Affordable housing: cause and effect?

Do you think these two things might be linked?

CAUSE?

“Redrow hit by shareholder revolt over bosses’ bonuses and controversial new chairman”

… Former boss and founder Steve Morgan, 66, will still be entitled to bonuses, even though he has retired.

He has a 20 per cent stake in the company worth £422million.

There has also been anger at former chief executive Tutte, 63, becoming executive chairman, in breach of City rules for best practice in the boardroom.

Tutte is not considered independent enough because of his previous years at the company.

It prompted investor advisory services Glass Lewis and ISS to urge shareholders to oppose both changes. …”

https://www.thisismoney.co.uk/money/markets/article-7657339/Redrow-hit-shareholder-revolt-pay-controversial-new-chairman.html?

EFFECT

“Affordable homes built at ‘pitiful’ rate despite increase

The number of affordable homes built in Britain has risen for the second consecutive year but analysts warned that the current level of housebuilding remained woefully inadequate.

Sixty thousand homes classed as affordable were supplied between April 2017 and March last year, according to official figures. While this is an improvement on the 43,473 built in 2015-16, it is still below the ten-year average of 62,400.

Affordable housing includes properties for social rent, shared ownership and other intermediate tenures. In 2017 the government set up a £7 billion fund to increase the supply of affordable homes by 40,000 within four years. As chancellor, Philip Hammond promised £3 billion to fund an extra 30,000 affordable homes through the scheme this year.

Scotland supplied the most affordable homes per person last year, at about 16 homes per 10,000 people.

England produced 8.5 homes per 10,000 people, although this was an improvement on six per 10,000 people in 2015-16. At 47,100, the number of affordable homes built in England last year was below the long-term average of 50,800. Wales also dragged on the long-term average, while Northern Ireland and Scotland registered growth.

The government also promised that 300,000 homes a year would be under construction by the middle of the next decade to increase affordability, but the present rate is about 220,000. Analysts have warned that the government will only hit its target if it increases funding for affordable housing because it can no longer rely on the private sector.

Marc von Grundherr, director of Benham and Reeves, an estate agency, said: “Just 60,000 homes delivered in a year and no change in the level of social housing in a decade is pitiful.

“Affordability is an issue not just in the London market but nationwide, and an issue that is largely exacerbated by a failure to build more homes at all levels to keep pace with a growing population and an increase in buyer demand. We must build more and this, in turn, will help boost affordability.”

Last month L&Q, one of Britain’s leading builders of affordable homes, withdrew from the market citing a “serious downturn” due to persistent uncertainty surrounding Brexit.

Source – TIMES (pay wall)

“New home owner in Exeter fumes over frustrations with Redrow”

“A disgruntled new home owner has spoken of his frustration at still waiting for his warped front door to be replaced after more than a year and having to contend with many other issues in his property.

Jamie Leaman moved into a two-bed house in Bishops Court – a housing development next to Sandy Park, Exeter – in July 2017 with his partner and their 12-year-old daughter.

Problems which have had to be corrected include a ‘leaky oven’ which had to be replaced and caused damage to a fitted kitchen cupboard; missing plasterboard tape which means joins are now visible; the back door handle had to be replaced because it was loose and had issues with the locking mechanism; and an incorrectly fitted bath panel has required replacing.

In January 2018, Jamie, 42, reported to Redrow he had a problem with his front door, and is still waiting for the issue to be resolved. Redrow have responded saying they are working with him to come to a resolution. …”

Jamie, who lives in a shared ownership property, claims there are also many other residents who live in Bishops Court who have also encountered problems with their homes.

He said: “There is a Bishops Court Facebook forum page where quite a few people have complained about Redrow. Someone said they wished they have never moved here. It doesn’t seem to matter if you live in a shared or full ownership home; the problems are the same. …”

Squatters in Persimmon and Redrow homes that buyers can’t move into “because access road not completed”

“SQUATTERS have invaded brand new £300,000 houses after a legal ruling banned residents from moving into their own homes.

The luxury family homes, which have already been bought, are still unoccupied after a bitter row over an access road erupted. …

… Developers Persimmon and Redrow are jointly building 500 properties on the Yew Tree Hill estate, which is on the outskirts of Droitwich, Worcs.

But a dispute broke out last February between the companies and Wychavon District Council.

Planners had initially agreed for 188 finished homes to be occupied before an access road on the A38 leading to the estate was completed.

But the council became concerned the roadworks were not on track to be finished properly so it took the developers to court.

They then secured an injunction banning any more people from moving into the properties until the access road was widened.

Residents say no new homes have been built for months and the completed houses have become a haven for squatters.

‘THEY’VE LIED TO US’

Retired police officer Mark Naylor, 52, who moved into one of the first homes with wife Dawn, 51, in December 2017, said: “There has been crime on the estate with people breaking into unoccupied houses.

“Vans have turned up with people trying to break down fencing and get inside to try and take whatever they can.

“Homeless people are sleeping rough in the houses.

“I do feel sorry for people who have put down deposits but can’t move in.

“Persimmon are happy for the residents to just soldier on. They’ve lied to us.”

