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Is a National Housing Fund the answer to the housing crisis?

Wednesday 02 August 2017

Independent think tank ResPublica, has teamed up with leading housing management consultancy PCA, and called on the government to create a National Housing Fund to boost the supply of new homes around the country.

Backed by a number of housing associations, the report – A National Housing Fund to build the homes we need – shows how £100 billion of repayable investment over a decade could transform the country’s housing offer, providing tenants with certainty through long-term tenancies and the opportunity to buy the home they rent at a future date.

As the case for austerity dwindles in the public and political consciousness, the authors argue this model will both produce the homes needed, and provide a significant boost to public finances. The report proposes the creation of a housing fund that aims to utilise government borrowing capacity in order to:

  • deliver at least 40,000 new homes annually;
  • boost public finances by £3.4 billion;
  • create 180,000 new jobs in the construction sector;
  • support the growth of small and medium sized builders and
  • grow the wider construction industry through repeat investment

The housing associations, collectively, and government would each hold a 50 per cent stake in the National Housing Fund. The associations would be responsible for managing the properties and the government would provide the funding through the raising of government bonds and then lending this to the Fund. The rental income of the Fund would then meet the cost of government interest payments until the loan is repaid, and over time, the net rental income would generate surpluses that could be reinvested into building more homes.

Production over the last 35 years has averaged 150,000 homes per annum against the government’s target of 200,000. The National Housing Fund provides a strategy that demands the building of more homes, resulting in the speeding up of developments and enabling smaller builders to rapidly increase their output.

In contrast to other initiatives currently deployed to boost housing supply, this proposal seeks to utilise government borrowing powers for a time-limited period while generating significant returns to the public purse, around which cross-party consensus can form.

Managing Director of PCA and report author, Philip Callan, said:

“Our report focuses on the practical steps that government can take to deliver many more homes. All of our proposed actions are in their control. What is needed now is the political will and leadership to make it happen.”

Director of ResPublica and report author, Phillip Blond, said:

“Successive Governments have failed to build enough homes, or enable enough homes to be built, and the election demonstrated that voters will punish parties at the ballot box if their housing offer is not credible. We must make radical changes if we are going to address a problem which is dividing our society between those who can afford to enter the property market and those who are priced out – the haves and have nots.

“Our National Housing Fund offers the Government a way to finally build the homes it acknowledges it needs. Through the notion of a guaranteed buyer we reinvent the only formula that has ever enabled the state to build at scale. Crucially this idea will dramatically expand the capacity of two relatively dormant sectors, the SME building market and Housing Associations, such that they too can build at scale and open up the market for the millions who need it to work for them.”

Kevin Hollinrake MP, Conservative member of the Communities and Local Government Committee, said:

“Despite the significant increase in housebuilding we have seen since the financial crisis, we are still nowhere near the level required and need to increase delivery by around 100,000 homes per annum to meet demand. We urgently need every sector of the market to step up their building numbers and this is a welcome initiative that could provide a long-term solution to one of our society’s biggest social and economic problems.”

Clive Betts MP, Labour chair of the Communities and Local Government Committee in the 2015 – 2017 parliament, said:

“While this new research finds that the economic benefits would be substantial, the authors are right to focus on the need not just for more homes, but the right types of homes. Building homes available at sensible rents, and offering new routes into ownership, would be transformational for young families feeling the pinch around the country.

Lord Kerslake, former Permanent Secretary at the Department for Communities and Local Government, said:

“This is a big and ambitious proposal that alongside other measures, would have a material impact on the supply of new housing. It deserves serious consideration by government and the sector.”