CMA warns homebuilding industry requires ‘substantial intervention’

Britain’s housing market needs ‘substantial intervention’ to ensure more high-quality properties are built, the competition regulator has advised.

The Competition and Markets Authority said the undersupply of new homes was caused by a ‘complex and unpredictable’ planning system and the ‘limitations’ of private speculative development.

And Britain’s eight largest housebuilders – Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry- now face an investigation into whether they are sharing commercially sensitive information.

Potential anti-competitive behaviour is not thought to be the main driver of the market’s issues, according to the CMA, but the regulator is concerned that such behaviour could be hurting competition and influencing new house prices. 

Findings: The CMA said the undersupply of new homes was caused by a ‘complex and unpredictable’ planning system and the ‘limitations’ of private speculative development

The findings follow a 12-month study into the UK housebuilding sector, which was launched amid significant concerns about housing costs and availability.

Only 212,570 homes were constructed across Britain in 2022/23, according to the Department for Levelling Up, Housing and Communities, far below the government’s target to build at least 300,000 dwellings per year.

In its study, the CMA said planning rules were leading to ‘unpredictable results’ and a ‘protracted amount of time’ for companies to traverse before they begin building.

It noted that many planning departments lacked up-to-date plans or incentives to build the required volume of homes in a particular area, and had to consult multiple stakeholders with the power to delay a project’s approval.

Housebuilders themselves have been vocal critics of Britain’s planning system, blaming it as the root cause of Britain’s overwhelming housing shortfall.  

New home completions fell in 2023 

In addition, investigators found private developers assemble and sell homes based on prices without diversifying the types and number of homes built.

The CMA also revealed that 80 per cent of new houses sold by Britain’s largest builders impose estate management charges.

These payments cost around £350 on average, but the regulatory body observed that homeowners could sometimes pay thousands of pounds in additional one-off charges for repair bills.

Many also receive poor-quality maintenance work and upfront information, and deal with ‘unclear administration or management charges’.

Sarah Cardell, the CMA’s chief executive, said: ‘Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them.’

Why is there a housing shortage in the UK? 

Britain’s housebuilders argue that payments to shareholders are not what is holding them back from building more or better homes. Most are keen to take potshots at the planning system instead.

> Read more here  

Among the CMA’s recommendations to reform the housing market include the creation of a New Homes Ombudsman and a compulsory consumer code to help Britons pursue builders over any quality issues.

The regulator also wants councils to adopt amenities on all new housing estate, and allow homeowners to change to a ‘more competitive’ management business.

Following this announcement, shares in many of Britain’s largest housebuilders were some of the FTSE 350’s biggest fallers.

Redrow shares were 2.3 per cent lower at 647.5p, while Bellway shares were 2 per cent down at £27.06, and both Taylor Wimpey shares and Persimmon shares fell 1.8 per cent.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: ‘Seeing rules streamlined could help some of the big listed names shift more houses, but it could also increase competition. 

‘The accusations of poor build quality and anti-competitive practice will be of more immediate importance, as findings against either strike could lead to margin degradation in the short term, but this is far from guaranteed.’

This post first appeared on Dailymail.co.uk