IF you want to know why Labour will struggle with their housing promises, it’s worth taking a look at the annual accounts of Taylor Wimpey.

Labour says it will “get Britain building again” and will “deliver affordable housing.” But it won’t do it by the traditional Labour method of building more council houses. Instead, it hopes to cajole the private housebuilders to build more houses.

Labour hopes the extra supply will lower house prices, and this might filter down to lower rents — and that it can do side deals with the private housebuilders to include some social housing in their developments.

Labour’s plan to tempt housebuilders into this deal is to make it easier for them to get planning permission, and help them build roads and infrastructure for new private developments.

But Taylor Wimpey’s accounts, filed at Companies House last month and covering figures for 2023, show why this bargain may not work.

The accounts are full of big numbers: Taylor Wimpey’s annual turnover was £3.5 billion. The firm made £473 million profit. From that, it paid out £339m in dividends to shareholders. So many hundreds of millions of pounds are flowing in and out of the company.

It is, as it says, “one of Britain’s largest homebuilders.” It is a “volume homebuilder” — meaning one of the big guys in the sector. But how big are those volumes? Taylor Wimpey says it built 10,438 houses in 2023.

That’s down a bit on previous years, but even their maximum annual house build in the last five years was just 15,000 houses. So it makes a great deal of money building a relatively small amount of houses. Britain’s “volume” housebuilders don’t actually build very big volumes of houses.

Why would it? The houses it build are sold for above-average prices: the average Taylor Wimpey house sold for £324,000 in 2023 when Britain’s average house price was £288,000. It makes plenty of money selling a small amount of houses for above-average prices. It doesn’t necessarily want to build a whole lot more and bring the price down.

The firm says in its “priorities going forward” that it intends to “continue to prioritise value over volume and seek to increase volumes where market conditions allow in a value-enhancing way.”

Building fewer houses for more money is just good business sense. This is how the market works. The Labour government is going to make it easier for these firms to build more houses. Firms like Taylor Wimpey will no doubt take advantage and build a few more. But there is no apparent enthusiasm here for increasing building enough to see prices — and profit — per house  — drop.

Key to Taylor Wimpey’s business is the firm’s “landbank” and “strategic pipeline.” The landbank is land that has some kind of planning permission for building houses. The “strategic pipeline” is land it has bought that the firm thinks is likely to win planning approval.

The firm boasts it has “£61bn potential revenue in our landbank across both the short-term landbank and strategic pipeline.” That sounds like it could build a lot more houses.

It clarifies that it has 80,000 plots in its “short-term landbank” alone. But it isn’t going to be building 80,000 houses in a hurry because it wants “to deliver superior returns for shareholders through our high-quality landbank.”

It makes sense to ration housebuilding even where it has the land: Taylor Wimpey does very nicely making a smaller amount of houses every year that it can sell for above-average prices. Giving them a bigger landbank isn’t a magic wand to summon up huge amounts more housebuilding, especially if that might depress prices.

The danger is firms like Taylor Wimpey will take the extra planning permission and convert it into higher income — by building on newly released land where prices are likely to be highest and focusing on the most expensive houses it can build on that land — rather than significantly increased volumes.

Taylor Wimpey is doing very well on relatively low volumes. It’s good news for shareholders. It is also very nice for the bosses.

Chief executive Jennie Daly got £2.1m in 2023, and group finance director Chris Carney got £1.5m. Jitesh Gadhia, who is a non-executive (part-time) got £83,000. He is a Tory lord — because big corporations like to have somebody politically connected on the payroll. I should expect them to appoint more Labour-connected top staff in good time.

Labour plans to encourage housebuilders — by loosening planning laws, helping with infrastructure for new estates, and other public subsidies — to build 1.5m houses in five years.

Current housebuilding is at 200,000 a year, so this really means an extra 500,000 houses over five years. It’s really unlikely that this increase will bring down house prices, given the explicit strategy of the housebuilders.

It’s also likely that Labour will have to offer them more and more favours to get them to deliver this increase — like reducing the amount of social housing required as part of any developments that do get planning permission.

A more direct intervention — like building an extra 100,000 or 200,000 council houses a year — would be a much surer way of making housing more affordable.

 We know what the problems are: the rent is too damned high, so it is eating up too much of people’s incomes. Some are forced into worse properties, further from their jobs and family.
 
Some are forced into homelessness. Renters can’t afford to save for a deposit to buy a house, and the price of houses puts them out of reach anyway.
 
 We do need to build more houses to make affordable housing more available, both to rent and buy. But Labour’s plan to do this by offering more and more incentives to private housebuilding firms, rather than just building council houses directly, is a version of “trickle-down economics.” The risk is that Labour incentives for housing firms will be converted into higher profits, not cheaper houses.

Follow Solomon on X @SolHughesWriter.