Big housebuilding firms have too much market dominance and the problem must be tackled to help fix the UK’s “broken” housing sector, MPs have claimed.
In a 61-page report published today, the communities and local government committee has urged government backing for smaller housebuilders and suggested the sector is too reliant on big developers, which has hampered competition.
More than half of all new homes are built by the country’s eight largest housebuilders, the report stated.
The committee’s chair Clive Betts MP said: “Smaller builders are in decline and the sector is over-reliant on an alarmingly small number of high-volume developers, driven by commercial self-interest and with little incentive to build any quicker.
“If we are to build the homes that the country so desperately needs, for sale and for rent, then this dominance must end.”
Trade body the Homebuilders Federation (HBF) said it backed measures to help smaller firms but that more builders of “all sizes and specialisms” were needed to tackle the “acute housing shortage”.
Today’s report comes in the wake of the government’s housing white paper in February, which pledged more support for SME housebuilders.
The report states: “The high-volume homebuilders dominate the market and are therefore able to shape how it operates.
“Having purchased land at a given price and devised a scheme that will allow them to recoup their investment and deliver a profit, they will not risk over-saturating a local market to the extent that house prices will fall and their profits decrease.
“This is rational commercial behaviour and a sound business model. But it is not one that is in the country’s best interests.”
Among the recommendations in today’s report are a call to give smaller builders improved access to land and finance.
MPs concluded that small building firms struggle to access land, as local plans often earmark large sites only suitable for high-volume housebuilders.
The committee urged the government to play a more active role in supporting the Modern Methods of Construction – including a sponsoring a single recognised quality assurance mark to give lenders, builders and consumers confidence.
The report also called for a “clear cross-departmental strategy” to boost further education routes in the construction industry.
On Brexit, MPs urged the government to be aware of the reliance the construction industry has on EU labour, particularly in London.
Cast consultancy chief executive and industry expert Mark Farmer, who authored the Farmer Review on the future of the construction industry last year, added: “If the recommendations set out in this document aren’t acted upon, homebuilding and the construction industry in the UK will continue to deteriorate, impacting economic growth at a time when we need a solid platform for domestic industrial performance.
“The findings only reiterate my previous challenge to both government and the construction industry to modernise the homebuilding policy framework and the basic delivery approaches used.”
A spokesman for the HBF said: “We fully support the committee’s call for measures to assist smaller builders, encourage new entrants and scale up specialist housing sectors, such as the retirement housing market.
“The vast majority of the big increases in housing supply in recent years have come from the larger, mainstream builders – but we need more builders of all sizes and specialisms if we are to tackle our acute housing shortage.
“The terms on which development finance can be accessed continue to frustrate the growth aspirations of SMEs, but many of the other obstacles around red tape and navigating the planning process are challenges that housebuilders of all sizes experience every day.
“However, larger firms are generally more equipped to deal with the inevitable uncertainty by spreading the considerable risks and costs associated with planning across dozens of sites rather than being exposed to just a handful.”