How SMEs can benefit from Homes England’s new system

A procurement system shake-up has opened up development opportunities for SMEs. We take a look at what this could mean for you.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Streets of terraced houses from above

Image source: Getty Images

Homes England has shaken up its procurement process. This has opened up £20 billion of development opportunities to small and medium enterprises (SMEs) as a result. The government agency has launched a Delivery Partner Dynamic Purchasing System. New players can apply to join at any point.

Its aim is to simplify the application process and make it more accessible to SMEs. Let’s take a look at what’s involved.

[top_pitch]

What is the new system?

Homes England has replaced its panel system with a Dynamic Purchasing System. This means SMEs and housebuilders can apply to join the agency’s list of preferred developers at any time.

Under the previous system, they could only join the list when it was renewed, which only happened every four years.

Homes England is now encouraging SMEs and housebuilders interested in working with the agency to monitor the new land hub when they see a site of interest.

How does the new system help SMEs?

The new system will provide a new element of flexibility that will benefit SMEs. For the first time, it will introduce different categories of membership. So SMEs bidding to deliver smaller sites will have simplified entry criteria.

To apply, an SME will need to demonstrate a track record including the following:

  • Getting planning permission
  • Supply chain management
  • Design and construction of houses
  • Sales and marketing of homes

The difference is that SMEs won’t be expected to demonstrate leadership around issues such as design quality, building safety and improving equality and diversity in the industry – unlike bigger developers who are bidding to deliver larger strategic sites.

The new process will help SMEs gain access to smaller plots. Brokers Hank Zarihs Associates commented that “Making smaller plots more easily available for SMEs is a positive step, and lenders are keen to offer construction loans to help them fund developments.”

Why is the system changing?

There is a huge shortage of properties in the UK. Even before the pandemic, there were issues around supply and demand. And as of September, the number of properties for sale in the UK has decreased to its lowest level in more than six years according to Zoopla.

The issue with low supply but high demand is that it drives prices higher. That’s great news if you are already on the property ladder and looking to sell. But not so great if you are trying to buy your first home.

Homes England’s purpose is to sell land for housing-led developments. The government has a target to build 300,000 new homes a year. So simplifying the procurement process for SMEs ensures that smaller sites can be developed.

[middle_pitch]

What are the advantages for buyers?

The introduction of the new system means development opportunities are opened up to a wider range of developers, including SMEs. When initial applications opened earlier in the year, SMEs accounted for 24 of the 66 companies chosen to be partners.

With more developers involved, more sites will be developed. This will lead to more opportunities for homeownership. Making the process simpler and more flexible removes some of the barriers to getting housing developments built. And adjusting the entry criteria makes successfully bidding on smaller sites more achievable for SMEs.

Because of schemes like Help To Buy for new builds, more housing developments across the country could mean more opportunities for first-time buyers.

With the Help to Buy: Equity Loan, the government will lend first-time buyers up to 20% of the value of their home. Buyers then only need to put down 5% to secure up to a 75% LTV mortgage.

The catch is that only new-build homes qualify. So, the more new housing developments are built, the more opportunities first-time buyers have to take advantage of home ownership schemes.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

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