Rather than extending 30 years of mortgage credit to young people, it makes more sense to invest in homes with affordable rents, long-term assured tenancy, and minimal energy impact.
If you are an economist, you might believe in the value of incentives to encourage people to act in ways that are rationally good for themselves and society as a whole.
Yet when it comes to housing we ignore the wider effects of incentives that produce unaffordable new homes, and contribute to growing wealth inequality and climate change.
The market is incentivised to build homes that are both inefficient and expensive. But it is possible to change the ‘home economics’ of the UK and produce homes that are both affordable to live in and encourage developers to reduce the overall costs of running and heating them.
While renewable energy generation continues to grow - despite the political headwinds - there’s been little or no improvement in energy efficiency in our homes.
We might moan about the cost and turn down the heating when times are tight, slowing our consumption of fossil fuels by a few percent. Meanwhile the new homes being built are out of the reach of first-time buyers except those few who can rely on the bank of Mum and Dad.
Over a third of users of the government’s Help to Buy ISA had incomes of more than £50,000.
The problem is that we no longer see homes as ‘somewhere to live’ but rather as investments through which ‘savvy’ buyers can build up equity for their retirement.
That’s exacerbated by the structure of the housing market which rewards developers building homes for their short term speculative value (in the underlying land), and not the long term ‘use value’ as a home.
Renting your own home is now predominantly a private, relatively unregulated ‘peer to peer’ affair.
Tenancies are held on short-term leases with little incentive (or compulsion) for landlords to improve their properties beyond the minimum.
I’m a long-term private renter and my landlord is intensely suspicious of installing a smart meter, let alone a better boiler or any form of green generation on the south-facing roof.
As often, the solution is right in front of us, if only we could see the wood for the biomass.
The UK needs to build thousands of new homes to keep up with demand caused by the growth in population and single person households. Rather than extending 30 years of mortgage credit to young people, it makes more sense to invest in homes with affordable rents, long-term assured tenancy, and minimal energy impact.
This means moving away from a finance model based on building and selling to one based on building to rent, with the ownership of the tenancy being held by a not-for-profit company.
These homes can be built and priced over the long term - up to 50 years - so that the costs of additional ‘green’ infrastructure can be included more efficiently and financed relatively cheaply.
They will be homes that are truly ‘built to last’, where profits are generated by the quality of the housing over its life and not derived from speculation on future land values.
To achieve this we need to raise different forms of finance and work with enlightened developers who see the road running out for the short term speculators and see the value in creating properties that deliver value by giving people homes to live in not pensions to invest in.
Abundance has done this with our latest investment that moves away from green energy to affordable housing.
Working with pioneering housing developer Octevo we’ve raised £4.2 million to fund 30 new-build affordable rental flats and houses in the Liverpool area.
Each home will be built to last and fitted with energy and water saving technology, as well as onsite renewables where possible. Because living in a greener, more affordable home should be a right not a privilege.
Bruce Davis is managing director of Abundance Investment, which advertises with The Ecologist.