Homeowners face high and unclear estate management charges

The UK competition watchdog has opened an investigation into eight housebuilders over sharing of pricing information

Homeowners are often facing high and unclear charges for the management of facilities such as roads, drainage, and green spaces, the competition watchdog has said. 

The Competition and Markets Authority (CMA) has also raised concerns about the quality of some new housing after seeing an increase in the number of snagging issues being reported by homeowners. 

The findings come after a year-long market investigation by the watchdog into the barriers leading to the undersupply of new homes in the housebuilding sector. Sarah Cardell, chief executive of 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.’

The watchdog has also opened an investigation into eight of the biggest housebuilders after it found evidence they may be sharing commercially sensitive information that could affect the price of homes.

High and unclear estate management charges

The watchdog found a growing trend by developers to build estates with privately-managed public amenities – with 80% of new homes sold by the 11 biggest builders in 2021 to 2022 subject to estate management charges.

Bills can be big, with a high proportion relating to administration or management fees, and future bills may be unpredictable and potentially very high as amenities degrade over time, the CMA said.

While the average charge was £350, one-off, unplanned charges for significant repair work can cost thousands of pounds and cause considerable stress to homeowners, the CMA said.

It highlighted concerns that many homeowners are unable to switch estate management providers, receive inadequate information upfront, have to deal with shoddy work or unsatisfactory maintenance, and face unclear administration or management charges which can often make up 50% or more of the total bill.

Estate management companies may possess significant market power and face limited competitive constraints to deliver services at a reasonable price or to an acceptable level of quality, it added.

Increase in snagging issues in new housing

The investigation also found that a growing number of homeowners are reporting a higher number of snagging issues.

The CMA’s consumer research indicated that a substantial minority had also experienced particularly serious problems with their new homes, such as collapsing staircases and ceilings.

Concerns were also raised that builders ‘don’t have strong incentives’ for high quality and consumers have unclear routes of how to receive any redress when issues arise.

The watchdog said it is recommending the Government sets up a New Homes ombudsman to support homeowners over quality issues and requirements for councils to take over amenities on all new housing estates.

Investigation into eight housebuilders over information-sharing

The watchdog has opened an investigation into eight housebuilders following evidence they may be sharing commercially sensitive information.

The watchdog found signs that some housebuilders may be sharing commercially sensitive information with their competitors, which could affect property prices and weaken competition.

‘While this issue is not one of the main drivers of the problems we’ve highlighted in our report, it is important we tackle anti-competitive behaviour if we find it,’ said Cardell.

The investigation will look into Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry. It has not reached any conclusions about whether the law has been infringed.

Shortfalls in the number of new homes built

The report highlighted ‘persistent shortfalls’ in the number of homes built across England, Scotland, and Wales, with fewer than 250,000 built last year across Great Britain, compared with a target of 300,000.

Complex and unpredictable planning rules across the three nations are partly to blame for this, it said.

The report highlights that many planning departments are under-resourced, some do not have up-to-date local plans, and do not have clear targets or strong incentives to deliver the numbers of homes needed in their area.

It also said shortfalls were linked to requirements to speak with a wide range of stakeholders.

In addition, there were concerns over limitations to private speculative development, highlighting that developers often produce houses based on pricing rather than diversifying the types and numbers of homes they build to meet the needs of communities.