The irony of being probed for anti-competitive practices in the midst of a transparently difficult year will not bring much comfort to the major housebuilders.

Lem Bingley

Lem Bingley, editor

As share prices slump on the back of downbeat projections, housebuilder bosses will no doubt wish there were less painful ways to argue their innocence. In short, if the major listed firms are colluding to rig the market, they’re not very good at it.

The Competition and Markets Authority (CMA) is an independent non-ministerial body, but the market study it launched in February this year came after repeated urging from housing secretary Michael Gove.

In an open letter to the CMA despatched in May last year, Gove wrote: “It is clear the housebuilding industry is not consistently delivering the beautiful, high-quality homes that consumers want in sufficient quantity and at the prices they can afford.”

One might equally observe that it is devilishly hard to find bread that is good, cheap and fresh, and that consumers still have to settle for two out of three. Such is the nature of supply and demand.

The CMA probe is focused on four areas: housing quality and the fairness of fees; whether ‘land-banking’ is anti-competitive; how developers negotiate with councils over Section 106 obligations; and barriers to innovation.

Responses to the study’s statement of scope were published earlier this summer, and include submissions from all the expected parties.

The submission from Persimmon is representative of its ilk, describing housebuilding as a “long-term, cyclical, high-risk and increasingly complex industry”. It adds: “Returns for housebuilders may come many years, if at all, after their initial investment in developable land, during which time their investment is highly vulnerable to volatile market conditions brought about by changing regulation and public policy.”


On the specific charge of land-banking, it says that the opposite – bringing sites to fruition as quickly as possible – gives it the best chance of making money, and lays the blame for delays at the feet of under-resourced planning departments and increasingly onerous regulation.

Support for that position comes from a group of academics at the universities of Reading and Cardiff, who penned a response to the study.

“We would encourage the CMA to more expressly consider the role of government – both local and national – in structuring the housebuilding market,” they urge, adding: “Because the state plays such an integral role in structuring the housing and land markets – much more so than other markets – it is important that the report looks at how their interventions, or lack thereof, affect the competitiveness of the housebuilding industry.”

In their exchange of open letters last year, CMA chief executive Sarah Cardell warned Gove that the outcome of a market study would likely include policy recommendations for government, noting that the “openness to such recommendations” was “therefore an important factor”.

We must wait to see what conclusions the CMA comes to when it publishes its findings next year, and to what extent market distortions might be the fault of those who make the rules.Gove may well learn, as so often in life, that it pays to be careful what you wish for.