29 October 2020

Escaping the mortgage: the future of housing

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Emma and Akin spent all their savings and took out an enormous mortgage to buy their first home, a three bedroom semi-detached house. She is a consultant, he a lawyer. And yet just five years after buying it, they now live in a bigger house, mortgage free.

Louise lived next door. Her husband passed away a few years ago and she found the stairs a strain. Her daughter had to stretch to buy a smaller home than hers, and her grandchildren planned to move far away to afford a house. She worried about paying to fix the roof.

But now she lives on the same street in a quiet and spacious ground floor flat, flooded with daylight from large windows, and designed to be safe for her for many years. She has given each of her grandchildren deposit money to buy in the area, and paid off her daughter’s mortgage.

The street itself has changed. The original houses, built in the 1930s for the working class couples who bought them on only one salary, have mainly been replaced by pretty, terraced houses, some divided into flats. Those houses occupy much of the concreted expanse that, decades before, had replaced the original front gardens and side passages. They are taller – five storeys or so – but nothing that would have shocked the Georgians.

Meanwhile, rents in the area have been ticking down. Jeff has arrived from Lancashire, having finally accepted a job with a nearby firm to help expand its export business, now that the rent is less of a stretch. The economy is booming, the local high street has finally picked up with more customers, and jobs are abundant.

It happened because their street, like many others, voted to approve new permitted designs for buildings on it: more ambitious and beautiful but also net zero carbon and able to hold far more and better homes. The materials from the previous buildings were reused or recycled.

Groups of residents, when they were ready, teamed up with or sold to small builders, who have been enjoying a renaissance unseen since the 1930s. Some residents opted to be given flats or terraced houses in the new street; some took their money and bought larger homes in the same area, mortgage free.

Some of the taxes on those profits went to the local council to build new classrooms and doctor’s surgeries, and pay for other local services. Some of that money went to improve the street itself, making it more pedestrian friendly and adding greenery and benches.

Neighbours on other streets are looking on enviously, and discussing potential designs from a range of local architects. It’s only a matter of time before the next street votes to transform itself.

That world has not happened yet. But the new planning White Paper could make it possible. The White Paper envisages letting residents of a single street pick their own designs for new buildings on their street, letting them share the benefits through the capital gains on their own properties. They can finally escape the mortgage and help the kids get homes; more renters can buy a place of their own; and everyone’s retirement will be easier.

Back in today’s world, Emma and Akin are still working 90 hour weeks to pay the mortgage. Louise fell down the stairs and had to move into a care home. And Jeff, far away from better firms desperate to hire and train him so he could one day return and start his own firm, has pushed wages in his home town down further by taking a local job offering no progression, that others in greater need would have loved to take.

There is a better world. The Government is right to reach for it.

More work remains to be done. The Housing Secretary, Robert Jenrick, is the first to say that he is keen for feedback to improve the current proposals. But the biggest mistake would be to heed the baseless arguments that no more homes are needed where rents are high; the pressure for short-term patches that will ultimately backfire; or the siren calls of dreamers who for decades have touted ideas with no chance of real world success.

The difference between good or bad housing rules is the choice between slow growth and neglected regions or a levelled up country with average wages overtaking Germany. Nothing else we can fix can have more effect. The Government is right to focus on reform, but it will have to be clever. You have one last chance, until late this evening, to encourage it in the right direction.

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John Myers is co-founder of London YIMBY, a grassroots campaign to end the housing crisis with the support of local people.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.