By The Competition and Markets Authority (CMA) has issued updates on 2 pieces of work in the housing sector – a consumer protection project on issues that private rental tenants are experiencing and a market study probing competition concerns in housebuilding.
As set out in its annual plan, the CMA is prioritising outcomes which help people, businesses, and the UK economy – and a critical part of this is ensuring that competition and consumer rights are protected in relation to where people live.
Sarah Cardell, Chief Executive of the CMA, said:
“The CMA alone can’t resolve the problems in the UK housing market.
But we have a role to play and will do our part to help ensure the private rental and housebuilding markets work better for people and businesses.
For private renters, we’re taking action to provide updated guidance for lettings agents so that both tenants and landlords are really clear about their own rights and responsibilities.
We’ve also identified areas of concern relating to zero deposit schemes, sham licences, onerous guarantee clauses, and possible unlawful discrimination.
These warrant further investigation and we stand ready to take enforcement action if needed.
In housebuilding, we’ll press on with our investigation of the 5 areas that are the focus of our market study so that we can get to the bottom of any potential competition concerns.
Once complete, we will consider what actions the CMA can take to tackle any concerns identified or whether there are more effective ways to deal with those concerns such as through recommendations to government for legislative change.”
Consumer protection in rented sector
While many landlords and letting agents are providing a good service, initial engagement by the CMA heard many complaints raised by stakeholders suggesting that a significant minority are not complying with consumer protection law.
To help letting agents understand their obligations, the CMA will update its guidance for lettings professionals.
If any letting agency or landlord is found to be in breach of the law, then the CMA does not rule out launching enforcement action.
Following its initial engagement, the CMA’s investigation will explore the 5 areas highlighted by stakeholder complaints:
- Zero deposit schemes: These schemes alleviate the need for tenants to come up with a hefty deposit when they enter a tenancy, but the CMA has heard concerns that tenants may be unaware of their liabilities under such schemes, alongside reports of pressure selling and undisclosed commissions earned by letting agents.
- Sham licences: The CMA has been told that there are still landlords who claim that tenants have licences to occupy rather than assured tenancies and who fail to recognise the rights that consumers have under a tenancy.
- Guarantees: The CMA has seen examples of onerous guarantee clauses which impose wide obligations on tenants – such as requiring them to provide extensive evidence of assets.
- Activity that could constitute unlawful discrimination: This includes, for example, looking at those who advertise properties as not available to housing benefit claimants (i.e. ‘no-DSS’).
- Retirement housing fees: The CMA’s initial engagement also heard concerns around so-called ‘event fees’ charged to vulnerable tenants entering specialist retirement housing. The CMA will review practices in the sector and whether some businesses are taking advantage of elderly consumers.
More information can be found on the rented housing sector consumer project case page.
Housebuilding market study
After receiving feedback from key stakeholders in the sector – which included housebuilders of all sizes, campaign groups, councils, and devolved administrations – the CMA will now look at 5 areas in greater detail as the market study progresses:
- Estate management charges: Evidence has shown a significant number of new housing estates built over the last 5 years have not been taken on (a process known as adoption) by their local authority – meaning homeowners are required to pay a private management company to maintain amenities such as roads, parks, and street lighting. This has led to concerns about high or uncapped charges for owners and the quality of work carried out in maintaining these amenities.
- Land banks: Analysis of the housing market shows the largest builders in the UK hold large swathes of land, and that these land banks have grown in recent years, leading to concerns from some stakeholders this may be limiting competition or slowing build-out rates in some areas.
- Planning rules: Concerns expressed by some stakeholders suggest that complex planning rules and uncertainty of decision making were hindering the delivery of new homes – particularly for smaller housebuilders that have less resources to help manage the planning process.
- Competition between builders: The market study has found that, at the national level, the housebuilding market does not appear to be particularly concentrated, with a number of large housebuilders competing alongside smaller, regional firms. The CMA is now considering the number of competitors in particular areas and the extent to which small and medium sized housebuilders are able to compete in these local markets.
- Barriers for new businesses wanting to build homes: The CMA has heard concerns about barriers facing small and medium-sized builders and the particular issues they face when delivering new homes (for example, access to land).
The CMA will investigate each of these issues further – while considering the economic conditions affecting the sector – and will provide updates on its work later in the autumn.
This will include publishing working papers on estate management charges, land banks, and planning rules.
The CMA will then consider a range of options to best address the issues it has identified, which could include recommending legislative changes to the UK, Scottish and Welsh governments, or launching a market investigation. (With regard to the private management of public amenities on new-build estates and the land banks controlled by the largest housebuilders, the CMA has identified concerns that may form the basis of a market investigation reference (MIR) and is launching a consultation to seek market participants’ input with regard to the possibility of an MIR in relation to those concerns. The consultation closes for responses on 18 September 2023.)
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