Category Archives: housing

Intorducing the Bee Token — The Currency for a True Homesharing Economy

Housing has become a nationwide nightmare. Due to the historically high demand for space and low supply of available options, landlords have had free reign to charge exorbitant rental rates. According to the Joint Center for Housing Studies of Harvard University, more than 11 million renter households pay at least half their incomes for housing. Airbnb attempted to solve this problem by monetizing underutilized housing, positioning itself as the leading central hub between those with available homes and those looking for a place to stay — the hero of the “sharing” economy. However, it’s more accurate to describe Airbnb as the middleman that charges entry fees into the “access” economy, which facilitates the use of another person’s goods and services, wrapped with convenience and quality, in exchange for compensation. But as these platforms like Airbnb scale exponentially in size, gaps in security breaches and scams are inevitable. It gets increasingly harder to trust strangers promising their rooms to you and vice versa. The main currency that the housing industry should be dealing with now is trust and decentralization. Our team realizes this and believes that through the Bee Token, we can achieve a true home sharing economy.

By creating a housing exchange platform around the Bee Token, we aim to make decentralized short-term housing a reality. Listing and booking short-term housing will be streamlined, transparent, secure, and affordable. All transactions will run on the Bee Token network which is powered by Ethereum and our own side chain. The Bee Token will appreciate in value along with the growth of the user base and number of listings on our platform. Our end goal is to give value back to the value creators: the people who are sharing their homes, and the people who are staying in them. Here are some of the ways we’ll do this:

  1. Decentralized Ownership: The access and capital required to participate in a future Airbnb funding round excludes an average investor. With the Bee Token, we will be distributing at least 50% of our tokens through presale and ICO. These tokens represent ownership of the Bee organization and are a form of currency to engage in housing exchange on our platform. We want the community to be able to partake in ownership of our organization from Day 0, a benefit usually reserved for top venture capital firms and founders.
  2. Low Fees: Traditionally, Airbnb charges the host between 5–15% in fees. We plan to reduce these fees to 2–3% total. The Bee Token will eliminate fees such as overhead through automation (Airbnb has thousands of employees and huge offices) and third-party payment processors (Visa, Mastercard — charges 2% fees per transaction). Since the Bee Token relies on the blockchain, which provides a transparent and secure public transaction record, processing fees are reduced to as low as 0.1%. And since we are a small and lean team, we will be able to optimize our resources, reducing the need for large operational expenses.
  3. Trust and Security: We plan to approach leading blockchain companies in the security verification space, such as Civic, to fully utilize the power of blockchain to provide security and anonymity to our users. In the future, we plan to develop a user quality score — based on all transparent information available on the blockchain — to bolster third party efforts in creating a crowdsourced verification and rating system.
  4. Automation: Moving forward, the Bee Token aims to create a self-operating homesharing network. Everything on our platform will be backed by smart contracts, from the housing exchange agreement to the processing of funds. No more waiting in between back and forths about timing, seamless integrations, and faster confirmation dates.

We are an experienced team with members primarily from Google, Facebook, and Uber. Look out for our upcoming White Paper announcement along with our presale date to learn more. In the meantime, join the conversation on our Website, Slack and Telegram.

Loci builds on peer trust

Loci is a global experiment. Loci seeks to fundamentally change the way people use money by resolving its central flaw: the lack of peer trust between at-risk users of the economy (generally consumers, merchants, producers, and shareholders).

The lack of peer trust historically as well as in the modern economy has resulted in a near total reliance on centrally powered financial intermediaries to conduct local and global commerce. The absence of peer trust powers the hegemony of financial interests over society and its governments. The global financial system, with no effective check on the power of its private owners, is prone to distort the allocation of economic value between consumers, producers, and at-risk investors on the one hand and its financial and government interests on the other.

Our founding team believes the distortion that results when structural advantage concentrates economic value in the hands of a few is unjust — and that this injustice feeds global violence and repression.

The void of peer trust globally and the corresponding economic distortion have two primary symptoms observable today. Loci’s features target these issues both individually and collectively:

Restricted flow of capital: Global capital flows (i.e., the movement of value between currency zones) are so heavily taxed by financial gatekeepers, intermediaries, and governments that only the highest value transactions are cost feasible. Barriers to capital flows are a form of economic injustice perpetrated by government-powered financial systems against the users of a currency.

Loci Network currencies exchange freely among network users of twelve currencies, including Bitcoin and Ether. Users trade network currencies globally, moving value freely between large and small network currencies in full compliance with local foreign exchange regulations. Loci network currencies enhance local value circulation by enabling individual flows and while maintaining balance in the aggregate.

Illiquid capital stocks: The illiquid nature of capital limits participation in its ownership. Lower earners are typically excluded from capital benefits that accrue to the wealthiest. The lack of broad capital participation globally serves to further distort the inequality between financial interests and the rest of society.

Loci capital stocks are liquefied in part by creating atomized units of risk, then properly labeling them for sale to network users. Stocks are also liquefied by broad dispersion through the global network and by active peer trading. Expanding participation in (globally diversifying) capital ownership both geographically (widely) and across wealth strata (deeply) will magnify ecosystem asset yields by achieving a lower net cost of capital.

Loci is re-engineering a key global ecosystem using first-order principles. The Loci ecosystem is fortified by long-term real assets engineered not to serve existing financial interests, but rather to protect Loci’s stakeholders, including consumers, merchants, producers, and investors. We believe people who use and create economic value should own and share control of the systems that circulate it.

Connect Financial, Loci’s parent company, is building an alternative to the current framework, one owned by network users. The Loci Network is a no-transaction-fee global marketplace restoring the liberty of direct commerce to individuals, businesses, and governments using twelve global currencies including the Bitcoin and Ether.

The network is centrally administered, with its political authority shared broadly among its global stakeholders. Users transact freely, sharing an autonomous trust agent called Lydia that serves as the network mediator and registrar rather than paying heavily for one motivated financially. Network users globally instead pay flat network access fees by feature and volume tier. Loci’s flat-fee model enables scale efficiencies to be shared equitably by network stakeholders (users, merchants, producers, and investors).

On behalf of the teams at Loci, we hope you’ll follow along as we learn to do it for ourselves at getloci.com.

Community Land Trusts in a Nutshell

Goofy but informative video about Community Land Trusts produced by CLT Associates. If you want a more in-depth look at their history and possibilities don’t miss our Community Land Trusts, Urban Land Reform and the Commons special report, authored by Pat Conaty and Mike Lewis.

From the notes to the video

CLTs (Community Land Trusts) provide many benefits, including: getting people out of the rent trap, keeping properties from speculation and avoiding gentrification. This means that we can have more stable communities.

The post Community Land Trusts in a Nutshell appeared first on P2P Foundation.

Community Land Trusts in a Nutshell

Goofy but informative video about Community Land Trusts produced by CLT Associates. If you want a more in-depth look at their history and possibilities don’t miss our Community Land Trusts, Urban Land Reform and the Commons special report, authored by Pat Conaty and Mike Lewis.

From the notes to the video

CLTs (Community Land Trusts) provide many benefits, including: getting people out of the rent trap, keeping properties from speculation and avoiding gentrification. This means that we can have more stable communities.

The post Community Land Trusts in a Nutshell appeared first on P2P Foundation.

A Tale of Two Housing Markets: Hot and Not So Hot

Though housing statistics such as average sales price are typically lumped into one national number, this is extremely misleading: there are two completely different housing markets in the U.S. One is hot, one is not so hot.

Just as importantly, one may stay relatively hot while the other may stagnate or decline.

All real estate is local, of course; there are thousands of housing markets if we consider neighborhoods, hundreds if we look at counties, cities and towns and dozens if we look at multi-city metro regions.

But consider what happens to average sales prices when million-dollar home sales are lumped in with $100,000 home sales. The average price comes in around $500,000– a gross distortion of both markets.

Here’s a real-world example of what has happened in hot markets over the past 20 years. The house in question is located in a bedroom community suburb in the San Francisco Bay Area metro area. The home was built in 1916 and has 914 square feet, no garage and a small lot.

