Yesterday, I wrote about how I disagreed with Boot’s reported proposal ‘to spend £70.5m on home improvements‘ and to “make that money available” to property owners which are ‘in poor repair or unfit.’ Having the Government merely “mak[ing] that money available” to property owners is wrong, because it would fundamentally be the transfer of taxpayer money to private gain – improving a property obviously primarily benefits private individuals for general issues of ‘poor repair’.
Instead, there is a credible argument that there are a whole range of enviromental benefits from broader issues of energy efficiency. In this specific area, there are some broader community benefits to improving the energy efficiency of homes. Ideally, such improvements would be funded by the property owner – after all, they’re going to get the primary benefit of insulation/energy efficiency/etc in lower energy bills and the resulting improved capital value. In our community, however, there are some people who have the illiquid wealth of home ownership, but low/fixed incomes which cannot fund such improvements. So, I think there’s a possible role for the Government to play in helping to fix this disconnect: some sort of mechanism to pay the up-front capital cost of improvements, with the money being repaid with the energy savings.
So, what should we do? An alternative idea
In most cases, the most direct way to resolve this would be for property owners to be able to re-draw on their mortgage to fund such improvements. This would give Manx property owners amongst the lowest interest rates available to consumers these days. However, I’m advised that the biggest barrier to this type of loan currently is the mortgage code of business affordability guidelines. I’m told that the MCOB was a UK response to the 2008 financial crisis when many homes were repossessed. Unfortunately many people in the U.K. took out high loan to value, larger mortgages on an interest only basis. I gather there was some of this here in IOM but it was unusual. This UK regulation, whilst good intentioned, effectively removed flexibility in their mortgage market. MCOB is a UK regulation and it is not compulsory here in IOM.
In practice, most lenders here in the Isle of Man are subsidiaries of UK banks so I understand that they have broadly followed the same, UK, rules. I’m told that some local banks will also fund their mortgage lending by securitisation which means they probably need to abide by the UK rules anyway.
So, what can we do here in IOM? I think there’s scope for organisations like Manx Utilities and Manx Gas to play a more active role here. They’re already in the practice of collecting monthly payments, they’re already managing some (small) consumer-facing credit risks, and they are supposed to be the experts on fuel consumption.
It is possible to imagine, for example, Manx Utilities paying the up-front cost of LED lighting or insulation, with the money being re-paid over time as part of the electricity bill (in the case of electric heating homes) or Manx Gas paying the up-front cost of insulation, etc, with the money similarly being repaid over time. This is the sort of thinking that helps to solve the underlying problem, but without the wholesale transfer of taxpayer money to private property owners. This sort of thinking achieves a worthy goal (improved energy efficiency; lower costs; investing in improving local homes) but without Boot’s wholesale transfer of public money for private gain.
Note: single quotes above are from the BBC report; double quotes above are from Boot himself.