Home Truths podcast: In conversation with Jennie Daly at Taylor Wimpey

Jenny Daly, chief executive of Taylor Wimpey, appears in today’s second episode of Building Talk’s latest series which is focused on the housing crisis and is co-hosted by Jackie Sadek and Peter Bill.

Daly started her career as a planner, before joining Harrow Estates, a subsidiary of Redrow, where she had a number of roles before becoming managing director. She joined Taylor Wimpey as UK director of planning in 2014, progressing to land director, then group operations director and finally chief executive in April 2022, taking over from Pete Redfern.

Since Daly took the reins, when operating profit was at £923m, she has had to confront worsening market conditions. A series of headwinds have hit, most notably the disastrous mini-Budget under Liz Truss which triggered rising interest rates which weakened consumer demand because mortgages became unaffordable.

Taylor Wimpey’s annual results in February – showing revenue down 20.5% to £3.51bn and pre-tax profit down 43% to £474m – revealed that private completions were down to 10,848 from 14,154. Output for this year is predicted to fall further, with completions expected to be in the range of 9,500 to 10,000 homes.

In this interview, Daly talks about the impact of the economic cycle on private sector housebuilders’ build-out rates of new homes. While she acknowledges that we are currently in a market shallow, she says: “I expect that what goes down will come up and that I will be able to grow [the business] again”.

>> Also listen to: Episode 1: In conversation with Peter Freeman at Homes England

The conversation ranges from the impact of housing shortages on community tensions in her native Northern Ireland to the urgent need to improve construction skills and her desire to see a top-down, long-term vision and strategy for the planning system from the next government.

Here are some extracts from the interview, which is available to listen to via the player above or wherever you get your podcasts.

Q: You’ve had a meteoric rise to be a chief executive of a FTSE 100 company. And I know you had a really interesting childhood growing up in Northern Ireland in the 1970s. Are your parents bursting with pride about the fact that you are now a captain of industry?

They’re very proud. My mother regrettably passed away some years ago. She would introduce her children saying: “Here’s John, he’s a civil servant. Here’s Rosemary, she’s a doctor. Here’s Dermot, he’s a chef. And this is Jennifer and I’m not really sure what she does.”

My parents really couldn’t get their head around planning and housebuilding because they grew up in a very different world. But that didn’t stop them from being proud.

I grew up in Northern Ireland and was born in 1970, so at the start of the Troubles. There was a really desperate housing situation with an undersupply of fit housing and it drove a lot of community tension and disaffection. I’m not going to overstate that, but some of that then did spill over into the sectarian issues that plagued the province for such a long time.

We don’t talk about the effect on the individual, the failures around social mobility, the fact that birth rates are falling due to deferred household formation, the impact on educational attainment and health

I did have the security of growing up in a council house, and that was really important. It’s something that [is reflected in] how I move through my career. I spent quite a lot of time as a non-executive director at Peabody and I was really proud to be able to put something back by giving them support. We can’t as Taylor Wimpey or as the wider private housing sector meet all need. But we do all have a societal responsibility to make sure that need is met.

We don’t talk about the effect on the individual [of the housing crisis], the failures that we have around social mobility, the fact that birth rates are falling which has a lot to do with deferred household formation, the impact on educational attainment and health. All of those things are linked to the availability or lack thereof of good quality housing.

Q: Private housebuilders build homes in line with the country’s economic cycle, rather than the government’s stated desire to build 300,000 houses a year. So last year, you built fewer homes than you did the year before, because the sales rate has gone down. Can you explain that sales rate issue, and how that impacts almost everything from the buying of land to the final product?

Yes, I lead a business and our main focus is the delivery of private homes for sale. I’m very proud of the fact that about 20% of our output is affordable housing. So we do support other parts of the housing sector, but I think that fundamentally what you’re describing is that there’s a difference between housing need and housing demand and my primary focus and the private sector’s primary focus is to meet demand, and that does vary. Affordability, wider economic concerns, cost of living – they all vary the levels of demand.

Q: There is demand and then there is what you’re willing to supply. Everybody would love a nice house. So the demand is almost unbounded. But you only meet the demand on the basis of what you can make money from, surely?

We would term it “effective demand”, meaning the ability to achieve a mortgage or mortgage availability and the ability to fund the mortgage. So last year we suffered a reduction in the effective demand, not because of mortgage availability, which remained very high, but the absolute affordability of mortgages given increases in interest rates.

We could increase demand by reducing price, but there’s a level where that becomes unviable and my business would collapse. And if my business collapsed, then the capacity of the sector to deliver housing need and housing demand would reduce.

Q: That tells you that a significant proportion of the housing supply is dictated by the market, even the supply of affordable housing because it’s linked to the supply of private housing. Now, if that’s the case, why is there silence over this when it comes to discussing targets?

If you go back in history, we had a multi-tenure strategy for housing delivery, and particularly if you look at the 50s, 60s and 70s, you had the private sector delivering quite a substantial amount of housing but you also had council house build and you also had housing associations. In those days council house build was significantly greater than housing associations.

There’s been a real haemorrhaging of capacity in the housing sector in absolute terms over a protracted period of time

What we’re experiencing now is an ever-decreasing capacity of the other elements of housing supply overall. Whether it’s funding, whether it’s access to land, the complexity and unpredictability of planning affects everyone not just the private sector. There’s been a haemorrhaging of capacity in the sector in absolute terms over a protracted period of time.

Q: Why do we keep going on about the planning system needing to be fixed when maybe there isn’t a fix?

