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Investigation launched into eight housebuilders following CMA review

  • 26/02/2024
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Investigation launched into eight housebuilders following CMA review
An investigation has been opened into eight major housebuilders to determine whether their actions are influencing housing development and prices.

The Competitions and Markets Authority (CMA) has launched the enquiry after finding evidence to suggest some housebuilders were sharing commercially sensitive information with competitors “which could be influencing the build-out of sites and the prices of new homes”, it said. 

The CMA said this activity was not believed to be the main reason behind the under-delivery of new homes, but had concerns it may weaken competition. 

Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry have been put under investigation. 

The CMA has not yet concluded whether competition law has been infringed. 


Complex reasons for insufficient housebuilding 

This comes as the regulator published the findings of its review into the development of homes in England, Scotland and Wales. 

It found that 250,000 new homes were built across Great Britain last year, which was below the 300,000 target for England alone.  

Between 2021 to 2022, some two-fifths were delivered by the largest housebuilders while smaller firms completed 50,000 homes. 

The CMA concluded that a speculative approach to building along with complex, unpredictable planning rules were the causes behind the lack of new homes. 

Speculative private development is when builders purchase land, get planning permission and build homes without knowing who will buy them and for how much. The CMA said this allowed builders to react to market changes but noted that the practice caused a gap in what was being delivered and what was needed by communities. 

It said private developers were building homes at a rate that meant they could be sold without a price reduction, rather than focusing on delivering diverse numbers and types of homes to meet community needs. 

The regulator also observed the plots of land held by housebuilders and found evidence of land banking but said this was mostly down to the complex planning system and speculative development, rather than the cause of underdevelopment. 

CMA said planning systems in the three investigated countries were “producing unpredictable results” and tended to take longer than usual for builders to work out before construction started. It said planning departments were under resourced and did not always have updated plans, clear targets or “strong incentives to deliver the numbers of homes needed in their area”. 

The CMA said planning departments also had to engage with numerous stakeholders which were “often holding up projects by submitting holding responses or late feedback to consultations on proposed developments”. 


Quality and private management concerns 

Developers are increasingly building projects with private managed public amenities, the CMA found, and 80 per cent of homes sold by the 11 biggest housebuilders in 2021 to 2022 were subject to estate management charges. On average, these were one-off charges of £350 for repair work. 

Homeowners were also found to be unable to switch estate management providers, given a lack of upfront information and had to deal with “shoddy work or unsatisfactory maintenance”. Additionally, homeowners received unclear administration or management charges which sometimes made up 50 per cent or more of the bill. 

The CMA also found that housebuilders did not have incentives on quality and homeowners were unsure of how to resolve this. It identified a rising number of homeowners reporting more snagging issues and serious problems in their homes such as collapsing staircases and ceilings. 


A ‘housebuilding market that delivers’ 

The CMA said intervention was needed and wanted to see a “housebuilding market that delivers”. 

It recommended requiring councils to take on amenities for all new housing estates, introduce consumer protections for homeowners on privately managed estates so it was easier to switch companies and introducing a New Homes Ombudsman so homeowners could resolve any issues. 

As for the planning system, the CMA proposed ensuring local authorities put plans in place with clear targets for the area’s needs, streamlining the planning process and introducing measures to increase the build-out of sites by encouraging a diverse mix in the tenures and types of homes delivered. 

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

“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.” 

She added: “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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