Around 4,690 construction firms went under in England and Wales in the year to June, accounting for nearly 17% of all company insolvencies. That figure tells you something important: the people who actually build homes are disappearing at an alarming rate. I’ve been watching the UK housing market for years, and this pattern keeps coming up in conversations with developers, planners, and frustrated first-time buyers. The problem isn’t just that we need more homes — it’s that the system for building them is broken for everyone except the biggest players.
Pocket Living is one of the few developers trying a different approach. They build compact one-bedroom flats that sell for 20% below local market rates, aimed squarely at first-time buyers priced out of London. The company has built 1,280 homes so far, with another 400 in the pipeline. But even they’re struggling — the firm has been in the red for four years, with a pre-tax loss of £13.9m in 2022. That’s the reality of trying to deliver affordable housing in today’s market. Here’s what you actually need to know about whether small spaces can make a real dent in the UK’s housing shortage, and what it means if you’re trying to get on the property ladder.
What Pocket Living Actually Builds — and Why It Matters
The flats aren’t just small for the sake of it. Pocket Living’s chair, Marc Vlessing, calls them “the Volkswagen Beetle of one-bedroom flats” — compact, practical, and designed to do one thing well. Higher ceilings, wider doors, floor-to-ceiling windows, and less wasted corridor space make the units feel bigger than their square footage suggests. The buildings include lightwells, communal garden roof terraces, and cycle parking. These aren’t luxury apartments, but they’re not shoeboxes either.
The key difference is the affordability mechanism. Pocket flats are classed as “affordable” because they’re sold at 20% below the average local market value. That’s not a government subsidy — it’s a planning agreement that locks in below-market pricing for the first buyer. The company receives funding from the Greater London Authority, which helps keep prices down. What I’d do if I were a first-time buyer in London is register interest with Pocket Living early, because the waiting lists are long and the turnover is slow. The flats sell below market rate, but they’re still not cheap — and sales have been sluggish even after the Bank of England’s August interest rate cut.
Why the Decline of Small Builders Hurts Everyone
The collapse of small and medium-sized developers isn’t just an industry problem — it’s a housing crisis problem. Around 4,690 construction firms went under in England and Wales in the year to June, up 2.1% on the year before. That’s nearly one in six of all company insolvencies. High interest rates and cashflow issues are the immediate causes, but the deeper issue is a planning system that Vlessing describes as “such a barrier to entry that new entrants don’t come.”
Compare that to Germany, where most homes are built by medium-sized regional developers. The UK used to have a similar model, but it’s been hollowed out over decades. The consequence is that big housebuilders now dominate, and they lack the talent pool of skilled executives that smaller firms used to supply. Smaller developers are also better at dealing with local opposition because they know local politicians and can build relationships. When they disappear, nimbyism becomes harder to overcome.
Pocket Living itself wanted to expand outside London but found it “quasi-impossible.” Vlessing says the local politics in places like Bristol or Bath are “internecine and complex” — and he already has to navigate 32 different London boroughs. That’s a real-world example of how the planning system stifles innovation. If a well-funded, politically connected developer can’t scale outside the capital, what chance does a new startup have? What I notice is that the government’s target of building 1.5 million homes over five years will remain a fantasy unless the planning system is fundamentally reformed for smaller players.
Where the System Fails — and What Needs to Change
Pocket Living, backed by an all-parliamentary group for SME housebuilders, has put forward a nine-point plan to the government. The report is called The Road to a Proportionate System, and it’s worth understanding the key proposals because they highlight exactly where the current system breaks down.
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| Problem | Proposed Fix | Who Benefits |
|---|---|---|
| Sites of 10–150 homes face same rules as 1,000-home estates | Redefine “medium-sized” sites and use National Development Management Policies (NDMPs) to embed proportionality | SME developers, first-time buyers |
| S106 agreements take months and cost thousands in legal fees | Endorse national S106 templates through planning guidance | SME developers, local authorities |
| Brownfield sites are stuck in planning limbo | Introduce “brownfield passports” via NDMPs and Local Development Orders | SME developers, urban communities |
| Planning fees are the same regardless of project size | Introduce tiered, cost-neutral planning fees and capped PPAs | SME developers, taxpayers |
Mistake 1: Treating every development site the same. A 15-home infill project currently faces the same planning hurdles as a 500-home estate. That makes small sites uneconomical. The fix is to redefine “medium-sized” sites in London as 10–150 homes, which would unlock thousands of SME-led homes. The plan also calls for automatic approval for brownfield housing schemes under 0.5 hectares through a clear NDMP.
