“Thousands of young homebuyers remain trapped in virtually brand-new homes made unsaleable by spiralling ground rents and abandoned by developers such as Taylor Wimpey, despite a ban on the charges promised by the government.
Guardian Money can also reveal that the £5bn John Lewis pension fund is behind the soaring rents that have made the lives of some homeowners a misery. …”
https://www.theguardian.com/money/2018/jan/13/ground-rent-young-homebuyers-charges
Taylor Wimpey’s Facebook page has some VERY unflattering comments about their houses in Cranbrook, and Cranbrook itself – poor construction, parking problems, not enough shops, no 1 bed properties, size of rooms disputed, checks not made, repairs not done …
Oh dear.
“The chancellor, Philip Hammond, is lining up another £10bn to extend the “help to buy” programme first launched by George Osborne in 2013, which has already sucked up £10bn of taxpayers’ cash. Yet a report from Morgan Stanley – not usually the type to stick the knife into a flagship government policy – lays bare how this colossal sum has been almost entirely wasted.
Those billions have not helped buyers. The money has gone almost entirely into the pockets of the giant housebuilding firms, which have raised the price of developments by almost exactly the amount made available by the government. All it has meant for first-time buyers is more misery – by pushing up house prices.
Help to buy works by giving aspiring homeowners an interest-free government loan worth up to 20% of a property’s value – if the buyer opts for new-build. The idea was that it would provoke a wave of new building.
But the Morgan Stanley report, headlined “The help to buy premium – and its unintended consequences”, drily unpicks the data, revealing how the beneficiaries have been the major developers. Researchers compared the price of new-build houses in 2013, when the scheme began, with the price of existing or “second-hand” houses.
There has always been a small premium for new-build; people will pay extra for spanking-new kitchens and bathrooms. But since 2013, that premium has rocketed. “The divergence between new-build and second-hand prices is higher than it’s been since records began,” says the report.
It says that the price of new-build has outstripped second-hand by 15% since the start of help to buy. “We are now around 5% points away from the level at which new-build prices have diverged by the full amount of the government’s equity loan (20% of house price across England).”
Of course, Morgan Stanley didn’t produce this report for the likes of me to make a dig at the government. Its interest is in the share prices of the major housebuilders. It worries that the big builders won’t be able to get away with charging a premium of more than 20% for new-builds, and that the super- profits may be coming to a close.
Make no mistake about just how much help to buy has fuelled developers’ profits. The new-build market is increasingly reliant on help to buy, with the large builders – Barratt, Taylor Wimpey, Persimmon – suggesting that about half of their volumes are help-to-buy purchases. And what a brilliant money-making wheeze it has been. Morgan Stanley says: “Help to buy (and broader house price inflation, among other things) have helped housebuilder earnings triple since its launch.”
The builders will say the scheme has, indeed, provoked some supply, but evidence is thin. Morgan Stanley says: “Though it has helped drive supply, figures provide ammunition for critics who suggest it has pushed up prices, rather than making them more affordable.”
Despite this, Hammond is preparing to bung another £10bn at the developers – perhaps to “give clarity and certainty” about the scheme – which even the rightwing Adam Smith Institute says is “like throwing petrol on to a bonfire”.
But George Osborne didn’t need investment banks or thinktanks to tell him this back in 2013 when he launched this madness. Guardian Money at the time spoke to the people at the sharp end: young people excluded from the property market. Duncan Stott of the PricedOut group was particularly prescient: “Help to buy should really be called ‘help to sell’, as the main winners will be developers and existing homeowners who will find it easier to sell at inflated prices. Pumping more money into a housing market with chronic undersupply has one surefire outcome: house prices will go up.”
But the government chooses to listen to the developers instead. Britain’s housing market is broken, and help to buy is just making it worse.”
https://www.theguardian.com/money/blog/2017/oct/21/help-to-buy-property-new-build-price-rise
“The biggest housebuilders are creating growing numbers of nimbys by trampling over communities and building ugly, unaffordable homes, the head of a homelessness charity has warned.
Polly Neate, the chief executive of Shelter, said that developers were putting profits before people and ignoring concerns about the quality and price of new homes.
She blamed the builders for “a huge loss of public faith in our housebuilding system” and called for reforms to planning laws to put people’s needs before corporate profits. “Even when communities create detailed plans for housing developments, these developers brush them aside and build unattractive, unaffordable homes,” she said. “This means many [people] choose to oppose new homes rather than go through a long planning process, only to be ignored in the end.”
