Public Housing, Diversified Investment

There’s an article in one of today’s newspapers in Nairobi telling of panic amongst buyers in an apartment complex. The developer has problems with the bank and the buyers worry they’ll lose their money and have no apartment to show for it. The model of private housing development creates a lot of risk for ordinary people. We devote a huge proportion of our savings and borrowing to a single purchase, banking on the success of one development in one part of town. It’s the opposite of diversified investment.

Why is it so much harder to access housing than it is to connect to electricity, access the mobile phone network or use public transport? All of these networks cost billions in public and private investment. Despite that, in advanced economies we access these utilities at a cost that’s only a small fraction of the average monthly salary.

The key difference with housing compared to other infrastructure is that our home is a huge part of our identity and self expression. We choose furniture and colours, collect craft works and tend gardens to express who we are and how we would like to be seen. Housing could continue to fulful that need even if it were supplied like a utility.

Access to housing as a utility means it has to be built in sufficient numbers and at locations where people need it most. A single family or even community of several families does not have the market power to negotiate a private land purchase in major urban areas. The local authority could plan housing zones and compulsorily purchase the land on which housing and amenities would be built. The builder could be a public housing association, a private building contractor, a community group, or the local authority themselves.

The key question is who pays for housing in a public- or community-led model. In Dublin, the average house costs €320,000 in early 2019. To jump that hurdle, the single person or couple needs to save over €30,000 to get a mortgage. Repayments on a €280,000 Bank of Ireland mortgage are over €1,300 per month for a first time buyer. If the couple contributed €400 each per month to a public housing fund for 40 years of their adult lives, the fund would have over €380,000 to invest in high quality environmentally sustainable housing.

The couple’s payment into the fund would give them access to housing in any part of the country. This would give them the flexibility to move if needed, avoiding the risk of investing all their life savings in one speculative development. The economy would benefit from the couple being able to invest what they save in housing costs in a business venture or further education. They are also able to reduce their work hours to contribute time to community initiatives or caring responsibilities.

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