The CMA Report into Housebuilding is out! and some other stuff.....
I hadn't even finished my first coffee of the day, when news of the publication of the CMA report into the housebuilding industry popped into my inbox.
The findings are noteworthy. So noteworthy, in fact, that I am going to set them out in full below:
CMA Findings
The report found that this speculative approach to building, coupled with complex and unpredictable planning rules across the three nations, has been responsible for the persistent under delivery of homes:
- Planning Rules: the planning systems in England, Scotland and Wales are producing unpredictable results and often take a protracted amount of time for builders to navigate before construction can start. The report highlights that many planning departments are under resourced, some do not have up to date local plans, and don’t have clear targets or strong incentives to deliver the numbers of homes needed in their area. They are also required to consult with a wide range of statutory stakeholders – these groups often holding up projects by submitting holding responses or late feedback to consultations on proposed developments.
- Speculative Private Development: the report found another significant reason behind under delivery of homes are the limitations of private speculative development. The evidence shows that private developers produce houses at a rate at which they can be sold without needing to reduce their prices, rather than diversifying the types and numbers of homes they build to meet the needs of different communities (for example providing more affordable housing).
- Land Banks: the CMA assessed over a million plots of land held by housebuilders and found the practice of banking land was more a symptom of the issues identified with the complex planning system and speculative private development, rather than it being a primary reason for the shortage of new homes.
- Private Estate Management: the CMA found a growing trend by developers to build estates with privately managed public amenities – with 80% of new homes sold by the eleven biggest builders in 2021 to 2022 subject to estate management charges. These charges are often high and unclear to homeowners. Whilst the average charge was £350 – one-off, unplanned charges for significant repair work can cost thousands of pounds and cause considerable stress to homeowners. The report highlights concerns that many homeowners are unable to switch estate management providers, receive inadequate information upfront, have to deal with shoddy work or unsatisfactory maintenance, and face unclear administration or management charges which can often make up 50% or more of the total bill.
- Quality: housebuilders don’t have strong incentives to compete on quality and consumers have unclear routes of redress. Analysis also suggests that a growing number of homeowners are reporting a higher number of snagging issues (at least 16). The CMA’s consumer research and other evidence revealed that a substantial minority also experienced particularly serious problems with their new homes, such as collapsing staircases and ceilings.
In short, whilst the CMA did find issues with build quality and estate management; it also found that the main drivers for low housing delivery in England are policy based, or the result of choices made by Government, rather than deliberate action by the housebuilding industry.
The highlighted issues include:
- Delays and unpredictability in the planning system;
- A lack of local authority resourcing; and
- The fact that development has largely been left to the private sector, which has commercial imperatives around build out and absorbtion rates to take into account.
One of the main recommendations on Estate Management is to encourage greater levels of adoption of public realm by local authorities. This would also require additional resources for the adopting authorities. Particularly as concerns over ongoing maintenance costs are one of the reasons why adoption has become less common in recent years.
The full report can be accessed here and is worth reading in full.
In other news, last week DLUHC:
- Announced that new legislation and other measures to tackle short term holiday lets will be coming forward this summer; and
- Updated its CIL guidance to urge charging authorities not to increase CIL rates for smaller schemes, on the basis that they are exempt from Affordable Housing requirements.
Short-Term Lets
The press release for the upcoming changes on short-term lets can be found here.
The government has announced:
- a new planning ‘use class’ created for short-term lets not used as a sole or main home. Existing dedicated short-term lets will automatically be reclassified into the new use class and will not require a planning application.
- associated permitted development rights – one allowing for a property to be changed from a short-term let to a standard residential dwelling, and a second that would allow a property to be changed to a short-term let.
The actual details have yet to be officially published, but will be included in the government’s response to the consultations, including the timeline for implementation of the register, the use class and the individual permitted development rights.
Updated CIL Guidance
The updated section of the PPG on CIL is set out in full below:
"Charging authorities may also set differential rates by scale. Rates can be set by reference to either floor area or the number of units or dwellings in a development. Given the significant financial pressures on small and medium sized developers, the government has introduced measures to help them. This includes existing national policy set out in paragraph 65 of the National Planning Policy Framework which states that authorities should not seek affordable housing contributions from residential developments that are not major developments, other than in designated rural areas (the so-called ‘small sites policy’).
Therefore, when setting and revising CIL rates, charging authorities should consider the impact of such rates on small and medium sized developers. Rate setting in this context must be considered alongside the small sites policy and its aim to support small and medium sized developers particularly. As set out in the Written Ministerial Statement of 19 February 2024, higher residential CIL rates should not be set for developments which are not major developments on the grounds that these sites are not required to provide affordable housing contributions, because doing so erodes the underlying policy objective of the small sites policy."
Whilst it is a helpful statement of the Government's intent, it will be of very little assistance where a charging authority has already taken this approach in their charging schedules.
However, given the vital role that the planning systems play in shaping market outcomes, the report sets out proposed options for consideration.
These include:
ensuring local authorities put in place local plans and are guided by clear, consistent targets that reflect the need for new homes in their area.
streamlining the planning systems to significantly increase the ability of housebuilders to begin work on new projects sooner - while not watering down protections such as for the local environment.
Measures to improve the capacity of council planning departments would also enable them to process more applications.
introducing measures to increase the build-out of housing sites by incentivising builders to diversify the tenures and types of homes delivered.”
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