The three biggest housebuilders, Persimmon, Taylor Wimpey and Barratt Developments, completed more than 46,000 homes last year and shared revenues of more than £11 billion. They made profits of £2.2 billion.
“The government needs to bring in a new way of building homes which listens to local people to build the high quality and genuinely affordable homes they need, along with schools, parks and other amenities,” Ms Neate said. “We once had a proud tradition of housebuilding in this country, as seen in our popular postwar new towns and garden cities, and it is now critical this is revived for the 21st century.”
Her comments came after a survey of more than 3,500 people found that only 13 per cent felt that developers listened to them. Almost 60 per cent said that they would be more inclined to support the building of new homes if they were listened to more keenly. The southeast had the highest proportion of nimbys, at 38 per cent, while the West Midlands had the lowest at 23 per cent.
The Times revealed last month that a consortium of housebuilders behind a new garden town in Devon had watered down its strict design code. The Sherford development on the outskirts of Plymouth was designed by the Prince of Wales’s architects to prove that his model village of Poundbury in Dorset could work on a larger scale.
The Prince’s Foundation for Building Community said that the builders, Bovis Homes, Linden Homes and Taylor Wimpey, used arcane planning laws to renege on their commitments to quality. Ben Bolgar, the foundation’s director, said they were determined to build a “normal, rubbish housing estate” instead. The consortium said the quality of the homes would not be affected.
Stewart Baseley, chairman of the Home Builders Federation, an industry body, insisted that his members “work closely with councils and residents to ensure the homes being built are what communities need”.
“Housebuilders have dramatically increased output to provide desperately needed homes,” he added. “Constructive debate is needed to develop policies that allow more homes to be built as opposed to baseless claims.”
Source: The Times (pay wall)
“Buyers of substandard new homes are being asked to sign gagging orders to keep the faults secret and are routinely refused access to technical plans that show how their properties should have been constructed.
Some owners are then locked out of their homes during repairs, an investigation by The Sunday Times has found.
The research reveals how builders wield power over buyers at every stage of the new-build market, allowing quality to slip as the government spends £43bn on stimulating private housebuilding to try to hit a target of 1.5m new homes by 2022. …”
Sunday Times, page 4 (paywall)
The article talks of builders forcing people to sign non-disclosure agreements and are forced out of their homes so they cannot see what work has been done before remedial work is carried out so neighbours and press cannot find out.
Bellway, Taylor Wimpey, Strata, Barratt and Bovis mentioned for various alleged transgressions.
“Denise De Souza, 30, was seven months pregnant when she went to get a mug out of her kitchen cupboard in Dartford, Kent, before it fell on top of her and landed it on the floor. …”
http://www.dailymail.co.uk/news/article-4555608/Distraught-wife-feared-daughter-brain-damage.html
“Taylor Wimpey last month offered £130m to buyers trapped in new-build homes with spiralling ground rent contracts. It was a move initially greeted with glee by victims of the leasehold scandal. But as details have emerged, some householders say they will still be left paying “frankly obscene” charges.
Jo Darbyshire bought her four-bed home in Bolton in 2010 from Taylor Wimpey without realising the full implications of the 999-year leasehold contract, which allowed the freeholder to double the £295 ground rent every 10 years. Only when a neighbour’s house sale fell through – because a mortgage company rejected the ground rent clause – did Darbyshire discover her home had been rendered potentially unsaleable.
When she inquired about buying the freehold, things went from bad to worse. Without her knowledge, Taylor Wimpey had sold the freehold to Adriatic Land at a price understood to be £7,375 for each of the 24 homes on the estate. Neighbours who have since tried to buy the freehold say they have been met with demands of £45,000-£50,000 – a huge amount compared to the £200,000 that some of the smaller homes on the estate currently fetch.
The ground rent company also demands £100 from householders who request a quote to buy the freehold. They also require that any householder wanting to make alterations – such as building a small extension – also pay a fee. “A neighbour wanted to build a small extension and was quoted £3,000 before a brick was laid,” says Darbyshire.
But Taylor Wimpey’s compensation offer has left her deeply frustrated. It offered a “deed of variation … specifically incorporating materially less expensive ground rent review terms”. It is understood the deal will involve the ground rent rising in line with inflation rather than doubling every decade.