It sold in 1996 for $135,000. This was a bit under neighborhood prices due to the lack of garage and small size, but nearby larger homes sold in the $145,000 to $160,000 range.

The house was sold in 2004 for $542,000, and again in 2008 for $575,000. It is currently valued at $720,000. The neighborhood average is $900,000.

According to the Bureau of Labor Statistics inflation calculator, inflation since 1997 has added 50% to the cost of living: $1 in 1997 equals $1.50 in 2016.

Adjusted for inflation of 2.5% annually, calculated cumulatively, the home would be worth a shade over $220,000 today. Long-term studies have found that housing tends to rise about 1% above inflation annually, so if we add 1% annual appreciation (3.5% calculated cumulatively over the 20 years), the home would have appreciated about $47,000 above and beyond inflation, bringing its value to $268,000–almost double the purchase price.

But being in a hot market, this little house appreciated a gargantuan $450,000 above and beyond inflation and long-term appreciation of 1% annually.

Those who bought in hot markets are $500,000 richer than those who bought in not-so-hot markets.

Another house I know in a hot metro market sold for $438,000 in 1997 and is currently valued at $1.4 million. The owners picked up substantially more than $500,000 in bonus appreciation.

Or how about a home that sold for $607,000 in 2010 and is now valued at $960,000? (Note that I have picked neighborhoods and metro areas I have known for decades, so I can verify the current valuations are indeed in the real-world ballpark.)

Inflation alone added about $60,000 to the value since 2010; the $300,000 appreciation above and beyond inflation is pure gravy for the owners.

It’s easy to dismiss these soaring valuations as credit-driven bubbles that will eventually pop, but that narrative misses the enormous differences in regional incomes and GDP expansion. The little 900 square foot house that’s barely worth $100,000 in most of the country may well fetch $700,000 in hot markets for far longer than we might expect if it is in a metro area with strong GDP and wage growth.

To understand why, look at these three maps of the U.S. The first reflects the GDP generated within each county; the second shows real growth in GDP by region, and the third displays the wages of the so-called “creative class”–those with high-demand skillsets, education and experience.

The spikes reflect enormous concentrations of GDP. This concentrated creation of goods and services generates jobs and wealth, and that attracts capital and talent. These are self-reinforcing, as capital and talent drive wealth/value creation and thus GDP.

Unsurprisingly, there is significant overlap between regions with high GDP and strong GDP expansion. The engines of growth attract capital and talent.

Creative class wages are highest in the regions with strong GDP expansion and concentrations of GDP, capital and talent. Attracting the most productive workers requires hefty premiums in pay and benefits, as well as interesting work and opportunities for advancement.

That people will make sacrifices to live in these areas should not surprise us–including paying high housing costs. This willingness to pay high housing costs attracts institutional and overseas investors, a flood of capital seeking high returns that further pushes up the cost of housing.

The rising cost of money will impact all housing. So will recession. But if we had to guess which areas will likely experience the smallest declines in prices and recover the soonest, which markets would you bet on?

Markets that are “cheap” because wages are low and opportunities scarce, or high-cost areas with high wages and concentrations of the factors that drive growth and innovation?

The point is that hot housing markets are hot for reasons beyond low interest rates for mortgages. These islands of concentrated capital, GDP growth and talent are magnets that attract global capital and talent, even as prices notch higher.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

When Assets (Such as Real Estate) Become Liabilities

Correspondent Joel M. submitted an article that struck me as a harbinger of the future:

Governments everywhere are facing fast-rising pension and healthcare costs, and the need for more tax revenues will skyrocket once the global recession trims income, payroll, business and sales taxes.

Additional taxes on assets that can’t flee the country–i.e. real estate–become extremely attractive.

Once an asset class shifts from being a means of wealth preservation and appreciation to a financial risk and burden, a self-reinforcing feedback loop reduces demand and increases supply, pushing prices lower–a decline that then causes more people to sell before prices drop further.

The nightmare scenario for recent buyers is a sharp tax increase that crushes the market value of their home, putting them underwater, i.e. their mortgage is greater than the value of their home. Faced with ever-increasing property taxes and further erosion of value, what’s the advantage of holding onto the property?

Anecdotally, stories of owners destroying buildings to lower their property tax appraisal emerged in America’s Great Depression, as owners desperate to lower their property taxes destroyed their assets (buildings on the land) as the only available means of keeping their property.

Which asset class attracts new taxes will be different from nation to nation, but we can anticipate that governments will go after assets that are currently considered safe and that can’t flee to low-tax havens.

Mobile capital can flee to safer, lower tax climes, and the super-wealthy can buy legislative tax breaks on their wealth. It will be the middle class that accepted the notion that “real estate is the foundation of family wealth” that will be stripmined by higher taxes on immobile assets such as real estate.

This essay was drawn from Musings Report 45. The Musings Reports are sent exclusively to major patrons and contributors ($5/month or $50 annually) every weekend.

Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

Obama “Housing Recovery” Crushes “Blacks, Young Adults” As Homeownership Rates Crash

zerohedge.com / by Tyler Durden / Dec 16, 2016 8:00 PM

The Obama administration has a tendency to conflate the strong performance of Fed-induced “assets bubbles” with “strong economic growth.”  Unfortunately, as is often the case these days, the “hard data” paints a slightly different picture than the “narrative” being pushed by Obama and his staff.

Per a new report from the Pew Research Center, and as our readers are undoubtedly aware, home prices have indeed recovered to pre-recession levels with a little help from Janet Yellen and crew.

 

READ MORE

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Housing Starts, Permits Crash In November (Despite Soaring Homebuilder Confidence)

zerohedge.com / by Tyler Durden / Dec 16, 2016 8:43 AM

Just yesterday homebuilders raged hard about how awesome everything was – sending their optimism index to its highest since the previous peak in 2005. It seems they are all talk and no action as November’s data for housing starts and permits collapsed (following the trajectory of mortgage apps).

Housing Starts crashed 18.7% MoM – near the biggest monthly plunge since the crisis peak in 2005.

Housing Starts are down 6.9% YoY.

Driven by a 43.9% collapse in Multi-family Starts MoM: look at the volatility in that time series: is that what a “stable” housing market looks like?

READ MORE

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Help the UK National Body of Student Housing Co-operatives

A short video announcement by one our favourite You Tubers: the descriptively named Libertarian Socialist Rants. This campaign to secure funds for the National Body of Student Housing Co-operatives to provide affordable, democratic housing for students. The campaign ends this Friday, so please, watch the video, read the text below and, if you want to support the project, vote for them through this link.

National Body of Student Housing Co-operatives

sfc

There is a strong need for affordable democratic housing for students. With rising rental costs for students across the UK and deficient management by university accommodation services, students are taking housing into their own hands. That is exactly what has happened in Edinburgh, Birmingham and Sheffield where collectively over 120 students are self managing their co-operative housing with fantastic results [http://newint.org/features/web-exclusive/2014/09/04/edinburgh-co-op-students/]. The creation of these housing co-operatives has shown this type of student self management creates resilient student communities, and is more cost effective than private rental or university halls.

However it is not without its problems, whilst three students co-ops is a large achievement there is a real need to expand the network and begin acquiring properties. Owning properties will allow the network to build up the capital needed to buy larger properties and expand to different cities where there are groups of students keen to set up housing co-ops to change their local housing conditions. Currently Birmingham, Sheffield and Edinburgh have commercial leases on their properties with supportive organisations, the Phone Co-op and Castle Rock Edinvar housing association. Although this arrangement has worked it is not always replicable. Students for Cooperation is keen to support a model which will allow student housing co-ops to be started wherever students are dedicated to feasible project through the purchasing of properties rather than leasing. Supportive partner organisations should not be a necessity for what is a very feasible business model.

