The Great Help-to-Buy ripoff

“Building chiefs cash in on Help to Buy”

Bosses at Persimmon, Barratt and Bellway have been handed shares worth more than £12million.

Persimmon chief executive David Jenkinson exercised share options worth £10million under the housebuilder’s controversial bonus scheme, while two top Barratt executives received stock worth nearly £1million, and two Bellway bosses were handed performance-linked shares worth £1.6million.

The bonanza came just a day after Tony Pidgley, the founder and chairman of rival builder Berkeley, sold shares worth £42million.

His deal took the amount he has made from selling stock in the past two and half years to £166m.

Last night critics condemned the share awards, which came just a week after figures showed the rate of house building in the UK had hit a three-year low.

Developers such as Persimmon, Barratt and Bellway – but less so Berkeley – have also raked in record profits off the back of Help to Buy, a taxpayer-funded scheme that lends cash to buyers.

Reuben Young, a spokesman for housing campaign group Priced Out, said: ‘The scandal is these payouts are only made possible by Help to Buy, which has taken developer profits into the stratosphere by investing public money into rising house prices.’

Persimmon’s Jenkinson, 52, received 411,084 shares worth £9.7million at yesterday’s prices. After taxes he received 217,874 shares worth £5.2million and he is required to hold on to them for at last one year.

Barratt chief executive David Thomas received 64,182 shares worth £431,000 through a bonus plan and deputy chief Steven Boyes received 50,795 worth £341,000.

Bellway awarded 30,667 performance-linked shares worth about £1million to boss Jason Honeyman and 17,823 shares worth about £600,000 to finance chief Keith Adey.

The final amount of shares they receive will depend on whether they hit performance targets.

Meanwhile, Pidgley has sold shares in the past six months that have made him £79.2million.

That included 1m he sold in July for £37.2million and a further 1m on Tuesday for £42million, cashing in on his company’s rising share price.

The sales came after Pidgley previously sold a total of 2.5m shares for £86.8million in 2017 – taking the amount he has made since then to a staggering £166million.

The building firms declined to comment.

https://www.thisismoney.co.uk/money/markets/article-7585531/Building-chiefs-cash-Help-Buy.html

“Property giants pay bosses £63m while ‘exacerbating housing crisis’ by sitting on enough land for 470,000 homes”

“Property giants have been accused of rewarding bosses for “exacerbating the housing crisis” after spending £63.6m on chief executive pay last year while sitting on more than 470,000 unused plots of land.

The chief executives of Britain’s 10 biggest housing developers raked in a combined £63.6m, earning a median sum of £2.1m, according to figures compiled by the High Pay Centre. Four FTSE 100 companies handed £53.2m to their top bosses in total, a median pay packet of £5.7m.

The 10 firms completed and sold 86,685 homes last year, but hold planning permission for 470,068 other plots of land on which homes have not been built. The UK needs an estimated 340,000 new homes a year to meet demand.

Councils have repeatedly complained of developers taking longer to build on sites which have been earmarked for housing, with the Local Government Association calling for powers that would allow local authorities to seize unused land.

The High Pay Centre said its findings raised questions about whether executives “should receive such vast sums of money, particularly given the many criticisms levelled at the big housing developers regarding the extent to which they are exacerbating the housing crisis”.

Luke Hildyard, the think tank’s director, told The Independent: “Homes are a public good and housing companies are charged with quite an important social responsibility. If the housing companies don’t play their part in delivering enough homes then we have real problems.

“There is something particularly unseemly about people who are supposed to be providing a public good raking in millions or even tens of millions.”

The 10 companies, which are all FTSE 350-listed, paid a combined £150m to chief executives and other directors last year. The four FTSE 100 house-builders – Barratt, Berkeley, Persimmon and Taylor Wimpey – accounted for £131.1m of that sum.

The average UK construction worker is paid £24,964 a year, 89 times less than the median pay packet of the 10 housebuilders’ chief executives, according to the union Unite.

The pay disparity was greatest at Persimmon, where chief executive Jeff Fairburn earned £39m – equivalent to the average pay of 1,561 construction workers – last year. He was forced out of the firm in late 2018 after a public outcry over his £75m bonus.

The pay ratio between Berkeley’s chief executive and the average construction worker was 331:1, at Taylor Wimpey it was 126:1, and at Barratt it was 113:1.