Darbyshire says it still leaves her in the clutches of a ground rent company and what she alleges are its “exorbitant charges”. In an open letter to Taylor Wimpey chief executive, Peter Redfern, Darbyshire says: “You seem to believe the only wrongdoing is the introduction of doubling ground rents. The real scandal is the onward sale of ALL freeholds … to investment companies, and the consequences to us … Did you know that, once the freeholds were sold on, that Adriatic would introduce exorbitant charges for alterations and increase the cost of buying the freehold significantly?”
Darbyshire says Taylor Wimpey should be offering homebuyers the chance to buy the freehold at the price originally offered when the estate was built. Her letter adds: “The only acceptable way forwards is for you to reinstate me to the position I would have been in had your sales people, and the solicitor you recommend I use, informed me fully at the point of sale, when I would have purchased my freehold for £5,900.”
Darbyshire is not alone. Sean Greenwood, who Guardian Money featured last November when we first revealed the extent of the ground rent scandal, says the construction giant should refund the £101,000 cost of the apartment his wife bought in Gornal on the edge of Dudley. We highlighted how one apartment had received a “nil valuation” from a mortgage company because of the doubling ground rents.
Greenwood has also written to Redfern, saying: “My wife would still like a full refund. Unfortunately, your most recent offer to change the ground rent review to RPI is unacceptable. We are worried our freeholder maintains the position of power in all negotiations relating to our freehold.
“We are also not willing to wait for the time period it will take to complete the change in the deed. We have been trying to sell for over a year and a combination of the doubling ground rent lease and the collapse of the wall in our car park has meant we cannot sell.”
More than 4,000 people have joined a Facebook group, the National Leasehold Campaign, to protest over ground rent issues and excessive charges, with complaints directed not just at Taylor Wimpey but at other major developers, including Persimmon and Bellway.
Last week, Nationwide told the construction giants it would no longer offer mortgages on new-build properties with short leases or, crucially, where the ground rent is more than 0.1% of the value of the home.
In a statement, Redfern said: “This is about doing what we think is right. We recognise the concerns and difficulties that some of our customers have faced as a result of their doubling leases and we are sorry for the worry this has caused. Although we are under no legal obligation to take action, we want to help our customers.
“We are working hard with the freeholders to convert our customers’ doubling leases to ones that are significantly less expensive … and which resolve concerns around how easy it is to sell or get a mortgage. Taylor Wimpey will cover the cost of converting the leases.
“These leases were put in place between 2007 and 2011 at a time when economic conditions were very different. We stopped using them on sites commenced after 2011.”
The company makes clear that the £130m should not be viewed as compensation, as the sale of the leases was legal, and that it has not been obliged to take action. It suggests that the aim of its Ground Rent Review Assistance Scheme is to address saleability and mortgageability rather than pay compensation.”
https://www.theguardian.com/money/2017/may/13/taylor-wimpey-compensation-leasehold-scandal-victims
“Children have been injured in shoddily built new homes, we can reveal.
The youngsters have suffered electric shocks and breathing problems, while one was even crushed by a radiator, after moving in to properties that had not been constructed properly.
The revelations are the latest uncovered by the Daily Mail as part of an investigation into the dire state of many of Britain’s new-build homes.
We have previously reported on leaks, water-logged gardens, missing windows, badly fitted doors, broken toilets and gaps in the guttering.
Many homebuyers have scrimped and saved for years to get on the property ladder.
Today we can reveal that poor workmanship by builders – some of whom are cutting corners in a rush to meet construction targets – is raising safety concerns.
Kate and Kevin Fever, from Tiverton, Devon, saved for years to buy a bigger home for their four children. When they moved to their new £265,000, four-bedroom property in December 2015, there were snagging issues with the downstairs flooring and drainage in the garden. These were fixed within a few weeks.
But, seven months later, a heavy double radiator fell off the wall as their eldest daughter Gemma, then aged ten, walked across the kitchen. Kate, 32, a student midwife, says: ‘When I rushed over and pulled off her sock, I expected just a graze, but it was a bloodbath. I grabbed a tea towel to wrap around her foot and we went straight to A&E.’ Gemma, now 11, needed stitches and a cast on her leg for a ruptured Achilles tendon. Kate and Kevin, 40, reported the incident to their builder Taylor Wimpey.
They claim the firm admitted wrong fixings were used on a number of radiators, which meant they weren’t secured properly to the walls.
The radiators were repaired and the firm contacted other customers they thought could be affected. Gemma also received toys, a £50 Toys R Us gift card and £150.
