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Gove’s overlay change makes Tory’s relationship with UK developers sour

Last week, Michael Gove asked UK property developers to find £4bn to help solve the cover scandal was the second of his brief tenure as housing minister. which he disturbed an area with close ties to the ruling Conservative Party.

“For too many people living in the properties your industry has built in recent years, their homes have become a source of misery,” he wrote in an open letter to the industry.

Gove had only been on the job for four months when he tear on the developers, threatening legal action if they don’t help replace the dangerous cladding on high-rise buildings – a safety issue that has affected millions in the wake of the deadly Grenfell Tower fire in 2017.

Before that, he destabilized the industry within days of taking over the housing brief in September – the announcement of a review of big plan reform designed for ease of development in several areas.

According to more than a dozen developers and politicians who spoke to the Financial Times, Gove’s interventions have fractured the government’s relationship with the industry.

A construction worker checks coatings at the Royal Artillery Quays residential apartments in London © Hollie Adams / Bloomberg

“I’ve been in this industry for over 40 years, I’ve never seen or heard the big thing I’m hearing right now,” said Steve Morgan, a veteran homebuilder who founded Redrow.

Executives are hoping for a partnership during a meeting with Gove this week. Otherwise, the sourness threatens to reverse the regulatory policies, developed during the decade in which the Tories have been in power.

This close relationship has allowed homebuilders to reap huge profits in return for building more homes to help solve Britain’s housing crisis.

The rebound index line graph shows that UK-listed homebuilders have performed strongly over the past decade

It began when David Cameron’s government launched a controversial Help to Buy equity loan scheme in 2013, followed by a target of 1 million new homes by 2020. That goal was increased in 2017 after Theresa May took the reins to 300,000 new homes a year by 2025.

“There is no doubt that there is an informal understanding that if we get to 300,000 homes built a year the big developers will have to contribute significantly to that and will need some help. ,” said a former Tory housing minister.

“The industry was certainly able to leverage that into useful policy,” said an executive at a construction company.

Line chart of Net Additions shows UK housing construction has accelerated after Help Buy was launched but is still well below the 300,000 annual target

The targets were popularized nationally but when translated into major housing developments proved the opposite at the local level, sparking a backlash. This was highlighted in the shock loss to the Tories in Chesham and Amersham by-election last June – an outcome that forced the government to rethink its planned reforms.

Gove has sought to create distance between his division and the field, in contrast to his predecessor Robert Jenrick, who has been criticized for his familiarity with developers.

The move, which wiped billions of dollars from builders’ valuations, took the sector by surprise and led many executives to conclude that the government had made politically irrational decisions to with them.

“We are described as Victorian barons with eyebrows. . . Graham Prothero, managing director at Vistry Group, a well-known construction company in London, said.

“I have no problem with paying polluters. . . But [the building safety crisis] is the result of a very broad group of people – managers, architects, manufacturers, contractors and developers,” he added.

However, Gove’s hand was forced by the Treasury Department over the cladding issue, the former housing minister said. “There is a clear political need to [stop leaseholders paying]. But Treasury, in classic Treasury style, refused to pick tabs, which is why Gove was pushed to start paying the industry. “

Developers fear that they will have to bear the brunt of the panel costs, although Gove indicated he will hold other parts of the industry, such as panel manufacturers, to account.

“We are a relatively easy target. Our members are based in the UK, pay UK taxes and employ staff in the country. The other groups involved are harder to reach, they make a lot of money but aren’t always accessible,” said David O’Leary, policy director at the Home Builders Federation.

As well as feeling victimized, the builders complained about being shut down by Gove. “He didn’t consult the industry,” Morgan said.

But leading Conservatives offer brief objections to such arguments. “You can elaborate on the time period and some details but I hope this will be an important turning point to make it clear that the real estate development industry will be treated like any other industry,” Damian said. Green, the former deputy prime minister said.

Another minister involved in housing policy said it was “outrageous” for developers to think they could rely on taxpayers to “find information about the buildings they’ve built”. . Their profits are getting fatter and fatter. “

The Help to Buy plan has fueled builders demand, build, and profits © Chris Ratcliffe / Bloomberg

Such antagonism between homebuilders and Conservative politicians is new. Both are reluctant to offer warmth, but the relationship is mutually beneficial.

Scheme Help to Buy – criticized by a Report of the House of Lords for not delivering good value for money – has driven demand, profit of builders and builders.

FT disclosure Last July, in the two years since Boris Johnson became prime minister, a quarter of all donations to the Tory party have come from the real estate sector – a source of income that could be threatened by the broad side of the economy. Gove. “After all, why would you give money to the guy who’s kicking you?” asked a sponsor.

The collapse of confidence in the sector could also cause broader ramifications for the government’s homebuilding push plans, including implementation of the upgrade agenda and gas targets. their ambitious posterity.

O’Leary said developers will want to keep building, but getting more than 250,000 new homes a year in a tougher policy environment is unlikely. “If you’re simply withdrawing cash from our businesses, that’s the cash we use to build homes,” Prothero said.

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