Students for Cooperation commissioned a report by Acorn Co-operative Support on the feasibility of a National Body of Student Housing Co-operatives which would tackle these key problems facing the creation of new student housing co-operatives

• Limited access to finance
• Lack of experience of co-ops, business management and property purchasing
• High turnover of membership, with associated problems of continuity
• Lack of support
• No specific student co-operative company rules
• No co-operative specific student tenancy agreements
• The affordability of property for new housing co-ops

The resulting report was created in consultation with existing student co-ops, prospective co-op groups, housing co-operative support organisations, supportive organisers and potential lending institutions gave a positive prospectus for the feasibility of this plan. The proposed body – the National Body of Student Housing Co-operatives – would be formed as a secondary co-operative made up of student housing co-ops themselves. It would access finance to purchase property freeholds, have equity from existing co-operatives and support from experienced co-operators sitting on its board of directors.

This funding application is being sought under recommendation of this report which students for cooperation has opted to pursue in line with our stated aim of increasing student control and self management over affordable housing. A link to download the full report can be found on our website HERE:
[http://www.students.coop/creating-a-national-body-of-student-housing-co-operatives/]

We are also able to provide Appendicies to the report including cashflow forecasts and financial models.

The 48 page plan is feasible with £20k of initial seed funding to cover costs necessary to get the businesses up and running. Through prior grant applications and a generous donation we have managed to accumulate £4675 already. So our request to you would be for the remaining £15,325.
This funding would cover the legal work associated with drafting new lease and tenancy agreements, model rules, incropration and a network co-ordinator who would support the existing and prospective co-ops involved who will be looking at houses to purchase and co-ordinating the membership meetings to ensure democratic participation.

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Homeownership is Dead. Long Live the Permanent Real Estate Cooperative

Janelle Orsi: Imagine that a group of people works hard to fill their neighborhood with urban farms, bike lanes, parks, murals, community services, and education programs. Next, imagine that those same people are forced to move away. Ouch, that bites.

Sadly, this is real: Improving the livability of a previously disinvested neighborhood creates opportunities for speculators, landlords, and developers to increase rents and drive up the cost of property, often causing displacement of the very people who made the neighborhood livable to begin with.

It’s paralyzing to realize that the positive changes we make in our communities can do more harm than good. We eventually arrive at the most difficult-to-answer question: What will stop the pattern of displacement of low- to moderate-income communities and communities of color?

I believe that only one solution will make a true and long-term difference, and you rarely hear anyone utter it, because it so radically challenges everything we’ve been told to do as responsible adults pursuing the “American Dream.” So brace yourself…

We have to stop profiting from property. We have to treat homes as homes, not as investment vehicles that we hope to later sell to the highest bidders. If the privilege of property ownership determines who builds wealth, then the wealthy will build wealth more quickly than everyone else, white people will build wealth much faster than black people, and we’ll continually deepen inequality and racism in this country.

This reality has settled in to the point where I’m ready to declare: I can never, with a clear conscience, buy a house and feel entitled to the capital gains generated by the housing market. I wouldn’t feel proud if my method of building wealth is to participate in the pricing out of lower income families. But I do not want to remain a renter and be victimized by the same dynamic. So, now what?

Now I believe that the most important thing the Sustainable Economies Law Center (SELC) – and everyone else, for that matter – can work on is creating and spreading a different model of property ownership.

This is where the Permanent Real Estate Cooperative (PREC) comes in. “Permanent Real Estate Cooperative” is the name SELC has given to a model we have been working on for land and housing acquisition, management, and ownership. The PREC model employs similar tools to those used by limited equity housing cooperatives (LEHCs) and community land trusts (CLTs): Residents buy homes and feel much like homeowners, but the equity that they can build in a property is limited to what they put in (purchase price and improvements) plus a strictly limited rate of return, usually tied to inflation rates or a consumer price index. Capping the resale value and putting land into community control helps ensure that it won’t be sold back into the speculative marketplace.

In addition, the PREC model brings multiple innovations:

1. It’s for everyone

Unlike most affordable housing developments and 501(c)(3) community land trusts (CLTs), which are often limited (by tax exemption or their funding sources) to providing housing to low-income households, the PREC is a cooperative corporation spreading the notion that everyone – high-income and low-income – should stop profiting from property and live in limited equity housing.

2. It’s self-help

PRECs are platforms for mutual aid and self-help, not charitable assistance. Charities can create a disempowering divide between the helpers and the helped. The cooperative structure transforms the relationship to create groups of people working together to provide for their own long-term housing needs. That can make it motivating and empowering, and it sets the stage for communities to engage in mutual support in many forms beyond housing.

3. It’s self-organizing and scalable

Our vision is to design the governance of PRECs to enable bottom-up organizing by hundreds or thousands of members, rather than top-down management by a board and staff. A household or group of people can self-organize, find financing, and identify a property to shepherd into the cooperative. The cooperative will serve as a container to hold title to land and enforce limited equity. The cooperative Board and staff support members in this process, but generally do not drive decisions about what properties to buy and who will live in them. Because all members will be responsible for organizing to acquire properties, we believe that a PREC can grow quickly to involve many people and homes.

There is much more to say about the PREC model, how properties are financed, how governance works, how to ensure permanence of affordability, how we can grow a movement of PRECs, how PREC members build economic security outside of the conventional housing market, and so on. SELC has put a lot of thought and research into it, and we feel satisfied that this is a viable and powerful path forward.

So, while a blog post cannot do it justice, a SELC project to pilot PRECs in the Bay Area will hopefully illuminate a way out of the gentrification and displacement trap. Stay tuned as we develop this model, and let us know if you recommend any resources or potential support for our work. Note: We have not received funding to do this particular work, and we are just beginning the process of fundraising while we use unrestricted funds to lay the groundwork. Stay tuned, and let us know if you have suggestions.

selc_prec

Cross-posted from theselc.org

Photo by ralky

The post Homeownership is Dead. Long Live the Permanent Real Estate Cooperative appeared first on P2P Foundation.

Homeownership is Dead. Long Live the Permanent Real Estate Cooperative

Janelle Orsi: Imagine that a group of people works hard to fill their neighborhood with urban farms, bike lanes, parks, murals, community services, and education programs. Next, imagine that those same people are forced to move away. Ouch, that bites.

Sadly, this is real: Improving the livability of a previously disinvested neighborhood creates opportunities for speculators, landlords, and developers to increase rents and drive up the cost of property, often causing displacement of the very people who made the neighborhood livable to begin with.

It’s paralyzing to realize that the positive changes we make in our communities can do more harm than good. We eventually arrive at the most difficult-to-answer question: What will stop the pattern of displacement of low- to moderate-income communities and communities of color?

I believe that only one solution will make a true and long-term difference, and you rarely hear anyone utter it, because it so radically challenges everything we’ve been told to do as responsible adults pursuing the “American Dream.” So brace yourself…

We have to stop profiting from property. We have to treat homes as homes, not as investment vehicles that we hope to later sell to the highest bidders. If the privilege of property ownership determines who builds wealth, then the wealthy will build wealth more quickly than everyone else, white people will build wealth much faster than black people, and we’ll continually deepen inequality and racism in this country.

This reality has settled in to the point where I’m ready to declare: I can never, with a clear conscience, buy a house and feel entitled to the capital gains generated by the housing market. I wouldn’t feel proud if my method of building wealth is to participate in the pricing out of lower income families. But I do not want to remain a renter and be victimized by the same dynamic. So, now what?

Now I believe that the most important thing the Sustainable Economies Law Center (SELC) – and everyone else, for that matter – can work on is creating and spreading a different model of property ownership.

This is where the Permanent Real Estate Cooperative (PREC) comes in. “Permanent Real Estate Cooperative” is the name SELC has given to a model we have been working on for land and housing acquisition, management, and ownership. The PREC model employs similar tools to those used by limited equity housing cooperatives (LEHCs) and community land trusts (CLTs): Residents buy homes and feel much like homeowners, but the equity that they can build in a property is limited to what they put in (purchase price and improvements) plus a strictly limited rate of return, usually tied to inflation rates or a consumer price index. Capping the resale value and putting land into community control helps ensure that it won’t be sold back into the speculative marketplace.

In addition, the PREC model brings multiple innovations:

1. It’s for everyone

Unlike most affordable housing developments and 501(c)(3) community land trusts (CLTs), which are often limited (by tax exemption or their funding sources) to providing housing to low-income households, the PREC is a cooperative corporation spreading the notion that everyone – high-income and low-income – should stop profiting from property and live in limited equity housing.

