Buy houses. Hold them. Govt should keep it simple

I’ll be honest, when I was asked for my intervention to solve the housing crisis, my first instinct was not to bother, writes Tim Heatley. Not because I don’t care about it. Quite the opposite.

It’s because we’ve spent decades asking the same question, producing longer reports and coming up with increasingly complicated answers.

Planning reform. Affordable housing percentages. Help to Buy. Grant. Guarantees. New acronyms. New targets.

We keep rearranging the furniture while the house is on fire.

For me, the answer is actually pretty simple.

Government should start buying homes. Lots of them.

Buy completed and newly built homes from housebuilders and developers across the country and hold them permanently in public ownership.

Some should be social rent. Some discounted market rent. Some full market rent. Change the mix over time depending on what each place needs. The important bit is, never sell them.

Let the best-performing housing associations manage them for a fee, but central government keeps the ownership, the income and the long-term value.

At the moment government spends billions every year supporting housing costs, with huge amounts of public money ultimately ending up paying rent on assets somebody else owns.

That’s bonkers.

Instead, start turning that expenditure into an enormous national housing portfolio.

The government gets the rent. It controls the rent. It owns the asset. And over decades the value of that asset grows with the economy.

There’s also a much bigger fiscal point that rarely gets discussed.

The bond market isn’t sentimental. It wants to know whether a government has control of its finances in five, 10 and 20 years’ time.

Imagine government could demonstrate that instead of accepting an ever-growing housing benefit bill, it had a serious long-term plan to control those costs while simultaneously accumulating billions of pounds of income-producing assets.

That is a very different story to tell the bond markets.

Greater confidence in Britain’s long-term finances should mean a lower risk premium and a lower cost of government borrowing. And when your national debt is measured in trillions, even a relatively small reduction in the interest rate you pay is worth an extraordinary amount of money.

Potentially enough over time to make a huge contribution towards the cost of acquiring the homes in the first place.

So, you start creating a virtuous circle.

Buy more homes. Collect more rent. Reduce exposure to an endlessly rising housing benefit bill. Build a bigger public asset base. Improve long term fiscal credibility. Reduce borrowing costs. Reinvest the saving into more homes.

And there’s another bonus. When the housing market slows and developers stop building because purchasers disappear, government becomes the buyer that keeps the production line moving. Sites continue, people stay employed and homes still get built.

We don’t need intervention number 61.

We need government to think like a long-term investor.

Buy the houses. Rent them intelligently. Keep them forever.

It really can be that simple.

Tim Heatley is co-founder of developer Capital&Centric