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Thank God for Trinity College. After centuries of trying it has finally turned out a well-trained brain. Step forward an Oliver we definitely need to hear more of. Yes it’s Oliver Leftwing, I mean Letwin. Our PM in a rare break from Brexit shenanigans asked him why no houses were getting built. What’s he got to say?
The obvious explanation is that simply spending the eye-watering salaries paid to the top brass of the developers leaves those individuals with very little time left over to do any actual work. Have you noticed that the Financial Times 'How to Spend It' magazine is bigger than the paper itself? That tells you all you need to know about the layabouts in charge. If I was Labour’s John Healey I would sneak into all the building sites shut fast while the jamboree in Cannes for MIPIM is on and do a bit of bricklaying.
That’s not the conclusion Ollie comes to sadly. But he does go straight to the heart of the matter. Developers drip feed homes onto the market to keep prices up. He uses a lot of jargon to say that but it is what he means. At last a moment of truth. Or what the brain boxes call an epiphany.
Here’s how the scam plays out. You hoard the dough from selling homes and when you have enough of it you build a handful of affordable homes. That shuts the council up. If you can get a few associations to bid against each other to buy these affordable homes so much the better. Never give a sucker an even break – that’s the motto. What a bonkers policy! You can only get affordable homes if the price for the other homes is sky high. Are affordable homes just adding to the house price frenzy? Could it be that we are causing a problem, not solving one?
But the developers do have a point don’t they? Look at what has happened with Lego. They made too many bricks and their profits crashed. So you do have to get this supply demand thing in line. That’s if you’re making ruddy toys not essential homes for people. When you might think other rules would be better. That’s why Theresa May has said this. “The bonuses paid to the heads of some of our biggest developers are based not on the number of homes they build but on their profits or share price. In a market where lower supply equals higher prices that creates a perverse incentive, one that does not encourage them to build the homes we need.”
Of course a lot of associations and councils have tried to build and sell high value homes to pay for affordable homes. What else could they do? I think this policy is on its last legs. Last year Grenfell stopped landlords cutting repair budgets. This year could bring an end to the idea that hiking house prices is any use at all in the affordability battle. It really is like asking GPs to sell cigarettes to help fund the NHS. There needs to be a better way out of the property trap.
But Ollie does strike a wrong note. He thinks you might get sharper price competition if a number of developers were selling on the same site. You might indeed. Though as we know to our cost the day to day management squabbles would be a nightmare. So good thesis Ollie, but a couple of points to pick up in the viva.
By Alistair McIntosh, HQN Chief Executive