William Eichler 16 November 2016

Developers enjoy ‘soaring’ profits during housing crisis

The UK's biggest housing developers are enjoying ‘soaring’ profits as the country suffers an ongoing crisis in the supply of new housing, research reveals.

Researchers from Sheffield Hallam University analysed the financial records of the nine biggest housebuilders between 2010-2015 and discovered while their output increased by 33% during this period, their profit before tax rose by 200%.

The findings, published in the report Profits before Volume? Major housebuilders and the crisis of housing supply, also showed the end of year profits for the biggest five firms increased from £372m in 2010 to over £2bn by 2015.

The report also raised questions about the levels of reinvestment in housing production that was taking place. It found dividend payments to shareholders in 2015 by these firms amounted to 43% of yearly profits.

The report’s co-author Professor Ian Cole welcomed Sajid Javid’s stated commitment to break the ‘stranglehold’ of housing developers and tackle land banking, but warned there needed to be ‘a major upscaling’ in housebuilding by councils.

‘We welcome the recent shift in focus by the Government towards housing supply, firstly in ensuring this issue has now been forcefully raised in public discourse, but also in proposing some interventions which could encourage greater diversity in the housebuilding sector, he said.

‘However, our research suggests that reliance on the private sector alone is not enough: unless there is also a major upscaling in housebuilding by local authorities, housing associations and other non-profit organisations, the crisis in housing supply will continue.’

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