(May 30, 2017) Theresa May has unveiled a build-rent-buy program that in one stroke promises to boost home construction, house the needy, and incentivize them to become homeowners.
This article, by Lawrence Solomon, first appeared in the National Post
Canada has a social housing problem. Despite massive taxpayer expense, the subsidized homes we offer are often so wretched that even the needy are repelled from living in them.
Britain has a solution, inspired by former prime minister Margaret Thatcher’s popular public housing privatization scheme of the 1980s, which let public housing occupants buy their homes at a discount, thereby creating a home-owning class. In a 21st-century version of Thatcher’s scheme, the current prime minister, Theresa May, has unveiled a build-rent-buy program that in one stroke promises to boost new home construction, house the needy in quality homes, and incentivize them to become proud and community-oriented homeowners. As a bonus, brownfield sites will be cleaned up and taxpayer expense curbed.
Under May’s scheme — which is part of the Conservatives’ platform in the current general election — the needy would be able to rent newly-built, city-owned houses at subsidized rates for a fixed period of 10 to 15 years. The houses would then be offered for sale at a discount, with the tenants having first dibs at becoming owners of their own homes — something that is beyond reach for most renters in today’s Britain. Knowing that they’ll eventually be entitled to a benefit worth tens of thousands of pounds, tenants will be likely to set aside the money they’ll need for the ultimate down payment 10 or 15 years hence, invest in their property’s upkeep, and develop a commitment to the safety of the neighbourhoods — all things homeowners are wont to do.
The local governments administering the program also stand to gain by seeing their communities improved. Many of the sites expected to be redeveloped for this rent-to-own housing will be in brownfield sites or derelict urban properties that haven’t been redeveloped by their private owners for lack of planning permission. May’s scheme will cut the redevelopment red tape, allowing the local governments to expropriate the properties at low market rates and rezone them to allow housing developments. To make sure the housing will be desirable for later purchase (including by the general public when tenants don’t take the government up on the offer to purchase), the housing will be built to better standards than is often the case with public housing.
During the tenancy period, cities stand to save on upkeep costs (because tenants will have an incentive to look after their own homes), while benefitting from what promises to be stable neighbourhoods. When the mandatory sale of the properties occurs 10 to 15 years following their construction, the local housing authorities will realize a tidy profit, having reaped the windfall that comes of redevelopment permissions and rising land prices.
When Thatcher introduced her Right to Buy program in the 1980s, the lure of homeownership was so great, and the discounts that started at 30 per cent were so attractive, that the public housing was snapped up by its tenants, bringing in more money than any of her many other privatizations. May’s version will likely prove equally popular with the public, since the new housing will also alleviate a general housing shortage in the U.K. The public won’t shed a tear for the only losers in the scheme: the current property owners who are today seeking permission to redevelop the land themselves, only to see it be expropriated by governments that have given themselves the permissions they won’t grant to private owners.
In Canada, the poster child for failed public housing is the Toronto Community Housing Corp., the continent’s second largest property owner with 58,500 rental units, 3400 of them vacant (only the New York Housing Authority is larger). Although TCHC’s waiting list of 177,000 delays eligibility for housing for as long as nine years, more than half the prospective tenants who see the units decline to move in. They are put off by the disarray — TCHC has a $1.6 billion backlog in repairs — and a culture of drugs and prostitution, factors that point to an absence of upward mobility and an abundance of apathy and defeatism among tenants that have little commitment to their community.
As always, Canada’s city politicians and social activists call for more money to house Canada’s needy, in more of the kind of dead-end housing that the TCHC delivers. As always, their approach perpetuates the problem. They might instead learn some lessons from Thatcher and May. Privatize the public housing that exists, and when building new public housing, give the tenants a goal in the form of home ownership to strive for.
Lawrence Solomon is executive director of Urban Renaissance Institute and the author of Toronto Sprawls (University of Toronto Press).