Thoughts On Mortgages And Renting By A Disgruntled Millennial
Do we think about mortgages all wrong? Mortgages are seen as a very sensible route to getting on the housing ladder (it's not a ladder, it is a housing pyramid) and owning your own home.
This is an entirely sensible option, as once we have cleared our mortgage we are then mortgage payment free. Or to put it another way - long-term hire purchases are free.
This will not be a popular thing to say, but mortgages are just hire-purchase agreements between the bank and the home buyer or hire-purchaser.
Indeed, you are really only ever a homeowner when the mortgage has been cleared. So it is a long slog, one that is worth it for the other benefits of homeownership for example freedom from Landlords and Letting agents neo-feudalism.
We are still thinking about mortgages wrong, we need to go both back in time and forward in time.
Building Societies used to only lend the money that they had on their books to prospective homeowners. This meant that it took time and patience to get a mortgage, however, it also meant that banks did not inflate house prices using international finance and other clever methods to find the money.
When people saved into a building society they knew that they were pooling their money with other people to one day be able to get their own mortgage.
Renting is how most millennials and large proportions of Generation X. This renting is mainly from poor quality private landlords. However, combining the best bits of renting and building societies could create solutions to the home-ownership crisis and the house-building crisis.
This idea I have been thinking of dubbing 'the people's mortgage' because everything in politics now has to be about 'the people'. However, this is both about the people and for 'the people'.
So this is the idea in a nutshell, every social housing association and council house becomes both a provider of social homes and a house builder. Offering homes that are available to rent via a rent-2-buy scheme initially to their tenants and then to new tenants.
After they have rented from the housing association for two years, they can apply to become Rent-2-Owners where their weekly/monthly rent slowly pays off owning the house.
Now, of course, there would need to be a range of rules and an excess to contribute towards further house building, the price of the house has a percentage added on top up front to pay down (e.g. 25%-35%) which helps build a pot for new houses.
Additionally, the tenant's rent would stay the same, to pay down owning the house, however, there would have to be certain
To cover the council/housing association expenses a 2% levy would be taken from all payments.
Now, the pot of money they build up can be used to either, build new homes that are for exclusive social, or social rent-2-buy or can be used to offer private renters the chance to rent-2-buy where the social housing would then have to be able through a legislatively created mechanism to buy the homes with a guaranteed no loss.
Given the scale of the housing crisis, this might take a while to start to have an impact, but over time, the Housing Association could open branches offering savings accounts revitalising local savings and investments.
Additionally, as the scheme starts to bring in cash, the government could allocate further money for building more homes.
This idea has not been fully shaped, but it's a start at least.