'HOUSING FOR THE MANY' - Labour Party Green Paper Response

Housing for the Many - Green Paper Response
A New Mortgage Deal for Millennials

Thomas Heavey

“A Labour Government will consider steps to enable more local authority mortgage lending to help local first time buyers” P20
HOUSING FOR THE MANY – A Labour Party Green Paper

The Housing Ladder Problem

It is clear that we are in the midst of a housing crisis, rising homelessness, repossessions, insecure housing and sky high rents, I have chosen to concentrate on the crisis surrounding young people and first time buyers and their difficulty getting a foot on the housing ladder. Not enough homes are being built and what stock there is, is prohibitively expensive and beyond the reach of increasing numbers of people.
Home ownership among our young people especially is collapsing, millennials are now described as ‘Generation Rent’ because it is estimated that by the year 2021, only 26% of young adults will have managed to get onto on the housing ladder. Sky rocketing house prices and rent threaten to lock 20-40 year olds, out of the housing market depriving them of the ability to invest in themselves and their families.
As John Healey MP said “The housing market is broken, and current Conservative housing policy is failing to fix it”.
One of the solutions the Labour Party is offering is to build high quality, truly affordable homes to enable young people and first time buyers take their first step on the housing ladder. 
However, this response proposes an alternative method how this can be achieved, yet also compliments Labours existing housing strategy. A solution that focusses in particular, on the difficulties experienced the by young people and first time buyers by enabling for them direct and instant access to the existing housing market coupled with the freedom to choose where they wish to live.
One way we can achieve this is by completely changing our thinking around the way mortgages are traditionally supplied. If we do this we can offer our young people and first time buyers, the new deal that they so desperately need. A deal that will enable instant access to the housing market, a more comprehensive choice of the available housing stock and at a cost that leaves a substantial proportion of their disposable income, in their own pockets, improving the quality of their homes and lives.
The mortgage turns the traditional mortgage up-and-down and represents a valuable investment for the tax payer, increasing the value of every £ they pay in tax.
The easiest and most sustainable way this can be achieved is by the government and local authorities, in partnership with the tax payer, becoming suppliers of government funded mortgages.

The Up-side-down Mortgage

The basis of the mortgage is that it provides the ultimate flexibility in how it is paid for to the mortgagee. As a young person or first time buyer they can begin their mortgage by paying the interest only. This has the effect of making the cheapest time to buy a mortgage at the beginning as opposed to the end, hence effectively turning the way we purchase a home, up-side-down.
As their careers develop, so they can start paying off the capital if they choose. This flexibility, which is missing from our current mortgage system, will ensure that at times when life decides to alter the circumstances of the mortgagee, they have a family, want to re-enter education, children marry, want a holiday or lose their jobs. They have a safety net where they can return to paying the minimum interest only payment and never face the risk of losing their home.
The option is also there for the mortgagee to never have to pay off the mortgage which will be addressed later in the report. In this circumstance the mortgagee is in effect, using the home to give them the maximum possible level of disposable income.


Calculating the Mortgage Fund

The amount the mortgagee can borrow is based on a maximum loan of 30% of their total disposable income.
Today for someone with a disposable income of £10,000, this would only allow them a mortgage of £60,000 at 2% interest as capital repayments are included in this cost, giving a monthly repayment of £254.
By changing the formula by which mortgages are supplied and funded, we can greatly enhance the mortgagees spending power, without increasing their monthly payment.
The formula is based on 30% of their annual disposable income. At £10,000 disposable income per year the base line annual payment for the mortgagee is £3000.
The amount of funding available now depends entirely on how much interest is charged to the mortgagee.
If £3000 represents 2% of the total mortgage then the mortgagee has a maximum fund of £150,000.
If 3% interest is charged, the fund now drops to £100,000.
And at 4%, the available fund reduces to £75,000.  
So the amount of interest charged is pivotal to the amount of funding available.
The lower the interest rate is kept, the better home and quality of life for the mortgagee and as will be shown later, the higher return on investment from the mortgage provider.

£20bn a year is currently spent on housing benefit. Instead, this money could provide 133,333 mortgages and at even only 2% interest, would create a gross income stream for the tax payer of £400m per year. 
The ‘Lock-in’
The mortgage can be used as a form of self-rent. With an interest being charged but the capital never having to be paid off. The advantage to the mortgagee with this type of arrangement is that unlike renting, their payment never changes throughout the life of the mortgage. As the cost to them, is based on purchase price and not market value.
With the interest rate being set by the government and not by the markets, the same interest rate can be set for the lifetime of the mortgage, meaning that it will never increase providing security and stability.
Forty years ago in 1979 the average house price was in the region of £20,000. Had we started this scheme back then, the average monthly repayment would have been £33 per month.
Forty years later in 2018, even without touching the capital, this mortgagee would still be paying £33 per month for their home and have a debt of £20,000.
Today, that property would be valued in the region of £200,000, more than enough to repay the original debt and to finance downsizing in property when the time comes, creating the building blocks for a comfortable old age and eliminating the worry of affordable heating, food and rent.

London

In London as with other areas of the country, housing costs can be out of reach for young people. Unable to afford a place of their own near their families, they are unable to buy or rent properties in the areas where they grew up.
Take a random London area, such as Islington North, the average house price in the area is £680,000. Far beyond the reach of many young people. The monthly cost of a mortgage in Islington on the average home is £2882 per month and also requires a deposit of 10% or £68,000.
If this scheme was available to them, the interest only payment could be reduced to £1,133pcm with the same terms, conditions and benefits applying, areas currently prohibited by today’s mortgage system, could be brought well within reach, giving people greater freedom of the places they choose to live.
    
