How was last year for you at work? Did you work hard? Or did you just do the bare minimum to get by? Working in the custom build sector, I’d imagine you’ve been working really hard to revolutionise housing and disrupt a dominant supply model. After all, doing something a bit different is never plain sailing, which I’m sure new Housing Minister Raab knows all about.
Recently it was reported that CEO of Persimmon, Jeffrey Fairburn, did such a blindingly good job last year that he earned £110 million in bonuses. He “worked very hard” to reinvigorate the housing market. Or, to boost share value, whichever way you look at it.
But we live in a capitalist society, so what’s wrong with business performing well?
Well, nothing at all, although we do have a system that favours an established housing market dominated by a handful of companies. And then you have a Government policy, Help to Buy, that supports this market by effectively subsidising it. Plus, these businesses operate in a market that we know is massively under-supplied and over-priced. And works to super-tight margins.
Who wouldn’t want to work in an industry operating in this context? Your product is subsidised, massively in demand and you’re not far off operating as a monopoly, meaning you cherry-pick where you build so it’s most profitable. Where do I sign up?
And luckily for the big builders, Theresa May has committed more money to Help To Buy to the tune of 10 billion – is that the sound of Champagne corks popping in board rooms?
In research released last year, the Adam Smith Institute claimed that Help To Buy actually pushed up house prices by increasing the numbers of buyers, but not of supply. But the problem for May is how do you stop subsidising, once you’ve started?
According to the Independent, back in 2013 then Bank of England Deputy Governor Paul Tucker, said that Help To Buy would be “unwise” as a medium or long-term scheme, saying: “This is not a market that needs a permanent subsidy…. [home loan guarantees] are devices for getting out of a hole to dig another one for the future.”
So keep digging, Prime Minister May. Another Government will surely sort it out later.
So did Fairburn earn his bonus? Well I’ve not sat in on board meetings, so how would I know? But from ‘fat cats’ to ‘corporate looting’, the terms that tend to get applied to this sort of activity reflect the public’s attitude.
After all, they are the taxpayers who actually fund Help To Buy and are also lumbered with the bill for our hyper-inflated housing market. Well, at least the younger generation that is trying to climb the housing ladder are.
Only it’s not even a ladder now, as moving and housing is so expensive that people move far less than they used to do. And they don’t even want the products of the big six volume builders, with reports of poor quality and poor design as they build to the lowest denominator to maximise profits.
So it’s in this market that the sixteenth housing minister since 1997 and the tenth Conservative housing minister since 2010 joins the parade. So welcome Dominic Raab to the position, we hope you’re open to change.
And people want change – there are now over 220 Community Land Trusts in the UK and the legislation to grow custom build and SME builders and developer is firmly in place.
Government support for change is clear, as is public appetite as people finally start to realise that the lack of housing will cripple and control their children’s lives for ever.
The average deposit a first time buyer now needs in London has increased four-fold in the last decade from £26,700 to £100,445, as reported in last year’s Halifax First Time Buyer Review, with the average deposit being £33,000.
Help To Buy has certainly ensured that more people get on board with home ownership. But our market has traditionally relied on these starters trading up the ladder, and is no longer a given, not at the speed they used to anyway.
Last year the Resolution Foundation found that average pay is back at 2006 levels (when adjusted for inflation). So a generation of people who’ve seen the least earnings increases are also facing the highest housing costs we’ve had in a long time.
Still think that £110 million in bonus is fair reward for Fairbank’s labours?
Personally I think it’s yet more evidence of the toxic market that the White Paper referred to mildly as “broken”. I don’t think having a third housing minister in 18 months shows much dedication to fixing this home-grown market problem. After all, most jobs take a few months to truly get to grips with.
Perhaps Brexit is just driving everything, but you’d think that a few home wins/good news stories in housing might garner a bit of support for May, who’s said that fixing the housing crisis is a “personal mission”.
Well Mr Raab, you’ve a lot to take on board to get up to speed. But we’re getting good at explaining our industry as this will be the third time we’re doing it in a year and a half.
But as a sector we know that your predecessors supported and backed our new model to housing supply, and we hope you do to. We think it’s really quite brilliant. So here’s a shortcut to the best bits.
But custom build homes need Government support and endorsement, and thankfully we’ve had this from Government in the last few years, with huge gains in planning, legislation and financing options, both for development and mortgage finance.
So Mr Raab, please do continue to back the Right To Build, and help us change housing for the better. We’re here to help grow the sector and are happy to chat!