Launched in February 2023, the housebuilding market study by the Competition & Markets Authority (‘CMA’) reached its conclusion with the 26 February 2024 publication of the final study report [1]. The CMA has also published national summaries including a ‘Scotland summary’. Given the CMA’s wide investigatory powers, its housebuilding market report should be considered a robust examination of the factors impacting successful market outcomes for the housebuilding industry.
Prompted by calls from both Government and industry bodies, its Statement of Scope promised to “look at barriers to the market working well and implications for customers” and not the “fundamental aspects of the planning regime or government policy”.
Inevitably however, the planning system has been called into question, with the Market Study concluding “that the nature and operation of the planning system are key factors contributing to the under-delivery of new housing”. This applies across England, Wales, and Scotland (Northern Ireland was not included in the study).
According to the Market Study there are 3 main areas of concerns with the current systems:
(a) Lack of predictability;
(b) Length, cost, and complexity of the planning process; and
(c) Insufficient clarity, consistency and strength of Local Planning Authority (LPA) targets, objectives, and incentives to meet housing need.
There is also apparently evidence that problems in the planning systems may be having a disproportionate impact on SME housebuilders. Due to uncertainty and the length of the consenting process, SMEs face higher costs per plot than their larger, more financially secure competitors.
The CMA states that it does not consider it appropriate to make recommendations in the area of Planning Reform so the Market Study provides “Options”. Given the scope of the Market Report, some of these Options are a bit vague and generalised. Although problems are highlighted, no concrete solutions are provided, and some are not particularly focussed on the Scottish position. There are, however, a couple of obvious “quick wins”, which would be universally welcomed, that is;
1 – Reducing delay caused by statutory consultee process; and
2 – More resources (and ringfencing of those resources) to LPAs.
If there is a positive to be taken from the Market Study it is that the Scottish Planning System appears to be fairing a bit better than its English and Welsh counterparts. You could perhaps describe it as the “least worst”. According to the Market Study, Scotland builds a higher proportion of affordable housing compared to England and the majority of LPAs in the last five years have had housing completions in excess of the 10 year Minimum All Tenure Housing Land Requirement (MATHLR) – although admittedly not in areas where housing need is highest – for example, Edinburgh or Glasgow. It also appears that since 2014 – 15 the number of consents granted annually has been higher than LPA land supply targets. Before we get too excited about Scotland’s performance, however, it should be noted that the timing of the Market Study means that although it references NPF4, the impact of NPF4 and, in particular, the Scottish Ministers application of policy 16(f) is unlikely to have been reflected in its conclusions. This thorny issue is still with the Court of Session to determine and may impact on Scotland’s performance going forward.
In addition to Planning, the Market Report cites other barriers to the deliverability of housing including quality and lack of innovation and private management of amenities on housing estates. Interestingly, the Market Study concludes that housebuilder profitability and land banking are not considered to be barriers to new housing, and reducing the levels of land banks artificially or taking measures to directly reduce housebuilder profitability in isolation from dealing with other market barriers could affect house numbers negatively.
To relevant stakeholders many of the Market Report’s conclusions may not seem particularly illuminating. It is hoped there is comfort, however, to be found in an independent body confirming what many in the industry have been saying for some time. Given the status of the Market Report, it can only be hoped that the “Options” it proposes will be explored by Government. What the market wants is what everyone wants, essentially, a sufficient supply of good quality, innovative homes built in the right locations. Surely that can’t be too difficult.
[1] Housebuilding Market Study, Final Report, Competition and Market Authority, 26 February 2024.
*This article originally featured in the April issue of SPEL – Scottish Planning & Environmental Law.