What does this mean for the lender?

The lender will ultimately be the tax payer and to ensure that they are getting a good deal, the mortgage could be equity based although not vital, as the tax payer will effectively double their investment through rent and owning the debt on the mortgage.
On a £150,000 mortgage, if the mortgagee has paid only the interest on the property, then the equity share arrangement will be determined by the lender anywhere between 0-100% (dependent on the generosity of the lender).
The home could become an investment opportunity for the mortgagee, by encouraging them to make payments off the capital and earn equity in the property. Both lowering their debt and increasing their equity share.
At 2% interest, it will take a mortgagee 50 years to have paid an amount in interest equivalent to the original cost of the home. This means that the local authority will have made the return on their investment and still own the original debt which will be paid off once the property has no further use. However I expect the use of the property to extend well beyond 50 years.
Essentially, for the local authority, this investment has created an income stream where they can expect their original investment, on average to be at least doubled.

Home Inheritance for Future Generations

A home should belong to the family, not just the individual. When a home has been passed on then the original mortgage agreement, could be passed on with it to benefit either the children or grandchildren of the original mortgagee.
In 2080, if salaries rise by an average of 2% per year, the equivalent salary of someone earning £10,000 today will be £45,000 in 2080, but the annual interest payment for the property will still be £3000 per year. Meaning that the percentage of disposable income needed to reside in the property has fallen from 30% to 6.15% and will continue to fall as long as salaries increase. Meaning that future generations continue to increase their wealth and security.

The advantages for the millennial home buyer:

 Highly flexible repayment plan.
 Mortgage can be based on 30% of disposable income meaning increased disposable income.
 Greater spending power meaning that the mortgagee can afford a property almost 3x the value they can afford today under current mortgage allowances.
 With enhanced quality of home comes an improved quality of life.
 With deposit free mortgage availability, the young person can get instant access to the housing market.
 Provides them with an investment opportunity (dependent on equity deal).
 Creates a return/profit for the tax payer.
 Creates an income stream for the local authority equivalent to the mortgage paid, less overheads.
 Increases the value of every £ the tax payer spends.
 Creates security in their homes by ending repossession.
 Creates set payments for entire length of mortgage.
 Creates low housing costs into and throughout retirement.
 Creates greater choice of the available housing stock.
 If housing price rises are under performing allows for return to interest only payments and investment can be sought elsewhere.
 Overall costs greatly reduced in comparison to a lifetime of renting.
 More disposable income created to enjoy life.
 Less money spent on housing benefit.
 More families living in their own homes.
 Could be £100's of £1000's better off compared to renting.

Disadvantages

 Mortgages can be lifelong.
 Could potentially pay more for the property if a repayment plan isn’t in place.
 May not be entitled to equity share.
 Responsible for own repairs and maintenance. (Also an advantage for the lender).

Mortgage Eligibility

An optional discount on the mortgage or qualification for eligibility could be the requirement to be a member of a trade union.
The mortgagee must be in full time employment, contracted employment, good history of self-employment. Zero hours contracted work will be illegible for qualification.
This is to provide the greatest security of interest payment and to ensure that the mortgagee enjoys the highest level of job security and career development to complete the mortgage agreement.

Funding Streams

Tax Payer
This creates a fantastic opportunity for the tax payer to increase the value of the tax £’s they spend.
Pension Schemes
An opportunity for pension schemes to double their investment and help to ensure their longevity of these vital schemes well into the future.
Private Investment
An opportunity for potential private investors to make a steady return on low-risk investment
New Central Investment Bank
Funding from the new Central Bank would create a return for the tax payer and provide the substantial capital needed to get ‘Generation Rent’ onto the housing ladder.
(Whilst the mortgage suggestion has been included in the Green Paper, I have also been informed that there is 'scope’ for funding from the New Investment Bank)


The Numbers

The numbers are there to be played with. There are many permutations of the direction they could take. How you play with them, depends entirely on what you want to achieve. The minimum is that after 100 years you effectively treble the value of the initial investment, double it after 50 years. So there is no doubt that profit can be made however, this system it is a balance between profit and quality of life.


Private Rented Sector

A system of housing such as this will undoubtedly have effects on existing markets. The private rented sector has created a very profitable place for people wanting to invest their money. A property can create income in terms of rent and the appreciation in value of the asset.
Providing interest only mortgages removes the rental element to this investment and therefore makes the private rented sector, a far less attractive investment opportunity. Therefore I would expect to see many homes currently used as rental investment, to be released into the housing market.
Property investment will remain, but rent will be based nearer the cost price of a property as opposed to market value. The private rented sector will have to adapt by improving standards and reducing costs, in order to survive.

The Up-Side-Down Mortgage Could Seriously Improve Your Wealth

Today’s renters can pay a rent based on up to 80% of the market value of the property. If the rented property was valued at £150,000, then the rent would be based on a property valued of £120,000. This would give a rental cost of £509 per month.
Over the next 50 years, if the house value went up by just 1% per year, the rent being paid in 2068 would be £836 per month or £10,032 per year. Over this 50 year period the renter would have paid an eye watering £435,900 in rent on a home with a value of £150,000. At the end of which the renter owns no property and has earned zero equity in the property. The reason why this cost is so high, is because rent, is inextricably linked to house value, not purchase price.
With the Up-Side-Down mortgage, the interest payments on a £150,000 property start at £3,000 per year and never change. At the end of the same 50 year period the mortgagee will have paid £150,000 in interest, £285,900 less than if they had rented. In addition to this they have also earned the equity on the property which equates to £96,694.
Meaning that the over the 50 year period, the mortgagee is £382,594 better off due to savings made from rent and equity earned on the property, than compared to a privately rented home.
Essentially giving a real terms boost to the householders finances on average of £7,651.99 per year.


