Research from The Federation of Master Builders (FMB) suggests that two-thirds of SME housebuilders are struggling to identify land for potential development.
For the second year in a row, the FMB's annual House Builders' Survey has found that a lack of 'available and viable land' is the biggest barrier to SMEs delivering more new homes.
The survey also found that difficulties accessing adequate finance are posing serious challenges for SME housebuilders, along with under-resourced local authority planning departments and the difficult planning system as a whole.
Some 40% of respondents also said the construction skills crisis is now presenting a major impediment to more new housebuilding.
Nevertheless, a high proportion of SMEs said that consumer demand for new homes remains resilient, even in the wake of the EU Referendum vote.
Brian Berry, chief executive of the FMB, said: "The biggest challenge facing SME housebuilders is the planning process. Councils need to find a way of allocating and granting planning permission for more small sites. The current focus on large sites is squeezing out smaller developers, which is reducing competition in the housing market at a time when we need more, not less, choice. The limited supply of opportunities for small scale development is one of a number of key structural constraints that has seen the number of homes built by SMEs decline from around two thirds in the late 1980s to less than a quarter today."
Mr Berry continued: "It is absurd that the planning system treats a 300-home application in largely the same way it treats a three-home application. While the government has attempted to remove red tape in its drive to increase the number of homes being built, it would appear that its reforms have yet to make a difference. Ninety-five percent of SME housebuilders report that the information demands being placed on them during the planning application process have either increased, or remain as bad as they were before. Our survey shows that the primary cause of unnecessary delays is the planning process, with the under-resourcing of planning departments being the most important concern."
Mr Berry called for SME housebuilders to be a key component of the government's housing stategy, and for government to press ahead with its proposed planning reforms, along with a renewed focus on granting planning permission to small sites.