The Problem: Britain has too little housing stock, too few new houses being built each year, and rent costs households too much of their annual income.
The Solution: The government creates a series of housing funds to buy and build properties to let at subsidised rent costs.
How do you increase average household income by £1,500 per year, decrease government spend and increase government income by billions, and reduce energy demand from households by improving efficiency?
You solve Britain’s housing crisis.
Many households in the UK spend 40% or more of their annual income on rent. That makes it harder for people to buy a property as they can’t save and also is a permanent brake on the economy as people have less money to spend.
Since the government can borrow at 1% and renting property yields around 5% and upwards, there is an opportunity for the government to go on a massive residential property buying and building spree and make a profit, while also reducing rent costs.
If the government simply bought up lots of buy-to-let properties from private landlords and dropped the cost of rent by 25%, they would return around £1,500 to the average household in the UK and would also generate a 2.75% net profit on their investments (after subtracting the 1% cost of borrowing).
That profit would be used to finance the ongoing maintenance and management of those properties as well as investing in improving efficiency to reduce energy consumption; helping reduce household bills and energy demand to support the fight against climate change.
Although there may well be resistance to such a scheme from landlords, compulsory purchase orders can be used and focusing on procuring housing from the worst landlords would achieve public support.
Other landlords would be allowed to carry on renting, but offered incentives to lower rents through access to a free property management service (the government would be running this anyway for its properties, so it would cost little) as well as tax benefits.
However, even with such a scheme, there are still too few households. So, the government should also borrow to build. By having largescale government-financed projects, proper planning can ensure housing is where it needs to be and designed to be as effective and efficient as possible; using the latest design thinking to maximise space, build communities, and minimise energy use.
The government could then rent these new properties out, once again at below market rates, and use that revenue to finance the loans, while gradually selling off the properties to generate revenue; priority would be given to those working as nurses, soldiers, police and other front-line and low paid public sector workers.
This proposal would give a major boost to the UK economy and government revenues as the cost of housing benefit would also reduce as rents would be lower and those benefits would come back into the government purse instead of into the hands of private landlords.
With such a scheme, it is vital it is not run as a single organisation, as this will impede innovation and effectiveness. The money should be borrowed centrally to get the best rates, but then handed over to locally run housing organisations to ensure local people are empowered to provide local housing solutions, not an out of touch and over powerful Whitehall.
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