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Media centre home > News > Research reveals scale of housing developers' profits

Issued:16/11/16

A new report from Sheffield Hallam University has revealed the true scale of soaring profits at the UK's biggest housing developers as the country suffers from an ongoing crisis in new housing supply.

The research, carried out by Sheffield Hallam's Centre for Regional and Economic Social Research (CRESR), analysed the financial records of the nine biggest housebuilders between 2010-2015 and found startling results.

The nine biggest housing developers, who build nearly half of all new housing, increased their housing output by 33 per cent from 2012-15. At the same time, revenue grew at more than twice this rate, increasing to 76 per cent, with profit before tax rising by a staggering 200 per cent in this period. 

The research also showed that end of year profits for the biggest five firms (after taxation, impairments and exceptional items are taken into account) increased from £372 million in 2010 to over £2 billion by 2015 - an increase of over 480 per cent.  Furthermore, dividend payments to shareholders in 2015 by these firms amounted to 43% of yearly profits, raising questions about the levels of reinvestment in housing production taking place.

The Secretary of State for Communities and Local Government, Sajid Javid, recently committed to "breaking the stranglehold" of the housing developers, whilst calling on them to release some of their land banks. Mr Javid, who recently claimed housing was his "number one priority", is expected to deliver a Government white paper next month laying out his plans to tackle the current housing crisis.

Professor Cole, who wrote the report alongside researcher Tom Archer, said: "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.

"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."

As well as providing a thorough financial analysis of the performance of major housebuilding firms, the report - Profits before Volume? Major housebuilders and the crisis of housing supply - provides a number of recommendations as to how the sector and Government can improve housing supply.

Professor Cole continues: "Whilst we are encouraged by the Government's recent attention to this issue, our report argues that there is scope for much more to be done. This could involve measures over the use of reserves, rent policy, land supply, borrowing restrictions and moving the balance of housing subsidy away from demand and towards supply.  

"We also support the recent calls by a wide range of economists and the CBI to the Government to borrow more for sustainable infrastructural investment, including housing, at this juncture in the economic cycle."  

Click here to read the full report.

For press information: Martin Webb in the Sheffield Hallam University press office on 044 225 2621 or email m.webb@shu.ac.uk.