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Labour MP Siobhan McDonagh, who cited the figures during a debate in parliament on Thursday, said the “vast scale of inequality” showed “the British housebuilding industry is broken”.

She added: “In the midst of a national housing crisis, how can it be right, just or fair, for the top housebuilding CEOs to walk away with such astronomical sums while there are workers are seeing their salaries stagnate?

“These companies have a land bank of a simply staggering 470,068 plots but completed just 86,685 homes between them. Is that really a record worth rewarding?”

Barratt, Berkeley and Taylor Wimpey all declined to comment.

Persimmon did not respond to a request for comment.”

https://www.independent.co.uk/news/business/news/property-developers-housing-crisis-homebuilding-chief-executive-pay-ftse-100-a9093676.html

“Barratt Developments shares slide on gloomy outlook with end of lucrative ‘Help to Buy’ scheme that helped triple profit on each home feared”

“… as one eagle-eyed hack pointed out today, before the taxpayer-funded scheme, Barratt made £14,000 profit on each house it built. Now, after six years of Help to Buy, it makes more than £50,000 profit per house. …”

https://www.thisismoney.co.uk/money/markets/article-7426533/Barratt-shares-slide-investors-fear-end-lucrative-Help-Buy-scheme.html?ito=rss-flipboard

Now new Barratt homes in Devon getting bad publicity for faults

“What was meant to be a family’s forever home has turned into a living nightmare after they suffered more than 100 problems with their new build – including a millipede infestation.

They moved into their detached four-bed house, built by Barratt Homes in tucked away development Hawthorne Rise in Newton Abbot, nearly two years ago and say they have since had more than 100 snagging issues with the property.

The mother-of-two, who asked not to be named, says the latest issue to be investigated is insufficient drainage in their sloping garden which has caused a millipede infestation and it to become boggy. …”

https://www.devonlive.com/news/devon-news/family-say-dream-home-turned-2659117

“Housing developer backtracks on promised Yeovil road improvements despite signing contract to honour work”

Remember what Owl said only yesterday after the news that Persimmon and Crown Estates demanded 200 extra houses (from 650 to 850) in Axminster to be able to afford to build a new road?

“A housing developer is trying to get out of making improvements to Yeovil’s roads, claiming they are no longer required.

Barratt Homes has been constructing the Wyndham Park development on Lyde Road at the north-eastern edge of the town, for which outline planning permission was granted in 2008.

As part of a legal agreement with Somerset County Council and South Somerset District Council, the developer promised to make improvements to the junction of Lyde Road and Mudford Road, as well as the junction of Combe Street Lane, Mudford Road and Stone Lane.

However the developer, that recorded a pre-tax profit of £835.5 million in 2018, has now applied for these conditions to be removed, claiming these junctions are “under capacity” and therefore the improvements will no longer be necessary.

Planning manager Andrew Cattermole wrote to the district council on December 12, laying out the company’s reasons for not undertaking the work.

He said: “The implementation of these elements has not been completed to date and it is considered, having discussed this with Somerset County Council, that neither of these works are required.

“The existing junctions are under capacity, meet the required safety performance and no junction improvements are required.”

The Lyde Road/ Mudford Road improvements were due to be undertaken before the 400th home on the Wyndham Park site had been occupied.

The Combe Street Lane project, meanwhile, was required to be completed before the 500th dwelling was finished and occupied.

A traffic assessment carried out for Barratt Homes concluded that “the additional demand created during the completion of development can be accommodated on the existing high way network”.

A spokesman for Somerset County Council said: “We have discussed this matter informally with Barratt Homes and advised that we would not object to modifying the S106 conditions and removing the junctions if they provided sufficient evidence that they were no longer required.

“Now the application has been submitted, we will review the evidence and provide a formal response.

“This will then be considered by South Somerset District Council as the local planning authority, which will make a final decision.”

A spokesman for the district council added: “This application was received on December 13 and we are awaiting the key views of Somerset County Council as the highways authority on this matter.

“It would be inappropriate to make further comment until these views have been received and our officers have completed their reports.”

The district council is expected to make a decision on this matter by February 7.”

https://www.somersetlive.co.uk/news/somerset-news/housing-developer-backtracks-promised-yeovil-2483395

“Help to buy” – or help to rip off?

