Tuesday, 24 February 2015
How Do We Pay For 500,000 New Council Houses?
Following several media reports regarding the Green Party's housing policy and an interview earlier today with Natalie Bennett on the issue, I have been asked a number of questions about how I would cost the policy of building 500,000 council homes. Firstly, I will make it clear that such homes should be built on existing brownfield sites and not over green fields. We are not about concreting over the countryside. Secondly, it seems to me that the policy is not only affordable but would save money in the long run. Here is how:
Why Will Building Them Save Money?
The aim is for 500,000 social housing units to be built over 5 years. That is 100,000 units a year. Let's say they cost only £100,000 each because they are on brownfield sites, often on land belonging to Local Authorities, can be converted from empty properties using Empty Property Use Orders, and built of new highly insulated and inexpensive materials such as Structural Insulated Panels.
So the programme will cost £10bn a year for 5 years. £50 bn in all.
If each house lasts 100 years the programme provides 50 million HRYs. HRYstands for Household Roof Years. One HRY provides 1 household with living space for 1 year. So each HRY costs £1,000 in this house-building programme.
Now the current way for us to provide for these families is in Temporary Accommodation (TA). In 1996, the cost of putting 1 family in TA was £10,000 a year. In 1996 it was a conservative estimate, and I imagine that the costs have gone up a bit over the last 19 years, but let us stick with the £10,000 figure for the sake of being conservative.
For each £1billion spent on social housing, the country saves £9 billion over the coming century.
Therefore the full £50 billion will bring savings of £450 billion overall, over the century.
£4.5bn of savings a year. We get an 11 year payback, and a total profit of £400bn on an outlay of £50bn.
So Where Does The Money Come From To Build Them?
The answer is that there are several options. Of course the money can be found.
We could of course borrow it from the banks, the same banks that we bailed out with £375 billion worth of Quantitative Easing (QE), but they would charge us interest, and why should we pay them interest?
It would be far better to pay for it with a £50 billion of QE.
Alternatively we could get some of it from a tax on private landlords, and also cancel Trident replacement which would bring in £15 billion over the 5 year term.
In addition we could have a partnership with private investment.
A combination of all of the above would find the money.