According to the Competition and Markets Authority (CMA), a "complex and unpredictable" planning system and the limitations of speculative private development are responsible for the "persistent" under-delivery of new homes.
Its report into the housebuilding industry also set out "substantial" concerns about estate management charges.
The CMA found that homeowners are facing high and unclear charges for the management of facilities such as roads, drainage and green spaces, alongside concerns about the quality of some new housing, with snagging issues increasing during the past ten years. The report identified "persistent" shortfalls in the number of homes built across England, Scotland and Wales. Fewer than 250,000 homes were built last year across Great Britain, with the government targeting the delivery of 300,000 homes a year in England.
Around two-fifths of the homes built between 2021 to 2022 were delivered by the largest national housebuilders and more than 50,000 homes were delivered by thousands of small, regional builders, the report found. The CMA also found that 60% of all homes built from 2021 to 2022 were delivered by speculative private development, a reliance on which "has seen the gap widen considerably between what the market will deliver and what communities need".
Such an approach, together with "complex and unpredictable planning rules" across the three nations, has resulted in the under-delivery of homes.
The CMA found that the planning systems in England, Scotland and Wales are producing "unpredictable results and often take a protracted amount of time for builders to navigate before construction can start".
The report states: "Overall, we have found that the nature and operation of the planning systems in England, Scotland, and Wales is a highly significant driver of long-term under-delivery of new homes against targets and assessed need".
It highlights that planning departments are under-resourced, some do not have up-to-date local plans, and some do not have clear targets or strong incentives to deliver the number of homes needed in their area. The Royal Town Planning Institute (RTPI) has consistently advocated for more resources for planning departments across the UK.
According to the CMA, requirements to consult with a wide range of statutory stakeholders "often" see the stakeholders holding up projects by submitting holding responses or late feedback to consultations on proposed developments.
Sarah Cardell, Chief Executive at the CMA, said: "Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them".
"Our report, which follows a year-long study, is recommending a streamlining of the planning system and increased consumer protections. If implemented, we would expect to see many more homes built each year, helping make homes more affordable. We would also expect to see fewer people paying estate management charges on new estates and the quality of new homes to increase. But even then, further action may be required to deliver the number of homes Great Britain needs in the places it needs them".
The report sets out some proposed options for consideration regarding the planning systems, but due to the wider policy trade-offs and complexities in the design and operation of the planning system, the CMA did not consider it appropriate to make specific recommendations to governments about how those trade-offs should be made. Nevertheless, suggestions included:
Victoria Hills, Chief Executive of the RTPI, commented: "There can be no doubt that the planning profession is being held back by increased policy uncertainty, making it harder for planners, developers and investors to create, and deliver, effective long-term plans, whilst staying abreast of the constantly evolving policy arena".
"We have consistently advocated for increased resources in the planning system. When appropriately resourced, planning is an enabler, not a blocker to unlocking the economic, environmental, and societal gains of the country".
Brian Berry, Chief Executive of the Federation of Master Builders (FMB), said: "The Competition Markets Authority (CMA) investigation into the state of housebuilding is right to highlight the planning system as a problem slowing down delivery of new homes. Resources are desperately needed by planning authorities to help small builders through the planning system. The CMA findings are a step forward, especially with an acknowledgement that SMEs are disproportionally affected by the planning system. These findings will hopefully give the Government renewed impetus to resolve these long-standing issues which the FMB has been highlighting for many years".
"It is concerning, however, that the report does not provide enough nuance in such a complex market. The report has a very broad definition of SMEs with very little definition given to the range of house builders within the SME market, such as micro developers, custom house builders and new entrants. There are also few international comparisons and where they are included, the findings are fairly tepid, with little realisation for the potential of areas such as custom build, which could be an area of growth for UK builders. In similar countries, such as Germany, they are much further ahead on custom build properties accounting for a much higher percentage of overall housing delivery, which means less reliance on a small group of major housing developers and more diversity of design".
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