UK government announces support for a mandatory New Homes Ombudsman scheme

On 22 October 2024, the UK government announced it would proceed with the recommendations from the Competition and Markets Authority’s (CMA) housebuilding market study to activate the mandatory status of the New Homes Ombudsman (NHO) and seek to implement a single consumer code for the new-build housing market.

Government agreed with the CMA study that “Renters and homeowners face exploitation, unreasonable charges, inadequate systems of redress, and poor information with which to make informed decisions.”

Back in February 2023, the CMA published its market study into housebuilding in England, Scotland and Wales. The study was primarily aimed at understanding and providing an overview of the current housing market, its primary models, delivery systems and operations. However, it also contained solutions to address some of the more prevalent problems in the market, such as land banking and consumer protection.

On consumer protection, the study found while most consumers are happy with their new-build homes, the quality of service from housebuilders deteriorates the longer that a consumer lives in their home.

Alongside this, consumers were often left dissatisfied with the information provided by their housebuilder on what is and is not included in the purchase agreement. The study also noted some consumers experienced serious defects in their homes.

Ultimately, the CMA considered all housebuilders in the UK should be held to a consistent set of quality standards and recommended the UK government, in consultation with the Scottish and Welsh governments, develop a single mandatory consumer code for all housebuilders operating in Great Britain and activates the mandatory status of the New Homes Ombudsman scheme. 

The Chartered Institute of Building (CIOB) welcomed the announcement, with Paul Gandy, senior vice president, adding: “Buying a home is the most expensive purchase anyone makes in their lifetime, and we have long called for a system which treats all purchasers fairly and ensures their rights are respected.

“The government’s response to the recent CMA’s housebuilding market study, showing intent to introduce a mandatory single consumer code for all UK housebuilders, is a much-welcomed proposal. CIOB is also pleased to see plans to activate the mandatory status of the New Homes Ombudsman take shape.

“We look forward to working closely with the government as it reveals its next steps, particularly in the formation of the single consumer code, and hope policymakers properly engage with the industry to ensure consumers get the fairest treatment possible.”

CIOB has been vocally supportive of the need to create a single mandatory consumer code and to activate the mandatory status of the NHO, advocating these positions in our December 2023 report, New-build housing – how regulation can improve the consumer journey.

Ultimately, these recommendations will change the relationship between consumers and their housebuilders for the better.

The creation of a mandatory system will not only hold housebuilders to account when quality fails during the sale, post-sale and occupation phases, but will also ensure that a good service is provided past the point in which contracts are exchanged. This represents a policy change grounded in the public interest.

Additionally, these recommendations will help to address the often-confusing consumer code landscape. This was detailed in a June 2018 report by the All-Party Parliamentary Group for Excellence in the Built Environment, which stated the system for consumer protection creates a “complicated and confusing landscape” in part due to the plethora of different warranties, housing building codes and complaints procedures.

Having a single code which all housebuilders are accountable to would significantly reduce confusion between what is covered and what is not and streamline the already confusing housebuilding process.

The Government will now embark on the process of putting these recommendations into force.

Activating the mandatory status of the NHO should be a relatively simple process, the powers already exist within the Building Safety Act 2022 to create new secondary legislation enabling the mandatory status of the ombudsman.

However, the creation of a new single consumer code will be more complicated. It is uncertain at this stage if Government will choose one of the existing providers or seek to form its own code. We expect a consultation to be launched in the coming months to ensure the insurance and housing sectors have a say on what a future single code covers.