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TOP housebuilding firm Taylor Wimpey increased its Conservative links, doubling the number of Tories on its board just as the government announced a new scheme that will pump up housebuilders’ profits.
Chancellor Rishi Sunak wants the government to support mortgages on properties worth up to £600,000 in a new version of a Tory scheme that has pushed up house prices, enriched building firms, but done nothing to help homelessness.
Sunak’s Mortgage Guarantee is a new version of Help to Buy, the mortgage support scheme introduced by George Osborne in 2013.
This was supposedly an “emergency measure” to support house sales in the wake of the 2008 financial crisis, but has been renewed in one form or another ever since.
The scheme subsidises house sales, rather than housebuilding — so it increases house prices rather than housebuilding.
Sunak’s version of the scheme will provide a government guarantee for 95 per cent mortgages for new-build properties.
Previous versions of the scheme created huge profits for housebuilders, allowing them to make billions selling smaller numbers of expensive houses, rather than addressing the housing crisis.
There are two reasons the supposedly “free market” government supports this subsidy: first, it helps them win support of better-off young people who can’t quite afford today’s inflated house prices.
Second, and more importantly, it boosts profits of housebuilding corporations. The key Tory housing policy is not aimed at creating housing for people on low incomes, where the housing crisis actually hits.
The Tories love those housebuilding firms because they give them money and jobs.
Just as Sunak floated the new scheme, Taylor Wimpey appointed Baron Jitesh Gadhia to its board. Gadhia is an investment banker and major Tory donor — he’s given about £200,000 to the Conservatives and founded Conservative Friends of India.
David Cameron made Gadhia a lord in 2016 and put him on the board of UK Government Investments, a government office overseeing public-sector shareholdings, including in bailed-out banks.
Taylor Wimpey already has former Tory minister Angela Knight on its board.
Knight is still close to Tory circles, and even had a part-time job at the Treasury — the department behind Help to Buy — as the chair of the Office of Tax Simplification from 2015-19.
Gadhia’s appointment doubles the number of top Tory directors running Taylor Wimpey.
Taylor Wimpey likes the Tory influence — it also very much likes Help to Buy.
This month Taylor Wimpey published its annual results, revealing that “during 2020, approximately 46 per cent of total sales used the Help to Buy scheme.” This is a firm deeply dependent on government support.
These annual results say a lot about what is wrong with the housing market.
Taylor Wimpey was hit by the Covid-19 crisis, reducing both its housebuilding and profits — but it still did very well because, thanks to government support, housebuilding is a money-maker, even as it fails to deal with the housing crisis.
Taylor Wimpey “completions” of houses decreased by 39 per cent to 9,799.
The company calls itself a “volume housebuilder” but even in a non-Covid year it only builds about 16,000 houses: in the years when the public sector was allowed to build houses, between the 1950s and 1980s, councils typically built 100-200,000 homes a year. Private “volume” housebuilding does not create the volumes we need.
Thanks to Covid-19, Taylor Wimpey profits also fell by about two-thirds: but even with this fall, it made a very healthy £217 million profit.
It can make a lot of money by building a relatively small amount of houses because the price of those houses keeps going up.
The average price of the houses it sold went up from £269,000 in 2019 to £288,000 in 2020. With government support, it is increasing house prices way above inflation.
With big housebuilders making big profits by selling a small number of houses, the private housebuilding industry will never solve the housing crisis. These prices are inflated by government subsidy for mortgages.
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