Telling home truths

Splattered all over the business pages of the national newspapers this week has been a damning story about how Persimmon was given a five star rating by the Home Builders Federation. The housebuilder was awarded this top star rating despite a catalogue of devastating safety failures, slapdash workmanship and punitive leaseholds.

The disconnect between the HBF’s customer satisfaction survey and the poor quality of Persimmon’s homes came to light after the housebuilder commissioned its own internal review into the quality of its new-build houses. While Persimmon’s homes have been subject to criticism for several years, the issue only really came to highly publicly following the very public controversy over vast bonuses paid to the management.

As the country’s second biggest housebuilder, the HBF ratings system is important because the housebuilder uses it to promote new homes while potential house buyers use it as a guide when buying.

Yet Persimmon need not have bothered with the QC led investigation. If Persimmon’s executives had cared – or dared – to watch Liam Halligan’s exposé of its housebuilding activities in his recent TV Dispatches programme, they would have known the answer.

More pertinently, if any of Persimmon’s bosses – four of whom shared in a £200m bonus scheme and another 140 top managers who had £800m to share between them – had visited the new-builds they were responsible for, they would also have known the answer.

Hundreds of their homes were not fitted with essential fire safety barriers. Other houses had leaks, exposed sewage pipes, virtually no insulation, wobbling walls, staircases held together with pins and faulty windows. Halligan interviewed one new house owner who had listed 295 defects in their new-build home.

Yet Persimmon – whose previous boss, Jeff Fairburn, earned a £75m bonus from the FTSE-100 listed company’s outrageous LTIP scheme which was boosted by the government’s ludicrous Help to Buy scheme – boasts this in its mission statement: “We are proud to be the one of the UK’s most successful house builders, committed to the highest standards of design, construction and service.”

How wrong could they be. It’s a subject Halligan goes over into in greater detail – and reveals even more horror – in his brilliant tour de force of a new book, Home Truths: The UK’s Chronic Housing Shortage.

Unsurprisingly, the title of his chapter on the UK’s house builders is brutal: “New-Build Nightmares”. What’s more, Halligan demonstrates how a handful of house builders are dominating the industry in an oligopolistic, exploitative and over mighty manner providing “sub-standard products to customers who face little choice because of the severe housing shortage.”

Ironically, they benefit from the shortage by holding on to land and jacking up house prices while at the same time building houses that are of a worse quality and craftsmanship than in the 1960s. Indeed, when you consider that the technology and the materials have been available for several decades to build houses which are energy self-sufficient and environmentally sustainable, the quality of UK housebuilding is not only a disgrace but an unforgivable one.

House builders are not the only culprits that get it in the neck from Halligan. Sadly, Britain’s housing crisis is far more complex than simply blaming greedy and shoddy house builders and developers. The real fault of Britain’s housing crisis and the sky-high prices of housing lies ultimately with government policy and our complex, labyrinthine planning system which leads to such a scarcity of building land. It’s a scarcity which has stymied  private individuals from building their own homes and has led to a situation in which only a half of all 35 to 44 years olds own their own homes. In 1991, that figure was 78%.

For a nation in which “an Englishman’s home is his castle” was once the prevailing philosophy, and owning your own home was the crowning jewel of the Thatcher era when buying a council home became such a prize, the collapse of home ownership among the young is an astonishing indictment of successive governments.

At current new-build levels, Halligan estimates that by the late 2020s, only around a quarter of 25-34 year olds will own their own homes: for the few, not the many comes to mind.

So what has gone so wrong? Halligan blames the Churchill and Macmillan Conservative governments of 1950s which led to the Land Compensation Act in 1961, legislation which gave landowners – and developers – the rights to all the profits of the sale made when they sold land with planning permission. It was a terrible mistake to make, and would have been far cleverer if they had found aw way of splitting the profits more evenly. But Macmillan caved into the landowner lobby.

Up until then, landowners who sold their land with planning consent had to share in what’s called “land capture value – or LVC – with the local community which used the share of profit gains for local amenities.” It wasn’t a perfect system as 100% of land gain went to government, which meant many landowners sat on the land.

But it is the main reason why there was such a boom in housing during the 1950s and meant that land was more competitive for housebuilders, allowing smaller builders to compete and keeping prices down.

In one stroke, Halligan reckons this piece of legislation destroyed the housing market and is behind today’s over-priced and constipated system.

Personally,  much of the blame should also be laid at the doors of backward looking local councils, which together with growth of Nimbyism, are hugely to blame for the gridlock. They are also to blame for much of the appalling housing standards – and design – that we see all around us where in some cases, it is clear no architect worth his or her salt have been near the design table.

If you want evidence of some of the more ghastly examples, visit one of the new estates in Wymondham in Norfolk for proof, a parody of Noddy Land. If council and government officials want inspiration for how to build well, they should head to Barcelona to see how to build stunning city-centre flats and apartments and to the outskirts of Oslo for how to build beautiful homes, houses that have used the latest in insulation materials for at least 50 years.

As you would expect, Halligan has solutions to break the gridlock and a ten-point manifesto for building more homes at affordable prices.

Reforms include using land the state already owns, (plus more brown field and change of use from office to residential in towns) developers must be encouraged to deliver homes within a set time frame rather than be allowed to sit on land and there should be incentives for SME builders to get back into the market.

More controversially, he wants to see a return to LVC to keep down the cost of homes and provide funds for more local facilities.

And for those Nimbys who don’t want more houses on our green and pleasant land? Remember that just 8% of the UK is built on. With brilliant use of urban space and other brownfield sites, there should be no fear of housing sprawl. The greater fear is that most of this generation of 30 year olds is priced out of buying home while the next will only rent unless the shortage is sorted.

Hopefully Robert Jenrick, the new secretary of state of housing, communities and local government, has Home Truths on his stocking list. So should you.