Barratt, Bellway, Redrow and Taylor Wimpey are amongst the top housebuilding firms being investigated for information sharing in CMA competition probe
The Competition and Markets Authority (CMA) has published its final report on the state of UK housebuilding, making several recommendations to boost delivery of new housing- as well as launching a probe into potential competition violations between some of the top housebuilding firms in the UK.
Evidence was found during the study that indicated some housebuilders may be sharing commercially sensitive information with their competitors, which could be influencing the build-out of sites and the prices of new homes.
Under the Competition Act 1998, the CMA has launched an investigation into the alleged companies engaging in this behaviour, with no verdicts at the time of writing “whether or not competition law has been infringed”.
Firms investigated in the housebuilding competition probe include:
Barratt Developments
Bellway
The Berkeley Group
Bloor Homes
Persimmon
Redrow
Taylor Wimpey
Vistry Group
UK housebuilding has fallen short of targets
The CMA report noted persistent shortfalls in the number of homes built across England, Scotland, and Wales, with less than 250,000 built last year across Great Britain – well below the 300,000 target for England alone.
The report identified a wide range of different types of housebuilders operating in the market: around two-fifths of the homes built between 2021 to 2022 were delivered by the largest, national housebuilders while more than 50,000 homes were delivered by thousands of smaller, regional builders.
The housing shortage is at least partially due to the limits of speculative private development
Around 60% of all houses built in 2021 to 2022 were delivered by speculative private development, which is when builders obtain land, secure planning permission, and construct homes without knowing in advance who will buy them or for how much.
This way of building homes has given builders flexibility to respond to changes in the market. However, the country’s reliance on this model has seen the gap widen considerably between what the market will deliver and what communities need.
The evidence shows that private developers produce houses at a rate at which they can be sold without needing to reduce their prices, rather than diversifying the types and numbers of homes they build to meet the needs of different communities (for example, providing more affordable housing).
Concerns were also raised about the quality of new housing
One of the key findings of the CMA report was that housebuilders don’t have strong incentives to compete on quality- and consumers have unclear routes of redress.
Analysis also suggests that a growing number of homeowners are reporting a higher number of snagging issues (at least 16). The CMA’s consumer research and other evidence revealed that a substantial minority also experienced particularly serious problems with their new homes, such as collapsing staircases and ceilings.
Other key findings of the CMA report focused on:
Planning rules
The planning systems in England, Scotland and Wales are producing unpredictable results and often take a protracted amount of time for builders to navigate before construction can start.
The report highlights that many planning departments are under-resourced, some do not have up to date local plans, and don’t have clear targets or strong incentives to deliver the numbers of homes needed in their area.
They are also required to consult with a wide range of statutory stakeholders – these groups often holding up projects by submitting holding responses or late feedback to consultations on proposed developments.
Land Banks
The CMA assessed over a million plots of land held by housebuilders and found the practice of banking land was more a symptom of the issues identified with the complex planning system and speculative private development, rather than it being a primary reason for the shortage of new homes.
Private Estate Management
The CMA report found a growing trend by developers to build estates with privately managed public amenities – with 80% of new homes sold by the eleven biggest builders in 2021 to 2022 subject to estate management charges.
These charges are often high and unclear to homeowners. Whilst the average charge was £350 – one-off, unplanned charges for significant repair work can cost thousands of pounds and cause considerable stress to homeowners.
The report highlights concerns that many homeowners are unable to switch estate management providers, receive inadequate information upfront, have to deal with shoddy work or unsatisfactory maintenance, and face unclear administration or management charges which can often make up 50% or more of the total bill.
The CMA has made recommendations to alleviate the issues identified:
requiring councils to adopt amenities on all new housing estates.
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.
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.
Further proposed solutions from the CMA include 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 for the local environment. Measures to improve the capacity of council planning departments would also enable them to process more applications.
Another proposal would increase the build-out of housing sites by incentivising builders to diversify the tenures and types of homes delivered.
“Further action may be required”
Whilst these solutions would mitigate the issues identified in UK housebuilding, the CMA emphasised that “fundamental interventions, often with fiscal and policy implications” from policymakers would be needed to effect more impactful change.
Speaking on the housebuilder competition probe and market recommendations made in the report, Sarah Cardell, chief executive of the CMA, said:
“Our report – which follows a year-long study – is recommending a streamlining of the planning system and increased consumer protections. If implemented, we would expect to see many more homes built each year, helping make homes more affordable. We would also expect to see fewer people paying estate management charges on new estates and the quality of new homes to increase.
“But even then, further action may be required to deliver the number of homes Great Britain needs in the places it needs them.
“The CMA has also today opened a new investigation into the suspected sharing of commercially sensitive information by housebuilders which could be influencing the build-out of sites and the prices of new homes. 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.”
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