Local authorities could be costing small house builders millions of pounds, the Federation of Small Businesses (FSB) has said.
Research conducted by the Building Cost Information Service (BCIS) on behalf of the FSB found that smaller housing projects of 10 or less units are suffering a 'significantly higher' cost burden that that faced by larger developments.
The report shows that the average cost of smaller housing developments is 14% higher than those of larger projects.
BCIS calculations found that local councils could be overcharging smaller house builders by as much as £100,000 per project. This adds up to millions of pounds across the sector.
The extra burden placed on small house builders could be restricting the number of viable projects and placing further pressure on a market where houses are already short of supply.
John Allan, national chairman of the FSB, said:
"We are deeply concerned that an inflexible approach by local authorities could be preventing smaller house builders from taking on otherwise viable projects. It's a lose-lose situation for everyone – smaller developers, local authorities and those in desperate need of local affordable housing.
"When considering whether to make use of the levy, councils should take a more flexible approach. They should consider the size of the proposed project when deciding how to set the levy, and ensure small house builders aren't overburdened with unaffordable costs.
"This approach will help to deliver the houses we need in the places we need them. It will also support local small businesses and their suppliers which are at the heart of our local communities."