Whether we like it or not, the Tories are heading for office, and perhaps for a 1997-scale landslide.

So it pays to take shadow housing minister Grant Shapps’ somewhat cumbersomely titled housing green paper Strong foundations - building homes and communities - nurturing responsibility seriously.

Since this paper endorses my Policy Exchange pamphlet setting out why social tenants should be given the right to move, and how to do it, your columnist obviously thinks that the green paper has much to commend it! Better still, Shapps proposes to pilot the scheme rather than introduce it nationwide overnight. Radical ideas should always be piloted.

Big ideas

Mr Shapps has other ideas for social housing, too. One section of the paper is entitled Rewarding good tenant behaviour with equity stakes - foot on the ladder.

The idea is to reward tenants with a good behaviour record and a good record of paying rent for five years with a 10 per cent equity stake in their house.

In reality, the phrase ‘10 per cent equity stake’ is a misnomer, in two senses.

First, if the tenant’s behaviour or rent payment record worsens, the equity stake will be taken back, so they never really own it as such. Second, this ownership does not entitle the tenant to 10 per cent off the rent, nor does it require them to pay 10 per cent of the cost of any repairs and upkeep costs. What it does mean, is that well-behaved tenants would be given 10 per cent of the value of their property when they leave social housing.

In theory the scheme could free up lots of social housing, very cheaply. After all, if lots of 30-something social tenants leave the sector armed with a government-provided deposit for a house of their own, a social house becomes available that might otherwise have been occupied for the next 50 years or more.

So we get a new social house 50 years early for just 10 per cent of the cost. A real bargain in these cash-strapped times.

But there are risks. The first is that a tenant does what the Conservative party wants them to do - but it goes wrong.

Perhaps they use the money as a deposit for a house but then lose their job in a recession, get into arrears, lose their home, become homeless and end up being rehoused in social housing again. At this point we have given away 10 per cent of the value of a house for nothing.

It is inconceivable that the state could ask people for the money back in these circumstances - they wouldn’t have it. Nor would we want to prevent them from getting a social housing tenancy again. Recessions do happen, people do lose their jobs and homes, and that is one of the roles of social housing.

Another scenario is that the tenant could use the money to found a business that fails. Or they could get divorced. There are all sorts of legitimate reasons why people who once gained access to social housing might need it again.

Exploitation

Equally, there is a risk of what economists call ‘adverse selection’, that is, the people who choose to take advantage of this scheme are the ones who get most out of it - at the expense of the state. The same happened with right to buy - the best houses got bought.

In this case, the obvious group who could exploit the system are the very old, and their families. Imagine that grandma lives in social housing, but will obviously need to go into a care home in a matter of months. She could move out now, claim her 10 per cent, and use it to pay for a better nursing home. Or she could move in with her (owner occupying) kids, give the money to them for a nice new conservatory to create more living space, before ‘discovering’ a month later that she needs to move into the same nursing home she would always have moved into.

Either way, the state has given away 10 per cent of the value of her house to get it a couple of months earlier than it would otherwise have done. That is very bad value.

More blatantly a tenant (of any age) could take their 10 per cent and blow it all on a round-the-world cruise. If you were confident that you would have enough points to be rehoused on your return, that option might look quite appealing. But, again, it would be very bad value for the state.
And imagine the Daily Mail outrage if even a single social housing tenant ever did this. And the outrage would, I am sure, be directed against the tenant, not at the Conservative government that created the rules.

Economists are often accused of being cynical. Perhaps no grandma is going to want to move into a better nursing home, or give their kids a better house.

Perhaps no one would ever try to persuade grandma to help them like this. Perhaps no one will decide to take the 10 per cent to do something that they have always wanted to do and think about tomorrow when it comes.

My own view is that all of these will happen, although the extent to which they will happen is hard to predict.

But the unpredictability is the point: this is a radical scheme and one with a potentially huge downside. After all, if everyone takes the 10 per cent at some stage - and I struggle to work out why anyone wouldn’t move out shortly before they need to go into a nursing home - then we will have given away 10 per cent of the value of social housing for very little return.

The Tories say that they will pay for the scheme from cash that would otherwise be used to build new houses. So if everyone uses it just before they would have moved out anyway, the price would be 500,000 social houses that don’t get built. That is a huge cost that will be borne by the most vulnerable.

So what is the best thing to do with radical but risky schemes? Pilot them. Sadly the Tories have no plans to pilot this one. That is a shame: a pilot would show us who is right, and if I am right, it would allow the Tories to avoid a very costly mistake.

Dr Tim Leunig is an academic in the department of economic history at the London School of Economics