At the time, it appeared that customer satisfaction had not increased substantially since the Barker Review of Housing Supply looked at the reasons for the lack of supply and low responsiveness of housing in the UK. Its final report in March 2004 called on the industry to increase levels of customer satisfaction and develop a code of conduct for new house sales. It called on the OFT to conduct a review of the market if progress was unsatisfactory or if customer satisfaction levels did not rise substantially in the next three years.
We had further noted the concerns of various commentators regarding why homebuilders were not building more homes even when house prices were rising sharply. [see note 1]
We were also aware of polarised views on landbanking and were alive to the belief in certain circles that homebuilders were hoarding land with planning permission, rather than building on it, in order to profit from rising land prices. [see note 2]
The main recommendation is that the Industry should establish a consumer code of conduct. The Industry has already agreed to implement a code which will address the following:
December 2008: create the body which will administer the code of conduct.
March 2009: finalise and consult upon the detailed content of the code of conduct (and associated contract terms issues) and dispute resolution scheme(s).
September 2009: have in place the necessary administrative arrangements to support the code of conduct and dispute resolution scheme(s).
March 2010: system test and refine the various processes and provide communication and advice to the industry and other interested parties and formally launch the code of conduct.
The industry has agreed to put in place a self regulatory system which will address the concerns raised in this report, including a code of conduct and an independent means by which homebuyers can obtain redress for any failings in the process of buying a new home.
Construction Employers Federation (NI), Council of Mortgage Lenders, Federation of Master Builders, Home Builders Federation, House Builders Association, Homes for Scotland, LABC New Home Warranty, National House Building Council, Premier Guarantee, Retirement Housing Group and Zurich Building Guarantee.
We have made a further recommendation that should be activated automatically in the event that the industry fails to meet any one of four agreed milestones on the way to its proposed deadline of a fully operational code of conduct by March 2010. That recommendation is that Government should introduce a statutory redress scheme funded by way of a levy on the industry.
This will be for DCLG/BERR to determine in consultation with stakeholders.
Support homebuilding industry research and development, paying particular attention to providing support to smaller homebuilders and self builders. There needs to be a more coordinated approach to meeting the challenges of the Code for Sustainable Homes. In particular there needs to be increased coordination in:
- Community Infrastructure Levy (CIL) timing.
In order to aid capital constrained small homebuilders, we recommend that consideration should be given to the timing of the payment for the proposed community infrastructure levy (CIL) for small homebuilders. Since profits are only realised at the end of the project, and the CIL paid at the beginning, this is likely to place extra pressure on small homebuilders.
Similarly, if the CIL is extended to self build developments, we would recommend that, in the event that self build homebuyers cannot borrow money from their self build mortgage provider to pay CIL, the CIL should be paid at the end, rather than the beginning, of a project. This may ease development funding pressure by reducing the up-front pre-mortgage costs faced by self builders.
- Support self builders to improve access to self building options for more people. In particular we recommend that:
It is useful to think of a landbank as a pipeline, a homebuilder will have land at a variety of stages in the planning process. Having a stock of land helps a homebuilder cope with fluctuations in the housing market and also helps to reduce risk. Before anything can be built on land, planning permission must be granted. The combination of these two factors may explain why homebuilders require a pipeline of land which is at different stages of the planning process to ensure they can build homes at a rate at which they will sell.
Throughout the study we worked closely with other government departments to ensure our work complemented rather than duplicated any other government work. This included discussions with the NAO about their study into the planning regime. In order to avoid an overlap with the NAO we have refined the scope of our homebuilding market study to omit any detailed examination of the planning regime. However we did consider the impact of the planning regime in terms of any effect on competition.
The market study was launched in June 2007.
The market study considered competition and customer satisfaction issues across the UK.
The OFT did look at affordable or social housing but only where it was linked to private sector development. The affordable or social housing sector is regulated. The Cave review examined how regulation in the sector could be modernised.
NOTES
1. See, for example, 'Hometrack, Housing Intelligence, June 2007, Where is the first rung of the housing ladder? Challenges and risks of a longstanding imbalance in housing supply' - download document (pdf 237 kb).
2. See, for example, 'Opening up the Debate Exploring housing land supply myths', a report based evidence given to the Callcutt review prepared by the Royal Town Planning Institute (RTPI) - download document (Word doc 313 kb), evidence to the Barker review submitted by the Chartered Institute of Housing - see webpage - and certain views expressed in 'Affordability and the Supply of Housing' - download document (pdf 419 kb).
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