Housing is an essential policy area for the transformation of Scotland. In everything from controlling the harmfully high price of housing to desegregating social classes to creating better social environments for people to reducing CO2 emissions to producing high-pay manufacturing jobs, housing is essential. It also has a self-contained business model. The means of building these houses is through long-term borrowing arrangements with a Scottish National Investment Bank.
Perhaps the most effective model for this is to create a National Mutual Company, the National Housing Company. This would build a new generation of first-rate public rental housing. The company would borrow against rents over a 30 year period. This would enable rents to be lower than now when borrowing is done over shorter periods (and if combined with very active planning and tax policies designed to reduce the cost of land, rents could be lower still). Therefore subject to available land, the company could be entirely demand-led—just like in the 1950s, anyone could put their name down on a list for a public rental house and so long as they'd commit to say five years of renting, as many houses could be built as there are names on the list.
The benefits of doing this through a national company are many: the ability to improve efficiency through scale; removing the profit-maximising, wealth-extracting imperative commercial developers currently impose; greatly improving the technologies of housebuilding in Scotland and therefore the environmental performance of housing; or creating much higher quality jobs in construction. A national company should build German-style 'house factories' in which high-tech housing is built on a production line and assembled quickly and efficiently where they are to be built. The jobs created are not labouring jobs but skilled jobs in design, engineering, and construction—as well as the traditional trades. And as the financial model is not limited to those able to raise finance for the costly business of deposits and mortgages on Britain's over-priced housing, so demand should be substantial.
A National Housing Company would also have an important role in renovating the existing housing stock. The financial model for this involves the company borrowing against the future savings in energy resulting from the renovation. Homeowners who want to improve their housing can commit to a fixed-price energy deal with the company. Once the work is completed the price of energy used by the house will fall substantially as insulation and the efficiency of heating systems is improved. The gap between the fixed energy price and the reduced cost of energy actually used creates an income stream for the company, as well as maintaining the fabric of the building, reducing long run costs and thus tackling fuel poverty. It can then borrow against this income stream to fund the initial work. In this way families can have substantially improved housing quality and Scotland can reduce CO2 emissions with no additional cost to either.
By creating high-quality rental housing and by stimulating the improvement of existing properties, the National Housing Company would create substantial amounts of economic activity which the current market simply isn’t—and these are high- and medium-skill jobs in a productive sector. There is little or no cost to the public purse in any of this and the economic returns are immediate. Over time, it would reduce our over-investment in low quality housing and generate a surplus for continuous investment in homes which are fit for purpose.