It’s time we built homes again
An Englishman’s home is his castle. Unless you are a tenant in the private rental sector, in which case you probably only call a place home for a year before moving on to the next one (a recent opinion piece on Vice summed up the experience with both humour and despair).
This scenario is played out all over the UK but increasingly so in cities. Market forces unique to the UK have made it attractive to purchase property as an investment commodity; while you pay off the mortgage your home increases in value and, if you have more than one property, you can earn an extra rental income while they all increase in value. That’s a win-win, right? Not for everybody. When property becomes a commodity it ceases to provide stable, long term homes for large swathes of the population.
The problems arising from this are worse than you might think. On an EU 28 index of living conditions, 37.3% of tenant households paying rent at market price in the UK were classified as overburdened. This means that 37.3% of tenants in the UK are using more than 40% of their net disposable household income on rent. Only four countries had levels higher than the UK: Estonia, Spain, Romania, and Greece (in escalating order).
People in private rented accommodation are struggling to afford market rents. They pay so much of their income in rent that they cannot afford to save a deposit to buy. It’s the definition of a catch 22.
How have we come to this, despite building hundreds of thousands of new homes each year? A total of 217,250 dwellings were completed in England in 2016–17. In November 2017 our government pledged to build tens of thousands more each year. Which begs the question: are we building the right thing?
“To make inroads on the affordability programme we’ve got to be sustainably delivering around 300,000 homes a year,” Chancellor Phillip Hammond, Nov 2017
Of the 217,250 homes built in 2016–17 just 41,530 were classified ‘affordable’, meaning that they were for social, intermediate, or affordable rent, or shared ownership. There were 1.15 million people on Housing Association waiting lists vying for those 41,000 homes.
At this rate it would take 28 years to build enough homes to clear the waiting lists, assuming that not a single new household applies to a Housing Association for help with affordable housing in that time.
If homes are no longer affordable we should be looking again at what we mean by the word home. A home is somewhere to live long term, a place that offers safety, comfort, and security. A home and the people in it form part of a community. For our communities to be strong and healthy we need people to stay in them.
So how can investing on Abundance help? Our first housing investment will involve building new homes for housing associations, with tenants on the local waiting list offered affordable rents on assured tenancies — which give greater certainty of long term tenure.
Most new development follows the standard model of financing: short term loans for a quick return. It takes an enlightened developer to try to break that mould. They need to genuinely want to build homes instead of speculative assets.
We are actively engaging with just such developers. Investors will help finance the building of new homes for a fair return, while the developer is incentivised to build quality homes because they need to last for at least 50 years under long term rent agreements. And the housing association gets new properties it can offer to households on its waiting list, who might never have to move again.
This will be just the first example of finance through Abundance that doesn’t fuel the housing bubble. In future we will be looking to expand in the housing sector just as we did with energy. The flexibility of our approach, with individual investment offers, means that we could look to create homes with very specific social outcomes, such as supported living facilities. We could also offer ultra-efficient eco home investments. There is significant positive potential for both our investors and our society. In the meantime, take a look at our website to find out more about our entry into housing.
Risk warning
Part or all of your original capital may be at risk and any return on your investment depends on the success of the project. Investments tend to be long term and may not be readily realisable. Estimated rates of return are variable and estimates are no guarantee of actual return. Consider all risks before investing.