2. It’s self-help

PRECs are platforms for mutual aid and self-help, not charitable assistance. Charities can create a disempowering divide between the helpers and the helped. The cooperative structure transforms the relationship to create groups of people working together to provide for their own long-term housing needs. That can make it motivating and empowering, and it sets the stage for communities to engage in mutual support in many forms beyond housing.

3. It’s self-organizing and scalable

Our vision is to design the governance of PRECs to enable bottom-up organizing by hundreds or thousands of members, rather than top-down management by a board and staff. A household or group of people can self-organize, find financing, and identify a property to shepherd into the cooperative. The cooperative will serve as a container to hold title to land and enforce limited equity. The cooperative Board and staff support members in this process, but generally do not drive decisions about what properties to buy and who will live in them. Because all members will be responsible for organizing to acquire properties, we believe that a PREC can grow quickly to involve many people and homes.

There is much more to say about the PREC model, how properties are financed, how governance works, how to ensure permanence of affordability, how we can grow a movement of PRECs, how PREC members build economic security outside of the conventional housing market, and so on. SELC has put a lot of thought and research into it, and we feel satisfied that this is a viable and powerful path forward.

So, while a blog post cannot do it justice, a SELC project to pilot PRECs in the Bay Area will hopefully illuminate a way out of the gentrification and displacement trap. Stay tuned as we develop this model, and let us know if you recommend any resources or potential support for our work. Note: We have not received funding to do this particular work, and we are just beginning the process of fundraising while we use unrestricted funds to lay the groundwork. Stay tuned, and let us know if you have suggestions.

selc_prec

Cross-posted from theselc.org

Photo by ralky

The post Homeownership is Dead. Long Live the Permanent Real Estate Cooperative appeared first on P2P Foundation.

The re-emergence and growth of cooperative housing and intentional communities

Excerpted from Realtor. Authored by Clare Trapasso:

“Decades after communes sprang into the public consciousness promoting the ideals of peace, love, and understanding, communities across the country report that interest from potential members is again surging. Cheaper prices tell part of the story. But so does a desire for a simpler, more unplugged lifestyle.

The Fellowship for Intentional Community, a networking and support group for the establishments, says their numbers in the U.S. increased by about 300% from 1990 to 2010 (its most recent data).

‘There are a lot of people who are pretty disappointed with the way the American Dream worked out. People feel isolated,’ says Sonoma County, CA–based Realtor Cassandra Ferrera, who specializes in helping clients seeking sites for new establishments. ‘These intentional communities are like social experiments to find a better way to live.’

Sure, there’s still plenty of patchouli and dreadlocks. But members regularly drive to work or to the movies, surf the web, and enroll their children in public schools.

‘[These] are not your mama’s communes,’ Ferrera says. ‘They’re just going to keep growing as a market niche.’

Business has been so good the past few years at Green Key Real Estate that Ferrera has had to hire new staffers and closes on several group properties annually. The numbers might be higher, she says, if it weren’t for the legal complications of group ownership, and zoning and sanitation restrictions in many towns that limit the number of people who can live on the same plot.

The classic commune: No rent, no mortgage, no outside job

When people think of the new age of communes, egalitarian communes such as Twin Oaks often come to mind. About 100 members live on the peaceful, 452-acre settlement in rural Virginia, nestled between Richmond and Charlottesville. Everyone is required to work 42 hours a week. This can range from labor in one of the businesses on the property, such as making tofu or hammocks, or cooking meals for the group.

In exchange for their labor, residents never have to worry about having a roof over their heads, enough food to eat, or clothes on their backs—all of these are covered. They also get health insurance and a stipend of $102 a month to buy a few things for themselves or go out to dinner.

‘I wanted that simple life,’ says Tom Freeman, 52, who sells tofu made at Twin Oaks to health food stores like Whole Foods along the East Coast. ‘I live on a hippie commune, because I don’t have to stress about [anything].’

The former lab technician joined the commune 20 years ago after visiting some college friends there. He was enchanted by seeing members growing organic vegetables, milking cows, and making their own cheese.

He now lives in an 18-bedroom house with the same number of inhabitants, including his 13-year-old daughter and 15-year-old son. (He met his ex-wife at the commune.) Everyone, including children, receive their own bedroom within the compound’s seven houses. There is also a communal kitchen, a community center, and a children’s building—and perks like a swimming pond, volleyball court, and sauna.

‘The stress of a maintaining a household, buying a car, and just living life is very hard,” Freeman says. So “when the economy’s bad, we tend to get a lot of interest.’

Cheap rent and a light footprint on Earth

Members of eco-villages focus on reducing their carbon footprint. There’s no free room and board in most of these groups—residents have external jobs and don’t share finances. But the green emphasis is helping make these communities ever more popular, says Lois Arkin, founder and executive director of the Los Angeles Eco-Village.

About 40 members live in individual apartments at the Los Angeles Eco-Village in three buildings spread across two city blocks. They grow much of their own produce, eat less meat, and drive fewer gas guzzlers. Many homes and individual units are also outfitted with solar panels and greywater systems.

Their environmentalism is rewarded with very cheap rents on their studios to two-bedroom abodes—which range from just $500 to $1,200 a month. (That’s in L.A., where the median rent for a one-bedroom apartment in the city was $1,950 in August, according to Apartment List.) Arkin says she receives double the number of inquiries than she did just three years ago.

The inexpensive housing is possible because the buildings are like group-owned co-ops, and the land they rest on is owned by a community trust.

On the other side of the country, demand is also up at the Ecovillage at Ithaca, in upstate New York. The 25-year-old community has grown to about 240 residents spread over three neighborhoods. The latest neighborhood was completed in late 2015 with 25 single-family homes and a 15-unit apartment building.”

The full article can be found here.

Photo by arievergreen

The post The re-emergence and growth of cooperative housing and intentional communities appeared first on P2P Foundation.

The re-emergence and growth of cooperative housing and intentional communities

Excerpted from Realtor. Authored by Clare Trapasso:

“Decades after communes sprang into the public consciousness promoting the ideals of peace, love, and understanding, communities across the country report that interest from potential members is again surging. Cheaper prices tell part of the story. But so does a desire for a simpler, more unplugged lifestyle.

The Fellowship for Intentional Community, a networking and support group for the establishments, says their numbers in the U.S. increased by about 300% from 1990 to 2010 (its most recent data).

‘There are a lot of people who are pretty disappointed with the way the American Dream worked out. People feel isolated,’ says Sonoma County, CA–based Realtor Cassandra Ferrera, who specializes in helping clients seeking sites for new establishments. ‘These intentional communities are like social experiments to find a better way to live.’

Sure, there’s still plenty of patchouli and dreadlocks. But members regularly drive to work or to the movies, surf the web, and enroll their children in public schools.

‘[These] are not your mama’s communes,’ Ferrera says. ‘They’re just going to keep growing as a market niche.’

Business has been so good the past few years at Green Key Real Estate that Ferrera has had to hire new staffers and closes on several group properties annually. The numbers might be higher, she says, if it weren’t for the legal complications of group ownership, and zoning and sanitation restrictions in many towns that limit the number of people who can live on the same plot.

The classic commune: No rent, no mortgage, no outside job

When people think of the new age of communes, egalitarian communes such as Twin Oaks often come to mind. About 100 members live on the peaceful, 452-acre settlement in rural Virginia, nestled between Richmond and Charlottesville. Everyone is required to work 42 hours a week. This can range from labor in one of the businesses on the property, such as making tofu or hammocks, or cooking meals for the group.

In exchange for their labor, residents never have to worry about having a roof over their heads, enough food to eat, or clothes on their backs—all of these are covered. They also get health insurance and a stipend of $102 a month to buy a few things for themselves or go out to dinner.

‘I wanted that simple life,’ says Tom Freeman, 52, who sells tofu made at Twin Oaks to health food stores like Whole Foods along the East Coast. ‘I live on a hippie commune, because I don’t have to stress about [anything].’

The former lab technician joined the commune 20 years ago after visiting some college friends there. He was enchanted by seeing members growing organic vegetables, milking cows, and making their own cheese.