I just could not accept that degree of fatalism. It is broken. And I think it is becoming more broken by the day. And I do worry that it’s becoming such a big issue that nobody will tackle it. And I feel really very strongly that when we talk about planning, we’re talking about planning for housing delivery but actually let’s talk about planning and everything that it delivers. Our infrastructure is under invested, the industrial strategy needs planning. I sit in meetings with chief executives across all sectors including big data, logistics, communications, and they’re all struggling to get through the planning system. That is fatal to our economic health, wealth and happiness.

So we have to grapple with it. We cannot have a system where planning becomes a conduit that just won’t work.

Q: What on earth would you do besides pour money into it?

Look, you can’t expect anything to work if you just simply don’t have the resources, and the level of under investment over the last 14 to 15 years in the planning services of local authorities is jaw-dropping. I think it’s about a 60% fall in funding to local authority planning departments.

So, doesn’t matter how perfect the system is – our legislative construct could be wonderful, but we don’t know because there’s just not enough people to do it.

So what would you do? I do think that we need a national plan. I think if you try to fix everything from the drains up without some form of strategic will and plan from the top down, then you’re not going to get anywhere.

Governments over a long period of time have constantly taken something that should be considered over a long term and they’ve tacked back and forward to change policy overnight and expected to have results in something that requires long-term patience and direction. Then when it doesn’t work immediately, which planning is just not set up to do, they’ve changed it again.

And then you apply that back to a frustrated, under-invested local authority, and the decision to do nothing starts to be a preferable decision than trying to keep up with all of this tacking back and forth.

Q: We live in a democracy and on the other side of the coin there are all these people who don’t want whatever it is you as a developer want to do. How much of the delays in the system are due to people exercising their democratic rights, and how much is due to the failure of the mechanism itself?

This is why I go back to needing a government that has a plan for housing, for infrastructure, for industry and commerce. The evaluation of what we do on the ground becomes less about the individual and more about what does it do for us as a population as a whole.

From a housing perspective, everyone can say, I don’t need it here, but eventually that means that no one is housed. And it’s a fundamental requirement. The definition of community for me isn’t hyper local, it’s about our responsibility on a social scale.

Q: Let’s say that you’ve got a situation where the planning system was working. Would you build any more homes?

Yes. Look, our delivery has fallen, not just at Taylor Wimpey, the whole sector has fallen. We’re in a market shallow, hopefully somewhere around the trough. Don’t think about it, though, as one year, think about the opportunity to deliver over a whole cycle.

We don’t have enough certainty, predictability and visibility around local plans, which means it’s really hard for me to decide how do I invest in growing my business

Planning has become a fundamental problem in our ability to deliver. We don’t have enough certainty, predictability and visibility around local plans, which means it’s really hard for me to decide how I invest in growing my business. Growing my business isn’t about growing demand; it’s about buildability.

In 2018 through to the early part of 2022 we couldn’t build fast enough to deliver for demand. It’s about having a consistent flow of land. If sites are delayed because planning is delayed and I don’t get it open quick enough, then I can build as quickly as I can but it’s not smooth and when delivery is not smooth, then your productivity falls. So if you had a more consistent planning system that was more predictable, we’d still be taking a risk around the ability of the customer to buy, but we would be able to use our resources in a much more productive way and increase our capacity.

Q: And keep smaller land banks presumably?

At the moment, I’ve got a land bank of 80,000 plots and my output last year was over 10,500 [home completions]. But I didn’t invest in my land buying thinking that I was going to run a business at 10,500 plots. I expect that what goes down will come up and that I will be able to grow [the business] again. I can get alternative materials, I can get alternative services, I cannot build homes without land and that land must have planning permission unless I want to end up in jail. [Certainty around planning permissions] drives productivity. At the moment I don’t think that [the system is] particularly efficient.

Q: Would you welcome the re-emergence of council housing as well as part of a sectoral response to the housing crisis? And given councils haven’t got the ability to build state-subsidised houses anymore, that means housebuilders are in the best position to build them. Would you get involved in the construction of state subsidised housing?

Let’s imagine a predictable planning environment, that’s delivering local plans, that’s delivering land certainty. As housebuilders, we’re very customer facing. But at the front we are developers, and there’s a lot of speculation and risk and all of that requires [housebuilders receiving] reward through the process. The more readily available land is, the less the developer [takes on] risk, then the more and more you grow. So if I can grow my business to meet demand and there’s an opportunity to add another value stream, which is doing direct works for a council or a housing association or other forms of partnership, then I’m going to embrace that.

Q: If you got involved in that, would you just build a few [state subsidised homes] on the side of your existing sites or would you create a separate division dedicated to building homes for councils?

If you think back to George Wimpey, or the other half of our business which was Taylor Woodrow, they were [originally] contractors that became housebuilders. What you’re describing is a housebuilder, going back to contracting. It’s all about risk and reward. If the housebuilder takes the risk, that’s not an equal partnership and they’re going to need to have a level of reward because by definition, some risk won’t pay off.

Q: It sounds like we’re in violent agreement on this. We proposed [in our paper for the think tank Localis] that instead of housebuilders getting a 6% margin on affordable homes, you’d get 20%. It would be based on whatever deal you do with the council for a particular site. So you might say we can afford only five council houses on this site, but we’ll build it for you for a 20% profit. Our idea is aimed more at smaller builders, but what do you think?

If that risk reward balance is there, then we come back to skills. We’re only going to deliver more housing of any tenure if we get more people in to build. It’s one of the reasons why I get so frustrated with some of the negativity around housebuilders [in the media]. I’m big enough that I can take some of it, but I get really concerned about how that impacts mum and dad reading the papers [influencing their views on their sons’ or daughters’ possible] career. I am concerned about this demonisation of the sector.

Q: We ask all our interviews this because we really wish we did have a magic wand to sort out the housing crisis, so if you had a magic wand, what would be the one thing you would do?

My wish would be that we have an intelligent, open conversation about housing in this country.