Out-Law News 3 min. read

CMA finalises housebuilding market study

SEO image New build housing estate 1

Richard Newstead via Getty Images

The UK’s Competition and Markets Authority (CMA) has published its final report following an extensive study of the housebuilding market across Great Britain.

The report (173 pages / 1,821KB) found that complex and unpredictable planning rules across England, Scotland, and Wales, together with the limitations of speculative private development without responding to community need, is primarily responsible for the persistent under delivery of new homes.

The study also identified concerns that homeowners, in some circumstances, are facing high and unclear charges for the management of facilities such as roads, drainage and green spaces. Concerns were also raised over the quality of some new housing with a significant number of ‘snagging’ reports from owners over the last 10 years. The report also highlighted potential issues relating to transparency and customer service, with buyers often facing challenges in obtaining accurate information about their purchase.

The CMA decided not to launch a market investigation reference (MIR) despite publicly consulting on the issue in August 2023. It concluded that a statutory market investigation would not be the most effective way to address the CMA’s concerns. Instead, the CMA is recommending a range of measures for government consideration, including streamlining of the planning system, and improvements to consumer protection for homeowners on new and existing private estates.

In parallel to publishing its final market study report, the CMA has opened a separate investigation under the 1998 Competition Act (215 pages / 9.2KB) into the suspected sharing of commercially sensitive information by certain housebuilders. 

The CMA’s final report follows a year-long market study under the 2002 Enterprise Act (619 pages / 26MB), where the CMA sought to examine the dynamics of the housebuilding market, identifying potential barriers to competition, and assessing the impact on consumers. 

In a press release accompanying publication of its final report, and setting out the wider context for its market study findings, the CMA stated that “[t]here are 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 market study reviewed “land banking” by developers – buying land as an investment, holding it for future use but making no specific plans for its development - and how planning rules influence competition and house supply. It concluded that the practice of banking land was more a “symptom” of the planning system issues the CMA had identified rather than a primary reason for the shortage of new homes. The CMA found that land banking did not significantly distort competition between housebuilders in delivering houses.

To address the concerns identified in its final report, the CMA has made a range of recommendations to the English, Scottish, and Welsh governments to help improve market outcomes. These include requiring councils to adopt amenities on all new housing estates, introducing enhanced consumer protections for homeowners on existing privately managed estates, and 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. 

The CMA’s final report also sets out proposed options for consideration by governments in England, Scotland, and Wales, to help address concerns with the planning system. For example, 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, streamlining the planning systems to significantly increase the ability of housebuilders to begin work on new projects sooner, and introducing measures to increase the build-out of housing sites.

The CMA’s findings raise various consumer protection considerations relevant to developers, such as around providing clearer, more comprehensive information to potential buyers. This includes details about property specification, warranties, and any after-sale support. The final report also notes the importance of quality standards, with the CMA emphasising the need for consistency across the industry with firms urged to ensure homes meet safety, energy efficiency and durability requirements.

The CMA’s consumer protection enforcement powers will be substantially strengthened once the Digital Markets, Competition and Consumers Bill is passed by parliament – as expected in the coming months. The changes will empower the CMA, across all industry sectors, to decide when consumer protection laws have been broken without resorting to court action, and it will be able to set fines at up to 10% of a company’s global annual turnover for breaching consumer laws.

Separately, the CMA is also conducting a research project into the private rented housing sector under its existing consumer protection powers.

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