At the end of last month the Competition and Markets Authority published their study Housebuilding market study. A thorough and rational analysis of the housebuilding market. For this reason worth reading. It also contains valuable, but not complete clues to explain why the house building industry is broken. Unfortunately, if the objective of the CMA report is to point Whitehall in the direction of a housing supply solution “We recognise that a very large increase in supply is required to meet housing need” (p.53)) it will fail. The report reveals its lack of institutional memory. As a result the report conspicuously under estimates the pivotal, all controlling role played by local councils in blocking supply. The CMA overlooks the fact that the problems they are examining start locally, and long ago.
The report examines three issues. Land banking by housebuilders. On this issue it rightly concludes that it happens, albeit not on a scale suggested by conspiracy inflamed politicians or some media based correspondents. . Instead the scale reflects the uncertainties of the planning system. Land banking is a natural market led response to uncertain supplies of a key ingredient to house building-simply land. The snag is, as the report sensibly notes, it restricts new entrants into the housebuilding market and protects the incumbents. Which in turn pushes land prices upwards. The fact that so many observers are surprised land banking happens shows the depth of ignorance of understanding of how a land market distorted by interventions on all sides, will respond to controls of this ingredient,
The report also examines another concern, about which personally I have very little direct experience. It is the medium and long term impact on consumers, ie. house buyers, of common areas, amenities etc remaining in the control of the builders but the long term financial costs of their maintenance sitting with the house buyers. There is a problem here. Traders, ie house builders, have exploited an opportunity. But long term investors have for generations used these amenities as a means of creating premium values. There is a dynamic here which must be understood. The CMA report seems unaware of this success story. Once again the contemporary estate management abuse is the direct consequence of land shortages, enabling builders to exploit consumers who have very little negotiating leverage. Again the analysis in the report is incomplete. Long term estate management as performed by the landed estates over generations creates premium values. It is a shame the report fails to examine the upside potential of curatorship place management principles. This omission shows a worrying level of ignorance. If their proposals block long established and respected landed estates from creating places people want to visit, want to live or work, our most popular urban environment locations will start a long term decline.
The core of the CMA report is its rational examination of the broken housing supply market, on which it makes many sound observations,. Its suggested remedies, are at best weak, or in reality in my opinion will fail to solve the problem. They will scratch the surface of the supply problem, The good news is the CMA recognise there is a serious problem. The CEO of the CMA, Sarah Cardell, in her letter to the Secretary of State Michael Gove at the DLUHC dated 26 February 2024 says
“Our market study has found that overall, the housing market is not delivering well for consumers and has consistently failed to do so over successive decades”.
She is spot on. And the report correctly identifies the failings of the planning system as the culprit. The report says
””Our analysis clearly highlights the planning systems as very significant drivers of negative overall outcomes in the housing market.”. (P52) and revealingly adds that
”Fourth, political and public attitudes to development are frequently expressed through the planning process with residential development becoming increasingly politically contested” (p.61).
Where we part company is their solutions. It is clear they too have serious reservations. The CMA highlight their planning concerns as a lack of predictability of the system; the length, cost and complexity of the planning process; and the lack of clarity and consistency and strength to be attributed to the targets and objectives expressed in councils’ local plans. Their analysis is valid, but their solutions will fail. The solutions lack precision and a delivery mechanism. They ignore the fact that planning is essentially a spatial control discipline, the unique feature of planning that fires up local agitation, and the CMA optimistically expect their solutions to deliver outcomes that land ownership can deliver and rules and regulations cannot deliver, as the CEO’s letter recognises.
For example (page 17) ‘ focus on housing needs targets’. Commendable but councillors elected to stop building will have other priorities on their minds, ‘Use local plans to support house builders’. Who elected the councillors, the builders! ‘Help builders to accelerate building timetables and support marginal projects’. Well meaning words with no commercial meaning I can see. ‘Streamline statutory consulatees timetables.’ Commendable but who is in the drivers seat? ‘More funding for planning departments’. This makes sense but will not help SME applicants for planning consent which is another CMA objective. ‘Compel builders on larger sites to widen the range of tenures’. Once again a commendable objective but it will increase planning uncertainties and delays. Consider, is planning a spatial discipline or part of social services? ‘Build more homes on smaller sites’. This objective too will have negative SME consequences. And finally ‘require builders on larger sites to increase the range or types of houses’. This one looks like repetition.
Despite this litany of disagreements the CMA report does contain one important and very promising suggestion. I hope it receives support. So why it fails to receive proper prominence suggests the Authority does not really understand how the housebuilding market, a very dynamic market actually operates and how lessons from elsewhere could be used to move supply forward. Is it because the report’s authors do not understand the powerful dynamic that new projects with the necessary consents generate?
Page 61 says build more publicly funded housing. This is not a planning issue it is a funding issue. But delivery reality means above all it is a spatial issue. How do you persuade the host authorities to welcome this sort of initiative as they all have strong and often emotional views about the right use for every bit of land in their area. Page 61 goes on to say ‘ government could consider a more active role for the public sector to buy and assemble land for development’. Here! Here! is my response. This will be a welcome but momentous step in the right direction. It has enormous spatial consequences. And equally enormous governance, cross border and cross party consequences. These consequences are ignored in the report. Rightly perhaps if they lie outside the remit of the CMA?
In summary, the CMA report is a very good start but there is a very long way to go to create a planning system that will deliver the houses needed. The housing supply solution is long term, cross border, cross party planning preceded by a campaign to win local support in host locations. This report, despite its excellent examination of some of the fault lines does not examine the problem from the bottom up. Various posts in this blog suggest how to start by first winning local support.
Ian Campbell
11 March 2024
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