He now lives in an 18-bedroom house with the same number of inhabitants, including his 13-year-old daughter and 15-year-old son. (He met his ex-wife at the commune.) Everyone, including children, receive their own bedroom within the compound’s seven houses. There is also a communal kitchen, a community center, and a children’s building—and perks like a swimming pond, volleyball court, and sauna.

‘The stress of a maintaining a household, buying a car, and just living life is very hard,” Freeman says. So “when the economy’s bad, we tend to get a lot of interest.’

Cheap rent and a light footprint on Earth

Members of eco-villages focus on reducing their carbon footprint. There’s no free room and board in most of these groups—residents have external jobs and don’t share finances. But the green emphasis is helping make these communities ever more popular, says Lois Arkin, founder and executive director of the Los Angeles Eco-Village.

About 40 members live in individual apartments at the Los Angeles Eco-Village in three buildings spread across two city blocks. They grow much of their own produce, eat less meat, and drive fewer gas guzzlers. Many homes and individual units are also outfitted with solar panels and greywater systems.

Their environmentalism is rewarded with very cheap rents on their studios to two-bedroom abodes—which range from just $500 to $1,200 a month. (That’s in L.A., where the median rent for a one-bedroom apartment in the city was $1,950 in August, according to Apartment List.) Arkin says she receives double the number of inquiries than she did just three years ago.

The inexpensive housing is possible because the buildings are like group-owned co-ops, and the land they rest on is owned by a community trust.

On the other side of the country, demand is also up at the Ecovillage at Ithaca, in upstate New York. The 25-year-old community has grown to about 240 residents spread over three neighborhoods. The latest neighborhood was completed in late 2015 with 25 single-family homes and a 15-unit apartment building.”

The full article can be found here.

Photo by arievergreen

The post The re-emergence and growth of cooperative housing and intentional communities appeared first on P2P Foundation.

Project Of The Day: Open Building Institute

I arrived home last week to find my wife busy with a tape measure and a pad of graph paper. When I asked her what she was doing, she showed me her plans for a new master bathroom.  New, as in she wants to knock out the back wall of our bedroom and build an addition.

My wife is a realtor and she told me we needed to upgrade the bathrooms and kitchen for resale value.  I was surprised  at this, since we just moved in last year.

When she told me how much money the addition would cost, I volunteered to do some of the work myself.  Still, she said we would need to involve an architect, a general contractor, and possibly a plumbing specialist.

This was on my mind as I researched my next post for project of the day, I learned of the Open Building Institute.  I sent her a link and she liked the concept of DIY modular units.  Best of all, their plans are open source.  I won’t have to pay an architect, although I will donate to the Institute.

Still, I’m a bit curious about her sudden interest in resale.


Extracted from: http://openbuildinginstitute.org/about-who-we-are/

The Open Building Institute is a collaborative effort made possible by the invaluable contribution of volunteer advisors and developers. The Open Building Institute is a collaborative effort  made possible by the invaluable contribution of volunteer advisors and developers.

Extracted from: http://openbuildinginstitute.org/about-what-we-do/

At the heart of the project is a library of building modules—walls, windows, doors, roof, utility and functional modules, etc.—that can be combined to create a variety of structures: studios, homes, multi-family houses, greenhouses, barns, workshops, schools, offices, etc.

This means that the system pays special attention to water-catchment, passive heating and cooling, photovoltaics, thermal mass, insulation, off-grid sanitation, and hydronic heat.

Designs and build instructions are contributed by designers around the world and are reviewed by experienced builders. A shared pool of designs means that each one of us does not have to reinvent the wheel. A greater number of designers means faster development. And the larger the number of contributions, the greater the diversity of approaches and solutions we can choose from.

All modules and procedures are OPEN SOURCE—forever and with no exceptions. This means that everyone is free to use, modify and redistribute them. Our OSHWA-compatible license also ensures that you are free to profit from these designs—by using them, for example, in design and/or build contractor work.

The modules on the library are designed specifically to be easily and quickly built by non-professional builders. A 4×8 ft insulated wall module, for example, takes a team of two people 1 hour to build.

Extracted from: http://openbuildinginstitute.org/buildings/

We’ve been developing the methodology for the Open Building Institute through a series of builds.

The process began in October 2013 with a microhouse—a 144 sq ft tiny house with a loft, a bathroom and a kitchen. To this we then added a bedroom, a mud room, a porch, a library/work space, an office, another bathroom, an utility room, and an aquaponic greenhouse. Together, these structures form a 2000 sq ft living and working space at Factor e Farm (Missouri, USA).

Infographic- How It Works

Extracted from: http://openbuildinginstitute.org/about-what-we-do/

This open source and modular approach to building also allows for social production.

In the 18th and 19th century, rural communities came together to build barns for each of their members. In our modern version of barn-raising, builds typically take place in 6-day workshops, during which participants collaborate to build a structure.

During workshops, participants acquire skills and hands-on experience with the system in order to organize their own builds. The barn-raising approach not only enables rapid builds, but also provides organizers with a stream of revenue that helps offset the cost of materials.

To further encourage adoption, replication and entrepreneurship, all workshop/build organization materials—from workflow and budget to publicity plan and logistics—are also open source. And for those who wish to build a business on top of this system, we are developing a training program geared specifically to entrepreneur-builders.

Extracted from: http://openbuildinginstitute.org/contribute/

Get Involved

The goals and scope of the Open Building Institute are extremely ambitious and could not be achieved by our core team alone. That’s why we’re calling out to all interested designers, developers and supporters to help us make affordable, eco-housing accessible to everyone. Just like Linux is developed by thousands of programmers around the world, we believe we can all get together to fix housing.

 

Photo by grongar

Photo by Scott Meis Photography

The post Project Of The Day: Open Building Institute appeared first on P2P Foundation.

Please Don’t Pop My Bubble!

One person’s bubble is another person’s “fair market value.” What is clearly an outrageously overvalued asset perched at nosebleed levels of central-bank fueled speculative euphoria is to the owner an asset at “fair market value.”

But beneath the euphoric confidence that valuations can only drift higher forever and ever is the latent fear that something could stick a pin in “my bubble”– that is, whatever bubblicious asset we happen to own and treasure as a source of our financial wealth could be popped, destroying not just our financial bubble but our psychological bubble of faith in permanent manias.

Consider housing prices, which are clearly in an echo-bubble of the Great Housing Bubble of 2000-2007. (Chart courtesy of Market Daily Briefing.)

The psychological underpinning of all bubbles and echo bubbles is on display here. In the first bubble, those benefiting from the stupendous price increases are not just euphoric at the surge in unearned wealth–they believe the hype with all their hearts and minds that the bubble is not a bubble at all, it’s all just “fair market value” at work.

In other words, the massive increase in unearned personal wealth is not just temporary good fortune–it is permanent, rational and deserved.

Alas, all bubbles, no matter how euphoric or long-lasting, eventually pop. All the certainties that seemed so obviously true and timeless to the believers melt into air, and their touching faith that the bubble valuations were permanent, rational and deserved dissipates in a wrenchingly painful reconciliation with reality.

The agonized cries of those watching their bubble-wealth vanish do not fall on deaf ears. The same central bankers that inflated the bubble with super-low interest rates suddenly see their much-loved wealth effect (i.e. the bubble-generated psychological sense of wealth that emboldens people to borrow and spend money they shouldn’t borrow and spend) imploding before their eyes.

In the panicky haste of blind expediency, central bankers drop interest rates to zero and unleash unlimited liquidity to save the bubbles they inflated. Instead of flushing the system of bad debt and speculative leverage and allowing the market to reprice impaired assets, central bankers push the perverse incentives that inflated the bubble to new highs.

Should lowering interest rates to zero fail to reflate the bubble, central bankers then start buying assets hand over fist, creating trillions of dollars, yuan, yen and euros out of thin air to boost asset prices with direct and indirect purchases.

The relief of those saved from financial destruction by the heroic efforts of central bankers is palpable. Rather than retrace to pre-bubble levels, valuations are caught in mid-air and pushed higher by central bank liquidity and asset purchases.

