Quite lovely logic here, just quite lovely

House builders are not going to do that: Persimmon convincingly evidences today that restricting supply is in their own best interests.

So, let us go and look at the link Ritchie tells us proves this.

A leading City investor has called on housebuilder Persimmon to cut back an executive pay plan that could see the management share £600m over the next five years.
The scheme is one of the largest ever at a FTSE 100 company outside banking.
The biggest beneficiary will be chief executive Jeff Fairburn, who could earn more than £100m.
Mike Fox, from Royal London Asset Management, said the payments were too high “in all circumstances”.
He called on the board to show restraint in the light of the housing crisis and government support for the housebuilding industry.
When the scheme was put in place, the housing market had begun to recover from the 2008 recession. About 150 managers were given the opportunity to earn shares worth up to 10% of the company’s total value, provided they hit tough targets on returning money to investors.
The company recently said it was running well ahead of those targets, and analysts say it is likely the scheme will pay out in full. Persimmon shares have more than tripled in value since the incentive plan was put in place, rising from £6.20 to about £20.

Hmm, so, executives incentivised to deliver profits to shareholders. We might think of this as a solution to the principal agent problem but it’s difficult to see why this means that the company won’t be building housing.

The company has defended the payouts, saying that since the scheme was put in place. Persimmon has increased the number of new homes it builds by half and invested more than £2bn in new land.

So it’s built more housing and stuck even more money into land to build yet more housing.

This proves that not building more housing is in the best interests of private market actors, does it?

Just where is it that he buys his logic from? Because I want some. With this sort of thing I could prove to my wife that having a girlfriend was my being even more faithful than monogamy.

10 thoughts on “Quite lovely logic here, just quite lovely”

  1. ‘Around the world it is now appreciated that the only way to solve our economic problems, and the only way in which we will get out of a recessionary environment, and the only way in which we can offer real job prospects to people is by government investing in those things that their populations need.’

    The entire world now recognises Murphy’s insight – this is a man who has rejected 200 years of ‘conventional’ economic thinking – like a prior ‘man with a blue pen’ he has decreed the economic equivalent of the sermon on the mount and the world has listened. I don’t blame Murphy Richards for giving it up as a bad job – how could anyone hope to satirise this? I am sure those living under the regimes of Venezuela, Eritrea and North Korea will be grateful for Murphy’s endorsement of those governments ‘investing in things the population needs’

    ‘There is no greater need in the UK at present than that for affordable housing. If we are to stop the scandal of high rents and give people a real chance on so many levels then we have to deliver Peoples Quantitative Easing, we have to do so now.’

    I thought the Greatest need last week was to tackle tax evasion? Which is it? Or indeed are there myriad ‘greatest needs’ decreed by the Sage of Ely that the government needs to jump on addressing as soon as possible? I particularly like the idea that delivering inflation directly into the economy is going to tackle either high rents or insufficient housing.

    Tim, I have to agree with your last statement – I think the man is dangerously close to a nervous breakdown – I means seriously, he can’t actually believe this shit, surely?

    One equally depressing thought – I wonder how long we’ll have to wait for Lawrence/Arnald or DBCReed to chime in here spouting more bollocks?

  2. ‘Around the world it is now appreciated that the only way to solve our economic problems, and the only way in which we will get out of a recessionary environment, and the only way in which we can offer real job prospects to people is by government investing in those things that their populations need.’

    Yes indeed, the world is full of authoritarian wankers who have never learned a thing from history.

  3. Given the time frames and financing etc. involved if building firms do not have land on their books then one effect may well be to radically diminish the actual building done. Housing is not and cannot be a “just in time” system.

  4. “give people a real chance on so many levels”

    Murphy’s in favour of building soviet style high-rise apartments.

  5. AndrewC

    LOL- Perhaps he, Wilcox, Dickie and Horrocks will get to share the penthouse suite – given their value to ‘Civil Society’ (Or I think it is just ‘society’ now)

  6. Has anyone told Murphy that there hasn’t been a mononopoly producer in housebuilding since SuperMac’s “bonfire of controls” in 1952?

  7. Nobody here buys it but the big house builders are into supply management. Careful increases in new builds. Frantic resupply of the land bank. And then supplying under the governmental requirements for new houses. Don’t the figures show 150k new houses against a government requirement of 200k? Murph seems to see it better than the timmers.

  8. @ Mister Bean
    If you have a local monopoly then you will go for supply management so that supply of new houses on your estate matches demand at your desired price level. And one or two are quite open that they do that; almost certainly a few more do that without admitting it. BUT there are tens of thousands of other housebuilders who never get near a local oligopoly, let alone a local monopoly, situation so they would get no benefit from restricting supply as it would have no discernible impact on the price of the houses they sell.
    The overwhelmingly dominant problem with housebuilding is planning regulations.

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