According to those in the know, our Prime Minister and Chancellor are not on the best of terms at the moment.
One of the reasons postured is a fundamental deadlock on what to do about housing.
In a nutshell, apparently, Theresa May wants to borrow more to build more – £50billion to be precise. Philip Hammond wants to deregulate and let builders put houses on green belt land.
Remember pensioner bonds? What about a new national housing bond?
The compromise they’ll inevitably come up with on 22 November – Budget day – will no doubt be simply, and disappointingly, more of the same. A little bit of money over here and a little bit less red tape there.
But here’s a novel idea. Why do they need to compromise at all? Why not do both and do them big?
Hammond would argue money. There’s not enough. But I disagree.
Remember pensioner bonds? What about a new national housing bond?
Britain’s love of bricks and mortar needs no introduction. First-time buyers are screaming to get on the housing ladder, buy-to-let bashing abounds and yet landlords continue to hoover up properties to rent.
Stamp duty be damned, everyone wants a piece of the action.
Over the past five years or so, an entirely new industry has sprung up to try to offer that action to those who can’t afford to buy a whole house themselves.
Peer-to-peer lending and property crowdfunding in the UK is now a multi, multi-million-pound business.
It’s possible to invest as little as £50 into part of a loan to a property developer or landlord through sites such as LendInvest or Landbay.
For £500, it’s even possible to buy an equity stake in a company that owns property developments in the UK through crowdfunders such as Homegrown.
What precisely is stopping the government from getting in on the action?
It’s already halfway there with its equity loans on Help to Buy.
Pensioner bonds were a huge success when they were launched back in 2015 through NS&I because they promised a better rate of return than was available on the high street, with the added security that the government was backing them.
Savings rates today are pathetic. Not one account beats inflation at just 3 per cent.
This is a miserable situation for savers and especially for pensioners.
On the flipside of rock-bottom rates comes the boon that it’s cheap to borrow, and that’s true for the government as well as the rest of us.
Rather than borrowing through the issuance of yet more gilts, which Hammond is reportedly loathe to do, why shouldn’t the government create a national housing bond and kill two birds with one stone?
Peer-to-peer lenders offer investors returns of anything between 2.5 per cent and 15 per cent annually.
A 10-year savings vehicle linked to the returns on offer from property backed by government? It’s a no-brainer for investors – individual and institutional alike.
It would also provide much needed funds to pump into building more affordable housing.
Pensioners happy. First-time buyers happy.
Head to head: Theresa May wants to borrow more to build more while Philip Hammond wants to deregulate and let builders put houses on green belt land
Now, I’ve heard the arguments that more money isn’t the answer. But it is a big part of the answer. Land is the other part and on this, Hammond is right.
It’s a deeply unpopular thing to say, but there are areas of the country where we need to build on the green belt.
The reason is jobs. There’s no point building 10,000 homes in Land’s End if there aren’t 20,000 jobs there.
London and the South East are already jam-packed full of people, but it’s where the jobs are, and frankly, the infrastructure just isn’t up to the job of getting people into the city to work every morning as it is.
Either we build bigger roads, more high speed railways and get 4G and fibre optic broadband working everywhere – faster – or we admit we need to build out and up in London and other major cities.
Once we’ve faced this fact, funding is needed to get it done.
Property-backed bonds are nothing new and there’s already demonstrable demand for them.
Property-backed bonds are nothing new and there’s already demonstrable demand for them
Just this week the Golden Lane Housing Retail Charity Bond closed early having raised £10million in two days, offering savers an interest rate of 3.9 per cent a year for a term of ten years.
The proceeds from this bond will be used to buy and adapt much needed, high-quality housing across the country for people with a learning disability.
It wouldn’t require much thought to structure a bond similar to this to fund a massive privately funded but public sector co-ordinated building project.
Builders would back it.
Brian Berry, who heads up the Federation of Master Builders, went on record this week saying: ‘If the government wants to solve the housing crisis, it must address the access to finance issue that local housebuilders continue to face.’
Well, bam. A national housing bond would take the pressure off the banks to lend to builders.
While we’re at it, why not roll out a national apprenticeship scheme in the building and associated trades to get more young people into work and restock the decimated bricklaying, electrician and plumbing industries with workers?
This government is finally trying to put its money where its mouth is on housing – for what feels like the first time in three decades.
Perhaps it’s worth thinking a bit outside the box rather than continuing to fall back on old hat approaches that haven’t worked before and are unlikely to work now.
