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Key Findings From the CMA's Housebuilding Market Report

Posted on 28th February 2024 in Affordable Housing

Posted by

Michael Taylor

Partner & Solicitor
Key Findings From the CMA's Housebuilding Market Report

The Competition and Markets Authority (CMA) has recently concluded its year-long housebuilding market study in England, Scotland, and Wales. The final report highlighted several significant areas of concern for the housebuilding sector, where intervention was required, these included:

Planning System and Speculative Development

The existing planning system is intricate and often unpredictable. Its complexity has hindered the timely delivery of new homes. Developers face hurdles in navigating the planning process, leading to delays and inefficiencies.

Speculative private development, while common, falls short of meeting the affordable housing needs of diverse communities. The report emphasized that speculative projects have not adequately addressed the demand for affordable homes.

Landbanking: A Necessary Practice

The CMA addressed the contentious issue of landbanking. House builders routinely hold onto more than one million plots of land. This practice is essential due to the protracted planning process and the need for a continuous supply of construction sites. However, the CMA clarified that landbanking is not the primary cause of the housing shortage. Instead, it arises from the intricate planning system and speculative private development dynamics.

Estate Management Charges

Homeowners often grapple with unclear and disproportionately high charges related to managing facilities such as roads, drainage, and green spaces. Transparency in fee structures remains elusive.

Many homeowners find it challenging to switch estate management providers. This lack of flexibility restricts their ability to seek better services or competitive pricing.

Inadequate upfront information and subpar maintenance exacerbate the situation. Homeowners face difficulties when dealing with substandard workmanship or unresolved issues.

Build Quality and Snagging Issues

The quality of newly constructed homes emerged as a pressing concern. Over the past decade, owners have reported increasing snagging issues. Housebuilders lack strong incentives to compete on quality, and consumers face unclear paths for seeking redress.

Anti-Competitive Behaviour

Following the publication of the report, the CMA announced that it had opened a new investigation into suspected sharing of commercially sensitive information by housebuilders. The investigation will seek to determine whether the country’s largest house builders have broken the Competition Act 1998 by sharing information to influence the build-out of sites and the price of new homes. Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry will be subject to the investigation.

Persistent Shortfalls in Home Construction

Despite the growing demand for housing, the construction of new homes falls short. Last year, across England, Scotland, and Wales, fewer than 250,000 homes were built—well below the target of 300,000 for England alone. The market comprises various types of housebuilders, including Registered Providers, large national firms, and smaller regional builders. Notably, approximately 60% of homes are delivered through speculative private development. In this model, builders acquire land, secure planning permission, and construct homes without prior knowledge of the eventual buyers or sale prices.

Recommendations & Options to consider

The CMA made a number of recommendations to address these challenges:

  1. Amenities on New Housing Estates: Requiring councils to adopt amenities on all new housing estates. This ensures that communities have access to essential facilities.
  2. Enhanced Consumer Protections: Introducing enhanced consumer protections for homeowners on existing privately managed estates – including making it easier for homeowners to switch to a more competitive management company.
  3. New Homes Ombudsman: Establishing a New Homes Ombudsman as soon as possible and setting a single mandatory consumer code so homeowners can better pursue homebuilders over any quality issues they face.  

Additionally, the CMA encourages further exploration of the following options:

  1. Local Plans and Clear Targets: Ensuring local authorities put in place local plans and are guided by clear, consistent targets that reflect the need for new homes in their area.
  2. Streamlined Planning Systems: Streamlining the planning systems to significantly increase the ability of housebuilders to begin work on new projects sooner, while not watering down protections such as those for the local environment. Measures to improve the capacity of council planning departments would also enable them to process more applications more quickly.
  3. Incentivising Builders: Introducing measures to increase the build-out of housing sites by incentivising builders to diversify the tenures and types of homes delivered.

In summary, the contents of the report are unlikely to come as a surprise to the vast majority of those working in the sector, the ‘broken’ planning system was a significant focus of the study, which has often been cited as a fundamental barrier to the delivery of new homes whilst adding unnecessary delay and costs to the development process.

The report will increase the pressure on the Government to revise the system, and, we hope, reduce the delays and costs faced by Registered Providers in their development programmes.  

How can Tozers help?

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Key Findings From the CMA's Housebuilding Market Report

Posted on 28th February 2024 in Affordable Housing

The Competition and Markets Authority (CMA) has recently concluded its year-long housebuilding market study in England, Scotland, and Wales. The final report highlighted several significant areas of concern for the housebuilding sector, which are summarised in our latest insight.

Posted by

Michael Taylor

Partner & Solicitor