A spokeswoman for the builder says: ‘Taylor Wimpey has apologised to the Fever family for the distress caused. The health and safety of our customers and their families is our number one priority.’
Paul and Lisa Holland, from Leyland, Lancashire, also bought a four-bedroom property from Taylor Wimpey, which they have lived in since 2010. In November last year, Lisa, 43, and youngest son Kyle, 11, suffered electric shocks after touching a lightswitch.
Paul, 45, an HGV driver, says: ‘It happened when we changed the bulb to an energy saver. The bulb started flashing. My son went to the switch, but he jumped back crying. My wife then tried it and jumped back after also suffering a shock.’ When Paul’s brother tested the plastic switch with a volt meter he found live current leaking. The switch had to be replaced, along with the light. ‘My wife and son are very, very lucky they did not each suffer more serious shocks,’ says Paul.
A Taylor Wimpey spokesman says: ‘The vast majority of our customers tell us they are very satisfied with the quality of their home. ‘However, we recognise that we do sometimes get things wrong, and in those cases we are committed to putting them right as quickly as possible.’
Figures show a staggering 98 per cent of new-build buyers report problems to their builders, according to a new home survey by the National House Building Council and the Home Builders Federation.
After years of saving, Colin and Jessica Nickless bought their first home in September 2015. But since moving into the three-bedroom, terraced new-build in Rainham, near London, the couple and their two children have been plagued by damp and mould. Ellie, five, and Freddie, three, have both been in hospital with breathing difficulties and chest infections.
The couple particularly worry about Ellie as she suffers from cystic fibrosis, which makes her vulnerable to respiratory infections. Colin, 41, a full-time carer for Ellie, says: ‘Our new-build home is making us all ill.
‘We’ve had problems with leaking pipes, damp carpets, water dripping through electrical sockets and light fittings, waste pipes not being connected properly and pouring filthy water into my son’s bedroom.’
A spokeswoman for Circle Housing refused to comment on the case due to an ongoing legal claim.
Philip Waller, a retired construction manager who runs advice website brand-newhomes.co.uk, says: ‘When children are being injured by defective new homes, the Government simply cannot stand on the sidelines.'”
http://www.thisismoney.co.uk/money/mortgageshome/article-4489582/Our-new-build-homes-children-E.html
“Housebuilder Taylor Wimpey PLC has revealed it will make a £130mln provision to cover disputes over leases taken out by customers that have left some of them with a doubling in ground rent as it unveiled a good start to trading in 2017.
In a trading statement ahead of the housebuilder’s annual meeting today in London, Taylor Wimpey’s chief executive, Pete Redfern said that following conversations with freeholders and lenders the group is unveiling “measures which will address our customers’ concerns in an appropriate and fair manner.”
The FTSE 100-listed firm said it entered into the lease structures in 2007 “in good faith”, but that a review sparked by customers’ complaints showed the clauses are causing “understandable concern”.
As a result, the firm said it will make a gross provision of around £130mln that will be recorded as an exceptional item in its first half accounts.
Redfern said: “Whilst there is a financial cost to the Group related to this course of action, we confirm that our dividend targets and land investment programme are not impacted”.”
“There are rising concerns that the rush to build new homes is causing housebuilders to cut corners. Many firms have set tough targets to cash in on huge demand.
There are rising concerns that the rush to build new homes is causing housebuilders to cut corners. Many firms have set tough targets to cash in on huge demand — and meet the Government’s pledge to build 200,000 new homes a year.
Thousands of victims of poor workmanship have formed groups on social media websites such as Facebook, including Taylor Wimpey Unhappy Customers, Avoid Persimmon Homes and Bovis Homes Victims Group.
Hundreds have posted on Snagging.org — named after the jargon builders give to the task of finishing a project — citing problems such as creaking floors, scratched windows and stained carpets.
Campaign groups want a new homes ombudsman who can step in when families are let down. Buyers should also be given a chance to inspect their new-build before being handed the keys, they say.
Paula Higgins, chief executive of HomeOwners Alliance, says: ‘You have more consumer protection when you buy a toaster.
‘The industry is tilted too far in favour of developers, and the complaints system is too confusing.’
A report by the All-Party Parliamentary Group for Excellence in the Built Environment found more than nine in ten buyers report problems to their builder.
Oliver Colvile, chairman of the parliamentary group and Conservative MP for Plymouth Sutton and Devonport, says: ‘There have been too many reports of new homes that are quite simply uninhabitable.
