CMA investigates housebuilding and rented housing sectors
In February 2023, the UK competition and consumer regulator, the Competition and Markets Authority (CMA), launched a market study into housebuilding. It is now consulting on a proposal to make a market investigation reference under section 131 of the Enterprise Act 2002 in relation to the supply of new homes to consumers. We discuss this in more detail here. The CMA's final decision on the reference is due by February 2024, but their preliminary findings are that there are two main areas of concern:
- Land banking: The CMA is examining whether
land ownership at the local market level is concentrated among a
small number of market players, both in terms of ownership of
developable land, as well as in terms of the holding of permissions
to build – and what implications this has for competition to
supply new homes in local markets. The CMA acknowledges that large
land banks could be a symptom of other problems with the
housebuilding market, such as the slowness and unpredictability of
the planning process. It also acknowledges the views of many
housebuilders that land banks help to ensure a steady stream of
projects successfully passing through the planning system.
- Estate management: The CMA is concerned about problems in the way in which common amenities in new-build housing estates (such as roads, lighting and public open spaces) are managed by estate management companies. The key issues include a lack of transparency for consumers about the way in which a newly built estate will be managed, including the actual costs/charges involved.
In March 2023, the Government published a consultation into the design of a new infrastructure levy (IL) to be paid by developers to fund affordable housing and local facilities such as GP surgeries, transport links and schools. Seen by many as quite a radical step, there had been some doubts about whether this would be taken forward. However, the IL duly appeared in the Levelling Up and Regeneration Bill and survived the passage through both Houses of Parliament to make it into what is now the Levelling Up and Regeneration Act 2023.
IL will be a locally-set, mandatory charge levied on the final value of completed development and represents a major reform to the present system of developer contributions being secured through S106 Agreements and the Community Infrastructure Levy (CIL).
Importantly, there are only skeleton provisions in the Act – further consultation and secondary legislation are needed before the provisions come into force and the detail emerges about how the IL will work in practice.
A sensible reform?
The proposal to introduce an infrastructure levy is quite radical and represents a brave move by Government to tackle a complex issue. Sensibly, there is a recognition that such a significant overhaul will, inevitably, create some teething troubles as people grapple with its introduction. As a result, the Government will adopt a 'test and learn' approach (as opposed to 'trial and error'!), with a phased introduction over the course of a decade and a minority of LPAs being introduced to it initially.
New building safety rules
The Building Safety Act 2022 overhauls the existing health and safety regulations for residential buildings. The following points are of particular note:
- New Building Safety Levy: the Act imposes a
new building safety levy (sometimes referred to as the
"Gateway 2 Levy"). This is payable by developers of new
residential buildings in England that are 18 metres or more in
height or at least seven storeys tall (unless excluded). The levy
must be paid during the pre-construction stage.
- New register of higher-risk buildings: Occupied higher-risk buildings (or those that could be occupied) must be registered with the Building Safety Regulator ("BSR") by 1 October 2023, and it is an offence to allow residents to occupy an unregistered building after this date. When new higher risk buildings are completed after 1 October 2023, they must be registered before residents can occupy them. To find out more about this obligation, including what counts as a higher risk building and the process for registration, read our briefing here. If you would like help with registering relevant buildings with the BSR, or with ongoing compliance, please contact our head of Construction and Engineering, Ed Colclough.
New fire safety requirements
Following the recommendations of the Grenfell Tower Inquiry Phase 1 report, new fire safety rules came into effect on 23 January 2023. These impose additional fire safety duties on Responsible Persons, with criminal sanctions for non-compliance, as we discuss here. Finally, the Government has announced that residential buildings of more than 18 metres in height should be designed with a second staircase. This brings the policy in line with the recommendations of the National Fire Chiefs Council and RIBA, but it is thought that in London, plans for around 123,000 homes have been scrapped or delayed as a result of the change to the regime.
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