Traditional Builders

Changing the way mortgages are supplied will hopefully influence the ways in which builders build. I believe that they will build the homes to match the available funding to a price and standard required by their customers.   

Freeing up the land to build

By improving access and purchasing power to the housing market, we could potentially create a new minimum standard in housing with the minimum value of a home being £150,000.
This would render many properties below this value redundant and of little use as an investment.
It is possible that the use of many older properties, below a £150,000 value would become redundant, freeing up land that can be re built upon with new, higher quality homes that regenerate an area and provides a better investment for the mortgagee.


Summary

This is just another option we could take in dealing with the housing crisis. In addition to making homes more affordable, we can also look at restructuring mortgages over longer terms, to bring the existing market, back within the reach of ordinary people.
We can provide the security people need so as they’ll never be faced with having their home repossessed, provide families a home they can call their own, end the scandal of homeless children and provide people with their very own investment opportunity.
The lower housing costs this will create will put more money into the pockets of ordinary people allowing them to live and enjoy a few more of the luxuries they want.
Young people and first time buyers can get instant access to the housing market. With no more years of saving for a mortgage the investment they make in themselves and their families can begin immediately.
For the tax payer, they will be spending far less on housing benefits and income support. And on top of this, the tax payer will also make a return on their investment, increasing the value of every pound spent, to use on the services we want.
Thank you for reading

Housing for the Many - Green Paper Response
A New Mortgage Deal for Millennials

Thomas Heavey 2018

Reform to Remain Strategy - Uniting Leave and Remain

Reform to Remain Strategy

The Quest to Unite Leave and Remain 

Lexit

As Labour members, our reasons for leaving the European Union with ‘Lexit’ are quite different to Brexit. Labour Leavers or ‘Lexiters’ wish for the EU to amend a few regulations that would allow the Labour Party, the freedom to make its own economic policy decisions. We also believe, that if the EU were to concede on the regulations currently preventing the creation of Socialist economic policy, then Brexit in itself, would become irrelevant.  

We are naturally internationalists and irrespective of our Brexit positions, we all hold a deep longing to maintain our close relationship with the people of the European Union. This is combined with the equally strong desire, to have the most progressive Labour Manifesto ever created, implemented in full and without delay or hindrance. The current belief that we can’t have both, has caused some consternation within the membership, as to the direction the Labour party should take in Brexit negotiations.   

Tory/Hard Brexit

We are united in the fact that, we are completely against any form of right wing tory Brexit. This is not just because of anti-tory sentiment but because we feel any deal they strike, will intentionally either lead to the greatest bonfire of Human and Employment rights ever seen in the UK or will tie the UK into the economically restrictive EU regulations for another generation, denying the realisation of our truly progressive, socialist manifesto.

We also believe that those demanding a hard Brexit, do so in their desire for total separation from European Union regulations, to create a UK where the protections of ordinary people are discarded and enable the UK to be reinvented as a low wage, low skilled, bargain basement, tax haven.

Unacceptability of Brexit Choice

The destructive nature of Brexit has forced Labour members into having to consider the most awful of choices, do we sacrifice the European Union for our Manifesto or do we sacrifice the manifesto, to remain in the European Union?

It’s a choice that irrespective of the decision we make, we all lose a piece of who we are and what we want our future to be.

As labour members we find this choice unacceptable and we recommend Labours negotiations with the EU, adopt a ‘Reform to Remain’ strategy.

Reform to Remain Strategy to Benefit All of the EU?

As Labour members, we recommend that Brexit negotiations should focus on changing the EU regulations that prevent the full and unhindered implementation, of the Labour Manifesto. 

We recognise that ‘Reform to Remain’ is a highly ambitious strategy, as it requires that we approach the EU, not just to negotiate a bespoke deal for the UK, that will allow us to trade as partners with the EU, but to change the regulations that are forcing us to consider leaving in the first instance. We believe that if this is achieved, then we completely remove the need to leave the European Union without a 2^nd Referendum or Peoples Vote.

As Labour members we are acutely aware and deeply concerned about the civil and economic issues that our brothers and sisters in the European Union are suffering with poverty, inequality, unfairness and the rise of the far right in Europe to name but a few. We believe that the restrictive nature of EU regulations on all European Union member states, has deprived the people of the EU the opportunity to vote for the changes that it needs. We believe that the rise of the far right in the EU has been caused by the lack of a political alternative, as opposed to the evils of racism and xenophobia. We believe that the ‘Reform to Remain’ strategy, whilst not only allowing the UK to remain as part of the European Union, will also provide ‘all’ nations of the EU, the fundamental changes they need to EU regulations, to start addressing the injustices within their own nations.

We believe that ‘Brexit’ can be turned into a fantastic opportunity to fight for the changes that not only the UK needs, but the needs of the entire EU region.

Creating a New Larger Support Base for Lexit

There are several Brexit positions which have coalesced into three main groups. This has led to much misunderstanding of each other positions. ‘Lexiters’ has been branded in the same group as those wishing to leave the EU to reduce our protections or on xenophobic grounds.

Likewise, those who wish to remain and reform the EU have been branded the same as those wishing to deny us the chance of Labours progressive manifesto.   

1.       Remain

This group is made up of two types of remain supporter. Those who are passionate about the EU and the Labour Manifesto those who are passionate about the EU and are not passionate about the manifesto. Reform to Remain would split this group.  

