Competition and Markets authority voices significant concerns with housebuilding market

The Competition and Markets Authority has shared its “fundamental concerns” with British housebuilding in a new report. The report, culminating a year-long study of the nation’s housebuilding market, outlines how both the unpredictability and complexity of the planning system, and a reliance on speculative private development, are significantly contributing to the under-delivery of new homes.

In addition, the study found that home owners on new housing estates are paying unfair estate management fees to pay for the maintenance of amenities such as roads and has called for new consumer protections to be introduced.

The report rightly concludes that local planning departments are in many instances under-resourced, which can lead to delays in processing applications. Between 2010 and 2018, spending in local authority planning departments in the North fell by 65%, compared to a 50% fall in the rest of England. To remedy this, the Competition and Markets Authority proposes that the government could make planning fees cost-reflective and ring-fence these funds to increase planning capacity.

Along with this capacity issue, the report concludes that the planning system is currently undermining the delivery of new homes in several other ways. Firstly, due to the requirement to obtain planning permission on a site-by-site basis, housing developers are not provided with certainty or predictability as to what proposals or schemes will receive permission prior to application. Secondly, the study found that the incredibly complex and resource intensive nature of planning applications is also undermining delivery. Thirdly, the Competition and Markets Authority found insufficient clarity, consistency and strength of local housing targets, objectives and incentives to deliver on these targets.

Another important conclusion from the study is that speculative private development – where developers purchase land, obtain planning permission and build new homes without knowing who will purchase them – cannot meet housing need alone. While private development will always play an important role in delivering new homes, increasing delivery outside of this model would further help to increase the number of new homes built each year. To do so, the country needs to increase the amount of new affordable housing, as well as the number of self-build and build-to-rent homes. This echoes some of the conclusions made in the 2018 Independent Review of Build-Out Rates that called for greater diversity across the housebuilding sector to improve the rate at which new homes that have received planning permission are built.

Finally, the Competition and Markets Authority also announced that they would be opening a new investigation into possible anti-competitive practices by eight major housebuilders. The investigation will focus on whether the developers in question shared information that may undermine competition in the sector. The Competition and Markets Authority was clear to point out that they are not making any judgements yet as to whether competition law has been breached.

A summary of the Competition and Markets Authority’s report and associated policy proposals can be accessed here.