City councillor John Clancy, who once worked in the venture capital market, explains in a Chamberlain Files article, [accessed via the Brummie], that ‘Brummie bonds’ can provide much needed investment and kick-start building by local councils and housing associations across Birmingham.
Some readers will remember that the Brummie Bonds concept was incorporated in the 2003 People’s Pensions Proposal, informally presented to MPs, an MEP and NGOs by a London colleague Colin Hines (co-founder of Localise West Midlands) with co-authors, accountant Richard Murphy (now of Tax Justice fame) and MP Alan Simpson. Read on here.
In October 2004, David Bell’s article on the subject in the Post: Buy a share in Brum pointed out that bond issues are used to raise finance by federal states in Germany and many other local authorities around the world, but although English councils have powers to issue bonds none are believed to have used them.
John Clancy’s vision is of a 40-ward investment strategy. An access-all-areas Brummie Bond investment issue is needed and he records that the Labour Party’s policy announcement last weekend on the Future Homes Fund is effectively the revival of the concept of housing bonds itself:
- Anyone saving for a house deposit can put it in an ISA to which the Government would contribute 20%. The Labour Party is proposing that those funds would be earmarked for new house building. The banks would be directed to invest these assets into housing bonds.
- Local councils and housing associations would issue bonds into which the UK’s banks would be required to invest. This would keep investment by UK citizens in the UK and, effectively, into local and regional investment.
- If local developers are sitting on a land bank where planning permission for housing is already given, then the “use it or lose it” principle would have to apply. If there is capital ready and willing to buy and build from housing bonds, then so be it. Positive, active creative capital will need to push out dormant, destructive, delayed capital.
There is now a growing consensus that investing in UK housing is the best investment strategy for the health and wealth of the funds. They provide healthy returns on a risk adjusted basis to the pension funds.
A recent analysis by TradeRisks.com recommends hard-nosed investors (especially pension funds) to go into social housing bonds rather than corporate bonds, and that now is the best time to do so. Sixteen of the biggest 60 Housing Associations have now issued own-name public housing bonds. It’s time for local councils to do the same.
Government has relaxed the rules on investment and recognised the key part that local government pension schemes have to play in regeneration, infrastructure and ‘green’ investments. Cllr Clancy says that if any local government pension fund has not laid out its 30% housing and infrastructure asset investment strategy, we should ask why it has not done so. He ends:
It’s time for Bonds: Brummie Bonds.