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So these housing costs...
Transcript of So these housing costs...
did we get here?
can we fix it?
How to fix the housing market by www.generationrent.org
I don't need to tell you that rents are sky
Rocketing in fact
to 40% of renters' earnings
It comes down to land
as an investment
Investors in property *
Want to make a return
...this doesn't just affect investors
Is based on what investors
think the future return will be
When they sell
By not building too many homes
investors can limit supply
guaranteeing prices will continue to rise
*though now maybe not so reasonably?
Anyone who wants to buy a
is in the same market as the
So as their profits rise
it costs you more to buy a home
And as prices go up
saving for a first time deposit becomes harder
And for more people...
Increasingly over time
the only people who can afford to buy property
Are those who already own property
If all the water companies limited supply, prices would go up and they would make huge profits
But they're not allowed to do that
Investors don't only invest in property
They invest in all sorts of things
And if the returns in property decrease they invest in something else
This means that when
land prices go down
There is less commercial
Because there's less
profit in it
get a really rough
As the cost of property goes up
The rents go up
So tenants are paying for increasingly expensive investments
Without getting any return on that investment
Investors can choose any mix of safe or risky, low yield or high yield investments
But homeowners and tenants have no choice in their investment profile: just the market rate and return
They're buying or renting a home
- because you have to live somewhere
...but they're paying for a potential future investment return whether they want one or not - and whether they're getting the return or not
The key to providing affordable housing sustainably is to allow people who want a home to be able to acquire one without also having to buy (and pay for) an investment
While still allowing those people who do want to invest in property to do so
And we know how to do this*
We need two
One for people who want an investment return
And one for people who just want a home...
...foregoing the investment return but getting a cheaper price
To make this secondary market the government would have to lend it
£1 billion pounds
This would be loaned out to developers, councils, housing associations or individuals as equity for new housebuilding investments.
So imagine this market held a 50% stake in a commercially built residential property development
Instead of getting half the profits
once the development is sold
market gets half
The secondary market then sells its portfolio of property at cost price (ish)
To whoever wants to buy those homes
But there are conditions for
(because this is a second market without investment returns remember)
Purchasers will get a cost-price home
but they won't be able to sell it for more than a regulated rate of appreciation
(something like a bank savings rate)
and they won't be able to rent it out for more than a fair proportion of the regulated value
(something like 7% a year)
You don't get to sell for a market rate
or rent out for a market rate
because you didn't pay a market investment
But the best
thing is that
reinvest the money
So £1 billion of money borrowed from the taxpayer
can be spent two or three times a year on releasing
new, permanently affordable homes.
And you never need another billion pounds
Which saves the taxpayer
money by bringing down the
£24 billion Housing Benefit
£10 billion of which is currently
spent on private landlords
Paying for their investments
So back Generation Rent's call for a secondary housing market
It's easy to implement
Saves the taxpayer money
And will provide truly affordable...
...permanently affordable housing
For anyone who wants a home more than they want an investment
Join us at www.generationrent.org/join