The UK’s housing crisis has become one of the most pressing social and economic challenges of our time. With house prices rising faster than wages, supply struggling to keep up with demand, and first-time buyers finding it increasingly difficult to enter the market, the question policymakers and industry leaders continue to ask is simple: how do we build more homes, faster and more sustainably?

One often overlooked answer lies in protecting and empowering small and medium-sized housebuilders (SMEs).

Here we look at the importance of SME Housebuilders and what’s to come.

The Decline of SME Housebuilders

Small builders once played a much larger role in delivering homes across the UK. In the late 20th century, SMEs built a significant proportion of the nation’s housing supply.

However, the landscape changed dramatically following the 2007–2008 financial crisis. Many SME developers were heavily reliant on bank lending to fund projects and land acquisition. When credit markets tightened, smaller firms were disproportionately affected.

During this period, many SME builders collapsed or were forced to sell assets. In particular, their land banks were often acquired by large PLC developers, further consolidating the market.

Although the number of SME developers has gradually increased again since the crash, the sector has never recovered to its previous scale, and housing delivery remains heavily concentrated among a small number of major housebuilders.

This concentration has had significant implications for housing supply, competition, and the diversity of developments being delivered.

Why Small Builders Matter

Supporting SME developers is not simply about helping smaller businesses survive - it is about unlocking additional housing supply across the country.

They Deliver Smaller Sites Faster

Large developers tend to focus on major housing schemes that require large land assemblies, significant infrastructure investment, and long delivery timelines.

SME builders typically specialise in smaller sites, including infill developments and underused land within existing communities. These sites can move through the development cycle more quickly, bringing homes to market faster.

They Strengthen Local Economies

Small builders are often deeply embedded in their local communities. They work with local contractors, suppliers, and tradespeople, meaning investment stays within regional economies.

Supporting SME developers, therefore, stimulates local employment and economic activity.

They Provide Greater Housing Diversity

Large developers often rely on standardised housing designs to deliver projects at scale.

In contrast, smaller developers frequently build a wider range of housing types, including custom homes, conversions, and smaller schemes that better reflect local character and demand.

They Unlock Overlooked Land

Many plots of land across the UK are simply too small or complex for large developers to pursue.

SME builders specialise in unlocking these overlooked sites, which collectively could contribute thousands of additional homes each year.

What’s Changing? The Proposed 10–49 Unit Medium Category

In 2025, the UK government published a Planning Reform Working Paper proposing changes to how residential developments are categorised within the planning system.

Currently, planning thresholds broadly distinguish between minor developments (under 10 homes) and major developments (10 homes or more).

The proposed reform introduces a three-tiered structure, creating a distinct middle category for medium-sized developments.

Proposed Site Size Thresholds

• Minor: developments under 10 homes
• Medium: developments of 10-49 homes
• Major: developments of 50+ homes

This “10–49 unit threshold” has become a key discussion point within the industry because it formally recognises the importance of medium-sized sites, many of which are delivered by SME housebuilders.

What Practical Effects Could Follow

These proposals are still under consultation and have not yet been fully enacted, but several potential changes have been outlined.

More Proportionate Planning Requirements

For developments within the 10–49 unit category, planning requirements could become more proportionate to the scale of the project.

Potential changes include:

• Simplified information requirements, ensuring councils only request planning documents that are necessary for sites of this size.
• Potential flexibility on developer obligations, such as affordable housing contributions or building safety levies (although these remain under consultation).

Reducing administrative complexity could make smaller developments more financially viable for SME builders.

Supporting Housing Delivery

The government has also suggested that local planning authorities should allocate at least 10% of their housing requirement to medium-sized sites - typically between 1 and 2.5 hectares.

This policy would ensure that a portion of the housing land supply is specifically accessible to smaller and mid-sized developers.

Environmental Considerations

Proposals also include simplifying biodiversity net gain requirements for smaller developments.

In particular:

• Very small sites under 0.2 hectares may see exemptions.
• Medium-sized sites could benefit from streamlined biodiversity compliance processes.

This aims to maintain environmental protections while ensuring requirements remain realistic for smaller projects.

Important Context

It is important to note that these 10–49 unit thresholds are still proposals linked to consultations on revisions to the National Planning Policy Framework (NPPF).

As of early 2026, the reforms have not yet been fully adopted into law, meaning most local planning authorities still determine applications under the traditional minor vs major development distinction.

However, the direction of travel suggests that policymakers increasingly recognise the need to support SME housebuilders through planning reform.

A Key Piece of the Housing Puzzle

Solving the UK’s housing shortage will require a combination of strategies: planning reform, infrastructure investment, and large-scale development.

But one of the most practical and immediate solutions is revitalising the small and medium-sized builder sector.

If barriers to entry are reduced and planning systems become more proportionate, SME developers could once again play a major role in delivering homes across the country.

In many ways, the future of UK housing supply may depend on bringing small builders back into the system - and keeping them there.

Looking Ahead

The UK’s housing crisis will not be solved by a single policy or reform. Large-scale developments will always play an important role, but a healthy housing market also depends on a diverse ecosystem of developers, including the small and medium-sized builders that once delivered a significant share of the nation’s homes.

The proposed planning reforms - particularly the introduction of the 10-49 unit medium category - represent a step toward recognising the importance of these smaller players. By making planning requirements more proportionate and ensuring medium-sized sites are brought forward, the government has an opportunity to unlock new housing supply while making development more accessible to SME builders.

If implemented effectively, the impact could extend far beyond housing numbers. A revitalised SME development sector would mean more active sites, stronger regional construction economies, and increased demand for skilled professionals across planning, construction, and development. In turn, this could create a more dynamic recruitment landscape, offering professionals greater choice, career progression, and opportunities to work on a broader range of projects.

Ultimately, supporting SME builders is not just about helping smaller companies compete. It is about creating a more resilient housing market, accelerating delivery, and strengthening the entire built environment workforce.

Because when small builders thrive, the whole housing ecosystem benefits, from communities and homebuyers to developers, planners, and the professionals who help bring projects to life.

What does Managing Consultant, Shawn Wood, have to say?

“As Managing Consultant heading up the Construction & Property division, I see first-hand how important SME housebuilders are to the wider construction ecosystem. Smaller developers often bring forward sites that larger PLC builders overlook, helping unlock housing supply while supporting local contractors, consultants, and supply chains. The proposed introduction of the 10–49 unit planning category is a positive step if it genuinely makes the planning process more proportionate for these schemes. If barriers for SME builders are reduced, it could not only accelerate housing delivery but also create greater opportunity across the construction workforce, from planners and surveyors through to site teams and specialist contractor” 

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