2.       Remain and Reform

This group are also passionate about the EU and the Labour Manifesto. I believe that they would support a Reform to Remain strategy as it meets their objectives. 

3.       Leave

This group is interesting because it combines Labour Leavers, tory regulation destroyers and xenophobes. ‘Reform to Remain’ would separate the Labour leaver from the regulation destroyers and racists.

By creating the new group of ‘Remain to Reform’ we believe it possible to separate the clustered groupings of remain and Leave supporters and create a new and very large central group. Bringing them together under the banner of ‘Reform to Remain’.

The new groupings would look like this.

1.       Reform to Remain

This group now consists of half the entire remain group, the entire and remain and reform group and the entire Labour Leave group.

2.       Remain

A group largely of hard remain voters with no interest in the Labour manifesto or changing EU rules to enable the Democratisation of the EU.

3.       Leave

This group now largely consists of those who wish to leave the EU for xenophobic reasons and those who seek a bonfire of our working and human rights.

     

Benefits of ‘Reform to Remain’

We believe that the ‘Reform to Remain’ strategy has the potential to unite both leave and remain supporters, both from inside and outside of the Labour Party because it:

·         Gives back control to freely decide our economic policy.

·         Gives confidence to remain voters that the Labour Party truly is fighting to remain as part of the European Union.

·         Gives confidence to ‘Leave’ voters that we really are fighting to return the control we need to direct our own political future.

·         Allows Labour Manifesto within the European Union.

·         Brexit is dealt with in months, as opposed to years as only a fraction of the EU rules need to be renegotiated, as compared with a full Brexit.

·         No issues with the Irish.

·         No divorce bill.

·         Retains access to cross border programs Schengen, Horizon 2020, Euratom, the European Medicines Agency, Eurojust, Europol and European arrest warrants.

·         No food and medical supply shortages.

·         Freedom of movement remains intact but current allowable restrictions are enforced.

·         Freedom for all political parties of the EU to determine and freely present their own unrestricted manifestos.

·         Provide alternative political direction for the people of the EU to the hard right.

·         Open up the political spectrum in Europe to ‘new thinking’ and direction.

 ‘Reform to Remain’ has three main advantages.

1.       Whilst negotiating with the EU it allows both ‘remain’ and ‘leave’ supporters to unite around a common vision, to remain with the Labour manifesto intact. As such, the focus of attention is redirected away from the Labour Party and onto the Council of the European Union Itself.

2.       We use Brexit as a fantastic opportunity, not just to fight for the rights of the people of the UK, but for the people of the entire EU region.

3.       If we don’t secure the changes we desire, then the EU will have sent a clear and unequivocal message to all of its member states, that if any of them desire the freedom to determine their own economic policy, then they will have to leave the EU to achieve it.

Does ‘Remain to Reform’ Change Labours Brexit Position?

We believe that ‘Reform to Remain’ doesn’t fundamentally change the Labour Party approach to Brexit but adds another layer to it. Our strategy must primarily be developed around options that will facilitate the Labour Manifesto. Therefore our strategy could be:

1.       Reform to Remain

2.       Bespoke deal/soft Brexit

3.       Peoples Vote (back stop)

As such, we recommend that a ‘bespoke deal/ soft Brexit’ and a ‘Peoples Vote’ for the UK are considered our back stops to ‘Reform to Remain’ as they both render the UK powerless to affect the changes that the people of the EU need.

Take a Break from Brexit / Withdrawal Bill Extension

 As ‘Reform to Remain’ has evolved in the twilight of the Brexit negotiation period, we recognise that we may need more time to negotiate Brexit and to seek support within the EU. With this in mind we also support DiEM25’s call to ‘Take a Break from Brexit’.

Recommendations

Therefore, as Labour Party members we respectfully request that you consider the following recommendations when entering into the Brexit negotiations.

·         Recommend ‘Reform to Remain’ strategy to unite ‘Leave’ and ‘Remain’ voters under common direction.

·         Recommend ‘Reform to Remain’ to turn Brexit into an opportunity to not only bring the changes the UK needs, but deliver the changes the entire EU region need.

·         Recommend that support is sought from sympathetic EU leaders to increase pressure on the Council of the European Union.

·         Recommend that we show the people of the EU that the decent people of the UK don’t want to leave the EU, but are not being allowed to stay.

·         Recommend that we show the people of the EU that if we do leave, it will be for purely economic reasons that is causing us as much regret as them.

·         Recommend that a bespoke deal/soft Brexit and Peoples vote are considered as back stops to ‘Reform to Remain’.

·         Recommend that if ‘Reform to Remain’ is not accepted by the EU then the softest possible Brexit is sought that allows the Labour Manifesto in full.

I hope that this recommendation will receive your support and we can fight to build a European Union for all people.

Reform to Remain

Reform to Remain

I think that the term ‘Lexiteer’ or 'Labour Leaver is a bit of a misnomer, the key to understanding Labour leavers is that by and large, they have absolutely no desire to leave the European Union, but instead feel that they have no choice and are in effect being forced out. The Labour Leave position is purely an economic one, to ensure the implementation of the Labour manifesto. Which is currently impossible or at best extremely difficult to realise, at least within current European Union regulations.  

Many consider Brexit to be the most important issue of our generation, I don’t think that Labour Leavers do. Their priority is to bring an end to homelessness, poverty, inequality, restore our public services to public ownership, create new green energy industry, build truly affordable homes to buy and rent. But to achieve this we have to create the income streams needed to end austerity and provide the investment to benefit the people of the UK.

So if you want the Labour Manifesto, then leaving the European Union is currently a necessity, not a desire.

