CMA to investigate housebuilders over alleged price collusion
The regulator’s report also highlighted unsatisfactory build quality, poor customer service and a “complex and unpredictable planning system”.
The UK Competition and Markets Authority (CMA) has today (26 February) published its final report into the housebuilding market in Britain. The 173-page report is a comprehensive analysis of the current state of the housebuilding market, highlighting several issues that have been plaguing the industry for decades and firing the starting gun on a more detailed probe.
Based on a thorough examination of various aspects of the market, including supply-and-demand dynamics, the quality of new homes and the service provided by housebuilders, the report revealed that the housebuilding market is not delivering well for consumers.
One of the key issues identified is the insufficient supply of new homes. The CMA found that the number of new homes is not keeping pace with the demand. This imbalance is contributing to a host of problems, including rising house prices and a lack of affordable housing options. The report also highlights the poor quality of some new homes and the subpar service provided by housebuilders, with many consumers having reported issues with the build of their new homes, ranging from minor defects to major structural problems. Furthermore, the report suggested that housebuilders are not doing enough to address these issues, often leaving consumers to deal with the consequences.
Another significant issue identified in the report is the detriment faced by households living under private management arrangements on new housing estates, with the report finding that these households often have to deal with high service charges and poor management practices.
To address these issues, the CMA has proposed a range of actions to the UK, Scottish, and Welsh governments to implement common standards and mandatory adoption of public amenities on new housing estates to improve the quality of new homes and the service provided by housebuilders.
The CMA has also recommended the development of a single mandatory consumer code and a new homes ombudsman scheme for all housebuilders, initiatives designed to provide consumers with greater protection and recourse in the event of issues with their new homes. In addition, the CMA has called for a ban on drip pricing and greater disclosure of optional extras.
The report also set out options for governments to consider reforming the “complex and unpredictable planning system”, which it found to be a key driver of the under-delivery of new housing. The proposed reforms include making more effective use of targets, streamlining the process, and increasing the diversity of housing tenure and types, although the report conceded that these proposals are unlikely to be sufficient to deliver the quantity and affordability of new homes that policymakers find acceptable. With that in mind, the report recommended more fundamental interventions including encouraging non-speculative housebuilding models, increasing publicly-funded housing, reforming the land market and stimulating demand among certain groups of customers.
Although CMA has decided not to make a market investigation reference, which would have triggered a more in-depth inquiry, it has initiated an investigation under the Competition Act 1998 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”. The investigation will examine the practices of housebuilders Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry, which, together, according to 2022 figures, account for about 40% of the new homes built in Great Britain. Chief executive of the CMA Sarah Cardell commented: “It is important we tackle anti-competitive behaviour if we find it,” adding that the market “needs significant intervention so that enough good quality homes are delivered in the places that people need them.”
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