CMA's multi-faceted investigation into UK housing sector

UK Housing Sector

The Competition and Markets Authority (CMA) has a crucial role from the consumers' perspective. The CMA is the UK government's important department ensuring that housing and other sectors work in consumers' favour by dealing with unfair behaviour. However, most people are unaware of the activities of the UK Competition and Markets Authority because of its low-profile presence.

What does the UK Competition and Markets Authority do?

Knowing about the role of the UK's watchdogs is necessary before understanding the steps CMA implements to protect the stakeholders in the housing sector. The Competition and Markets Authority is a non-ministerial body ensuring a strong economy through healthy competition that will not harm consumer interests. The CMA in the UK covers these activities:

• Investigation of Competition Act 1998 breaches
• Conducting Phase 1 and Phase 2 investigations into mergers
• Preventing cartel activities by initiating criminal proceedings
• Protecting consumer interests by enforcing relevant legislation

Many people do not know what the Competition and Markets Authority is, as the CMA does not attract media attention or appear in many news headlines. Most activities of the CMA involve the business sector. In the UK the CMA is a strong organisation with extensive powers to levy hefty fines and halt big business deals and mergers.

What is the scope of the Competition and Markets Authority's investigation into housing market concerns?

The Competition and Markets Authority announced plans to study the private rental and house-building sectors in February 2023. The study determines the prevalence of consumer protection violations and discriminatory practices against certain types of tenants. The private rental sector dominates the UK's house-building market, contributing up to 80 percent of house completions as per the 2021-22 data.

Zero deposit scheme complaints investigation

The Competition and Markets Authority has received complaints about zero deposit schemes that allow tenants to begin their tenancy without paying large sums of deposits (5 weeks rent) without being aware of liabilities. Several landlords refuse the tenants their consumer right to an assured tenancy by giving them only a license to occupy the property.

CMA investigation into the rental market

The Competition and Markets Authority (CMA) shared the scope of its investigation into the functioning of the UK's rental market. The CMA will focus on several areas after seeking feedback following receipt of complaints from the stakeholders in the private rental sector. The areas of investigation are:

• Tenant awareness of their obligations when choosing zero-deposit schemes
• Landlords who provide sham licenses to tenants thereby depriving them of their consumer rights
• Unlawful discrimination by landlords who deny tenancies to claimants of housing benefits
• Exploitation of senior citizens through retirement housing fees
• Burdensome lease/tenancy clauses imposing severe obligations on tenants

The Competition and Markets Authorities plan to address consumer protection in the private rental market by educating the letting agents about their responsibilities.

Investigation in the house-building sector and developers holding large land banks

The CMA UK is also investigating the large UK house-builders holding huge land banks which is felt is affecting the housing supply on the basis more homes could be built more quickly if land banked land was used.

Effective functioning of the house-building sector is crucial to safeguard the stakeholders' interests. The CMA will study the following areas to ensure healthy growth of the house-building sector:

• large house-building companies and builders hold land banks, impacting the housing availability in certain areas
• Failure to complete the adoption of new housing estates, forcing homeowners to bear the cost of maintaining basic amenities
• Removing barriers to entry for new businesses planning to build homes to improve deliveries of new homes
• Complex planning rules impact the new home deliveries, causing inconvenience to stakeholders.
• Ensuring healthy competition between small and large house builders

The Competition and Markets Authority (CMA) will focus on the issues of planning bottlenecks and land banks to guarantee favourable conditions for new home buyers. These multi-pronged approaches by the CMA result from an extensive analysis of the housing sector and stakeholders' complaints.