comment 11
period – from 4 per cent to 3.4 per cent as a per- centage of the rent owed, the rate of improvement slowed over the period and it remains to be seen if the improved performance can be sustained when further cuts in the rent cap kick in and Universal Credit is rolled out to all claimants. This all combines to raise a question mark
over the business cases being made for the cur- rent rash of mergers in the HA sector. Let’s ignore the loss of competition for one minute. The case for mergers can be traced back to min- isters urging associations to amalgamate and reduce the number of highly paid chief execu- tives and directors. While the number of mergers being
announced has grown, it is noteworthy this is not being accompanied by a spate of executive sack- ings or redundancies. Instead we are seeing senior executives’ jobs being retained, often with new roles or job titles. This is not necessarily a bad thing – it pre-
serves talent and knowledge, while retaining expertise within organisations as they look to get the best out of themselves. But it’s not deliv- ering the savings on the salary budget as envisaged by Ministers. How long will it be before those Ministers spot this as well, and
PERSIMMON PAYOUTS
Persimmon senior executives set to pocket multi-million payout this year
high payouts to senior board members despite the backdrop of a continued housing crisis in the UK and criticisms of the industry’s failure to hit housebuilding targets. In the context of major housebuilders seeing
F
high profits recently, the reported £240m payout planned for Persimmon executives includes Mike Farley, outgoing CEO, who is thought to be col- lecting £20m in shares this December. A 10 year bonus scheme which started in 2011 tasks man- agers to return £1.9bn to shareholders, with resulting bonuses predicted to reach a total of nearly £620m. Persimmon said the LTIP (Long Term
Incentive Plan) scheme has been designed to “drive outperformance through the housing cycle,” and “incentivise the management to deliver the capital return, grow the business and increase the share price.” Other firms such as The Berkeley Group have
been the target of media criticism, with founder and chairman Tony Pidgley’s six-fold pay rise to £23.3m making the headlines in 2014. Housebuilders are building more homes however – while Bovis reported a 9 per cent rise in profits
respond online at
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ollowing a 54 per cent rise in the com- pany’s share price over the past year, Persimmon is reported to be planning
in the first half of this year, it also built a record 1,525 houses. A spokesperson from Persimmon told
Housebuilder & Developer: “Since the LTIP scheme was put in place, Persimmon has delivered
a 56 per cent increase in new homes completed, invested over £2bn in new land, opened 812 new development sites, returned £1bn to shareholders and created thousands of jobs, while at the same time building a stronger, bigger business.”
urge the HCA to take action on this? The latest merger announcement saw Sanctu-
ary Group and Housing & Care 21 declare their plans to combine all of their elderly-specialist housing operations into a single 32,000-home subsidiary of the Sanctuary organisation. They said the efficiencies generated would allow them to double their development programme to a combined 800 affordable rent homes for older people a year.
Regulatory fees
With the Housing and Planning Act now on the statute book, we wonder how long it will be before the regulator announces plans to intro- duce charges for its work. Consultation on bringing in regulatory fees has been postponed several times already but it is understood the time for a formal announcement is fast approaching and Communities Secretary Greg Clark is allegedly a fan of fees unlike his prede- cessor Eric Pickles. Ministers and officials at the HCA are believed
to be keen on allowing fees to be charged from 2017/18 if possible. The HCA and its sponsoring government department, the DCLG, have each witnessed significant funding cuts in recent
spending reviews, and more cuts are forecast. Previous plans to introduce regulatory fees in
2014 and 2015 had to be dropped because Min- isters did not sign off the necessary consultation papers in time. The election and the new legisla- tion then took priority. The regulator is currently funded via a grant
from the DCLG. According to an HCA discus- sion document published back in February 2014, the total cost of the regulator was around £12.5m for 2013/14 but since then the number of regu- latory staff has fallen. Surprisingly the HCA analysis found ‘other
factors’, such as associations’ involvement in non- social housing activity and the geographical dispersal of stock, had no statistically significant effect on landlords’ costs. Any landlord with costs higher than the aver-
age cannot say they have not been warned. Apart from working hard to reduce costs (by learning from the better performers), they also need to ensure they know why their costs are higher and what if any justification there is for this. Board members and executive teams need to
expect closer scrutiny and to understand that value for money will remain an integral part of their oversight for years to come – well, for the next four years at the very least.
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