Shareholders are pocketing billions in dividends – and it’s making UK’s housing crisis worse

In the search for new resources to build affordable homes, we might turn to the excess profits of housebuilders, or as they define it, their ‘surplus capital’. This could be put to much more productive use to create many more affordable homes – and in turn mitigate levels of homelessness, housing need and entrenched poverty.

Your support changes lives. Find out how you can help us help more people by signing up for a subscription

Let’s imagine that the government requires housebuilding firms of a certain size to sign a Builder’s Social Contract. This contract states that over and above a specific level, their profits will be subject to a ‘public return’ to support the development of new affordable homes, such is the state of the crisis in our housing market. Since housebuilders are benefitting from excess demand, may be aided by reforms to the planning system, and would get a boost from reinvestment in the construction of affordable homes, the proposal for a public return seems a reasonable request.

The contract states that the equivalent of 15 per cent of all profits before tax will be paid into a fund for new affordable homes. If this measure had been implemented between 2010-22, it would have generated £6.3 billion, or enough to develop 100,000-plus additional affordable homes. There are no real losers here because most large shareholders do not impart new capital into housebuilding firms for new housebuilding, and so it does not hinder development capacity. Shareholders would still get a dividend return that far exceeds what they were getting before the financial crisis. SME housebuilders, excluded from these contract requirements, would be given a competitive edge, and a major signal would be provided to housing associations to gear-up for new development.

Get the latest news and insight into how the Big Issue magazine is made by signing up for the Inside Big Issue newsletter

Capturing a share of excessive profits should be seen as our entitlement. Programmes such as Help to Buy – which were underwritten by us the taxpayer – played a major role in creating the levels of housebuilder profit seen in the last 10 years. Securing public benefit from this is a legitimate claim.

If we needed a final reminder of how important this is, consider the home buyer who purchased a home from a big housebuilder in 2022. They paid, on average, £22,000 extra on the purchase price of their new home just so shareholders could receive inflation-busting returns. It’s time to return some of that value for the hundreds of thousands of people who really need it.

Tom Archer is a senior research fellow at the Centre for Regional Economic and SocialResearch (CRESR) at Sheffield Hallam University. Ian Cole is emeritus professor of housing studies at CRESR at Sheffield Hallam University. Their report ‘The Invisible Hand that Keeps on Taking’ can be read here

Do you have a story to tell or opinions to share about this? We want to hear from you. Get in touch and tell us more.