexible development finance, Andrew Smith from Phoenix Funding says.
He says that SME developers are often overlooked in the national housing debate, despite being the best people to deliver smaller, regional and more complex sites that larger housebuilders and businesses won’t prioritise.
Andrew’s warning comes as the UK faces major pressure on housing delivery, with Savills estimating that we’re going to be 42% short of the Government’s target of 1.5m new homes in the next five years.
Smaller housebuilders now deliver just 9% of new homes, down from 40% in the 1980s, according to the Federation of Master Builders’ Small House Builders’ Survey 2025. The same research found that 47% of small builders see planning as their biggest constraint, while one third cite a lack of suitable sites, according to Federation of Master Builds.
Andrew says that if policymakers and the property industry are serious about increasing housing supply, they need to look beyond planning reform and land availability, and address the finance barriers that prevent smaller developers from getting viable schemes moving.
Andrew Smith, founder of Phoenix Funding, said:
“SME developers have a huge role to play when it comes to helping the UK Government hit its target. However, they currently can’t do that under the current terms, with many finance options remaining slow, over rigid and extremely inconsistent.
These are often the developers that’ll take on smaller sites that may be more complex, and local schemes that larger housebuilders won’t want to know, and may not prioritise.
The issue we currently face is not the lack of ambition, or viable projects. In many of these cases, the barrier is finding funding that’s able to accurately reflect the timeline, the risk, and the overall practical realities of the scheme.”
Andrew discusses a potential solution for the current problem, and how housebuilders can help the Government meet its 1.5m housing target by the year of 2028/29.
Andrew says many SME developers operate with tighter cashflow, smaller teams and less margin for delays than national housebuilders, making the speed and structure of finance critical.
He says delays in funding decisions, unclear lending criteria, rigid drawdown structures and a lack of appetite for complex projects can all hold back otherwise viable developments.
“If we’re serious about meeting the target that the Government has set, then we need a funding environment that gives smaller developers the confidence to, not only move quickly, but plan properly and bring projects to completion without any delays.
Small developers are often working on the sites that can make a huge difference to communities locally, whether this is a small residential scheme, a heavy refurbishment or infill plots, things that typically won’t suit the model of a major housebuilder.
However, these types of projects still need funding that understands the reality of the development. A lender needs to not only look at their setting-stone checklist, but also look at the quality of the scheme, the borrower’s previous history, the full exit plan and the timescales.
When funding takes too long, developers can lose sites, lose contracts, miss deadlines or even see massive increased costs before the work has even started. It doesn’t just hurt the developer, it’s killing the potential to help resolve the housing crisis here in the UK.”
Andrew suggests that better support is needed for SME developers, and this would help decrease the reliance on smaller groups of major housebuilders.
