A Little Less Conversation
By the time you read this, there’s a fair to middling chance I’ll be breezing along a windswept and deserted highway in northern climes. As someone who enjoys driving, I like a good road trip, and it’s been way too long since my last one. This time, a group of us are tackling the North Coast 500, a scenic jaunt across the northernmost tip of Scotland. I’ve done the John O’Groats to Land’s End trip a few times before, but this one promises to be somewhat more stunning in the scenery department, assuming that the weather holds. And it being Scotland, I’m not exactly holding my breath.
The scenery flashes past so quickly that you have little chance to take everything in; it’s just one long blur of tarmac. This time, while not necessarily wiser, I’m definitely older, so plan to take things a little more sedately, albeit we’ll still need to get a shift on if we’re to cover our proposed route in just 72 hours. That said, we should still have time to take in a spot of sea kayaking and Munro-meandering en route – after all, there’s only so much driving a chap can do.
What will be the highlight? That’s a tricky one. Our first stop on day one is Glen Etive, where Daniel Craig and Judi Dench exited Bond’s Aston Martin DB5 to take in that iconic view in the film Skyfall. I’m hoping there’s not a burger van parked up to mar the view – and I may even have a cheeky snap taken to prove I was there. I won’t try to recreate the film stills – I suspect I’ll look more like Dame Judi than Mr Craig – but it’s definitely a road trip bucket list visit. As for the piece of road I’m most looking forward to driving, that’s easy. The A836 at Tongue is a legendary piece of tarmac, partly financed using European money, and it lays claim to being one of the best roads in Europe. I may even slip a little Elvis number onto the playlist as I wend my way along its curves. I know it’s geeky, but you did ask.
Now, preparation is vital for a road trip, and luckily, one of my fellow drivers will be my business partner, who’s so prepared it’s off the scale. A few weeks ago, he sent me the proposed itinerary. I was expecting to see the names of a few hotels and places of interest to visit, but no. Instead, I get a detailed breakdown of the entire trip. Every coffee stop listed, every restaurant booked, every tiny detour outlined; it was all there, with our timetable shown to the nearest minute. So, if you happen to be reading this at 7.36 on Tuesday morning, then I can tell you that I’m just tucking into my second kipper, trying my best to ensure that I finish breakfast in time to hit the road at 8.08.
He also told me that he’d written out the address, opening hours, and distances between every potential fuel stop on our 520-mile route, which I thought was complete overkill until I realised there were only eight petrol stations on his list. Which rather serves to underline the importance of being prepared. Getting caught short in the fuel department in the middle of nowhere will never make for a great road trip. The best advice is to assume that half a tank of petrol is as good as empty and that you need to fill up when you can rather than when you need to.
Now, if decent planning is the secret to a successful road trip, it looks like the Competition and Markets Authority (CMA) has decided that it’s also one of the key things we’ll be needing if we’re to start building enough new homes in this country. Of course, the CMA isn’t a regular commentator on the housing market; its job is to strengthen business competition and ensure that anti-competitive practices are reduced – essentially a cartel-buster. However, in February 2023, it undertook a year-long housebuilding market study to understand why too few homes were being built. And now, one year later, its report is out.
Before we get to the CMA’s key findings on planning, it’s worth mentioning that it also looked at a few other issues. The first involved private estate management charges, where the owners of newly built homes have to pay fees to private ‘estate managers’ – something that applied to 80% of new homes built by the eleven largest housebuilders in 2021/22. These charges are often high and unclear to homeowners, and many aren’t able to simply switch providers. In some cases, homeowners have experienced shoddy work or unsatisfactory maintenance and face administration charges that can make up more than half the overall bill. The CMA’s recommendation to the government is that enhanced consumer protections be introduced for homeowners on existing privately managed estates, including the right to switch to a more competitive management company.
The second issue the CMA looked at involved the build quality of some of our new housing stock. They found that housebuilders don’t have strong incentives to compete on quality, and the routes of redress are often unclear for consumers. Worryingly, their analysis suggested that a growing number of new homeowners are reporting more snagging issues, with a not-insubstantial minority having more serious problems such as collapsing staircases or ceilings – which really can’t be much fun. The CMA has recommended to the government that a New Homes Ombudsman be set up as soon as possible alongside a single mandatory consumer code so homeowners can better pursue homebuilders over quality-related issues.
Always on the lookout for anti-competitive behaviour, the CMA also used the publication of its report to announce that it would be opening a brand-new investigation. Following its labours, the CMA suspects that commercially sensitive information may be being shared by some of the leading housebuilders, which it believes could influence the build-out of sites and the prices of many new homes. We’ll have to wait and see what comes of it.
