U.K. May Ban Persimmon From Help-to-Buy Program, Times Reports
(Bloomberg) -- The U.K. government may not allow Persimmon Plc to use the extended Help to Buy program, which offers interest-free loans to purchasers of new homes, following allegations of poor standards and hidden charges, The Times reported.
Housing Secretary James Brokenshire is worried about the company’s behavior in relation to a string of complaints regarding the use of leasehold structures, under which buyers have to pay an annual rent for their new home, and the quality of its construction, the Times reported, without saying where it got the information. Help to Buy offers interest-free loans of as much as 40 percent of a house’s cost to low deposit home purchasers for five years.
Former Persimmon Chief Executive Officer Jeff Fairburn decided to leave the U.K.’s largest homebuilder by market value last year after his 75-million-pound bonus package became a focus of public anger about executive pay. Help to Buy had helped fuel profits at the firm and former Chairman Nicholas Wrigley and Jonathan Davie, former head of the company’s remuneration committee, both resigned in 2017 as a result of a decision not to impose a cap on its long-term incentive plan, which led to the huge bonus for Fairburn.
A person familiar with Brokenshire’s plans said the secretary is concerned about the issues tied to leasehold, quality and leadership at Persimmon, and added it would be surprising if the company’s behavior wasn’t a point of discussion in a review an extension of the program for 2021-2023.
Persimmon in a statement said it increased output by 75 percent since 2012, and invested 3.8 billion pounds ($5 billion) in acquiring land for construction.
“In late 2018 we announced a range of new customer service initiatives and we are confident that these will improve our performance once they have had time to take effect,” a Persimmon spokesman said in an email. “We are also making a significant investment in training to address the shortage of skills in the industry.”
Help to Buy has been criticized for boosting homebuilder profits by pushing up prices. Chancellor of the Exchequer Philip Hammond said in October that the program would be extended by two years to 2023, but added that regional price caps will be introduced, limiting the value of the home to 1.5 times the price for an average debut home purchaser. Brokenshire is reviewing Persimmon’s participation in the extended program, The Times reported.
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