‘Uniting Leave and Remain’

There are two ways to take back control of our laws, our ability to decide our own policies, we can either leave the European Union or we can put pressure on the European Union to change theirs.

‘Remain and Reform’ does not immediately and may never achieve the reforms we need, as they have to be negotiated and as such, will never get support from Leavers.

Leaving the EU guarantees the changes we need, but at great cost, both financially and to the ‘Four Freedoms’ and quite rightly, will never get support from ‘Remain’. So the people of the UK are both divided and entrenched. Both have positions that cannot be opposed because both in their own way, are correct.

It is possible to bring both 'Leaver' and 'Remain' together to fight for a common cause. By fighting for 'Reform to Remain' we can keep the 'Four Freedoms' whilst winning the ability to determine our own economic policy. If we successfully negotiate reforms to EU regulations before we leave, then all of valid reasons to leave the EU will have been satisfied and leaving the EU becomes pointless. We will have taken back control over the laws that ‘Remain’ want to change inside of the EU and what ‘Leavers’ want to change out of it.                                                    

If Brexit happens, it will not be because we wanted to leave, but because we weren’t allowed to remain.

The People of the EU

However, I do think that we can take this a step further. ‘Reform to Remain’ is a position that could unite the majority of 'Leave and ‘Remain' voters alike, but as it also positively changes EU regulations, should also gain support from European socialists across the continent and direct the focus of attention, away from each other and onto the EU leaders.

The people of the EU are fighting their own battles against austerity, poverty, inequality and the hard right. The neoliberal EU rules, that have promoted austerity and have allowed poverty and inequality to get out of control in the UK, is also causing the social problems and civil unrest we see in the EU today. This is why I am not fan of a bespoke deal for the UK, because it’s very limiting and UK specific. It provides us with a way out of our problems, but leaves the people of the EU trapped in the same desperate position they are in now. 

If we change the way we are approaching ‘Brexit’ by fighting to ‘Reform to Remain’ it makes no difference to our Brexit strategy. The benefits we want for the UK won’t change, but we can also win them for the people of the European Union. We can help the entire EU region to win the reforms it needs to allow them also, the freedom to imagine, create and implement the policies they need.

The purpose of ‘Reform to Remain’ should be able to tick the boxes of every reasonable leave and remain voter. Besides fighting for a more prosperous EU and UK, the EU employment regulations will become the minimum standard, not something to be aspired to. Immigration will decline naturally as people will be less inclined to migrate because improved conditions in their own countries will remove the desire to seek a better life elsewhere. For those that do come here to live, love, work and play, they will come because they want to, not because they have to.

Remaining in an unreformed EU denies us these freedoms and condemns us all to a neoliberal controlled future.

We have an opportunity to use Brexit to fight for the changes that will affect the entire EU region by fighting for ‘Reform to Remain’.

Lets’ not waste it.

HOUSING FOR THE MANY

Housing for the Many - Policy Suggestion
A New Mortgage Deal for Everyone

(C) Thomas Heavey Feb 2022

“A Labour Government will consider steps to enable more local authority mortgage lending to help local first time buyers” P20
HOUSING FOR THE MANY – A Labour Party Green Paper

The Housing Ladder Problem
It is clear that we are in the midst of a housing crisis, rising homelessness, repossessions, insecure housing and sky high rents. I have chosen to concentrate on the crisis surrounding young people and first time buyers and their difficulty getting a foot on the housing ladder. Not enough homes are being built and what stock there is, is prohibitively expensive and beyond the reach of increasing numbers of people.
Home ownership among our young people especially is collapsing, millennials are now described as ‘Generation Rent’ because it is estimated that by the year 2021, only 26% of young adults will have managed to get onto the housing ladder. Sky rocketing house prices and rent threaten to lock 20-40 year olds out of the housing market, depriving them of the ability to invest in themselves and their families.
As John Healey MP said “The housing market is broken, and current Conservative housing policy is failing to fix it”.
One of the solutions the Labour Party is offering, is to build high quality, truly affordable homes to enable young people and first time buyers take their first steps to home ownership. 
This response represents new thinking, a fresh approach as to how this can be achieved, whilst at the same time, complements Labours existing housing strategy. A solution that focusses in particular, on enabling young people and first time buyers to access instantly the existing housing market.
Supplied by Government and delivered by local authorities it will completely changing our thinking around the way mortgages are traditionally supplied. So radically different, that this level of change can only be delivered by a Labour Government. This proposal will offer our young people and first time buyers, the new deal that they so desperately need. A deal that will enable access to the housing market, a more comprehensive choice of the available housing stock and at a cost that leaves a substantial proportion of their disposable income, in their own pockets, improving the quality of their homes and lives.
The mortgage turns the traditional mortgage on its head and represents a valuable investment for the tax payer, increasing the value of every £ they pay in tax.


The Up-side-down Mortgage
The basis of the mortgage is that it provides the ultimate flexibility in how it is paid for to the mortgagee. As a young person or first time buyer they can begin their mortgage by paying the interest only. This has the effect of making the cheapest time to buy a mortgage at the beginning as opposed to the end, hence effectively turning the way we purchase a home, up-side-down.
As their careers develop, so they can start paying off the capital if they choose. This flexibility, which is missing from our current mortgage system, will ensure that at times when life decides to alter the circumstances of the mortgagee, they have a family, re-enter education, their children marry, want a holiday or if disaster strikes and they lose their job. They have a safety net where they can return to paying the minimum interest only payment and never have to face the trauma of losing their home.
The option is also there for the mortgagee to never have to pay off the mortgage which will be addressed later in the report. In this circumstance the mortgagee is in effect, using the home to give them the maximum possible level of disposable income.