But the naive faith of asset owners cannot be restored to its pre-bubble virginal state. The nagging realization that all bubbles are temporary and irrational, and that bubblicious wealth is unearned and undeserved, lingers in the traumatized psyches of the former true believers.

Sensing their vulnerability, every asset owner demands: don’t pop my bubble!Go pop somebody else’s bubble, but please please please leave mine intact.

This knowledge that all bubbles pop sooner or later generates a skittishness that finds voice in sell-offs. Once the skittish owners of a bubblicious asset sense the nail is pushing against the bubble and the inevitable popping is nigh, they sell sell sell.

No wonder the stock market has sold off hard three times in the past 18 months. Every punter who’s not a sucker knows that 1) stocks are overvalued, 2) every bubble eventually pops, and 3) the survivors are those who sell at the first whiff of trouble.

So ride your bubble of choice up–stocks, bonds, housing, bat guano, take your pick–but it’s best to keep your thumb on the sell button and your mind attuned to the many needles and nails pressing aginst the thin membrane of the bubble.

A Radically Beneficial World: Automation, Technology and Creating Jobs for All is now available as an Audible audio book.

My new book is #11 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

Please Don’t Pop My Bubble!

One person’s bubble is another person’s “fair market value.” What is clearly an outrageously overvalued asset perched at nosebleed levels of central-bank fueled speculative euphoria is to the owner an asset at “fair market value.”

But beneath the euphoric confidence that valuations can only drift higher forever and ever is the latent fear that something could stick a pin in “my bubble”– that is, whatever bubblicious asset we happen to own and treasure as a source of our financial wealth could be popped, destroying not just our financial bubble but our psychological bubble of faith in permanent manias.

Consider housing prices, which are clearly in an echo-bubble of the Great Housing Bubble of 2000-2007. (Chart courtesy of Market Daily Briefing.)

The psychological underpinning of all bubbles and echo bubbles is on display here. In the first bubble, those benefiting from the stupendous price increases are not just euphoric at the surge in unearned wealth–they believe the hype with all their hearts and minds that the bubble is not a bubble at all, it’s all just “fair market value” at work.

In other words, the massive increase in unearned personal wealth is not just temporary good fortune–it is permanent, rational and deserved.

Alas, all bubbles, no matter how euphoric or long-lasting, eventually pop. All the certainties that seemed so obviously true and timeless to the believers melt into air, and their touching faith that the bubble valuations were permanent, rational and deserved dissipates in a wrenchingly painful reconciliation with reality.

The agonized cries of those watching their bubble-wealth vanish do not fall on deaf ears. The same central bankers that inflated the bubble with super-low interest rates suddenly see their much-loved wealth effect (i.e. the bubble-generated psychological sense of wealth that emboldens people to borrow and spend money they shouldn’t borrow and spend) imploding before their eyes.

In the panicky haste of blind expediency, central bankers drop interest rates to zero and unleash unlimited liquidity to save the bubbles they inflated. Instead of flushing the system of bad debt and speculative leverage and allowing the market to reprice impaired assets, central bankers push the perverse incentives that inflated the bubble to new highs.

Should lowering interest rates to zero fail to reflate the bubble, central bankers then start buying assets hand over fist, creating trillions of dollars, yuan, yen and euros out of thin air to boost asset prices with direct and indirect purchases.

The relief of those saved from financial destruction by the heroic efforts of central bankers is palpable. Rather than retrace to pre-bubble levels, valuations are caught in mid-air and pushed higher by central bank liquidity and asset purchases.

But the naive faith of asset owners cannot be restored to its pre-bubble virginal state. The nagging realization that all bubbles are temporary and irrational, and that bubblicious wealth is unearned and undeserved, lingers in the traumatized psyches of the former true believers.

Sensing their vulnerability, every asset owner demands: don’t pop my bubble!Go pop somebody else’s bubble, but please please please leave mine intact.

This knowledge that all bubbles pop sooner or later generates a skittishness that finds voice in sell-offs. Once the skittish owners of a bubblicious asset sense the nail is pushing against the bubble and the inevitable popping is nigh, they sell sell sell.

No wonder the stock market has sold off hard three times in the past 18 months. Every punter who’s not a sucker knows that 1) stocks are overvalued, 2) every bubble eventually pops, and 3) the survivors are those who sell at the first whiff of trouble.

So ride your bubble of choice up–stocks, bonds, housing, bat guano, take your pick–but it’s best to keep your thumb on the sell button and your mind attuned to the many needles and nails pressing aginst the thin membrane of the bubble.

A Radically Beneficial World: Automation, Technology and Creating Jobs for All is now available as an Audible audio book.

My new book is #11 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition) For more, please visit the book’s website.

Are Property Taxes a “Wealth Tax” on the (Mostly) Non-Wealthy?

In my recent entry Dear Homeowner: If You’re Paying $260,000 in Property Taxes Over 20 Years, What Exactly Do You “Own”?, I questioned the consequences of high property taxes. Some readers wondered if I was saying all property taxes should be abolished. The short answer is no–what I was questioning is local government reliance on property taxes to the point that owning a home no longer makes financial sense because the property taxes consume any appreciation other than the transitory “wealth” generated by a housing bubble.

In effect, local tax authorities are capturing all future appreciation for themselves. Note that applies to areas with high property taxes–in excess of $10,000 annually, not locales with annual property taxes of $2,000.

State and local taxes–sales, income and property–tax very different events. Sales taxes are based on consumption, and are typically highly regressive, as low-income households pay a higher percentage of their income on sales taxes than higher-income households.

Income taxes are typically progressive, as the higher one’s income, the more income tax one pays.

Property tax is not based on consumption or income, but on the presumed wealth and income of property owners. In effect, property taxes are a wealth tax: if you can afford a house, you can afford property taxes.

The fallacy in this assumption is that homeowners’ incomes do not automatically rise along with housing valuations. Consider the 35% increase in the Case-Shiller 20-City Index since 2012: in a four-year period that officially experienced a mere 4% inflation, housing leaped 35%.

Meanwhile, real median household incomes rose a paltry 5%. Local tax authorities love housing bubbles because rising valuations justify higher property taxes. But the homeowners’ income needed to pay higher property taxes may well have declined during the bubble due to layoffs, shortened hours, medical emergency, reduced bonus, etc.

Real estate professional EB described the consequences of this mismatch of earnings need to pay property taxes and soaring property taxes:

You are correct that property taxes are an oft-forgotten cost of homeownership that many buyers fail to properly evaluate when determining how much house they can afford over the long term.

Perhaps a better way to view property taxes is as an inefficient proxy for income taxes — state and local governments assuming that people who can afford a home of a certain value, must have sufficient income to pay ad valorem taxes and per foot and per parcel charges at a given rate.

In a volatile economy, that assumption is often invalid. When the Fed runs out of monetary games to play, and asset values across the economy normalize, both state and local governments and homeowners will all be in a pinch — governments because the valuation-based portion of the tax base will crash, and homeowners because the fixed charges will no longer fit within their diminished incomes.

This is already occurring in suburban Chicago, where annual property taxes can approach 10% (!) of property values.

In a recession, earnings can decline very quickly indeed. Meanwhile, property taxes are “sticky”: they only decline grudgingly (if ever), and only if homeowners pursue bureaucratic appeals based on the declining value of their home.

Owning your house free and clear (no mortgage) is no guarantee you’ll be able to live there once property taxes are $1,000 per month. One of the emotional triggers of Prop 13 limitations on property tax increases in California was the stories of elderly pensioners having to sell their homes because they could no longer afford the skyrocketing property taxes.

A wealth tax based on housing valuations applies equally to homeowners with diminishing income, i.e. the decidedly non-wealthy.

As pensions dry up and blow away under the relentless erosion of the Federal Reserve’s zero-interest rate policy (ZIRP), unaffordable property taxes may well start evicting homeowners from the “asset” they mistakenly thought they “owned.” If your Social Security pension can barely pay your property tax, never mind your Medicare, healthcare costs, food and other living expenses, then what exactly do you own?

