In 2022 the Competition and Markets Authority (CMA) was called upon by the Secretary of State for the Department for Levelling Up, Housing and Communities to conduct a study into the housebuilding sector and provide recommendations on how the sector can operate as efficiently as possible. The market study was launched in January 2023 and the final report was published on 26 February 2024.
CMA’s final report
Over recent years the number of new homes built has consistently fallen short of official targets. The CMA’s final report found that the current planning system and the limitations of speculative private development were driving factors to the persistent under delivery of new homes. Housebuilders lacking strong incentives to compete on quality and the unclear routes of redress for consumers were also listed as contributing factors to the under delivery.
The CMA found that the current planning system is complex, unpredictable, and prolonged the time taken before the construction of new homes actually started. It also reported on how many of the planning departments within the UK lacked resources, up to date local plans and clear targets or incentives to deliver a certain number of homes. Regarding speculative private development, it was reported that houses are being produced by private developers at a rate which they can be sold without needing to reduce their prices, instead of diversifying the types of homes to satisfy different communities needs.
The report commented on the rise in private companies providing and charging for estate management services to maintain public amenities, including roads, sewers and open spaces. In 2021 to 2022, 80% of new homes sold by the eleven biggest builders were subject to estate management charges. The CMA voiced its concerns over these substantial charges, as they are often high and unclear to homeowners, who do not receive adequate information upfront. It also highlighted how many homeowners are unable to switch estate management providers and face unclear administration or management charges which usually account for 50% of the total bill.
The CMA was cautious in its recommendations, noting that a number and location of new homes are impacted by factors outside the housebuilding market itself, including interest rates, population growth and household income levels. It did not, therefore, find it appropriate to make specific recommendations on how any trade-offs with other policy objectives should be made. However, the CMA did set out proposed options for consideration, such as streamlining the planning system so that housebuilders can start construction work sooner.
CMA’s new investigation into housebuilders
The CMA announced, within its final report, that it will be opening a new investigation under the Competition Act 1998 into the suspected sharing of commercially sensitive information by housebuilders. The CMA stressed that it had not yet reached any conclusions as to whether or not any competition laws had actually been broken. The investigation was launched into Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry. Sarah Cardell, the Chief Executive of the CMA, commented that “while this issue is not one of the main drivers of the problems we’ve highlighted in our report, it is important we tackle anti-competitive behaviour if we find it”. The CMA estimates that the initial investigation, which will include information gathering, analysis and review, will last until December 2024.
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