Communities Secretary, Sajid Javid, has outlined plans by the UK government to launch a massive housebuilding scheme.
Speaking on the Andrew Marr Show, he talked about plans to build between 275,000 and 300,000 homes a year. He said that lack of housing stock is "the biggest barrier to social progress in our country today".
He continued: "So for example... you borrow more to invest in the infrastructure that leads to more housing - take advantage of some of the record-low interest rates that we have. I think we should absolutely be considering that."
So let's consider this and also spare a moment for a mystery.
The UK government can borrow money over ten years for 1.33 per cent, based on current bond yields, and for 1.90 per cent over 30 years. The average rent on a home in the UK is around five per cent if its value. So the government can borrow at less than two per cent, rent out at around 2.5 per cent, giving a 25 per cent return on investment, in the process maybe halving the rent paid by tenants.
What's not to like?
The mystery relates to why it has taken so long to introduce such a pragmatic business model that offers the additional benefit of being good for society,
Then again, landlords who have become used to a five per cent yield, and the property owning part of the electorate who do very nicely out of the value of their home going up, won't be so happy.
But then shifting the UK economy that sees rent seeking taking precedent over wealth creation, with entrepreneurs at the core, always was going to be tricky.
PS: Have rising house prices creating a new type of economy, with more people renting, helped encourage greater entrepreneurship? After all, mortgages can act as millstones, strangling the mobility of labour, and entrepreneurship needs a mobile labour force.
