Wednesday, December 12, 2012

Big house builders, Less houses, more profit

You know the argument so I won’t dwell on it. But we need more homes and yet we’re building less. I have argued before that the real problem is affordability not supply, but the government certainly does accept the need to build more. It has been keen to help by creating guarantees and grants and relief from regulation to make it easier for more homes to be built. Its recent initiatives to help house builders include:

  • £20 billion housing guarantee plan
  • £225 million to support large-scale housing sites
  • New buy scheme providing subsidy to allow 95% mortgages on new build homes
  • A holiday for house builders from their obligations to build social housing as part of large housing developments
  • Requirement for all new homes to be zero carbon by 2016 watered down.

So is there any sign that this vast amount of public support for the house building industry is working? Nope. The latest government statistics show that house building is actually in further decline, with housing completions down 6% and housing starts down 10%.  The industry is unapologetic and is asking for yet more help inviting the chancellor to "refine and expand" the measures he's already introduced.
So how have the big builders faired during this (apparently) most  difficult of periods? Here is the latest profit news from the UK’s ten biggest house builders:

  1. Barretts profits up 159% to £111m 
  2. Taylor Wimpey profits up 135% to £78.2m
  3. Persimmon profits up 65% to £98m
  4. Berkley profits up 40% to £142m
  5. Bellway profits up 57% to £103m
  6. Redrow profits up £17m to £30M
  7. Galliford Try profits up 80% to £63m
  8. Bovis profits up 100% to £16m 
  9. Crest Nicholson profits up £34m to £12m
  10. Bloor profits up £18m to £40m

I suspect that most people would be surprised to hear this, but far from having a difficult time, many of these companies are making record profits. How? simply by building fewer homes for higher prices. In their results both Persimmon and Bellway even boast that their average house sale price is the highest it's ever been. It appears suspiciously like the large house builders have happily accepted government support and used  it to shore up their own profits by building a small amount of expensive houses for the small number of people who can actually afford their prices. If I'm right and affordability is the real problem, this hardly feels like the answer.


N.b. the profits data given here is the latest from each company and is a mixture of full and half year reports. Bloor only publish operating profit information for the holding company Bloor holdings.

Tuesday, December 11, 2012

A letter to Graham Jones MP

Dear Graham,

I’ve just seen your latest blog post, and seeing as you were good enough to mention us, I thought it deserved a reply. If I can summarise you make three points:
  1. “It’s a false argument to suggest that those on housing waiting lists are in desperate need for these homes”
  2. Your constituency has declining population and therefore demolishing houses is necessary.
  3. That guacamole eating southerners like me are dictating national policy.

Perhaps I can start with the first point and refer you to the latest published housing statistics for Hyndburn  (source:https://www.gov.uk/government/statistical-data-sets/housing-strategy-statistical-appendix-hssa-data-returns-for-2010-11 )

Empty homes: 2565 (the 2nd highest rate in England)
Families on the housing register: 4001
Families housed by council: 96
New homes completed: 0
New homes granted planning permission:0
New homes built by the council:0
New homes built by Housing Associations: 0
New affordable homes built by others: 0
New affordable homes granted planning permission:0

Of course statistics never tell the whole story, and you may well have some more recent (as yet unpublished) data; but it’s pretty hard to support your claims based on this evidence. There clearly is a great deal of housing need, and much as you and I would like these people to be housed in nice new houses, there’s no evidence of any being built or about to be built. Your suggestion of knocking two houses into one is a good one, but I fail to see how demolishing houses in these circumstances helps anybody when there is so little building in prospect.

Your second point is that homes need to be demolished because there is a declining population. I accept this is the case in a few areas, (although the population of Lancashire is projected to rise over the next 20 years) but can you honestly say that none of these houses were decanted?  Can you also be sure that uncertainty over possible demolition did not cause people to move out? . I know if the council kept threatening to bulldoze my house I’d look to move to somewhere where they’d leave me alone. This is important, because if you can’t be certain of these points then it's equally likely that demolition plans have helped create the problem you now cite.

I am of course flattered by your implication that my colleagues and I are driving national policy. As it happens I’m not a southerner, I just happen to live here because (like you) I have a job here. But your invitation to have a debate in a chip shop in the north is perhaps your best idea here. I will however be careful to avoid the Peter Mandelson faux pas and remember that the green slimy stuff is mushy peas not guacamole.


Update 13th December in response to Graham Jones' reply

Dear Graham,

I’m very grateful for your reply. Funnily enough I agree with some of what you say, but perhaps that’s because you are rebutting arguments that I haven’t made.

I’d like to challenge a few points though. Firstly your declining population point: Lancashire county council’s population projections don’t agree with you. They show a slow but steady increase in population for Hyndburn over the next twenty years. But perhaps they haven’t factored in the council’s demolition policy, which, as I’ll come onto, may be a self-fulfilling prophecy.

I’d also like to correct you on our policy on demolition. It isn’t actually true that we're against it on principle; I think it’s a sensible approach sometimes where obsolete housing needs to be replaced. What I’m against is speculative clearance. Knocking people's houses down in the hope that the cheap land it frees up will lure in a  private developer to build something.  

I’m not in favour of public subsidy footing the bill for renovating all empty homes. I do think its pragmatic for government to invest in refurbishing empty homes to create affordable housing. As you know there was a grant program this year that did just that, but I see Hyndburn didn’t apply. However,  another bidding round has just opened, and I’d be more than happy to help the council make an application.

I see that you didn’t comment on my questions about how the houses you want knocked down became empty in the first place. It’s important to point out that a lot of empty houses in ex housing market renewal areas were decanted and the program caused blight leading to many others becoming empty.  Of course the housing market was weak in the first place, but the HMR program poured £2.5bn of taxpayers money in with little obvious benefit, and left a lot of problems like the scale of housing vacancy we are discussing here. . 

You are right on this point, I accept that refurbished empty houses might not be the aspirational choice for all the 4001 families on the councils waiting list, but at least the houses exist and can be readily made into decent homes. Your proposal of knocking them down combined with the area’s nonexistent house building programme would mean that most of the 4001 families won’t get a house at all. Faced with this, what do you think they’ll do? I think they'll move somewhere else, which is why your policy probably is a self-fulfilling prophecy.