Tag Archives: social housing

A solution to the housing crisis that doesn’t cost councils a penny?

The housing market is in crisis with many first time buyers locked out of owning and, in many areas, being able to rent property at affordable levels. As a country, we also have a homeless problem with a shocking lack of care for the mentally ill and, our military veterans.chris matterport me

Various solutions have been tried over the years and charities have also played a vital role in alleviating some of the need. For years there has been much hand wringing and blame-gaming by politicians for who is at fault but, the problem stubbornly remains.

Owning a home of ones’ own is not a human right but, having a secure place to call home is.

I believe there is a solution that has been staring us as all in the face for many years and it does not require any additional spending.

Local government (councils) currently sit on, and annually invests in, billions of pounds worth of investments, predominantly in stocks and shares for their pension funds. This is almost always invested in major companies who have little to no local connections or interest in the well-being or growth of the area and people whose money they have invested in them. Neither is there any guarantee that these investments will provide any return and, may even lose money.

However, if local and national government were required to use a minimum of 50% of existing pension funds and new contributions to invest in their own local housing needs, this would have immediate, medium and long term benefits. This investment would be in the form of, but not limited to

  • Making means-tested local authority buyer property deposits available

  • Building new, and refurbishing existing vacant property stock, means-tested, short to medium term social housing

  • Building flats and help centres for the homeless to be leased to and run by homeless charities at nominal rates

Making means-tested local authority buyer property deposits available. This would operate by offering qualifying local residents secured loans for private property purchase to be used as deposits. Deposits would be up to ten percent of the purchase price and would be based over a ten-year period. The homeowners would make affordable capital repayments with no interest over the first 10 years (e.g. £20,000 loan = £83.33 per month for 10 years) guaranteeing local government a minimum return on their investments and a source of income.

Any remaining initial loan amount plus interest would be repaid in whole or in part on the sale of the property (most buyers move home 2 to 4 times in their lifetimes though this figure varies) or, become due after ten years. The interest rate would be calculated as a percentage rate of the median house price inflation over the term of the loan for the Council area as a whole as using ONS or HM Land Registry figures. Homeowners who did not need or want to move after the ten year period would have a commercial interest rate calculation made for the previous ten year period (set against Bank of England rates) which ould be payable as a lump sum or, spread over a further ten year period at a variable current rate of interest.

To protect the homeowners and facilitate the flow and turnover of housing stock, the maximum chargeable interest would be capped at a set amount of any house price inflation. To ensure council pension investments were assured of a return (unlike at present), the minimum interest payable would be at an agreed minimum percentage; (for example, this could be set at 1% below Bank of England Base rates over the period.

Building new, and refurbishing existing vacant property stock, means-tested, short to medium term social housing. Self-explanatory. Councils would again have funds available to invest in their local housing needs to bring back derelict and unused housing stock into use and, to build new housing stock for social rent.

Building flats and help centres for the homeless to be leased to and run by homeless charities at nominal rates. Not only is looking after this countrys’ homeless a moral imperative, there are also sound financial reasons to help people back into society and a secure home. By utilising existing pension funds and contributions to invest in these buildings, existing expenditure on policing and emergency accommodation can be utilised elsewhere or, saved.

If implemented, I believe the above innovations would build happier communities and good, better-maintained cities, towns and villages. The positive consequential advantages would be many. A happier society tends to be healthier, crime drops, jobs are created and wages increase.

From purely a cold investment point of view, the above paragraph outlines how I believe this will help ensure local property prices remain stable and grow, bringing in good returns for the pension funds who have invested in them. The greatest returns though are for our society.

Affordable housing doesn’t work

Local homes for local people, key worker policies, Section 106 agreements. Do they work or do they create more problems than they solve?

Related blog Housing in West Cornwall, an opinion

…instead of being able to sell with perhaps a little profit or, at least a small loss; they are now almost certain to face repossession and subsequent credit blacklisting.

There has been a lot of debate in the media recently about ‘affordable housing’. But what is it? For many, it is trumpeted as the greatest thing since sliced bread; allowing local people or, people who are not so well off, to live in or move to, an area they could otherwise not afford. A helping hand in the dog eat dog world of the housing market. A laudable aim.  But is it that simple?

My solution is that local authorities could lend deposit monies to first time buyers with the same percentage stake being retained in the property by the council.

Politics aside, the first question that must be addressed is that of why we are building affordable housing. Is it a) to ensure that everyone who wishes to can own their own property or, b) to provide housing for people who could otherwise not afford to buy?

If it is a) then we need to ask whether we can afford to do this as a country and, also, whether this is ethically sound. Why do we want everyone to own their own home? Home ownership is not the right choice for many for a variety of reasons in any case.

So, is it b)? giving a helping hand to those who wish to buy (or have been convinced by peer, social & media pressure that it is a good thing) but cannot afford market prices? Leaving aside the ethical and moral issues this, then, begs the immediate question as to how do we decide who receives the helping hand and why. And with that question there is the accompanying unsaid statement and moral issue about who doesn’t receive help and why.

This means that the children of many ‘local’ families, my own included, have little, if any, chance of buying their own home near to where they were born or wish to work.

Whilst it is certainly not unique to the Duchy; in Cornwall, we have a terribly low median salary and very high median property prices. This means that the children of many ‘local’ families, my own included, have little, if any, chance of buying their own home near to where they were born or wish to work. The result is that many live at home, rent or move away. There are knock on effects too. Emergency services such as fire-fighters etc. need to live within a certain distance of their work but this is often impossible. This has led many across Cornwall and other areas (parts of London and other cities as well) to suggest that we have a ‘key worker’ policy for property. But what, exactly, is a ‘key worker’?