Calculating the Mortgage Fund
At the time of writing the amount the mortgagee can borrow is based on a maximum loan of 30% of their total disposable income.
Today for someone with a disposable income of £10,000, this would only allow them a mortgage of £60,000 at 2% interest as capital repayments are included in this cost, giving a monthly repayment of £254. 

By changing the formula by which mortgages are supplied and funded, we can greatly enhance the mortgagees spending power, without increasing their monthly payment.

The formula is based on 30% of annual disposable income. At £10,000 disposable income per year the base line annual payment for the mortgagee is £3000.
The amount of funding available now depends entirely on how much interest is charged to the mortgagee.
If £3000 represents 2% of the total mortgage, then the mortgagee has a maximum fund of £150,000.
If 3% interest is charged, the fund now drops to £100,000.
And at 4%, the available fund reduces to £75,000.  
So the amount of interest charged is pivotal to the amount of funding available.
The lower the interest rate is kept, the better home and quality of life for the mortgagee and as will be shown later, the higher return on investment from the mortgage provider.

£20bn a year is currently spent on housing benefit. Instead, this money could provide 133,333 mortgages and at even only 2% interest, would create a gross income stream for the tax payer of £400m per year. 

The ‘Lock-in’
The mortgage can be used as a form of self-rent. With an interest being charged but the capital never having to be paid off. The advantage to the mortgagee with this type of arrangement is that unlike renting, their payment never changes throughout the life of the mortgage. As the cost to them, is based on purchase price and not market value.
With the interest rate being set by the government and not by the markets, the same interest rate can be set for the lifetime of the mortgage, meaning that it will never increase providing security and stability.
Forty years ago in 1979 the average house price was in the region of £20,000. Had we started this scheme back then, the average monthly repayment would have been £33 per month.
Forty years later in 2018, even without touching the capital, this mortgagee would still be paying £33 per month for their home and have a debt of £20,000.
Today, that property would be valued in the region of £200,000, more than enough to repay the original debt and to finance downsizing in property when the time comes, creating the building blocks for a comfortable old age and eliminating the worry of affordable heating, food and rent.

London
In London as with other areas of the country, housing costs can be out of reach for young people. Unable to afford a place of their own near their families, they are unable to buy or rent properties in the areas where they grew up.
Take a random London area, such as Islington North, the average house price in the area is £680,000. Far beyond the reach of many young people. The monthly cost of a mortgage in Islington on the average home is £2882 per month and also requires a deposit of 10% or £68,000.
If this scheme was available to them, the monthly payment could be reduced to £1,133pcm with the same terms, conditions and benefits applying. Areas currently prohibited by today’s mortgage system, could be brought well within reach, giving people greater freedom of the locations in which they choose to live.
    
What does this mean for the lender?
The lender will ultimately be the tax payer and to ensure that they are getting a good deal, the mortgage could be equity based although this is not essential, as the tax payer will effectively double their investment through rent and owning the debt on the mortgage without the need to remove equity.
On a £150,000 mortgage, if the mortgagee has paid only the interest on the property, then the equity share arrangement, will be determined by the lender and will range anywhere between 0-100% (dependent on the generosity of the lender).
The home could become an investment opportunity for the mortgagee, by encouraging them to make payments off the capital and earn equity in the property. Both lowering their debt and increasing their equity share.
At 2% interest, it will take a mortgagee 50 years to have paid an amount in interest equivalent to the original cost of the home. This means that the local authority will have made the return on their investment and still own the original debt which will be paid off once the property has no further use. However I expect the use of the property to extend well beyond 50 years.
Essentially, for the local authority, this investment has created an income stream where they can expect their original investment, on average to be at least doubled.

Home Inheritance for Future Generations
A home should belong to the family, not just the individual. When a home has been passed on then the original mortgage agreement, could be passed on with it to benefit either the children or grandchildren of the original mortgagee.
In 2080, if salaries rise by an average of 2% per year, the equivalent salary of someone earning £10,000 today would potentially be £45,000 by 2080. However the annual interest payment for the property will still be £3000 per year. Meaning that the percentage of disposable income needed to reside in the property has fallen from 30% to 6.15% and will continue to fall as long as salaries increase. Meaning that future generations continue to increase their wealth and security.

The advantages for the millennial home buyer:
 Highly flexible repayment plan.
 Mortgage can be based on 30% of disposable income meaning increased disposable income.
 Greater spending power meaning that the mortgagee can afford a property almost 3x the value they can afford today under current mortgage allowances.
 With enhanced quality of home comes an improved quality of life.
 With deposit free mortgage availability, the young person can get instant access to the housing market.
 Provides them with an investment opportunity (dependent on equity deal).
 Creates a return/profit for the tax payer.
 Creates an income stream for the local authority equivalent to the mortgage paid, less overheads.
 Increases the value of every £ the tax payer spends.
 Creates security in their homes by ending repossession.
 Creates set payments for entire length of mortgage.
 Creates low housing costs into and throughout retirement.
 Creates greater choice of the available housing stock.
 If housing price rises are under performing allows for return to interest only payments and investment can be sought elsewhere.
 Overall costs greatly reduced in comparison to a lifetime of renting.
 More disposable income created to enjoy life.
 Less money spent on housing benefit.
 More families living in their own homes.
 Could be £100's of £1000's better off compared to renting.


Disadvantages
 Mortgages can be lifelong.
 Could potentially pay more for the property if a repayment plan isn’t in place.
 May not be entitled to equity share.
 Responsible for own repairs and maintenance. (Also an advantage for the lender).

