“Britain’s most profitable housebuilder faces being stripped of its right to sell Help to Buy homes after allegations of poor standards and punitive hidden charges.
James Brokenshire, the housing secretary, is reviewing Persimmon’s participation in the government scheme, which accounted for half of the homes it built last year, The Times has learnt.
Since Help to Buy was introduced, Persimmon’s profit per house has almost tripled, rising from £22,114 in 2012 to £60,219 in 2018. Half of the 16,000 homes the company built last year were sold under the scheme, which is designed to boost home ownership.
Persimmon is now set to become the first housebuilder in the country to report profits of more than £1 billion.
Introduced in 2013, Help to Buy offers buyers with a deposit of only 5 per cent an interest-free loan of up to 40 per cent of the purchase price in London, or 20 per cent outside the capital.
Critics say the scheme has subsidised huge profits and multimillion-pound bonuses across the housebuilding industry while inflating property prices.
An investigation by The Times last year found that homes available under Help to Buy cost an average of almost 15 per cent more per square metre than comparable properties that were not eligible.
At the end of 2017 Jeff Fairburn, then Persimmon’s chief executive, was in line for a bonus of £110 million despite the company being embroiled in a scandal over unfair leases and criticised for the quality of some of its homes.
The company has been accused of selling houses on leasehold terms, under which buyers are forced to pay ground rent charges that provide an extra source of income. There have also been complaints about the quality of some of the new homes.
Mr Brokenshire is understood to be worried about the company’s behaviour after a string of complaints. A source close to the housing secretary said that Persimmon’s “approach” would be “a point of discussion” when the government decided which house builders would be allowed to offer Help to Buy homes from 2021.
“James has become increasingly concerned by the behaviour of Persimmon in the last 12 months,” the source said. “Leasehold, build quality, their leadership seemingly not getting [that] they’re accountable to their customers are all points that have been raised by the secretary of state privately.
“Given that contracts for the 2021 extension to Help to Buy are being reviewed shortly it would be surprising if Persimmon’s approach wasn’t a point of discussion.”
They added: “James is clear any new government funding scheme will not support the unjustified use of leasehold for new homes, including Help to Buy.”
Yesterday critics demanded a complete overhaul of the scheme.
Clive Betts, the Labour MP and chairman of the housing, communities and local government select committee, said: “Help to Buy has clearly been the prime driver of Persimmon’s profits. Companies are there to make money but they should behave responsibly as well. Some of Persimmon’s practices have been questionable to say the least.
“I think most ordinary people will be outraged by this.”
Nationwide Building Society says that house prices for new-build properties have grown 15 per cent faster than for older properties since Help to Buy was introduced.
An official report published last year found that almost two thirds of people using Help to Buy did not need it to get on the property ladder and that the average income of applicants was £53,000.
Mr Betts added: “My personal view would be that if government wants to help solve the housing crisis, it will have to put more money into helping build homes that people can afford to rent.”
Henry Pryor, a buying agent, said that the increasing number of homes being built across the country had led to a decline in quality. “If you aspire to build 300,000 homes a year there will be people taking short cuts, it is human nature, and we don’t have a sufficiently robust system in place to ensure the properties are fit for purpose,” he said.
“I don’t think there is a conspiracy to knock out shoddy homes but we are seeing what I call Friday afternoon houses. Homes that seem like they have been built by someone who’s had a good lunch on a Friday or is rushing off for the weekend.”
The government confirmed last year that Help to Buy would be extended by a further two years from 2021, although from this date there will be a cap on the value of eligible homes to within 20 per cent of average prices in each region.
The Home Builders Federation argues that the scheme has been a huge success because it has helped to boost the supply of new homes.
A spokesman for Persimmon said: “Our performance over recent years reflects the group’s success in growing its construction volumes to meet UK housing need, particularly by offering attractively priced new homes to first- time buyers. Since 2012 we have increased our output by 75 per cent and invested £3.8 billion in new land. In late 2018 we announced a range of new customer service initiatives and we are confident that these will improve our performance once they have had time to take effect. We are also making a significant investment in training to address the shortage of skills in the industry.”
Analysis
Help to Buy has some heartfelt enthusiasts (Anne Ashworth writes). These are the millennials who cannot rely on a payout from the Bank of Mum and Dad but still want a place of their own. If they have a deposit of 5 per cent they can use Help to Buy to climb on to the ladder. Without it some would be forced to remain in rental accommodation for decades, excluded from home ownership.
However, even supporters of Help to Buy will share the widespread dismay about the way in which housebuilders have exploited the policy. Some bosses have enriched themselves at the taxpayers’ expense, apparently with the co-operation of the Treasury, which did not impose rules to ensure that the policy did not become a bounty for the boardroom. The most notorious example is Jeff Fairburn, former chief executive of Persimmon, who pocketed £75 million, but others have also prospered.
One of the original aims of Help to Buy was to ensure that builders “got shovels into the ground”. Little thought seems to have been given to ensuring that these homes would be solidly constructed. Many are shoddy, unlovely and not energy-efficient.
Thanks, in part, to Help to Buy, mortgage lending to first-time buyers is at its highest since 2006. The chancellor is likely to hail this as a success story in his spring statement next month. He should instead order that Help to Buy, which runs until 2023, provide quality housing for first-time buyers, rather than financing yet more mansions for housebuilder directors.
Anne Ashworth is property editor of The Times
Case study
Nicola Bentley thought she was buying a “dream home” for her family last May when she exchanged contracts on a £280,000 house from Persimmon in Kippax, Leeds (Louisa Clarence-Smith writes). However, when the finance director, 46, moved in she said she found 700 snags, ranging from a damaged cooker to leaking pipes and shoddy plasterboard on internal walls.
Ms Bentley, a mother of two, said she is still waiting for issues to be resolved. “We have been living in hell for the last nine months,” she said. “Persimmon told us it would take three to four weeks to rectify all our snags. We are now into week 26 and living in a building site.”
A spokesman for Persimmon said: “We recognise that Ms Bentley has experienced an unacceptable level of issues and have been working hard to address these. The majority have been dealt with and we are working with Ms Bentley to resolve the remaining matters.”
Source: The Times (pay wall)
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