Call for new rules to be introduced to safeguard new-build owners against defects

People buying new-build homes should be able to hold back 5% of the purchase price until the house builder has fixed any problems or defects with the property, says a new report.

Think tank, the Social Market Foundation, believes that new rules are needed to fix a broken and uncompetitive market for new build housing where builders can prioritise profits over customers and leaves buyers increasingly unhappy about quality and services, new report says.

It says in its report that some house builders have a ‘culture’ of neglecting customers’ interests and is calling on the Government to do more to boost consumer power and back new entrants to the market.

The report comes amid growing political focus on the quality of new build housing, and the profits reported by builders whose customers are often left unhappy. It points out that a 5% scheme is in use in the Netherlands and should be available in the UK.

Overall, the SMF report paints a bleak picture of the market for new build homes, with consumers increasingly unhappy with their new homes, even as developers’ profits rise.

Salima Ali, the report’s author, said:

‘Buying a new home is the biggest purchase most people will ever make, but the market doesn’t work well for many consumers. They should have more information about housebuilders and more power to push builders to fix problems with new homes.

‘House builders should also face more competition: they’re not under enough pressure to provide the better, cheaper houses that consumers want. It’s too easy for them to sell homes that leave buyers unhappy while making large profits. A better market would push them to work harder and give their customers a better deal.’

Secretary of State for Housing, James Brokenshire, acknowledged that the report highlights a number of challenges around quality of build and the approach of certain parts of the market that are unacceptable.

James Brokenshire added:

‘Where we need to, we will act to protect consumers and ensure the market rewards quality, consistency and customer service. I will consider the recommendations made with interest.’

The report suggests that an 80% reduction in the number of small house builders in the last 30 years does not help as a lack of competition and weak consumer power means house builders can prioritise maximising profit rather than, for example, meeting consumer needs in terms of quality.

Consumer satisfaction in new housing is declining, whilst the number of new homes is increasing. Only 46% of new buyers were very satisfied with the quality of their new build home in 2018, compared to 53% in 2012.

There is a gap between consumer expectations of quality and the quality delivered by house builders and 99% of new home owners reported problems including snags or defects since they moved in, and of these, 69% had over five problems.

It also points out that it is difficult for consumers to access redress for problems with new homes as the system is complex and difficult to navigate, and home buyers are not well informed about what their warranty covers.

Another issue is that new homes are not always well connected to transport or amenities. Some 46% are not within reasonable walking distance of the nearest railway station.

It is calling for the introduction of a detailed information pack for prospective new home buyers so that they can their options and make a more informed choice and it should include measures on performance of each house builder such as satisfaction, defect data relating to previous home and warranty claim numbers.

There should also be clear information on what the warranty covers and more support for smaller builders as well as more sites being made available for custom build homes.

And it suggests that house builders should be obliged to provide compensation if repairs are delayed as this would incentivise house builders to take more immediate action if there are issues with the new home.

Lastly, it calls for the introduction of a compulsory licensing and certification of house builder firms, including those that are subcontracted, as a formal system would ensure that all companies have appropriate standards which should improve quality across the industry.

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