Competition and Markets Authority Report on Housebuilding is Another Missed Opportunity

Earlier this year, the Competition and Markets Authority (CMA) reported on the housing market. It came at the end of a year long study.

Competition and Markets Authority Report on Housebuilding is Another Missed Opportunity

The report was a mixed bag, but there was nothing in it that will shock anyone over much. And nothing much will change.

The CMA looked at the build quality of new homes and found that there was a lack of drive for homebuilders to compete on quality and that the routes to the home buyer to get snagging issues, as well as more serious problems, sorted were unclear.

So, they recommended that a Home Ombudsman be set up as soon as possible, together with a single and mandatory consumer code so that homeowners can more easily pursue home builders over quality related issues.  

Along with the report was an announcement that the CMA would open a new investigation into the leading housebuilders who it thinks may be sharing information, which they worry could be having an impact on holding back the build out of sites and the prices of new homes.

What else was in the report?

Well, the CMA found that we still are not building enough new homes.

Who knew?

In 2023, 250,000 new homes were built in the whole of the UK compared to the 300,000 that were needed just in England.

Of course, we have been missing the target for quite a while. I remember the Kate Barker report saying much the same thing and that was aeons ago now.  And, with 900,000 net inward migration in the last year alone, the situation will only have got worse since then.

Naturally, the report took aim at the planning system. The main complaints the CMA had were about the unpredictability of planning decisions, the complexity of the planning system (it takes too long to navigate), the under resourcing at the local planning authorities, the lack of clear targets in local plans and the lack of incentives to deliver homes in a planning area.

Further, they observed that the requirement to consult a wide range of stakeholders added significantly to the time taken to approve new homes. Also, late feedback from stakeholders seemed to be accepted and normalised, which further delayed things.

Amazingly, to the CMA, (but maybe not to anyone else), housebuilders sometimes produce and release new homes at a rate to maximise their profits, so they often hold up site development to achieve this aim and they do the minimum to produce (usually loss making) affordable housing.

Crikey!

But the big house builders got let off on the oft quoted “land banking” charge in the report.

Long term critics of the big house builders’ market conduct say they often acquire a plot or get an option on a plot with the intention to develop at some future point, but often delay building on it to maximise profits. They say this reduces the land available to smaller housebuilders who would build out quicker, if only they had the chance.

But the big housebuilders’ PR machines, their work in the clubs near Westminster and down at the lodge all paid dividends here as the CMA said land banking was needed to maintain a pipeline of projects and that the long timelines were mainly a function of the complexities and uncertain outcomes in the planning system, not the fault of the house builders.

Naturally, smaller housebuilders were ignored again in this report, which is a shame because they are more competitive, have lower overheads and can work with smaller profit margins on smaller brownfield sites and could, with the right support and incentives, deliver a lot of new housing supply. (So, it is a bit like the smaller Mum n Dad private landlords being far more efficient and delivering a better private rental experience than the big build to let schemes of the pension firms, banks and other global investors).

The CMA made no specific recommendations other than some “options for consideration”.

These were:

  1. Incentivise developers to diversify the types of homes they deliver. (That seems odd as surely the market dictates this to a large degree, within the local planning constraints).
  2. Streamline planning systems to get developments started sooner. No problem with that, but where is the detail.
  3. Ensure local planning authorities establish local plans guided by clear, consistent targets that reflect the need for new homes. (Sounds obvious and a bit like apple pie – but where is the big stick to make this happen?)

I feel a bit sorry for the CMA in this. All they can recommend really is to improve the planning system, but it’s up to the government to sort that. But disappointing about the lack of recommendations to help smaller builders.

What we really need is for central government to tackle the broken planning system and a fair recognition that smaller developers could make a significant difference, on which matter, my point about the lodge, the clubs of Westminster and the PR machines of the big housebuilders are all relevant.

Plus ca change.

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