But now let’s return to the CMA’s investigation into why too few new homes are being built; what exactly did it discover? Well, to kick things off, it did some fact-checking and confirmed that we definitely weren’t building enough homes. In 2023, we needed to build 300,000 new homes in England and instead managed to construct fewer than 250,000 across the whole of the UK. Now, you might think that 250,000 new homes is still a pretty large number, but the problem is that we’ve been failing to hit the 300,000 target for quite a while now. And with every year the target is missed, the shortfall doesn’t simply evaporate in a puff of statistics. The shortfall of 50,000 homes from 2023 simply gets rolled over and effectively added to the 300,000 target for 2024, and so on.
And, as I’ve already alluded to, the CMA found that it was the planning systems in England, Scotland and Wales that were letting the side down. Its view was that the current planning systems not only produce unpredictable results but also take developers a lot of time to navigate before they can actually start building anything. It found that local planning authorities (LPAs) were woefully under-resourced, with many lacking up-to-date local plans or clear targets, nor were they adequately incentivised to deliver the number of homes needed in their area. LPAs are also required to consult with a wide range of statutory stakeholders, which can significantly add to the time taken to approve new homes. Late feedback or holding responses from these stakeholders seemed to be the norm, pushing timescales back even further.
The CMA also found another contributor to the lack of new homes: the limitations of what they call ‘private speculative development’. Essentially, housebuilders produce houses at a rate at which they can be sold without having to reduce their prices, and they don’t look to produce more affordable housing to meet the needs of local communities. This won’t be a surprise to anyone; housebuilders are commercial organisations who are responsible to their shareholders. Why would any manufacturer look to build something they have to sell at a discount or, in the case of affordable housing, effectively build at a loss (or substantially reduced profit margin)? They have the same commercial drivers that result in large corporations paying less tax than I do; businesses will always look to maximise profitability, and the government needs to intervene through incentivisation, regulation, or taxation if it wants to see a different result.
One of the historic criticisms aimed at larger housebuilders has been the practice of land banking. This is where (typically) larger developers acquire a building plot (or have an option to buy a plot) and hold it with a view to developing it at some point. Critics argue that it reduces the amount of land available to smaller housebuilders and that land is being banked for a protracted period without being physically developed. However, the CMA’s view was that land banking was essential for housebuilders to maintain a pipeline of projects and that the timescales involved in its development were driven by the market, including the inadequacies and uncertainties of the planning system, rather than by the deliberate actions of the developer.
So, where exactly does all this leave us? One observation that seems to be missing from the CMA’s report is that small-scale property developers are inherently more competitive than their larger brethren. With lower overheads, smaller target profit margins and greater flexibility to take on brownfield projects, small developers are well-placed to make a significant contribution to new housing supply figures in the UK. They just need greater incentivisation and support from the government to make it happen.
And on the thorny issue of planning, the CMA pleads the Fifth, having decided not to make any specific recommendations. It cites the ‘wider policy trade-offs and complexities inherent in the design and operation of the planning system’ as its excuse. I’m not entirely sure what this means other than it thinks it’s one for the Too Difficult Pile. Instead, it has proposed some ‘options for consideration’ that include:
– Ensuring LPAs establish local plans guided by clear, consistent targets that reflect the need for new homes
– Streamlining the planning systems to allow developments to start sooner without watering down protections while also improving LPA capacity
– Incentivising developers to diversify the types of homes they deliver
My initial response was an excrementally focused three-word expression ending in ‘Sherlock’. But then I guess it’s not the CMA’s job to try and solve the housing crisis itself, so perhaps I should forgive it for simply coming up with a wish list. Yet, even this won’t be enough to solve the housing crisis, according to the CMA, and more intervention from policymakers will still be required.
It does, however, underline a fundamental problem which is that no one in Westminster has the political cojones to tackle the housing crisis head-on nor to overhaul our hopelessly broken planning system. There are many fine words and promises emanating from every political quarter, and these will doubtless be shouted all the louder as we approach election day, whenever that is. But because it’s a sure-fire vote loser, nothing meaningful will happen until it becomes a cross-party responsibility to solve the problem. The sooner the powers that be admit to that, the quicker the crisis will be addressed.
It is, of course, a little-known fact that Elvis’s 1968 hit, ‘A Little Less Conversation’ was penned as an uncannily accurate prediction of successive governments’ response to the UK’s housing crisis. If the great man were still with us today, I suspect he’d say it’s high time we had a little more action please.