A growing number of lenders are now refusing to lend on 106 agreement homes – making onward sale very difficult and further affecting values for the owners

Is a fire-fighter, more important than, say, a shoe salesperson? Is a nurse not a key worker along with a refuse collector? Is a local business owner who provides employment for local people to be denied an ‘affordable home’ simply because everyone assumes that, as a business, she she is automatically wealthy (an odd but pervasive assumption that often defies reason and reality)? Some would argue strongly that people who work in the media, politics or arts are key workers for the important role they play in our democracy and spiritual well-being. In fact, in my opinion, everyone who works for a living and pays taxes is a key worker; no matter which way you value their job. So can you really make homes available for key workers if you can’t fairly define what one really is?

…in my opinion, everyone who works for a living and pays taxes is a key worker; no matter which way you value their job.

So let’s move away from the tricky subject of key workers and try another angle that is often tried: local homes for local people. Again, we then have the problem of defining just what is local. Is it to be by mere accident of birth/ a demonstrable lineage within an area for a set number of generations? Or, perhaps in Cornwall and Wales at least, it could also be by genetics?

Being born locally: now is this to be physically born in the town itself (a home-birth) or, to parents who lived in the town at the time of birth and, what if you were born in the town but moved away as a child; do you still qualify? All sorts of problems there so; maybe a demonstrable lineage from an area is better? Well, that immediately creates problems for those whose families have actually married outside of the local gene pool at some point in the recent past so that idea falls at the first fence.

Genetics it is then! But even here in Cornwall, where the remnants of the oldest tribes to inhabit Britain reside, the Celts, we also have a problem. For thousands of years, the Cornish have been  miners, seafarers and metal-traders and, like most sailors and traders, they haven’t always played at home, ahem. Consequently, proud ‘Cornish’ families bear the now anglicised names of Breton fishermen, survivors from the Spanish Armada and miners from all over the world. And, no doubt, scratch deep enough, and there will be genetic evidence linking many of long historical descent to the pre-historic traders from the Mediterranean who traded tin, silver and gold with our distant forebears. So that’s out too… unless you bring in a ‘racial purity’ clause of course. Anyone feel comfortable with that?

Leaving aside the minefield of whether we should and can build affordable housing and who we actually give the golden ticket too, what happens to those people who have been given one of these cheaper than average houses? Often, such properties are sold with a great deal of red tape tied in with them, often as what is called a ‘Section 106 Agreement. Sadly, in my experience, these golden ticket holders soon find themselves trapped in a home they cannot sell and are usually forbidden from letting out; that no longer suits their growing family or personal circumstances. Cornwall Council 106 page

Sadly, in many years of dealing with these properties, I have seen these same people who were supposed to have been helped by this well-intentioned piece of meddling with the laws of market forces; suffering real hardship and distress as a result:

  • Couples who need more space for a new baby, unable to sell at a price that enables them to trade up without moving out of the area; stress, just when they don’t need it.
  • Families who are splitting up, tied to a property that they can’t sell at a price that allows each side to move swiftly on with their lives – causing more tension and stress at an already emotionally charged time.
  • Home-owners who, having lost the relatively low paid job they did have, now unable to sell as no buyers meet the buying criteria {update – A growing number of lenders are now refusing to lend on 106 agreement homes due to the restriction clauses making onward sale difficult and further affecting values for the owners}. Consequently, instead of being able to sell with perhaps a little profit or, at least a small loss; they are now almost certain to face repossession and subsequent credit blacklisting. Much as the champions of affordable housing might hope; market forces have the final word.

Affordable housing is, as I have said above, a highly laudable ideal if you believe that everyone should be encouraged to own their own homes. Making it work effectively has, so far, proved to be counter-productive in almost every case I have encountered. Is state/ local authority owned social housing due for a return perhaps?

My solution is that local authorities could lend deposit monies to first time buyers with the same percentage stake being retained in the property by the council. The stake would have to be repaid within a twenty five year period or, on the sale or transfer of the property. At that point, the stake would be repaid plus interest at a set rate above the base rate or, at 25% of the area average house price* increase over the period since purchase – whichever is the greater figure. This would provide an excellent start for first-time buyers without onerous re-sale restrictions and, would be an ethically and financially sound investment vehicle for councils.

What do you think? Share your views below

Chris Wood

I welcome feedback so please feel free to leave constructive criticisms or ask questions below. If you could also take a second to rate my blog and pass it on to others who you think may find it interesting that would be great. Thanks.

Chris Wood of PDQ Estates Ltd

PDQ Estate Agents website

About Chris Wood: Chris is an estate agent with over 25 years of property experience. His business, PDQ Estates Ltd is based in Penzance and Helston, West Cornwall. He has worked with all sizes and types of businesses from single office independents to the management team and board of RBS and Tesco.

A former President Elect of the NAEA and board member of NFoPP until he resigned in 2009, Chris has always championed the highest professional standards forestate agents in the UK. No stranger to the media, he has appeared on various programs including BBC, News 24, ITV, independent and BBC radio and is a regular contributor to trade journals, local and national Newspapers.

Chris is on KloutLinkedIn Ecademy Facebook and Twitter  In his spare time; Chris likes to keep fit and is a long-standing member of the Territorial Army. In 2010 he mobilised for a tour of duty in Afghanistan with 1 Rifles as part of 3 Commando Brigade.

*using HM Land Registry Data