Mortgage eligibility
An optional discount on the mortgage or qualification for eligibility could be the requirement to be a member of a Trade Union or Trade Association. This is to provide the greatest security of interest payment and to ensure that the mortgagee enjoys the highest level of job security and career development, to complete the mortgage agreement.
The mortgagee must also be in full time employment, contracted employment, good history of self-employment. Zero hours contracted work will be illegible for qualification.

Funding Streams
Tax Payer
This creates a fantastic opportunity for the tax payer to increase the value of the tax £’s they spend.
Pension Schemes
An opportunity for pension schemes to double their investment and help to ensure their longevity of these vital schemes well into the future.
Private Investment
An opportunity for potential private investors to make a steady return on low-risk investment
New Central Investment Bank
Funding from the new Central Bank would create a return for the tax payer and provide the substantial capital needed to get ‘Generation Rent’ onto the housing ladder.
(Whilst the mortgage suggestion has been included in the Green Paper, I have also been informed that there is 'scope’ for funding from the New Investment Bank)


The Numbers
The numbers are there to be played with. There are many permutations of the direction they could take. How you play with them, depends entirely on what you want to achieve. The minimum is that after 100 years you effectively treble the value of the initial investment, double it after 50 years. So there is no doubt that profit can be made. This system it is a balance between profit and quality of life.


Private Rented Sector
A system of housing such as this will undoubtedly have effects on existing markets. The private rented sector has created a very profitable place for people wanting to invest their money. A property can create income in terms of rent and the appreciation in value of the asset.
Providing interest only mortgages removes the rental element to this investment and therefore makes the private rented sector, a far less attractive investment opportunity. Therefore I would expect to see many homes currently used as rental investment, to be released into the housing market.
Property investment will remain, but rent will be based nearer the cost price of a property as opposed to market value. The private rented sector will have to adapt by improving standards and reducing costs, in order to survive.

The Up-Side-Down Mortgage Could Seriously Improve Your Wealth
Today’s renters can pay a rent based on up to 80% of the market value of the property. If the rented property was valued at £150,000, then the rent would be based on a property valued of £120,000. This would give a rental cost of £509 per month.
Over the next 50 years, if the house value went up by just 1% per year, the rent being paid in 2068 would be £836 per month or £10,032 per year. Over this 50 year period the renter would have paid an eye watering £435,900 in rent on a home with a value of £150,000. At the end of which the renter owns no property and has earned zero equity in the property. The reason why this cost is so high, is because rent, is inextricably linked to house value, not purchase price.
With the Up-Side-Down mortgage, the interest payments on a £150,000 property start at £3,000 per year and never change. At the end of the same 50 year period the mortgagee will have paid £150,000 in interest, £285,900 less than if they had rented. In addition to this they have also earned the equity on the property which equates to £96,694.
Meaning that the over the 50 year period, the mortgagee is £382,594 better off due to savings made from rent and equity earned on the property, than compared to a privately rented home.
Essentially giving a real terms boost to the householders finances on average of £7,651.99 per year.

Traditional Builders
Changing the way mortgages are supplied may influence the ways in which builders build. I believe that they will build the homes to match the available funding and to a price and standard required by their customers.   

Freeing up the land to build
By improving access and purchasing power to the housing market, we could potentially create a new minimum standard in housing with the minimum value of a home being £150,000.
This would render many properties below this value redundant and of little use as an investment.
It is possible that the use of many older properties, below a £150,000 value would become redundant, freeing up land that can be re built upon with new, higher quality homes that regenerate an area and provides a better investment for the mortgagee.

Summary
This is just another option we could take in dealing with the housing crisis. In addition to making homes more affordable, we can also look at restructuring mortgages over longer terms, to bring the existing market, back within the reach of ordinary people.
We can provide the security people need so as they’ll never be faced with having their home repossessed, provide families a home they can call their own, end the scandal of homeless children and provide people with their very own investment opportunity.
The lower housing costs this will create will put more money into the pockets of ordinary people allowing them to live and enjoy a few more of the luxuries they want.
Young people and first time buyers can get instant access to the housing market. With no more years of saving for a mortgage the investment they make in themselves and their families can begin immediately.
For the tax payer, they will be spending far less on housing benefits and income support. And on top of this, the tax payer will also make a return on their investment, increasing the value of every pound spent, to use on the services we want.
Thank you for reading

Housing for the Many - Green Paper Response
A New Mortgage Deal for Millennials

©Thomas Heavey2018

Privatisation - Socialisms Misunderstood Little Friend

This is quite possibly the craziest notion I've ever had. I still can't believe I thought it.
The question popped into my mind, "why is our NHS, our social housing and our publicly owned industries so vulnerable to being privatised, and how do we protect them?
Well, we know that they are 'public assets' and as soon as we let the tories anywhere near them, they are broken up and get sold off, or 'asset stripped'. It's been this way for the last 40 years.
But it also occurred to me, that just the act of privatisation is not necessarily going to be damaging for that industry and may, just may provide it with a degree of protection. The real damage begins, by how that industry is managed.
Give the industry to people intent on making profit (conservatives/neo-liberals), and invariably employee terms and conditions are reduced, the customer service experience is diluted and prices go up. We can see this happening today as our hospitals fail to meet demand and the unaffordability of housing, which is displacing so many families. However if managed correctly (non profit) and there is no reason why employees cannot be looked after and customers given 'world class' service at great value for the tax payer.
A similar train of thought I recently explored with housing, suggested that the best way to protect the social housing market could be to achieve 100% home ownership essentially ending the need for social housing, an idea which is not beyond the realms of possibility. People can enjoy the benefits of home ownership and can practically choose the level of repayment starting above a set minimum of 2% or 3%. This would bring the affordability of a decent home within the grasp of even the smallest of budgets. It would be possible to pay as little as £250pcm for a £150,000 home. The finance is supplied by the tax payer who essentially becomes a mortgage provider and shareholder, where all profits are directed back to the tax payer.
People get quality, affordable housing and the next time the tories get into power, they can't touch it because it isn't a state owned asset. The social housing market has been privatised with a little piece of it owned by everybody.