‘We need to ensure there is a clear process whereby developers can be held to account and are responsible for correcting any below-par workmanship as soon as possible.’
Britain’s biggest house builders nearly all reported soaring profits last month. Persimmon reported a pre-tax profit of £783 million for 2016 — a 23 per cent increase on 2015.
Barratt Developments saw a 20.7 per cent rise to £682.3 million, Bellway a 36.5 per cent rise to £492 million, Redrow a 35 per cent rise to £140 million and Taylor Wimpey a 21.5 per cent rise to £733.4 million.
Bovis reported a 3 per cent fall in profits but still made £154.7 million.
Bovis has been forced to set aside £7 million to compensate buyers who have complained about the poor quality of its homes.
In January the firm was revealed to have offered up to £3,000 to buyers who moved into their houses by December 23 as it struggled to meet targets.
Sales have been boosted by the Government’s Help to Buy scheme, which has helped 100,284 first-time buyers onto the property ladder since 2013.
All the firms reported an increase in both the number of homes built and average selling prices. …
… A spokesman for the National House Building Council says: ‘We carry out spot check inspections at key stages during construction… [but] the builder is responsible for ensuring homes conform to building regulations and our standards.’
A Taylor Wimpey spokesman says: ‘We recognise that we do sometimes get things wrong, but we are committed to resolving those issues.’
A Bovis spokesman says: ‘We are putting more resource into customer care and reviewing our processes to ensure a focus on quality.’
http://www.dailymail.co.uk/money/article-4314028/Who-help-families-forced-live-half-built-homes.html
“Not so long ago, the communities secretary, Sajid Javid, sounded like the scourge of the big housebuilders as he complained that current rates of housebuilding were “not good enough”. His white paper on housing upgraded the rhetoric to describe the market as “broken” but it would be hard to conclude the fix-it plan will make life uncomfortable for the likes of Barratt, Persimmon and Taylor Wimpey.
The stick that Javid has chosen to beat the big boys looks more like a twig. Developers will be forced to build on land within two years of gaining planning permission. That is a reduction from the current cut-off of three years but, given that most developers tell us they start building almost as soon they receive permission, the switch may be barely noticed.
At a push, one might say government assistance for small housebuilders could inject more competition. But, if the sight of profit margins at 20%-plus across the sector hasn’t brought forth a rush of new rivals, the problem may go deeper than a lack of official encouragement for the smaller brigades.
Javid’s greater focus seems to be funding more “affordable” homes, to be delivered chiefly by housing associations and local authorities. Since the big boys tend to be uninterested in the affordable end, they’ll be happy to let others get on with the job. Share prices across the sector rose gently, and one can understand why. The big boys can continue building at their current steady rate and their special dividends can keep flowing.”
Owl believes that the Conservative government’s policy is to destroy affordable and social housing in favour of private renting, where housing benefit is payable direct to landlords and councils have no responsibilities for their poorest residents and their families.
Current “affordable housing” provided by developers (at 20% less than average prices on the same site) are actually much smaller houses, with basic and/or cheap fittings on the least pleasant parts of sites – e.g. near main roads, parking areas, etc and require such discounting.
“[Persimmon] reported an 8 percent revenue rise, and said that the sales rate was up 15 percent between July and December, confounding the notion that the Brexit vote could take the wind out of property-related companies.
However, the stock remains down 9.2 percent since the referendum last June.
Sector peers also rose on Thursday, with Taylor Wimpey (TW.L) and Barratt Developments (BDEV.L) both up nearly 3 percent.
“This latest positive update from a sector major adds to yesterday’s positive UK PMI Construction read and improving mortgage approvals data while the UK mortgage market remains highly competitive and government initiatives supportive,” said Mike van Dulken, head of research at Accendo Markets.
“Although house price data does remain notoriously mixed, the post-Brexit crash foreseen by many simply hasn’t materialised and prices held up remarkably well”.
http://uk.reuters.com/article/uk-britain-stocks-idUKKBN14P0YK
One of the firms involved in building the huge new town at Sherford near Plymouth [and Cranbrook] has issued a profit warning causing concern that the construction sector is in decline
Bovis Homes, one of Britain’s biggest housebuilders, is part of the Sherford Consortium alongside Linden Homes, and Taylor Woodrow [as in Cranbrook].
… The announcement, which preceded a 4.8 per cent fall in the Bovis Homes share price, was seen by analysts as a blow for the construction sector as it heads into 2017.