Mistake 2: Ignoring the S106 negotiation burden. Section 106 agreements — the legal contracts that secure affordable housing contributions — are a major source of delay and cost for small developers. National templates would cut negotiation time from months to weeks. What I’d do if I were a small developer is push for these templates through local planning guidance before starting any negotiation.
Mistake 3: Overlooking mortgage reform. Post-crisis mortgage rules are too restrictive for modern affordability. The plan calls for raising caps and fixing the Mortgage Guarantee Scheme. This matters because even if you build affordable homes, buyers still need mortgages they can actually get. The current rules lock out the very people Pocket Living is trying to help.
Mistake 4: Applying biodiversity net gain rules to tiny brownfield sites. BNG requirements make sense for large greenfield developments, but for a 0.2-hectare brownfield plot in a city centre, they add cost without meaningful ecological benefit. The plan proposes exempting or simplifying BNG for small brownfield schemes. If you’re looking at a small brownfield site for development, check whether BNG exemptions apply in your area — it could save thousands.
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What You Can Actually Do — Practical Steps for Buyers and Developers
Register for Pocket Living and Similar Schemes Early
If you’re a first-time buyer in London, Pocket Living flats are one of the few genuinely affordable options. The company has built 1,280 homes so far, with another 400 coming. But the waiting lists are long, and sales are slow — partly because buyers are cautious in the current market. Register on their website, attend open days, and have your finances ready. The flats sell at 20% below local market value, but you still need a mortgage and a deposit. A property lawyer can help you understand the affordability covenant and what happens when you sell — because the below-market pricing may not carry over to the next buyer.
Push for Planning Reform in Your Area
The nine-point plan isn’t just for developers. Local residents and community groups can support these proposals through consultations and by contacting their MP. The all-parliamentary group for SME housebuilders, chaired by MP Sarah Edwards, has already thrown its weight behind the report. If you’re involved in a local planning committee or neighbourhood forum, ask about brownfield passports and tiered planning fees. These changes would make it easier for small developers to build in your area, which means more homes and more competition. The debate over government intervention in housing is directly relevant here — the question isn’t whether to intervene, but how.
Consider Modular Construction for Your Own Project
Pocket Living initially built about half its homes as modular units, including an award-winning triangular tower in Wandsworth. But the company has had problems with suppliers, and now less than 15% of its new homes are modular. Several modular firms have gone bust, and Legal & General shut its modular factory near Leeds last year. Despite this, Vlessing remains “passionate that precision-built factory-enabled housing needs to play a vital role.” If you’re planning a self-build or small development, modular construction can reduce build time and improve quality control — but choose your supplier carefully. The industry is still nascent in the UK, unlike in Germany, Sweden, and Japan where it’s well established. A real estate lawyer can review your contract with a modular supplier to protect against insolvency risk.
Understand the Future of Housing Policy
The Labour government has ambitious plans to build 1.5 million homes over five years, underpinned by planning reforms. Vlessing argues the state needs to act as “ringmaster,” setting up development corporations with special planning powers to cut through local bureaucracy. A development corporation has been proposed for Cambridge, which has long struggled with housing shortages. But Ebbsfleet in Kent — picked in 2014 as the first new garden town in 100 years — shows the challenges: only 4,000 of the promised 15,000 homes have been built so far. If you’re following housing policy, watch for the Planning & Infrastructure Bill and the introduction of tiered planning fees. These changes could reshape the market for small developers and first-time buyers alike. The future of UK housing development depends on getting these details right.
Are Pocket Living flats really affordable? ▾
Can Pocket Living expand outside London? ▾
What happened to Pocket Living’s modular homes? ▾
Is Pocket Living financially stable? ▾
What is the nine-point plan for housing? ▾
The housing crisis won’t be solved by any single developer or policy. But Pocket Living’s model shows that compact, well-designed homes at below-market prices can work — at least in London. The bigger lesson is that the planning system needs fundamental reform to let small and medium-sized builders back into the market. Without them, the government’s 1.5 million home target is just a number on a page. If this was useful, you might also want to read Is Co-Living the Future of UK Property?.
Sources and Further Reading
Garden Cities Revisited: A Sustainable Solution for UK Housing Shortages — Explores another approach to solving the housing crisis through planned communities.
Property Investment Myths Debunked — Separates fact from fiction for anyone considering UK property investment.
Pocket Living presents nine-point plan to improve housing delivery. Development Finance Today, 2024.
Marc Vlessing: the modular homes mogul seeking a ‘renaissance of the British housing market’. The Guardian, 2024.
