The CMA’s Housebuilding Sector Investigation

In February 2024, the CMA issued its final report.  It concluded that the main reason for the shortfall in the delivery of new houses is the planning system, which does not deliver enough planning permissions to deliver the required number of new homes.  The CMA also identified problems with a lack of predictability in the outcomes of an application; the length, cost, and complexity of the planning process; and a lack of clarity, consistency and strength of targets, objectives and incentives within the planning system. The CMA is, however, no longer concerned about land banking, seeing this as a “symptom” of the problems with the market rather than a cause, given, for example, the length of time that it takes to obtain a planning consent.

The CMA detected consumer detriment as a result of the ways in which public amenities on housing estates are managed by private management companies, including some households being unable to switch managing agent; unacceptably high and non-transparent charges; poor quality amenities and management services; and disproportionate sanctions for any outstanding charges.

It concluded, however, that a market investigation is not the most effective way to address its concerns in the housebuilding sector. Rather, recognising the complexity and sensitivity of the sector as a policy issue, the CMA considers Government action to be a more appropriate and comprehensive response to the market-wide issues that the CMA has identified in the sector.  As explored in our briefing here, the CMA has confirmed that it stands ready to engage with policymakers, housebuilders, and others to explain its recommendations, options and wider considerations for the sector. The outcome will therefore be policy led – with implementation required by Government – rather than a competition led process run by the CMA itself.

Separately, but based on evidence found during the market study, the CMA has also opened a new competition law investigation into whether eight of the largest housebuilders have been exchanging information in an anti-competitive way. The CMA suspects that some housebuilders may be sharing competitively sensitive information about sales prices, incentives, and rates of sale with each other, and that this could be influencing the build-out rate of new sites and the prices of new homes.  Although the CMA does not consider the suspected exchanges to be one of the main factors behind the sector’s disappointing build rates, it has decided to launch an investigation under the Competition Act 1998 on the basis that the suspected conduct may weaken competition in the market.