Open Editor's Digest for free
Rula Khalaf, editor of the Financial Times, selects her favorite stories in this weekly newsletter.
The UK's competition watchdog has launched an investigation into eight housebuilders over whether they shared commercially sensitive information after a year-long study into why Britain built too few homes.
The Competition and Markets Authority said on Monday that the main reasons for the shortage of new homes were the UK's “complex and unpredictable planning system” and the fact that housebuilding production was heavily reliant on “speculative private development”.
Only about 250,000 homes were built across the UK last year, less than the government's target of 300,000 homes a year in England alone.
However, the CMA said that during its study it found evidence of information sharing between housebuilders, which was not “one of the main factors in the continuing shortfall in home deliveries” but could “weaken competition”.
The watchdog said it had launched an investigation into Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vestry.
The news hurt company stocks, with Taylor Wimpey down 2.8 percent, Persimmon down 2.4 percent, Vestry down 1.7 percent, Barratt down 1.6 percent, and Berkeley stock down 1.1 percent.
The regulator said that during its year-long study into the shortage of new homes, it discovered evidence suggesting commercially sensitive information about sales rate, prices and incentives may have been shared. The Capital Markets Authority released the results of the study on Monday.
Tom Smith, competition lawyer at Geradin Partners and former CMA legal director, said the investigation “could lead to significant fines and potential litigation” for companies.
The Home Builders Association declined to comment on the investigation. Bellway said it is cooperating with the Capital Markets Authority. Other homebuilders did not immediately respond to requests for comment.
The study, which looked at issues including housing quality and land management, was launched a year ago after urging from senior secretary Michael Gove.
At the time of the launch, the CMA cited “widespread concerns about housing availability and affordability” and whether builders were “delivering the homes people need on a large enough scale or quickly enough”.
Sarah Cardell, chair of the CMA, said the watchdog “recommends simplifying the planning system and increasing consumer protection”, which would “see more homes being built every year, helping to make homes more affordable for everyone”.
Its finding that one of the main barriers to housebuilding is the planning system will reinforce the industry's call for major reform at a time of high tensions between housebuilders and the government over planning policy.
“We welcome the recognition that the planning system represents a fundamental barrier to implementation. . . .[and]Housebuilders are not degrading their land unnecessarily, HBF said.
Recommended
The regulator found that so-called mortgage banking by developers was not “significantly distorting competition” in the market. The practice of holding a stock of land has been a point of criticism against housebuilders. The finding that land banks are essentially a “symptom” of a sluggish planning system is likely to be welcomed by industry.
The CMA also raised concerns about quality control issues and property management fees, “as homeowners often face high and unclear fees for managing facilities such as roads, sewerage and green spaces”.
She urged the government to set new quality standards and establish an ombudsman's office to give consumers more recourse.
It found that there were limits on the ability of private speculative projects to provide an adequate supply of housing, because “evidence suggests that private developers are producing homes at a rate at which they can be sold without having to reduce their prices.”
