A Shot Across The Bow: Why Michael Gove Said Housebuilding Is A Cartel

Two weeks ago, the UK government turned up the heat on its long-simmering dispute with the property industry. 

Speaking at a private meeting of the Conservative Environment Network — a party caucus committed to retaining the government’s net-zero carbon ambitions — Housing and Levelling-Up Secretary Michael Gove launched a broadside.

This is just another example of how, at the moment, property and the government are at loggerheads. It is not a great position for the industry to find itself in.

“I’m not a poster boy [for developers] … I’m not particularly popular with developers at the moment because of some of the steps we’ve taken in respect of building safety and some of the other changes we want to make as well,” The Telegraph reported him saying.

“We’ve essentially got a cartel of volume housebuilders who operate in a particular way, and there are all sorts of unhappy consequences,” Gove added.

The remarks came just ahead of tense final negotiations with housebuilders and apartment developers over how the industry pays a £4B cladding bill. A deal is now close, likely this week or next.

Even so, the use of the word "cartel" represents a serious ratcheting up of language in a relationship that has seen the government and the property industry talk past one another.

It became clear during the pandemic that the government’s populist instincts would lead it in a different direction from property business: The moratorium on commercial evictions was imposed regardless of industry complaints, as was a new arbitration process that aligned more closely with tenants’ agendas than landlords’. 

Meanwhile planning reforms that housebuilders quite liked got shelved when it turned out that Conservative voters (in the Chesham & Amersham by-election) didn’t share their enthusiasm. The August 2020 Planning for the Future white paper was expected to lead to legislation in October 2021, but this did not happen. Last week it was reported that Gove had dropped the idea of a separate planning bill altogether. The smart money is on limited changes included in an omnibus regeneration bill later this year.

Populist governments need villains: After all, they have to protect the little guy from someone. And the response to the tall buildings cladding crisis caused by the 2017 Grenfell fire provided an opportunity to paint part of the property industry in just such a light. In the opinion of many in the property industry, this is the context for the “cartel” claim as related by the Telegraph.

In particular, the inflamed language comes as an April deadline approaches on talks between the government and landlords over how the property industry pays the estimated £4B bill for the last stage of cladding replacement and building safety. No agreement had been reached, with the Home Builders Federation saying existing suggestions will drive some developers out of business.

The industry’s public response to the “cartel” comment has been limited but plainly it has stung. Home Builders Federation chief executive Stewart Bazeley wrote to Gove, saying “the implications of this remark are significant and entirely unfounded,” the Telegraph reported.

The British Property Federation declined to comment referring Bisnow to the Home Builders Federation. The RICS did not respond.

In the last week the mood has lightened. Housebuilders have been engaging constructively with officials and the discussions have been more positive. The industry side anticipates some sort of an agreement being reached in the next week or so.

Gove-watchers with strong connections to Whitehall, and plenty of experience with the way public policy works, think the “cartel” claim arises in part from misunderstanding, part from frustration, and partly from a desire to give the industry a shot across the bow in the run-up to completing the cladding negotiations.

“I wonder if maybe the housebuilding industry response to the cladding issues was misconceived by the government? Perhaps the uniformity of view in the sector was a surprise to Mr Gove?” Walter Boettcher, chief economist at Colliers, told Bisnow. Whilst Boettcher adds “never say never” he doubts the political threat embodied in the cartel claim will be realised.

A similar sense that this is theatre, not war, comes from Cushman & Wakefield UK Public Sector Chair John Keyes.

“I think this is a phoney war. It is politically expedient to criticise property industry, but they know that if levelling-up is to succeed they need the property industry to deliver,” Keyes told Bisnow.

Both Boettcher and Keyes agreed that it is not fair to paint the housebuilding industry as a cartel, nor is it fair to suggest commercial landlords are rapacious wolves who are only prevented from baring their teeth at pandemic-damaged retail tenants by the good graces of the government. But both caricatures feed a political narrative that needs a villain at the centre of the story.

The property industry must learn to tell a different story if it is to rebuild relationships with government.