Bovis Homes denied the slowdown was due to any Brexit effect following the UK’s referendum decision to leave the EU.
… But completions in the second half of 2016 fell by one per cent to two per cent, year-on-year.
Meanwhile, GDP data has shown that construction generally is now in a “technical recession” with output down 1.1 per cent in Q3 2016. … “
“Major housebuilders such as Taylor Wimpey and Persimmon may be forced to spend millions compensating home buyers locked into unfair leasehold contracts, following a warning by housing minister Gavin Barwell.
Amid accusations in the House of Commons of “the PPI scandal of the property sector”, Barwell ordered developers to halt future sales of leasehold houses or face government action next year.
He also told developers to come up with solutions for householders already stuck in homes where soaring ground rents have made their property virtually unsaleable.
“There is a widespread problem here that needs addressing. These practices are not illegal but it seems to be one of those cases where there is a gulf between the letter of the law and our sense of what is right.
“The secretary of state and I are clear that it is not just a matter of stopping this practice going forward, but it is also about addressing hard working people who believe they have bought their home but actually they are in a position where they may find they are unable to sell that home down the line.”
A series of reports in Guardian Money has revealed how developers have been selling detached and semi-detached houses as leasehold, with clauses which allow the ground rent to double every 10 years. The freeholds are then sold on to private companies which extract the ground rent, charge high fees if a homeowner wishes to make alterations, and refuse to sell the freehold except for a huge premium.
Homebuyers have been left with houses they cannot sell as lenders will no longer offer mortgages against them because of the ground rent clauses. …”
“Fifty companies own more than 1.3m acres of land in England and Wales, making up 3pc of the total, according to an investigation into the biggest landholdings in the country.
The biggest corporate landowner is United Utilities Water, which owns 140,124 acres. Utility companies make up eight of the 50 on the list.
Other big landowners include mining and quarrying companies, aristocratic estates and grouse moors, which make up 550,000 acres, three times the land that is currently used for housing in England. This is still far less than the amount of land owned by the state: the Ministry of Defence, for example, owns 494,210 acres in the UK, and has rights over a further 504,000 acres.
One house builder, Taylor Wimpey, is in the top 50, with 14,684 acres; the supermarket giant Tesco owns 11,743 acres of land, on which it may start to build mini villages with homes to help solve the housing crisis.
Also included on the list were companies owning farm businesses, such as Beeswax Farming (Rainbow) Limited, which has 21,891 acres, and is believed to be owned by Sir James Dyson. UK Power Networks, which owns sites such as electricity substations, came eighth on the list. …”
http://www.telegraph.co.uk/property/uk/companies-land-england-wales/
THE average price of a house in Britain has doubled since 2000, as supply has lagged behind demand. Successive governments have aimed to put up 250,000 dwellings a year, but none has done so since 1980. Some blame housebuilders for this sorry state of affairs. The firms are accused of “land banking”, hoarding undeveloped plots to push up prices. Last month Sajid Javid, the communities secretary, told builders to “stop sitting on land banks, delaying build-out: the homebuyers must come first.”
There is plenty of unused land. The Local Government Association, which represents councils, recently identified sites for half a million homes in England which had been given planning permission but were yet to be built. Three of the largest builders, Persimmon, Taylor Wimpey and Barratt, have 200,000 plots of land that are “ready or close to ready” for development, according to an official report. Last year in England permission was granted for 250,000 housing units—enough to meet the target—but only 140,000 got under way.
To some, all this looks like anti-competitive behaviour by the big developers, eight of which build over half of Britain’s houses. A report from Sheffield Hallam University found that in 2012-15 the biggest private housebuilders increased construction by a third, but their profits trebled.
The builders protest that their critics misunderstand the economics of housing. Some land banking is inevitable: in order to show shareholders that their business has viable prospects, builders need a stock of land for future development. Builders’ profits have risen partly because they acquired land when it was cheaper than it is now, and the price of houses has increased.
Furthermore, the builders say, they are victims of bureaucracy. Even after planning permission is granted, there are conditions to meet, such as outlining plans for flood defences. “Back in my day, you only had to tell the council the colour of the bricks you planned to use,” says Ian Burnett of United Living, a property firm. Planning departments have shed staff following deep cuts to councils’ budgets. The lag between receiving planning permission and building being completed has risen by 12 months since 2007.
