MORE HOUSES

Dominion, Volume 12, Issue 78, 27 December 1918, Page 4

MORE HOUSES

HOW RAISE THE MONEY? A PREMIUM BONDS SCHEME "The Housing Problem in Wellington" is the title of an interesting article in "Accounting and Commerce," the oiiiciul organ of the New Zealand Society <t' Accountants. Tho author cf the article is Mr. U. ii'Cartney, and his moßt interesting proposition ia that money can ba raised for tho buiUliug of houses necessary to relieve the present congestion by resort to the issue of premium bonds. This method of borrowing is ! suggested presumably because it would not be possible to obtain the money needed by ordinary means cxcept at high rates of interest.

llr. M'Cartnoy iirst of all makes, one or two paints on which he bases the rest of his proposals. He says that it will not bo practicable as a means of remcdy- [ ing an existing evil to pull down liousej , until others are built to give the people shelter, that the remedy must therefore | be in building new houses m ground now unoccupied, and that the scheme must be self-supporting, so that citizens not benefiting 'by the scheme shall not be rer/uiral tu bear any part of the yost of it. lie also admits that it is not possible to build houses at the present cost if tho finance is provided in the ordinary way, and to let those houses at ren. tals which the less well-to-do could afford to pay. Therefore, cheap money is an essential of any scheme. He suggests that there could lie a scheme b.i which the tenant would not be required to pay more than, say, ij per cent, on capital, and l>y which they would reap any ultimate benefit accruing from their payments.

The City Council' is to bo the controlling authority, to arrange the finance and construct tiie buildings. It is suggested that the city should bo able to purchase sufficient land within a praciicablo distance of the city to provide 130 sections at £120 each, say, for the lot. By importing its own hardware and other building material, it is suggested that the City Council should lie aisle to build 130 houses—SO of four rooms, 30 of five rooms, and 20 of six rooms—at a cost of JJStI,OCO. Taking account of an amount of, sny,. JBSOOO which would 'be required for interest during the construction, the total cost is estimated at .£BO,OOO. Let at rentals of 155., 18s., and 21s. per week, respectively, it is calculated that these houses would bring in a revenue of XSGIG.

To ra.iso the money for this venture, Mr. M'Cartney suggests that the City Council should obtain power to issuo 80,000 £1 boutis, redeemable as follows:— SQO bonds to be redeemed every year for ft period of 25 years, at tho following rates:—! for ,1250, 1 for XIOO, 1 for ,£SO, 20 for «E5 each, 177 at £2 rach; a total annual cost of i:SS4. At tho etid of the 25 years there would be 75,000 bonds still current. To provide for tho redemption of these bonds the proposal is that £3MG be paid annually to the Public Trustee, these moneys to accumttlato at the rate of 4J per cent, per annum. At tho end of 25 years the moneys would have at this rate of interest amounted to .£150,000, sufficient to repay all the bonds at the rate of ,£2 bond.

The annual revenue froTi rents has been already assessed at ,£5816. This would allow, assuming all the houses were let, a balanco ot JJJ336 per year,' which would be available for sucii charges as rates, insurance, repairs, and contingencies, in respect of the 136 houses. At tho end of the period the City Council would, find that the loan would be repaid without cost to the city, and it is therefore suggested that tho houses should all bo given to the tenants free of cost. It would happen in most instances that the tenant would not remain in continuous occupation of the houses for all the years, and provision would have to 'be made for the computation on an equitablo basis of the amount which an outgoing tenant might claim from a successor in respect of his prospective ownership of the property.'

The bondholders would net no interest, but they would get at the least ,£2 at the end of the period, and they would each have 25 chances of getting X2SG for their bond, and other chances ■ of winning less amounts. If a man put "liia XI into the Post Office instead of bu.ying a. premium bond, he would receive at the end of 25 years .£1 18s. 9d.

No allowance is made here for management expenses, but M'Cartney thinks that the.v would bo 'mot out of tho profits paid over by the Public Trustee, and out of the interest on sums in hand for various terms during the year, and bearing interest during tho period that they would be held. The scheme is that the City Council should build houses with finance provided by this method. There would be no cost to the city, and the tenants would nt the end of the time become tho owners of their houses by the payment in the meantime of n very moderate rentals The rent payments, after allowing for the payment of rates, insurance, and an amount for repairs, would rot ;be sufficient to pay ti per cent. The total rental at the amounts stated would bo at the rate of about 7 per cent., which is much less than a payable rate tq the' ordinary investor who lias to par rates, taxes, insurance, repairs, and allow for depreciation, and after all these reductions, show a profitable return on the money invested—say, 6 per cent, in the present market.