As I noted before, as far as the tax authorities are concerned, all you really own is an obligation to pay property taxes and an option to profit from the next housing bubble. If the bubble pops in a recession that also costs you your job, well tough luck, Bucko–your “asset” reverts to the state/county as payment for property taxes you can’t possibly pay.

If politicos and tax authorities think people will passively watch their neighbors lose their homes to sky-high property taxes, they will soon discover their mistake.

My new book is #3 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.

A Nation of Housing Haves and Have-Nots

Everyone who follows the statistics of rising income and wealth inequality knows we’re becoming a nation of haves and have-nots. What’s not being discussed is the role of housing.

Let’s start by recalling that for the vast majority of bottom-95% American households, the primary asset is the family home. (The wealthy, not coincidentally, own businesses and income-producing assets.)

Back in 2000, many homes around the U.S. could be purchased for $93,000. It was a substantial sum, but at 2.2 times median household income of $42,128 that year (and less than 2X median family income), it was affordable. (source: U.S. Census Bureau Income Data for 2000)

The conventional down payment (20% of the price) of roughly $19,000 was substantial, but within grasp of a two-income household that lived below their means and scrimped and saved for a few years.

According to the BLS inflation calculator, if the $93,000 home had kept pace with inflation, it would now be worth $128,600 in 2016. Since median household income is now $57,263, the $128,600 home is 2.24 times median household income–in the same ballpark as valuations in 2000. (source: March 2016 median household income via Doug Short)

Guess what a nothing-special sold in 2000 for $93,000 home in a nothing-special S.F. Bay Area neighborhood just sold for. Hint: guess high. How abouttriple the inflation-adjusted value of $128,000 or $384,000– 4 times the original purchase price of $93,000.

Not even close. The house just sold for $897,000, almost 10 times the 2000 valuation. This is not 2 times median household income; it’s 15 times median household income. The conventional down payment of $180,000 is beyond the reach of any household that didn’t inherit substantial wealth or get the down payment from wealthy parents.

The down payment of $180,000 exceeds the total wealth of most households.

As for saving up $180,000 for the down payment–only households in the top 5% can even hope to save such a sum after many years of scrimping and saving.

Compare the family wealth of a household that bought a house for $93,000 in 2000 and finds it’s now worth $130,000, and the household that finds their home is now worth $900,000. After fifteen years of paying the mortgage and inflation-matching appreciation, the first family may have home equity of around $50,000 to $55,000–a nice sum to help fund retirement, but not enough to insure there will be equity to distribute to heirs once the owners have passed on.

The second household has seen its $19,000 down payment and modest mortgage payments balloon into a cash-out valuation in excess of $850,000.This equity is large enough to not only help fund a comfortable retirement; it’s enough to fund cash purchases of homes in lower-cost regions for several offspring.

Imagine the leg-up offered to the children of the second household when their parents’ housing windfall enables them to buy a home for cash. If the $850,000 equity was wisely husbanded, it could fund two home purchases (in lower cost areas) and the college expenses of a few grandchildren.

The second household has the advantages of unearned wealth simply from buying a home in a housing bubble area. The children of the first household won’t be able to buy a house for cash from the equity of their parents’ home–assuming there is any equity left after the parents’ retirement expenses are paid.

The offspring of this family will have to save up a down payment (or qualify for a subsidized mortgage), even if they do inherit some percentage of their parents’ home equity. They will have to make 30 years of mortgage payments to own their home free and clear.

They may well remain renters for life if they choose to live in high-demand, high-valuation regions such as the S.F. Bay Area or NYC.

The second household’s offspring could live mortgage-free, and have a nest egg to invest in their children. Again, this requires wise management of the $850,000 equity, but the generational wealth that could be transferred (if it isn’t squandered) will widen the already large gap between the prospects of the two households.

Of course bubblicious valuations will likely decline, but even a 50% drop would still leave the second household with a $450,000 home and a mortgage well under $50,000. Even if this family holds onto the house and never sells it, the equity is available via home-equity lines of credit (HELOCs) or second mortgages.

Geography charts the financial destiny of households, at least in terms of housing. Hot housing markets (San Francisco Bay Area, West Los Angeles, Brooklyn, etc.) were once affordable to everyday middle-class households. Now they are only affordable to wealthy foreigners bringing bucketloads of cash or to the top slice of upper-income households, i.e. those with incomes in excess of $200,000 or more annually.

Those who bought homes in these areas when they were still affordable (the year 2000 or earlier) are reaping gains in wealth that remain unimaginable and unattainable to middle-class households outside these rarified high-demand housing markets.

Housing is yet another driver of our increasingly have/have-not economy.

My new book is #3 on Kindle short reads -> politics and social science: Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle ebook, $8.95 print edition)For more, please visit the book’s website.

A Nation of Housing Haves and Have-Nots

Everyone who follows the statistics of rising income and wealth inequality knows we’re becoming a nation of haves and have-nots. What’s not being discussed is the role of housing.

Let’s start by recalling that for the vast majority of bottom-95% American households, the primary asset is the family home. (The wealthy, not coincidentally, own businesses and income-producing assets.)

Back in 2000, many homes around the U.S. could be purchased for $93,000. It was a substantial sum, but at 2.2 times median household income of $42,128 that year (and less than 2X median family income), it was affordable. (source: U.S. Census Bureau Income Data for 2000)

The conventional down payment (20% of the price) of roughly $19,000 was substantial, but within grasp of a two-income household that lived below their means and scrimped and saved for a few years.

According to the BLS inflation calculator, if the $93,000 home had kept pace with inflation, it would now be worth $128,600 in 2016. Since median household income is now $57,263, the $128,600 home is 2.24 times median household income–in the same ballpark as valuations in 2000. (source: March 2016 median household income via Doug Short)

Guess what a nothing-special sold in 2000 for $93,000 home in a nothing-special S.F. Bay Area neighborhood just sold for. Hint: guess high. How abouttriple the inflation-adjusted value of $128,000 or $384,000– 4 times the original purchase price of $93,000.

Not even close. The house just sold for $897,000, almost 10 times the 2000 valuation. This is not 2 times median household income; it’s 15 times median household income. The conventional down payment of $180,000 is beyond the reach of any household that didn’t inherit substantial wealth or get the down payment from wealthy parents.

The down payment of $180,000 exceeds the total wealth of most households.

As for saving up $180,000 for the down payment–only households in the top 5% can even hope to save such a sum after many years of scrimping and saving.

Compare the family wealth of a household that bought a house for $93,000 in 2000 and finds it’s now worth $130,000, and the household that finds their home is now worth $900,000. After fifteen years of paying the mortgage and inflation-matching appreciation, the first family may have home equity of around $50,000 to $55,000–a nice sum to help fund retirement, but not enough to insure there will be equity to distribute to heirs once the owners have passed on.

The second household has seen its $19,000 down payment and modest mortgage payments balloon into a cash-out valuation in excess of $850,000.This equity is large enough to not only help fund a comfortable retirement; it’s enough to fund cash purchases of homes in lower-cost regions for several offspring.

Imagine the leg-up offered to the children of the second household when their parents’ housing windfall enables them to buy a home for cash. If the $850,000 equity was wisely husbanded, it could fund two home purchases (in lower cost areas) and the college expenses of a few grandchildren.

The second household has the advantages of unearned wealth simply from buying a home in a housing bubble area. The children of the first household won’t be able to buy a house for cash from the equity of their parents’ home–assuming there is any equity left after the parents’ retirement expenses are paid.

The offspring of this family will have to save up a down payment (or qualify for a subsidized mortgage), even if they do inherit some percentage of their parents’ home equity. They will have to make 30 years of mortgage payments to own their home free and clear.

They may well remain renters for life if they choose to live in high-demand, high-valuation regions such as the S.F. Bay Area or NYC.

The second household’s offspring could live mortgage-free, and have a nest egg to invest in their children. Again, this requires wise management of the $850,000 equity, but the generational wealth that could be transferred (if it isn’t squandered) will widen the already large gap between the prospects of the two households.

Of course bubblicious valuations will likely decline, but even a 50% drop would still leave the second household with a $450,000 home and a mortgage well under $50,000. Even if this family holds onto the house and never sells it, the equity is available via home-equity lines of credit (HELOCs) or second mortgages.

