Eight housebuilders under investigation by competition authority

The Competition and Markets Authority (CMA) is investigating eight housebuilders as a study of the UK residential building market suggested possible information sharing between the rival firms.

Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry may have shared commercially sensitive information with competitors, the CMA said. The investigation, under the Competition Act 1998, is expected to run until December.

“While the CMA does not consider such sharing of information to be one of the main factors in the persistent under-delivery of homes, the CMA is concerned that it may weaken competition in the market,” the authority said in a statement. It added, “he CMA has not reached a view as to whether there is sufficient evidence of an infringement or infringements of competition law for it to issue a statement of objections to any party under investigation. Not all cases result in the CMA issuing a statement of objections.”

The suspicions arose during CMA study into underdelivery of new homes, which found concerns over unpredictable results from planning applications and underfunding of planning authorities, a reluctance to reduce new housing prices, lack of clarity over estate management charges and a lack of incentives for housebuilders to compete on quality.

Sarah Cardell, chief executive of the CMA, said, “Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them.

“Our report – which follows a year-long study – is recommending a streamlining of the planning system and increased consumer protections. If implemented, we would expect to see many more homes built each year, helping make homes more affordable. We would also expect to see fewer people paying estate management charges on new estates and the quality of new homes to increase. But even then, further action may be required to deliver the number of homes Great Britain needs in the places it needs them.”

She said the potential information sharing could influence build-outs of sites and the prices of new homes. “While this issue is not one of the main drivers of the problems we’ve highlighted in our report, it is important we tackle anti-competitive behaviour if we find it.”

The National Federation of Buildings (NFB), said the CMA report confirms that the housing crisis is caused by the planning process and government failure.

Richard Beresford, NFB chief executive, said: “Planning should be enabling homes, better places and competition which benefits not just Britain, but the British consumer. The CMA has correctly identified that the UK planning system does the opposite.”

Rico Wojtulewicz, Head of Policy, and Market Insight for the NFB and House Builders Association (HBA), said: “The CMA report has confirmed that a broken planning process is the reason we have a lack of social housing, why big builders build too many of our new homes and SMEs are shut out, that homes are in the wrong places and too expensive, there are some issues with quality, and we don’t do placemaking.

“None of this is new or uncontroversial but the UK needed this CMA report to keep hammering home the reality that politicians of all colours are the reason we have a housing and placemaking crisis. It’s time they stopped blaming builders and instead, were held accountable for the mess they have caused and keep causing.”

Russ Mould, investment director at Manchester-based investment platform, AJ Bell, said: “While they may all profess to want to help with the national mission of building more homes – and undoubtedly, they do help – there is also an advantage to housebuilders if the balance between supply and demand remains tight.

“This helps sustain higher house prices and supports their margins. In this context, the competition authorities are taking a closer look to see if some of the big housebuilders – including Barratt, Berkeley, Persimmon, Redrow, Taylor Wimpey and Vistry – have been sharing commercially-sensitive information and using that knowledge to make decisions on build-out of sites and the price of new homes.

“The CMA notes this is not a significant factor in the persistent under-delivery of homes, nonetheless it is sufficiently concerned that competition in the market has been undermined to take a closer look.

“A regulatory probe is the last thing the sector needs. It is just finding its feet again after a tricky period for the property market as demand dried up thanks to higher borrowing costs.”

He added: “Housebuilders may also argue the proposed introduction of more red tape, including the establishment of a New Homes Ombudsman, will clip the sector’s wings. However, previous issues around build quality and treatment of customers means they are reaping what they have sown.

“Where the CMA will be preaching to the converted when it comes to the industry is identifying problems in under-resourced local planning departments – a familiar grumble in the housebuilding space.”