“Britain’s biggest housebuilders have doubled the average profits they make from each home since the Help to Buy scheme was launched.

Analysis by The Times reveals that the top five builders in Britain are making an average profit of £57,000 on each house they sell, compared with a mean average of about £29,000 in 2007.

Barratt, the biggest builder, is making almost double the amount of profit compared with ten years ago but is building only 411 more homes. Another builder, Bellway, is making more than £58,000 profit a house compared with a little more than £30,000 in 2007 but is building 2,000 fewer homes.

At the time of its launch in 2013, it was hoped the scheme would stimulate house-building. When it was extended in 2014, Mark Clare, then chief executive of Barratt, said: “Britain urgently needs more homes and by setting out a longer-term framework for Help to Buy this announcement will enable the industry to deliver just that.” Yet figures show that the total number of new houses delivered has barely changed since the introduction of the scheme.

The profits last year have been compared with 2007 because this was the last full year that housebuilders were at their peak before the financial crash. Annual pre-tax profits were divided by the number of homes built in each year to reach a “profit per house” figure.

Britain is facing its worst housing crisis in generations, with ownership at a 30-year low and a record 1.8 million families with children renting privately.

Housebuilders were quick to point out that underlying growth will have boosted profits, with house prices having risen by 23 per cent across the UK since 2007. They also noted that they were paying huge amounts back in debt each year at high interest rates before the financial crash, compared with today, when they have millions in cash at the end of each year.

However, analysts believe that a large driver of profits is the government’s Help to Buy scheme, which supports about 40 per cent of housebuilders’ sales. Robin Hardy, an analyst at Shore Capital, believes that housebuilders would be making £22,000 less in profit on each house built for first-time buyers if Help to Buy was not in place. “We reckon that homes sold through Help to Buy are 53 per cent higher than in June 2013, whereas house price figures from Land Registry or Nationwide suggest that across all first homes it’s more like 19 per cent,” he said. “That suggests that someone is gaming the system.”

Neal Hudson, a housing expert at Resi Analysts, said that shareholders had become “the main priority” for housebuilders since the financial crash. “The over-arching factor has been big pressure from the City,” he said. “The priority for them is profit margin not the number of homes built.”

Persimmon, Britain’s second-largest housebuilder, made an average profit of just over £60,000 on each house it built in 2017. In 2007 the figure was £36,787. It built only 138 more homes.

The housebuilder made pre-tax profits of £966 million in 2017 and has a war chest in net cash of £1.3 billion. Jeff Fairburn, its chief executive, was paid £75 million in a bonus scheme last year, which was more than the highest paid banking executives on Wall Street.

Lord Best, vice-chairman of the all-party parliamentary group on housing, said: “These bumper profits come at a time of growing recognition of the catalogue of failings of major housebuilders: poor design, miserable space standards, defective workmanship, delaying development to keep prices high . . . and exploiting a loophole in the planning process to renege on their obligations to include affordable homes in their developments.”

However, developers said the type of product they build has changed, with far fewer flats and a much tighter control over what type of land they buy.

A Home Builders Federation spokesman said: “House building is cyclical. After the financial downturn companies posted big losses and had to make huge writedowns on the value of their land. Many companies disappeared. Since 2013 output has increased by 74 per cent, an increase that as well as providing desperately needed homes has given the economy a huge boost.”

Source: The Times (pay wall)

“Housebuilder Barratt shrugs off market worries to post record profits”

“Britain’s largest housebuilder Barratt Developments has shrugged off fears of a slowdown in the property market to post record profits.

The FTSE 100 giant made £836m in pre-tax profits in the year to June, a 7.9pc improvement on the previous year, after revenues grew 4.8pc to £4.9bn.

Barratt sold 17,579 houses in the year, up 1.1pc, at an average selling price of £289,000, a rise of 5pc.

While there are signs of a slowdown in the wider housing market, John Allan, chairman, said Barratt’s new builds were continuing to attract strong levels of interest from buyers.

He said: “Market conditions remain good with a wide availability of attractive mortgage finance, which, alongside Help to Buy, continues…”

https://www.telegraph.co.uk/business/2018/09/05/housebuilder-barratt-shrugs-market-worries-post-record-profits/