Geography charts the financial destiny of households, at least in terms of housing. Hot housing markets (San Francisco Bay Area, West Los Angeles, Brooklyn, etc.) were once affordable to everyday middle-class households. Now they are only affordable to wealthy foreigners bringing bucketloads of cash or to the top slice of upper-income households, i.e. those with incomes in excess of $200,000 or more annually.

Those who bought homes in these areas when they were still affordable (the year 2000 or earlier) are reaping gains in wealth that remain unimaginable and unattainable to middle-class households outside these rarified high-demand housing markets.

Housing is yet another driver of our increasingly have/have-not economy.

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Sharing Cities: Why Ownership, Governance and The Commons Matter More Than Ever

Ballarat St permanent park providing green space for the people of Yarraville (Melbourne).

Sharing Cities have been generating a lot of attention recently thanks to the Sharing Cities Network and the announcement of Shareable’s upcoming book on commons-based urban solutions for municipal and civic leaders. Interest in Australia and New Zealand is growing too as evidenced by some recent events like the Melbourne Conversations panel on Smart City Leadership that I spoke at for the launch of Melbourne Knowledge Week last year.

In a recent interview with Wallace Chapman for RadioNZ Sunday, I talked about the rise of Sharing Cities,platform cooperativism and the shift from extractive to generative forms of ownership and value creation. This led to a series of invitations from Kiwis across the country keen for me to speak on sharing cities including a warm welcome by the Mayor of Christchurch, New Zealand, a city devastated by the 2011 earthquake and going through a period of experimental urban regeneration (see Gap Filler for inspiration).

The Commons in Christchurch is located on what used to be the site of the Crowne Plaza hotel which was demolished in 2012. The site is now a hub of transitional activity and home to a number of post-quake organisations.

Widespread interest in Sharing Cities makes perfect sense. In 1800 only 3% of the world’s population lived in cities. This figure has climbed to 50% today, and the global urban population is projected to reach around 70% by 2050. We are clearly living through the urban century and human civilization will either make it or break it in cities. The need to develop innovative thinking to address the climate crisis, resource constraints, inequality, and energy descent is greater now than ever.

That’s why Sharing Cities is a refreshing antidote to the top-down, technologically deterministic vision of the future we so often hear about in discussions of Smart Cities and the Internet of Things – a vision dominated by sensor networks, data mining and myriad opportunities for corporate and government surveillance.

Too many cities have been quick to embrace ‘smart technologies’ where buildings have automatic climate control and computerised access. Where roads, water, waste and electricity systems are hooked into integrated systems that track and respond to the movement of people and objects. Who wins and who loses in this scenario?

It’s reminiscent of a scene from the 1969 Philip K. Dick novel Ubik where the protagonist gets into an argument with his “money gulping door” which demands payment every time he needs to enter or exit the building as his terms of service contract makes clear.

Chinese city opens ‘phone lane’ for texting pedestrians via The Guardian,

Sharing Cities on the other hand provide citizen-centric alternatives that focus on increasing the sharing capacity of existing infrastructure like public buildings and free wifi; provide access to idle or underutilised assets for ridesharing, coworking or urban agriculture; and strengthen the social fabric through deliberative decision-making like Citizen’s Juries, Participatory Budgeting and other forms of active citizenship.

Sharing Cities are an interesting hybrid between the public, private and community sectors and rely on a range of public goods and commonly owned resources to operate effectively. These include everything from the internet and road networks to open data and vacant public land. Cities are at the vanguard of the sharing movement as hubs of disruptive innovation, knowledge transfer and creative communities. Sharing Cities are about creating pathways for participation that recognise the City as Commons and give everyone in the community the opportunity to enjoy access to common goods and create new forms of shared value, knowledge, and prosperity.

The Agrocité urban commons project in the suburbs of Paris (via The Guardian).

The time has come for cities everywhere to emulate Sharing City trailblazers like Seoul and Amsterdam who recognise that sharing builds urban resilience, economic interdependence and social cooperation. City governments can help strike a fair balance by putting citizens first, supporting platform cooperatives and protecting the public realm. Cities can design the infrastructure, services and regulations that enable sharing in all its forms and strengthen the urban commons through policies for sharing cities that support food, jobs, housing and transportation initiatives to keep and grow wealth in local communities.

Sharing Cities give everyone who wants to participate in the sharing economy the opportunity to have a fair go. Government and business must work together with citizens to develop policy solutions that make sense for people, cities and sharing platforms. Sharing Cities provide a framework to make this vision for an inclusive sharing economy a reality.?


 

This article originally appeared in Shareable

The post Sharing Cities: Why Ownership, Governance and The Commons Matter More Than Ever appeared first on P2P Foundation.

If You Want To Be Wealthy, Don’t Focus on Owning a House–Build a Business

One truism of investing is to follow the lead of those who are building wealth.This chart reveals the foundation of the wealth of the top 1% and the next 9%; business equity, i.e. ownership of enterprises. Compare the assets boxed in red:

The wealthiest households’ primary wealth is businesses and shares in businesses. The bottom 90% depend on the family residence as a store of wealth, and on debt as a means of funding asset purchases and consumption.

Primary residences were once a reliable store of wealth–a store that was accessible to working families who were willing to pinch pennies and save up a down payment.

But now that housing has been financialized and globalized, it is prone to boom and bust cycles like every other risk-on financialized asset. Unfortunately, recent history shows that many middle-class households bought homes at the top and rode the post-bubble burst down.

Those fortunate enough to own homes in bubble-prone regions may benefit from speculating in housing, but playing this speculative game requires cashing out at the top of the bubble–something few have the knack for.

Building a profitable business isn’t easy. That’s why many of the wealthy let entrepreneurs take the risk of starting businesses and then buy the business for a premium once it has proven to be profitable.

But many entrepreneurs refuse to sell out, preferring to hold their businesses as a family asset that can be passed on to the next generation.

It’s also worth noting that the wealthiest 10% own over 90% of the securities and stocks, 84% of trusts (essentially tax havens) and almost 80% of non-home real estate (i.e. second homes and income-generating properties).

Primary residences represent a mere 10% of the wealthiest 1%’s assets.

The key take-away: focus on owning income-producing assets, not a primary residence. The second key take-away:

Don’t finance your assets with debt; finance your income-producing assets with savings and sweat equity, not borrowed money.

It is not accidental that the wealthiest 1% hold very modest levels of debt.

If You Want To Be Wealthy, Don’t Focus on Owning a House–Build a Business

One truism of investing is to follow the lead of those who are building wealth.This chart reveals the foundation of the wealth of the top 1% and the next 9%; business equity, i.e. ownership of enterprises. Compare the assets boxed in red:

The wealthiest households’ primary wealth is businesses and shares in businesses. The bottom 90% depend on the family residence as a store of wealth, and on debt as a means of funding asset purchases and consumption.

Primary residences were once a reliable store of wealth–a store that was accessible to working families who were willing to pinch pennies and save up a down payment.

But now that housing has been financialized and globalized, it is prone to boom and bust cycles like every other risk-on financialized asset. Unfortunately, recent history shows that many middle-class households bought homes at the top and rode the post-bubble burst down.

Those fortunate enough to own homes in bubble-prone regions may benefit from speculating in housing, but playing this speculative game requires cashing out at the top of the bubble–something few have the knack for.

Building a profitable business isn’t easy. That’s why many of the wealthy let entrepreneurs take the risk of starting businesses and then buy the business for a premium once it has proven to be profitable.

But many entrepreneurs refuse to sell out, preferring to hold their businesses as a family asset that can be passed on to the next generation.

It’s also worth noting that the wealthiest 10% own over 90% of the securities and stocks, 84% of trusts (essentially tax havens) and almost 80% of non-home real estate (i.e. second homes and income-generating properties).

Primary residences represent a mere 10% of the wealthiest 1%’s assets.

The key take-away: focus on owning income-producing assets, not a primary residence. The second key take-away:

Don’t finance your assets with debt; finance your income-producing assets with savings and sweat equity, not borrowed money.

It is not accidental that the wealthiest 1% hold very modest levels of debt.