Competition regulator recognises custom & self-build as important delivery models to boost housebuilding and market diversity.

The Competition and Markets Authority (CMA) yesterday published the findings of its year-long study into the UK housebuilding market, finding that the complex and unpredictable planning system, together with the limitations of speculative private development, is responsible for the persistent under delivery of new homes nationally.

An important conclusion welcomed by Custom Build Homes is that too few houses are being built nationally, especially in areas where they are most needed, which is harming affordability. This, the CMA has concluded, is underpinned by two key drivers. Firstly, the nature and operation of the planning system (including the ineffective use and application of targets by councils) and, secondly, the limited number of homes built outside the speculative housing delivery model which dominates the market.

Although the headline action is the CMA’s decision to launch a market investigation into eight UK housebuilders over ‘anti-competitive behaviour’ related to market information sharing which may affect site build-out and sales prices and not to further investigate housebuilding land banks and private management of public amenities, Custom Build Homes notes that the CMA has made important recommendations to Government concerning the planning system and action to increase the diversity of housing tenure and type, including:

• increasing the housing mix/tenure on sites;
• increasing the number of homes that are delivered through smaller sites; and
• increasing the diversity of the types of housing built on sites.

It also raised concerns about the quality of new homes.

In framing its report, the CMA has acknowledged that custom and self-build (CSB) housing is one of the main models in the UK housing market, quoting industry figures that of the 239,000 homes completed in 2021/22, some 15,900 were CSB, dispelling the assumption by some that CSB is an insignificant part of the housing market.

The CMA concludes that by enabling more alternative private and non-speculative models (such as affordable, CSB, and build-to-rent housing), dependence on the speculative housebuilding model can be reduced. This aligns with the conclusion of the Government-commissioned Bacon Review.

Custom Build Homes especially welcomes the CMA’s conclusion that market diversity is closely related to site build-out speed and that councils should consider supporting the amount of non-speculative housebuilding by increasing the diversity of tenure for larger sites. This, according to the CMA, could allow for more homes to be absorbed within local markets without housebuilders needing to reduce the prices of the housing they produce for the private market, thereby improving the speed of housing delivery.

Although the conclusions are helpful to drive improved policy nationally, Custom Build Homes is disappointed not to see more specific solutions being proposed. Such as measures to increase housing tenure diversity and targeted policy on small sites, which are crucial to supporting increased delivery.

We nevertheless welcome the suggestion that councils publish their policy on housing tenure requirements so that these are understood by housebuilders and reflected in land transactions. Such policies, the CMA believe, could be decided and operated in a similar way to council policies on affordable housing. Based on our own market intelligence, whilst such policies are already applied by about one third of councils across England to increase delivery of CSB on larger sites, there is scope for wider application of such policies where the market circumstances support such approaches.

We now look forward to working with the Government to take forward the CMA’s recommendations so that custom build housing can play an increasing and effective role to boost the diversity and number of better quality homes built nationally and give consumers real choice over the homes they live in.

Details of the report and its conclusions can be found here: https://www.gov.uk/government/news/cma-finds-fundamental-concerns-in-housebuilding-market