CMA to examine housebuilding and rented housing markets

According to the CMA, the market study, which will allow officials to use compulsory information-gathering powers under the 2002 Enterprise Act to probe the entire industry, was prompted by “concerns that builders are not delivering the homes people need at sufficient scale or speed”.

The study will consider the issues faced by smaller, regional firms, as well as helping the CMA to develop a deeper understanding of how and when housebuilders decide to deliver new homes and the interaction of that with local authority housing targets.

The regulator said it would inspect overall housing quality and consider whether builders are delivering the right sorts of homes that communities and buyers need, including the fairness of estate management fees charged for ‘unadopted’ roads and amenities. It will also look at land management techniques, examining whether the practice of ‘banking’ land before or after receiving planning permission is anti-competitive.

Local authority oversight will also come under scrutiny, with the CMA exploring how councils manage the delivery of homes and how developers negotiate affordable home requirements. The CMA will also consider any factors that might be holding back innovation in the industry, preventing builders from adopting new building techniques or moving towards more sustainable, net zero homes.

The CMA’s consultation on the scope of the market study will run until 20 March 2023. It said it will decide whether to make a market investigation reference by 27 August 2023, with its final report on the market study published by 27 February 2024.

Alan Davis of Pinsent Masons said: “The market study was launched following UK government requests for the sector to be examined in the context of increasing economic pressures impacting the country. The CMA’s predecessor, the Office of Fair Trading (OFT), previously reviewed the housebuilding sector over 14 years ago but found little evidence of competition problems. However, the OFT concluded at that time that homebuyers could experience faults or delays with new homes, and to address this the industry agreed to develop a code of conduct and redress scheme for consumers.”

As part of the same announcement, the CMA also said it would undertake a UK-wide research project on the rented housing sector, focused on potential consumer protection enforcement. The study will examine the end-to-end experience from a tenant’s perspective, including finding somewhere to live, renting a property, and moving between homes.

It will also evaluate the relationship between tenants and landlords and the role of intermediaries, such as letting agents, and identify any consumer protection issues that may arise. The CMA said it expected to report on its initial findings and proposed next steps in the summer of 2023, following a period of targeted stakeholder engagement across England, Scotland, Wales and Northern Ireland.

Angelique Bret of Pinsent Masons said: "The CMA previously used its consumer protection enforcement powers to examine the leasehold housing market. The new rented housing sector project highlights the CMA’s continued focus on residential housing from a consumer protection perspective. Both the market study and the consumer research project align with the CMA’s focus on ‘areas where consumers spend the most money and time’ and the promotion of an environment where ‘people can be confident they are getting great choices and fair deals’, as stated in the CMA’s draft Annual Plan for 2023-2024 (31-page / 5.68 MB PDF)."

The forthcoming Digital Markets, Competition and Consumer Bill is expected to include a number of changes that will allow the CMA to use its market study and market investigation powers more flexibly. The Bill will also will significantly strengthen the regulator’s consumer protection enforcement powers and align them more closely with its existing powers under competition law.