A new National Housing Fund should be created to build the homes the country needs, according to a think tank.
Citing last month’s election result, the think tank says continued inaction on housing will hit parties ‘at the ballot box’.
ResPublica say the proposed National Housing Fund is a credible and deliverable proposal to do this, around which cross-party consensus can form.
Backed by a consortium of large housing associations, the report – A National Housing Fund to build the homes we need – shows how £100bn 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 recedes in the public and political consciousness, the authors argue this model will both produce the homes we need and provide a significant boost to public finances.
The report proposes that government joins a number of leading housing associations in the creation of a National Housing Fund that would utilise government borrowing capacity to:
- Deliver at least 40,000 new homes annually
- Boost public finances by £3.4bn
- Create 180,000 new jobs in the construction sector
- Support the growth of small and medium sized builders
- Grow the wider construction industry through repeat investment
The housing associations, collectively, and government will each hold a 50% stake in the National Housing Fund.
The associations will manage the properties and government will provide the funding through the raising of government bonds and on lending this to the fund.
The rental income of the fund will meet the cost of government’s interest payments until the loan is repaid, and over time, the net rental income will generate surpluses that can be reinvested into building more homes.
Understandably, developers only build at a rate that they know they can sell. As a result, production over the last 35 years has averaged 150,000 homes against the government’s target of 200,000.
Every year this target is missed, demand is pushed up and ultimately so too are house prices and rents – with one in seven households nationally already spending 50% of their income on housing.
The National Housing Fund provides the certainty the development market requires to build more homes.
It will contract to buy homes on existing and planned schemes, speeding up developments and enabling smaller developers 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 in the process.
Managing director of PCA and report author, Philip Callan, said: “Government has confirmed that we have a broken housing market and we now have a strong political consensus to build more rented homes.
“Historically low borrowing costs can provide the mechanism to deliver the homes we need. 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: “I warmly welcome ResPublica’s new report on its proposal for a National Housing Fund. The report sets out a clear financial case for investing in the right way in housebuilding.
“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.
“We need new thinking because business as usual is not an option. With Brexit looming, the government has a lot on its plate, but that must not mean it shies away from the task of tackling the housing crisis. The National Housing Fund is a novel and exciting proposal for change, and I urge ministers to consider it closely.”
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.”