In the same way, we can protect the NHS by privatising it. Instead of handing it over to people who will seek to exploit it, it will be handed to people who will treat the industry no differently than a social government would, by ensuring that every penny is directed back into the services it provides and the people who serve it. And again, it is the tax payer who benefits from a world class service. 

So, it's not privatisation that we need to protect our essential services from, it's capitalism.

Is it possible that the best way to save our NHS might be to privatise it, but under social, not neoliberal conditions?
After all, it is unlikely that the neoliberals new best friend will be to re-nationalise industry.

Housing Strategy - Solving The Housing Problem

I don’t think that there is anyone on the UK who isn’t aware of the seriousness of the housing crisis we are currently experiencing.

There seems to me to be four main areas needing attention being:

1. Social housing
2. Shortage of new affordable homes to buy
3. Getting young people onto the housing ladder

4. Homelessness

I don’t think that there is any reason why we cant tackle all of these issues in one go and with zero cost to the tax payer.
This idea started life as quite a complex solution some 6 months ago but over time, through development has simplified substantially.  

It is now entirely possible to give young people the instant access they need to the housing market with the ability to purchase property in virtually any location they desire. This will inspire the existing house builders to design and build excellent quality, genuinely affordable homes, freeing up valuable land and which returns a substantial profit for the tax payer. A profit so great that it alone could start to address the repayment of the national debt.

The way to achieve this is by truly radical thought and completely change the very basic principals of our housing market functions.

I am a strong believer that tax payers money should be invested to create the finances needed to fund the tax payers needs. And this is where it begins. The tax payer becomes a provider of interest only mortgages, with capital repayment becomming a matter of choice. I had toyed with the idea of long term standard mortgages, but these are not protected from market fluctuation so are inherently unstable. The mortgages provided buy the tax payer are free from market interferrence and as such the interest rate can be secured for the lifetime of the mortgage.

By providing interest only mortgages it enables all people to get onto the housing ladder, this includes the unemployed as the interest they pay on the mortgage will be substantially lower than the rent they pay a private landlord for the same property. This will give the unemployed and employed substantially more disposable income or they could choose to have less disposable income and opt for a better quality home. 

As the tax payer is providing mortgages as opposed to social housing, people will have the freedom to purchase the home they can afford in the area they can afford which will end the existence of council and social housing estates. Virtually every home will be privately owned. People will not be forced to make repayments to their capital which means that a mortgage can last a lifetime. But if they find themselves with a change of circumstance they can make the minimum interest payment meaning that they will never face the prospect of losing gheir home. Christmas and holidays will never be a thing to fear for lack of affordability. And time off to educate oneself is a choice and no longer an obstacle.

Lets say for example a home with a purchase price of £250,000 over a 25 year period at 3% interest. The initial repayments would be in the region of £1458 pcm. However on interest only at 3% this cost reduces to £625 pcm. The property becomes eminently more affordable and as the owners career develops and their salary grows, so the capital repayment increase. In 40 years, £250000 may become a trivial amount, much like the mortgage payments appear of people who purchased their homes 25 years ago.

If no capital is paid off then after say 50 years it will have made the tax payer a return of £375,000 and the tax payer still owns the 100% of the property.

If we invested £500b in mortgage provision, then every 50 years at 3% the tax payer would still own the £500bn investment and will have made £750bn in interest payments and the tax payer still owns the initial investment of £500bn, which quite possibly will have appreciated in value.

Double this investment to 1tn and in 50 years the national debt is paid. Double it again and the debt is paid in 25 years. Taxpayers money is no longer needed to pay the debt.

With a mortgage based on £100,000 the interest at 3% is £250 pcm. At 2% it is £166 pcm. 

With the extra disposable income being spent, new opportunities will naturally present themselves encouraging a growing and prosperous economy. 

The Poorest Pay The Most - Poem

The Poorest Pay The Most

We started renting in ‘77
Cos the bank wouldn’t give us a loan,
My job, it didn’t pay very much,
But at least, we had our own home.

A lad of 20, that’s all I was,
With a little one, on the way,
It wasn’t a home we would ever own,
Just a place we’d pay, to stay.

The house was only worth twenty grand,
And the rent, it seemed pretty low,
But that money, it went to the landlord,
Not invested in my family, to grow.

As the years passed by, its value went up,
And my rent, well that went up too,
“Market rates” the landlord he said to me,
“Only right that your rent’s based on value”

Ten years later, it's now worth sixty grand,
My rent, well that too has tripled,
It raids my disposable income,
My finances are all but crippled.

If only they’d given me a mortgage,
My outgoings would’ve been less,
Had no choice but to pay my landlord,
In my own family, I couldn’t invest.

Well it’s 40 years later and I’m still paying rent,
On what’s now a two hundred grand home,
Imagine how small my mortgage would be,
Had the bank only given us a loan.

In 20 years hence, I’ll depart this world,
A lifetime with little to show,
And five hundred grand, in rent I’ve paid,
Seems a lot, for my twenty grand home.

“A scrounger” some people once said to me,
When I couldn’t pay my host,
But hundreds of thousands in rent I've paid,
Tis' true, the poor pay the most.