Housebuilding market study: UK government responds to CMA proposals

Failure to deliver for consumers and the need to fundamentally reform the planning system were the key messages of the Competition and Market's Authority's (CMA) report on UK housebuilding released in February.

The government has now issued its response to the CMA's report, which begins to put some flesh on the bones of the regulator's proposals and to indicate the shape of how the identified issues in the market will be addressed through legislation and policy in light of the CMA's findings and recommendations earlier this year.

Privately managed estates

A consultation will be launched in relation to the management and funding of shared amenities on new housing estates. Housebuilders currently face much uncertainty over whether estate facilities will be adopted by local authorities, with the result that many estates remain in private hands – the estate running costs being borne by the homeowners.

Tackling inconsistencies and the burden of ongoing maintenance costs, as well as prohibiting new embedded management arrangements, were among measures recommended by the CMA. It also advocated the application of a consistent adoptable standard, allowing developers to work towards ongoing responsibility for maintenance of a new estate being handed over to the authority.

However, the government will need to weigh in the balance the additional burden that this will place on public finances – at a time when many authorities are significantly stretched – as well as the need to avoid further delays in bringing forward new homes. Accordingly, the government has not fully embraced the suggestion that embedded management agreements should be prohibited and will review the results from the consultation before making any firm decisions on the management of both current and new estates.

Consumer protection

Clear and consistent consumer protection both during the home buying process and once a home has been purchased has been accepted as desirable by the government and, if implemented appropriately, should ensure a fair system without hindering the market with unnecessary red tape. The framework for such protection has already been brought into law via the Leasehold and Freehold Reform Act 2024, which received Royal Assent in May 2024, and the government commented that it would "monitor how the measures in [that Act] bed in", indicating some reluctance to introduce new legislation at this stage.

In addition, the government has accepted the recommendation that the UK adopt a single mandatory consumer code for new homes to ensure consistency of quality and provide a clear route for redress. It would be sensible to endorse an existing system that housebuilders are already familiar with to ensure smooth adoption. The largest provider is currently the New Homes Quality Code protecting around 54% of new UK homes.

Planning system reform

The government has expressed broad agreement with the CMA's criticisms of the planning process, which included the finding that the current system "exert[s] a significant downward pressure" on the number of approved planning applications. This echoed the long-expressed complaints from developers – and an update of the planning system has been high on the political agenda to drive the economy, develop infrastructure and improve rates of home building. Consultation on the National Planning Policy Framework (NPPF) was one of the first steps taken once the government took office in July. Further detail is anticipated on the much-needed reforms once responses to the consultation have been reviewed and the new NPPF is published – with this revised framework expected by the end of the year.

A number of specific proposals put forward by the CMA are likely to be addressed in connection with the government's revision of the NPPF and via an anticipated Planning and Infrastructure Bill that is due to be introduced early in 2025 following its announcement in the King's Speech in July.

The government is yet to comment substantively on the CMA's controversial suggestions that some planning approvals are granted directly through the local plan process (rather than through later planning applications) and that certain decisions are taken away from planning committees. If taken forward, these measures would represent a substantial change to the current planning system. However, support has been expressed for the CMA recommendation that measures are put in place to improve access to the market by smaller builders. Details of how these measures could operate are awaited.

Osborne Clarke comment

Delivering on the ambitious pledge to deliver 1.5 million homes over the course of this Parliament is a big ask and it is essential that government works together with industry and consumer groups to optimise the framework for delivery of housing in the UK within a system that ensures quality, fairness and consistency. Insight into government thinking so far indicates significant changes on the horizon and we will be working with our clients to ensure appropriate input into government policy and adaptation to new processes.

Emily Shields, a Trainee Solicitor with Osborne Clarke, contributed to this Insight.