What did George Osborne expect as chancellor in April 2013, when he granted state aid to first-time buyers of new homes in the generous guise of Help to Buy equity loans?
Did he expect developers to cope with the queues by holding prices level, while building lots and lots more homes for the good of the country? Or did he expect builders to push up prices to quell demand, so keeping output within bounds dictated by prudent business planning? Or did Osborne not care either way, expecting only a political winner?
Barratt’s results last week allow examination of the issue, now that we can add its year to June completions to Taylor Wimpey’s and Persimmon’s 2016 completions. The trio build almost 30% of all private homes.
Have they upped output since Help to Buy began? Yes, by 9% to 37,300 from 34,300 in 2014, earning overall profits of £2.28bn on £6.8bn in revenues. Sales rates of 0.6 to 0.8 per site per week remained static - this is a business planning standard since time immemorial. If more than one a week is sold, sales directors discuss price rises.
Property Week columnist and City analyst Alastair Stewart caused a stir on 7 August by suggesting in a closely guarded 28-page note that Help to Buy customers were paying 5% to 7% more for their homes than regular buyers.
An even bigger stir was caused days earlier. On 4 August, £1bn was temporarily wiped off volume builders’ share prices when Property Week suggested a current review threatened the scheme. A ministerial half-denial was quickly issued: “We remain committed to 2021… this is just a regular review.”
The scheme is a whopper, with 20% or 40% loans advanced against the price of 120,000 new homes in four years to March. The five previous schemes garnered 31,000 buyers in seven years. The current appraisal is being carried out by well-respected LSE academics Peter Williams and Christine Whitehead. They are expected to report by the end of the year. The pair conducted the first assessment in February 2016, concluding that 14% more homes were being built than otherwise - the so-called ‘additionality’ boost. That was then.
Our chosen trio built 9% more private homes in their last full years than in 2014. If Help to Buy did not exist, would the three be building fewer units? Surely not. Also, the tone of the questions asked by Ipsos MORI of buyers and builders for the 2016 LSE review was a bit Mandy Rice-Davies. Buyers: did you like getting 20% of your deposit from the government?
“Oh yes!” Builders: do you like having state-incentivised punters? “Oh yes, yes!” Well, they would say that. No need to offer discounts and free white goods.
The latest review needs to test the concept of ‘additionality’ and either prove or disprove the charge of price-gouging. Whatever the result, the scheme that last week was dubbed Osborne’s ‘cynical crowd-pleaser’ will continue to 2021.
Do not underestimate the political capital ministers earn from pretending they have control over private starts. All peddle boasts beginning: “This government will build…”. Nor blame those doing the actual building for participating in what, prima facie, is Help to Profit. Why not?
Time to test the testers
Sir Martin Moore-Bick’s Grenfell show opened at 10:30am yesterday at the Connaught Rooms in Covent Garden. This is a tragedy that will play out to a noisy chorus of self-interest groups and cries of “not me guv” or “I’m saying nothing” from those fearful of the accompanying police inquiry. Cock an ear instead for Dame Judith Hackitt’s yet-to-open sideshow.
In spring, a giant post-Grenfell stable door will be declared shut with the publication of her report on changes to the Building Regulations, requested last month by communities secretary Sajid Javid. Regulations will be changed, responsibilities will be shuffled and the deckchairs at the Building Research Establishment rearranged. No heads will roll.
George Osborne’s ‘cynical crowd-pleaser’ will continue to 2021, whatever happens
Or maybe that is underestimating Dame Judith. Perhaps the 62-year-old former chemical engineer, who says she enjoys the music of ageing rock stars and good food and wine, has a good nose. Sniff the money trail, Dame Judith. The British Board of Agrément, which has been controlled largely by building material companies for 50 years, and the BRE’s 100-year-old Loss Prevention Certification Board take money in return for issuing certificates.
The tests are done in close co-operation with manufacturers. They are relied upon by everyone up the specification trail, right to the subcontractor hammering on the Reynobond panels that are still BBA approved. Both organisations need a far greater measure of public interest representation, or replacement by a watchdog with no financial interest in testing materials.