All this does not entirely exonerate the builders. Lately the government has become keener on large-scale housing developments. They tend to be farther from NIMBY-ish residents, and local authorities find it easier to manage one big project than lots of small ones. But they can give large builders local monopolies. To maximise profits on a plot, the builder may ration supply, putting up houses gradually rather than completing them all at once.
There is circumstantial evidence of this process at work. One study in 2014 looked at sites in London where more than 500 homes were earmarked and found that it was rare to build more than 100 of them a year. Research by Nathaniel Lichfield and Partners (NLP), a consultancy, suggests that as the size of a plot goes up, the annual rate of building gets relatively smaller. One development of 3,000 homes near Winchester, managed by two firms, saw only 526 constructed in six years, according to NLP (the companies insist they are developing the sites without delay).
These problems are not intractable. Councils could allocate smaller plots to a bigger range of builders, making the drip-drip style of construction more difficult. Andrew Lainton, a planning consultant, says that an obligation to build within a given deadline could be attached to planning permission. And ministers could get their own houses in order: one of the biggest hoarders of land suitable for residential development is government itself.
Source: The Economist, 24 November 2016 via Timekeeper newsfeed
The Chancellor has been blasted for giving more taxpayer subsidies to greedy housebuilders – who rake in billions while making the homes crisis worse.
In his Autumn Statement, Philip Hammond ploughed another £1.4bn into the affordable homes programme as well as £1.7bn for developers building on public sector land.
Yet the biggest builders – Persimmon, Taylor Wimpey, Barratt and Berkeley Group – have all missed affordable housing targets set by councils in recent years, while watching profits soar.
They even plan to pay out £6.6bn in extra shareholders’ dividends by 2021, the Bureau of Investigative Journalism found.
Now housing experts are questioning why builders need subsidies when the top four raked in more than £2bn in pre-tax profits last year – with their bosses getting immensely rich.
Eight directors of major housebuilders together earned £230m in the past five years.
Meanwhile, the number of homeless families in temporary accommodation in England has risen 45% since 2010 to 73,120.
Two bosses, Tony Pidgley and Rob Perrins, of Berkeley, have taken £141m in pay and share sales since 2011. They have shares totalling £440m.
MPs and campaigners have accused the top firms of keeping housing supply low to drive up prices.
The big four built 50,000 houses between them in the past year, but are sitting on 450,000 empty building plots.
Joanna Kennedy, chief of housing advice firm Z2K, said: “Only a fool would imagine the big volume builders work in the national interest.”
Shadow Housing Minister John Healey said: “We need much tougher rules. Non-developing firms should forfeit planning permission.”
The big four are all in the Home Builders Federation, who told us: “House building is a high risk business.”
http://www.mirror.co.uk/news/uk-news/greedy-housebuilders-make-billions-getting-9342409
476,000 outstanding GRANTED planning permissions not commenced.
28% rise in planning permissions, 10% more completed homes.
Average delay from granting planning permission to starting construction up from 21 to 32 months.
Developers build out big sites very slowly to maximise profits says MP Clive Betts.
Oxford – most unaffordable city – land is being hoarded says Ed Turner, Oxford Councillor and a housing spokesperson for the Local Government Association. Developers “making a fast buck”.
Big developers have made serious money –
Persimmon profits up from £638 MILLION – up 34% on the previous year.
Taylor Wimpey £604m – also up 34%
Barratt Homes – £682m – up 45%
(these 3 builders provide a quarter of all new homes, the eight next largest more than a half, small builders around a quarter). In the 1980’s small builders built two-thirds of homes each year.
Community Secretary Javid talks the talk but isn’t walking the walk – said he wants to “break the stranglehold of developers”.
Home Builders Association – weasel words – 30% more new homes in last 2 years, industry not sitting on land banks – no reason why they would delay. Nothing their fault.
Reporter puzzled by that statement – it includes existing houses turned into multiple flats and shops converted to housing. Official government data shows in 2013 133,000 new homes built – lowest figures in over half a century. 2015 – 152,000 new homes – up only 14% over 2 years NOT 30% and from a very low base. Over this summer housebuilding actually fell.
Javid “determined to do something about it”!
Small builders feel shut out – no land particularly in London, only small sites available. Developers have too cosy a relationship with councils says one small builder. Public sector land is not being released to small builders.
Last year the Big 3 house builders completed 44,360 homes and had planning permission to build a further 200,823 homes. They have strategic land holdings that could accommodate a further 278,600 more homes.
