Project Director: Tom Archer
Project Duration: 2014-2023
Over the past decade, the sluggish rate of new housing supply has been a core concern for UK policy makers. Many analysts and politicians have declared this to be at the heart of the current ‘housing crisis’. Government has sought to remedy these problems by, among other things, bolstering demand for new private homes through financial support. Yet the housebuilding market has become increasingly dominated by a small number of companies, who have been the major beneficiaries of such policymaking. In recent years the biggest eight housebuilders have developed close to half of all new homes in the UK, as the number of small to medium sized builders has dwindled.
There are strong indications that relying on larger housebuilders to increase supply comes with significant drawbacks. For the eight largest housebuilders, their growth in profits has consistently outstripped the growth in their development of new homes. As the level of profit has increased, shareholders - especially institutional shareholders such as global asset management companies, pension funds and insurance companies - have extracted this value to an ever greater extent. They have enjoyed unprecedented largesse, with minimal return benefits for the UK housing market.
We have charted these trends in multiple reports and articles, beginning in 2014 with ‘Still not plannable’? and followed up with deeper analysis in 2016 in our report ‘Profits before Volume’. In 2021 we noted how these trends reveal broader processes of financialisation and value extraction, in ‘The Financialisation of Housing Production’.
In our most recent report, ‘The Invisible Hand That Keeps on Taking’, we show how billions of pounds have been lost to new housing supply through dividends, share buy backs and other means of dispensing the ‘surplus capital’ of large housebuilders. The value extracted is comparable to the total amount of public expenditure on new affordable homes, and yet this is rarely factored into any discussion on how to address the housing crisis. The cost of increasing dividend payments represents a real additional cost for new home buyers, in a period of worsening housing affordability. We argue that the financial performance of large housebuilders needs to be brought much more firmly into the spotlight of public scrutiny. We call for a fundamental shift to new forms of supply orientated around all those who have a stake in the housing market, rather than simply maximising returns for the benefit of institutional shareholders.
The project team also includes Professor Ian Cole.