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Real Estate
February 14, 2024

UK housebuilders investigated over possible sharing of price information

Watchdog says there is need for ‘significant intervention’ over supply and quality of new homes

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The UK competition watchdog has opened an investigation into eight housebuilders after it found evidence they may be sharing commercially sensitive information that could affect the price of homes.

The Competition and Markets Authority (CMA) launched the investigation into some of the sector’s biggest operators after it found evidence that suggested some were sharing non-public information, including sales prices and details of incentives for buyers.

It said this behaviour “prevented and distorted” competition, and could influence decisions around pricing levels, as well as the rates at which the companies built new homes.

The decision came after a year-long market investigation by the watchdog into the barriers leading to the undersupply of new homes in the housebuilding sector.

The report concluded that it had “fundamental concerns” over the housebuilding market, pointing to the complex planning system and the limitations of speculative private development as the key reasons for the too few homes being built.

The government set a target of building 300,000 homes a year by the mid-2020s in its 2019 manifesto but only 250,000 were built last year, with many in the sector warning that this is likely to shrink considerably this year.

The report said many local planning departments were under-resourced or did not have clear targets or incentives to deliver the number of homes needed in their area. This meant developers were having to deal with protracted and unpredictable planning processes before they could start construction, with small- and medium-sized companies disproportionately affected.

It was also critical of “speculative private development” that led to housebuilders producing houses at a rate at which they could be sold without needing to reduce prices, rather than providing the right type of homes where most needed. This included not building enough affordable housing where it was needed.

The CMA found that profits of the 11 largest housebuilders were “generally higher than we would expect for a well-functioning market”. However, it also warned that any measures introduced to tackle profitability in the sector would reduce the number of homes being built and exacerbate supply problems.

The investigation launched on Monday will look into suspected breaches of competition law in relation to the potential sharing of non-public information at Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry. The CMA said it had not reached any conclusions about whether the law had been infringed.

The report was also critical of the quality of homes built by some developers, saying that a growing number of homebuyers were facing more than 16 snagging issues after purchase, and facing weeks and months to get them fixed. A “substantial minority” of these faced more serious problems, such as collapsing staircases or ceilings.

According to the CMA, housebuilders did not have strong incentives to compete on quality and residents did not have clear routes of redress, and called for the full implementation of a new homes ombudsman so housebuilders could be more easily pursued on quality problems.

It also called for local councils to take over the amenities on new housing estates after finding some homeowners were being charged “high and unclear” charges by private companies for these services.

A spokesperson for the Home Builders Federation, the body that represents big housebuilders, said: “We welcome recognition that the planning system is a fundamental barrier to delivery and adds unnecessary delay and cost into the development process, and the need for local authorities to have plans in place and properly resourced planning departments.

“We also welcome the CMAs recognition that housebuilders do not land bank unnecessarily, that supports a number of similar investigations over recent years.”

A Bellway spokesperson said: “We are reviewing the CMA’s report. Bellway has engaged and cooperated fully with the CMA throughout its market study – and will continue to do so.

“Bellway is committed to exceptional customer care. We remain focused on the delivery of high-quality new homes that meet local demand and enhance the communities we build in as we work to increase the supply of UK housing.”

A Taylor Wimpey spokesperson said: “Taylor Wimpey notes the investigation opened today and we will cooperate fully with the CMA in relation to this.”

The Guardian has contacted Barratt, Berkeley, Bloor Homes, Persimmon, Redrow, and Vistry for comment.

The Department for Levelling Up, Housing and Communities said: “We welcome the CMA’s final report following its full market study into housebuilding and the report will now be carefully considered.

“Despite the economic challenges we remain on track to build 1m homes this parliament, backed by £10bn investment in housing supply, while our long-term plan for housing will allow us to go even further to build the homes that local communities want and need.”

The shadow housing secretary, Angela Rayner, accused the government of overseeing a broken planning system that provided incentives for developers to trickle out homes.

She said: “Labour will strengthen the rules to prevent developers wriggling out of their responsibilities on social and affordable housing, and we will reverse recent planning changes made by the Conservatives, including the removal of mandatory local housing targets.”

Source: Theguardian

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