Competition regulator’s housebuilding probe to be approved in weeks

The government’s competition regulator has said it will launch a probe into the operation of the housebuilding sector at the next available opportunity, following a request last year for an inquiry by Michael Gove.

Competition and Markets Authority (CMA) chief executive Sarah Cardell said in a letter to the housing secretary that its board had agreed to look at the housebuilding sector as the next market study undertaken by the body.

The CMA said its officials will now work up the details of the scope of the study prior to a formal board decision whether to proceed “in the next few weeks”.

The decision follows a request by Gove in a letter to the CMA on November 9 last year, when he said that changes in the market since the last competition probe into the housebuilding sector, 14 years ago, meant “it feels timely that the CMA should be considering a market study”, and that a study was “an important priority for the public”.

Gove was also last year reported to have described volume housebuilders as operating as a “cartel” in a private meeting, a quote he has never denied, and which prompted an angry response from the housebuilding sector at the time.

Market studies are probes by the CMA into the entire operation of a market sector to look at why they may not be working well, and can result in a range of outcomes, from a declaration of a clean bill of health, to recommending government policy changes or commencing consumer enforcement action.

The study comes amid a three-year inquiry by the CMA into the mis-selling of leasehold properties by a number of housebuilders, which led to enforcement action against Taylor Wimpey, Countryside and Persimmon, and has now been widened with Crest, Miller, Redrow and Vistry all agreeing to try to sort out leasehold problems for customers.

Sarah Cardell, CMA chief executive, said: “We expect that promoting competitive markets and tackling unfair practices across the accommodation sector more broadly will be a continued area of focus over the next 12 months.

“The [has] Board decided in principle that homebuilding should be prioritised as the next market study that the CMA launches.”

In response, Michael Gove said that having a housing market that works properly and fairly was “vital”.

“We want to deliver the homes communities need where they want them, and to do that we need a market that offers a level playing field, so smaller homebuilders get a look in, not just the big developers,” he said.

“That’s why I asked the CMA to consider a study on the housebuilding market and I am delighted that their board has confirmed that they will. The Government will always stand up for first time buyers and will make sure any recommendations made by the CMA are put into action.”

Neil Jefferson, managing director of the Home Builders Federation, which represents housebuilders, said: “We welcome the confirmation by the CMA that they will undertake an investigation.

“Independent analysis of the policy and regulatory regime the industry has to work within and the considerable constraints on delivery should provide useful for ministers as they consider how they meet their commitment to build 300k homes a year.”

The decision to press ahead with the probe comes as four former Conservative housing ministers put their name behind a new report from right of centre think tank the Centre for Policy Studies that argues there is a “massive shortfall” in housing and that housebuilding is not unpopular.