‘OVERRUN WITH SQUATTERS’

Another resident living in the finished side of the development added: “It’s a nightmare.

“The estate is being overrun with squatters and gangs targeting the empty houses.

“Sometimes at night you can hear them trying to snap the locks on the fences around the empty houses and sometimes the sound of glass breaking.”

The resident says “squatters and undesirables” have “exploited the window of opportunity created by the legal row”.

They added: “It must be torture knowing you’re dream home is being abused by squatters and rough sleepers while you’re powerless to do anything to stop it.

“It’s not right. The developers aren’t interested and the people who already live here and those waiting to move in have been hung out to dry.”

https://www.thesun.co.uk/news/8209327/squatters-take-over-new-homes-droitwich-yew-tree-hill/

Wain Homes, Redrow, Persimmon – more local horror stories

One home selling for £50,000 less than bought for after 10 months to escape it (Wain Homes, South Molton); one family moved out for 3 weeks at their own expense as the house was unliveable in (Redrow, Exeter) and one home allegedly still has 120 problems 5 years after moving in (Persimmon, Exeter).

https://www.devonlive.com/news/new-build-horror-home-stories-2177182

“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)

“MP back plan for ombudsman to resolve new homes disputes”

“The government is under pressure to set up an independent ombudsman with the power to order housebuilders to pay out up to £50,000 or even reverse a sale, following reports of new-home buyers lumbered with defective properties.

A group of MPs and peers has called on the government to make it mandatory for housebuilders to belong to the proposed scheme, which would be free for consumers and offer a quick resolution to disputes. The scheme would be funded by a levy on housebuilders, with larger ones such as Berkeley Group, Persimmon, Barratt, Galliford Try, Redrow and Bovis Homes, paying more than small and medium-sized firms.

A report, Better Redress for Home Buyers, by the all-party parliamentary group for excellence in the built environment, highlights the confusing landscape buyers face when trying to resolve building defects, not helped by a plethora of warranties, housebuilding codes and complaints procedures.

It says the proposed ombudsman should be able to order payouts of up to £50,000 so buyers are not left out of pocket. Disputes over larger sums might have to be settled in court, but the report adds: “In certain extreme situations the new homes ombudsman should be able to reverse the sale.”

People have no idea that when they buy a new home directly from the developer, they have no access to redress.

The recommendations come after a scandal over the poor quality of new homes built by Bovis, while other housebuilders have also faced similar complaints.

A recent survey by the Home Builders Federation and the main warranty provider, NHBC, showed that 98% of new-home buyers reported snags or bigger defects to their housebuilder after moving in.

The parliamentarians have proposed a snagging app that would enable buyers to photograph defects and send them to the builder, monitor the progress of complaints and go to the ombudsman if needed.

Dominic Raab, the housing minister, said this week that the “vice-like grip” of the big developers must be broken to boost the building of affordable homes.

Lord Best, vice-chair of the all-party group, says: “Buying a new home is stressful enough, but buying a defective one, as we heard from witnesses, can take a toll on people’s wellbeing as they wrestle with a Kafkaesque system seemingly designed to be unhelpful.”

The proposed scheme would be modelled on the property ombudsman, to which all estate agents must belong. If they are struck off, they can no longer trade.

Katrine Sporle, the property ombudsman, says: “New homes should be covered by an ombudsman. People have no idea that when they buy a new home directly from the developer, they have no access to redress.”

The proposed scheme would cover the first two years following a house purchase when housebuilders are liable for defects, while subsequent problems would be down to the warranty providers.

The report says: “Affected homebuyers are exasperated not so much by the existence of defects but by a builder’s failure or even refusal to put them right. Submissions we received described how buying a new home had been ‘the worst decision of their life’; how it was like ‘going through hell’ as the complaint passed between housebuilders and warranty providers; and how fighting for redress was taking a toll on their health.”

The proposals have been presented to the ministry of housing, communities and local government as part of its consultation on a single housing ombudsman.”

http://flip.it/716e6t

Redrow posts record profits

“Housebuilder Redrow recorded record profits and revenues after completing it highest ever number of homes in the first half of its financial year.

The figures

Profits before tax rose by 26 per cent year-on-year in its first-half accounting period to hit £176m. Revenues rose by 20 per cent to £890m.

Legal completions from by 14 per cent to 2,811 during the period, while order books were up by five per cent year-on-year at £1.05bn….

Why it’s interesting

This time last year Redrow was chasing Bovis Homes for a merger. That fell through after Bovis rejected their advances, so the FTSE 250 firm has had to look for growth through other means.

The Flintshire-headquartered builder has since defied the slowdown in house prices to post a string of strong profits.

Economists are not confident about the state of the UK housing market, after an extended period of real wages being squeezed and uncertainties around the Brexit process.

What Redrow said

Steve Morgan, chairman of Redrow, said: “Reservations in the first five weeks of the second half have been in line with the strong comparable period last year. We entered the second half with a record order book, and customer traffic and sales remain robust.

“Given the strength of both our order book and land holdings, together with the robust sales market, our growth strategy remains on track. This gives me every confidence it will be another year of significant progress for Redrow.”

