Tuesday 10 October 2017

Housing Strategy - Solving The Housing Problem


I don’t think that there is anyone on the UK who isn’t aware of the seriousness of the housing crisis we are currently experiencing.

There seems to me to be four main areas needing attention being:

1. Social housing
2. Shortage of new affordable homes to buy
3. Getting young people onto the housing ladder
4. Homelessness

I don’t think that there is any reason why we cant tackle all of these issues in one go and with zero cost to the tax payer.
This idea started life as quite a complex solution some 6 months ago but over time, through development has simplified substantially.  
It is now entirely possible to give young people the instant access they need to the housing market with the ability to purchase property in virtually any location they desire. This will inspire the existing house builders to design and build excellent quality, genuinely affordable homes, freeing up valuable land and which returns a substantial profit for the tax payer. A profit so great that it alone could start to address the repayment of the national debt.

The way to achieve this is by truly radical thought and completely change the very basic principals of our housing market functions.
I am a strong believer that tax payers money should be invested to create the finances needed to fund the tax payers needs. And this is where it begins. The tax payer becomes a provider of interest only mortgages, with capital repayment becomming a matter of choice. I had toyed with the idea of long term standard mortgages, but these are not protected from market fluctuation so are inherently unstable. The mortgages provided buy the tax payer are free from market interferrence and as such the interest rate can be secured for the lifetime of the mortgage.

By providing interest only mortgages it enables all people to get onto the housing ladder, this includes the unemployed as the interest they pay on the mortgage will be substantially lower than the rent they pay a private landlord for the same property. This will give the unemployed and employed substantially more disposable income or they could choose to have less disposable income and opt for a better quality home. 
As the tax payer is providing mortgages as opposed to social housing, people will have the freedom to purchase the home they can afford in the area they can afford which will end the existence of council and social housing estates. Virtually every home will be privately owned. People will not be forced to make repayments to their capital which means that a mortgage can last a lifetime. But if they find themselves with a change of circumstance they can make the minimum interest payment meaning that they will never face the prospect of losing gheir home. Christmas and holidays will never be a thing to fear for lack of affordability. And time off to educate oneself is a choice and no longer an obstacle.

Lets say for example a home with a purchase price of £250,000 over a 25 year period at 3% interest. The initial repayments would be in the region of £1458 pcm. However on interest only at 3% this cost reduces to £625 pcm. The property becomes eminently more affordable and as the owners career develops and their salary grows, so the capital repayment increase. In 40 years, £250000 may become a trivial amount, much like the mortgage payments appear of people who purchased their homes 25 years ago.
If no capital is paid off then after say 50 years it will have made the tax payer a return of £375,000 and the tax payer still owns the 100% of the property.

If we invested £500b in mortgage provision, then every 50 years at 3% the tax payer would still own the £500bn investment and will have made £750bn in interest payments and the tax payer still owns the initial investment of £500bn, which quite possibly will have appreciated in value.
Double this investment to 1tn and in 50 years the national debt is paid. Double it again and the debt is paid in 25 years. Taxpayers money is no longer needed to pay the debt.

With a mortgage based on £100,000 the interest at 3% is £250 pcm. At 2% it is £166 pcm. 

With the extra disposable income being spent, new opportunities will naturally present themselves encouraging a growing and prosperous economy. 



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