Don't leave house building to the house-builders

Give people a driving seat in housing investment, writes VMC Rozario.

The reality is mortgage finance is never going to get back to the heady days of the early 2000s, nor should it. But with rents rising, saving for a deposit when a lack of supply keeps prices overinflated seems impossible.

I'm part of Generation Rent, a generation unable to access social housing or mortgage finance and left paying more per month for housing than any other group. But I'm also part of a growing generation of people that, unlike their parents, need to find our financial security in something other than the bricks and mortar of their own home.

Whatever the larger debate, we need more homes all sorts of homes, for rent, socially and privately, and to buy.

The question becomes where will this investment come from?

The London Mayor wants a £1.3bn rebate in stamp duty from the Treasury to build 1 million homes by 2050. Yet with the banks holding back on lending and the Government set against going back to a pre-2010 situation of more public subsidy for capital investment in social housing (despite the economic evidence that it could be the short-term kick the economy crucially needs).

Political parties are desperate for a quick fix to this investment problem. Institutional investors, like pension funds, have been incredibly slow to come to the table to kickstart building.

Perhaps we would be better off crowd sourcing investment from the public directly.

There are a growing number of success stories of start-ups who have gone directly to large groups of ordinary savers/investors through websites like Kickstarter. Although the model isn't directly transferable, the principle is. Get people to invest in housing other than their own. Around 1 million plus private landlords in the UK are doing and making a profit out of it, so why not make more of us landlord investors?

That doesn't mean becoming a country of buy-to-let investors, but if more people want to invest in housing other than their own why not tap into that?

Some might scoff at the idea given the economic climate but actually there are two things that mean we should look at it seriously. Firstly we already have a model of public savings that has grown in sufficient volumes to take seriously.

When Premium Bonds were created by Harold Macmillan government in 1956 the aim was to control inflation but also to encourage saving in post-war Britain. On their first day £5 million worth of bonds were sold and by 2006 improvements in accessibility and a desire for safer investments than the stock market saw 23 million people (then around 40 per cent of the British public) hold premium bonds.

The ability to bring together savings from such a broad section of society (1.6 million of those bond holders had saved only a reasonable £5,000) should be something to replicate in housing investment, especially as housing is relatively stable and long-term investment.

Now National Savings and Investments manage over £100 billion in ordinary people's savings. Imagine if a separate housing fund was launched. There is something powerful about the idea of a family growing into habit of saving, with the added bonus that their investment has helped a housing association deliver them a home and keep house prices and rents down is a bonus. Unlike dead rent, in time those savings could fund a deposit on their own home, university fees or even retirement costs.

The second indicator that this general idea, people investing in housing other than their own, needs closer inspection is that where housing associations have dipped their toes in retail bond issues they have generally had their feet bitten off. Steve Binks, Places for People's Finance Director told the Communities and Local Government Select Committee last year about their experience of reaching out to private investors:

We went out with a relatively small issue, or ambitions for a relatively small issue of £25 million to £50 million. That was our initial asking and we were surprised-almost overwhelmed-by the demand. We ended up raising £140 million in two weeks from people who would invest money with us for five and a half years, put it into an ISA at-I think the interest rate was 5 per cent.

Moreover there's enormous scope of innovation and creativity in this space to give ordinary people a stronger say in housing investment. More work should be done to think and test how this could help communities fund more housing locally, how housing associations could come together to utilising the wealth of savers in the south east (who unsurprisingly save the most) to fund affordable housing across the country and how investments could be made as easy to buy and manage as a premium bond.

A sign marks a plot for sale on a housing construction site on in Swindon, England. Photograph: Getty Images

V M C Rozario is a pseudonymous former housing professional and a member of Generation Rent.

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.