Why it’s interesting

This time last year Redrow was chasing Bovis Homes for a merger. That fell through after Bovis rejected their advances, so the FTSE 250 firm has had to look for growth through other means.

The Flintshire-headquartered builder has since defied the slowdown in house prices to post a string of strong profits.

Economists are not confident about the state of the UK housing market, after an extended period of real wages being squeezed and uncertainties around the Brexit process.

What Redrow said

Steve Morgan, chairman of Redrow, said: “Reservations in the first five weeks of the second half have been in line with the strong comparable period last year. We entered the second half with a record order book, and customer traffic and sales remain robust.

“Given the strength of both our order book and land holdings, together with the robust sales market, our growth strategy remains on track. This gives me every confidence it will be another year of significant progress for Redrow.”

Why it’s interesting

This time last year Redrow was chasing Bovis Homes for a merger. That fell through after Bovis rejected their advances, so the FTSE 250 firm has had to look for growth through other means.

The Flintshire-headquartered builder has since defied the slowdown in house prices to post a string of strong profits.

Economists are not confident about the state of the UK housing market, after an extended period of real wages being squeezed and uncertainties around the Brexit process.

What Redrow said

Steve Morgan, chairman of Redrow, said: “Reservations in the first five weeks of the second half have been in line with the strong comparable period last year. We entered the second half with a record order book, and customer traffic and sales remain robust.

“Given the strength of both our order book and land holdings, together with the robust sales market, our growth strategy remains on track. This gives me every confidence it will be another year of significant progress for Redrow.”

http://www.cityam.com/280180/housebuilder-redrows-revenues-and-profits-rise-record

Help-to-buy helps developers much more than buyers

Owl says: But isn’t that what this government and our council wants?

Housebuilder Redrow says it’s looking forward to working with government to consider the future of the help-to-buy subsidy scheme beyond 2021. You bet it is. Since former chancellor George Osborne in 2013 committed to helping homebuyers purchase new properties with a deposit of only 5%, Redrow has reported record profits every year.

The latest annual numbers – and a share price that has improved threefold since 2013 – shows how wonderful life has become for big housebuilders. You’d almost think Redrow was producing high-tech consumer gadgets. Operating margins are running at 19% and return on capital employed has hit 26%. About 40% of its private sales are to help-to-buy purchases, which is typical for the sector.

After an improvement of a quarter in pre-tax profits to £315m, the company hiked its dividend by 70% and said there’s plenty left in the tank. Profits will rise to about £430m by 2020 and the dividend can be almost doubled again “subject to market conditions remaining unchanged”.

The obvious question is why on earth the government, having spent £4.6bn already, would wish to continue with help to buy after 2021. Yes, the scheme has allowed some people to buy homes who would not otherwise have been able to do so, but the clearest beneficiaries of the stimulus to prices have been housebuilders’ shareholders and executives.

Back in 2013, one justification was the limp state of the mortgage market. That no longer applies. The banks are well-capitalised, high loan-to-value mortgages have returned and the Bank of England these days frets about too much lending, not too little.

Osborne’s other argument was that more demand for houses would increase supply. The numbers suggest modest success, even if some of the increase would have happened anyway. But the point now is that withdrawing help to buy overnight wouldn’t obviously cause the housebuilders to down tools for fear that non-subsidised houses would sell for slightly less. A return of capital of 26% is splendid but it is still worth getting out of bed for 15%.

Before ministers commit to renewing help to buy on the same terms, they should recall the warning by Lord King, former governor of the Bank of England, in 2014: “This scheme is a little too close for comfort to a general scheme to guarantee mortgages. We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis, and we need to get back to that healthy mortgage market … We mustn’t let this scheme turn into a permanent scheme.”

Ditching help to buy outright in 2021 may be undesirable since there is a fair case that first-time buyers still deserve a leg-up. But, as even wiser housebuilders concede, too many houses qualify for help to buy. Current ceilings are set at £600,000 and 20% of the value of mortgage. Both figures could usefully be cut in half before the scheme becomes an addiction.”

https://www.theguardian.com/business/nils-pratley-on-finance/2017/sep/05/help-to-buy-scheme-buyers-builders-subsidy

Those “poor” developers get richer

“[Redrow’s] Pre-tax profits rose 26 per cent to £315m in the year to the end of June, Redrow said today, against revenues of £1.66bn, up 20 per cent on last year’s figures.

Legal completions – the number of homes bought – rose 15 per cent to 6,416, while its order book rose 14 per cent to £1.1bn. Average selling price increased seven per cent to £309,800.

Meanwhile, its number of outlets increase three per cent to 132, while it added 5,419 plots to its land bank.

So good was its performance, it has raised guidance to turnover of £2.2bn by 2020, while pre-tax profit is expected to hit £430m. Dividend will rise to 32p per share.

Today it hiked its dividend by 70 per cent to 17p. Shares rose 5.8 per cent to 655.9p in the first minutes of trading.”

http://www.cityam.com/271378/redrow-has-hiked-its-dividend-70-per-cent-after-profits