“Option agreements” are common – paying landowners if planning permission is granted – but only they can buy the land – no-one else.
A farmer near Gatwick told his story – first approach “a chat” to sell an option for exclusive development. They offered £275m which the farmer rejected, saying the developer already has land nearby they can develop. But options are not always recorded by the Land Registry so it is hard to know who controls such land.
So what is Javid going to DO, asked the reporter – a White Paper next month – we can’t have a market dominated by big suppliers, more small developers needed. But no idea how he is going to do it!
Reporter pointed out that the big house builders are major donors to the Tory party.
The big house builders are not impressed by talks of fines for not starting new builds more quickly. The bloke from their association said that if you start restricting the house building industry they will react by reducing output. The reporter asked if that was a threat – the spokesperson denied that. He said that, if the big builders had to forfeit land with planning permission but not started, house builders will restrict the flow of planning applications.
Land banking taxes may be needed says reporter, as the system is broken.
Nasty.
“When Clare Budgen bought her first house in Ellesmere Port in 2009 for £155,000 the last thing on her mind was the lease. Taylor Wimpey, the developer, arranged the lease on a 999-year basis, so what could the then 22-year-old possibly have had to worry about?
But just seven years later, when she looked into buying the freehold (to enable her to sell the home more easily in the future) she was astonished to find that, first, Taylor Wimpey had sold her freehold to another company, E&J Estates, and, second, it wanted £32,000.
Paula Richmond is in a similar boat. In 2015, she bought a four-bed house built by Taylor Wimpey in 2011 for £122,000, thinking she had bagged a bargain. Again, the original lease was for 999 years and with 995 more years to go, it was the least of her concerns. At the time, she understood that buying the freehold would cost no more than £2,000-£3,000. But, like Clare, she has found that her lease has been sold to E&J Estates by Taylor Wimpey and has been told by surveyors that she will have to pay up to £40,000 for the freehold – one-third of the house’s value. Paula can’t afford it and says “the house is almost unsaleable”, with solicitors warning potential buyers to stay away.
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Like thousands of others in England and Wales, buyers like Paula and Clare (not their real names) have been trapped by a controversial trend among developers to sell homes as leasehold when they previously would have been freehold. The buyers are given reassuringly long 999-year leases – usually it is leases of less than 60 years on flats that are a worry – but later find that buying the freehold is prohibitively expensive.
One surveyor Guardian Money spoke to in Manchester said a client had just been forced to pay £38,000 to buy the freehold on their recently built home, despite its long lease.
The trap for unsuspecting buyers comes from the escalation in ground rent in the small print of long leases. Initially, it looks affordable. The developer gives the buyer a 999-year lease, with the ground rent set, in Paula’s case, at £295 a year. The contract says the ground rent will double every 10 years. This may look innocuous – after all, most people move every seven to 10 years. But to the company that buys the freehold, the income is valuable….
…Campaigners say issues around leasehold properties will be top of the agenda for an all-party parliamentary group on leasehold and commonhold next month. It has attracted 43 MPs and lords, and is chaired by Labour MP Jim Fitzpatrick and Tory Sir Peter Bottomley. Members include Sir Keir Starmer, Emma Reynolds and Barry Gardiner.
Sebastian O’Kelly of support group Leasehold Knowledge Partnership says: “It is disgraceful that plc housebuilders are building leasehold houses that ordinarily – and until recently – would have had freehold title. This is an erosion of the wealth of ordinary people at the expense of the rich.
“Young people, after years of paying rent, finally buy a home and then find they are still, in fact, tenants – which is what a leaseholder is – with all the vulnerability that that implies.”
He adds: “The housebuilders are evasive over this issue and it beggars belief that the outrageous ground rent multiples come from household-name builders. There is no attempt to justify the adoption of leasehold tenure for these houses, which are not complex communal sites such as blocks of flats.
MP Justin Madders is calling for a ban on leasehold for estates of houses. “It is clear this system is being abused to drive huge profits at ordinary homeowners’ expense. There is no need for there to be leasehold properties, particularly those on an estate where the properties are mainly detached houses.
“They need to be banned – it may be a convenient way for developers to get extra profit from their building work, but once they get in the hands of these private equity companies the profit motive overrides any considerations that there are real people living in their homes, who are being asked to stump up eye-watering sums.”
http://www.theguardian.com/money/2016/oct/29/new-builds-house-buyers-leasehold-property-trap
East Devon Watch 