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Comment by don-code | Hacker News Reader

I didn't quite glean a thorough understanding of the model from the article. It sounds like it's:

1) Public funds provide capital to build a new dwelling; individuals move in at rates similar to market rent.

2) Rather than rents paying a landlord, rents act like principal payments on a personal mortgage - e.g. I own $10,000 worth of shares of the property after paying $1,000/mo for ten months.

3) Eventually, I own enough of a share of the property that I no longer have to make payments, similar to having paid off a mortgage. I'd be responsible for upkeep (e.g. roof repairs), property taxes, that sort of thing.

What I'm not understanding, though, is how this passes down. If I'm a partial owner and move, doesn't the next buyer have the same issue raising capital that the model tries to address? Does it not also mean that I could become a landlord in my own right, and begin renting to another occupant, who stands to build no wealth themselves?

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My dad administered a similar program for getting historically disadvantaged people owning multi family homes.

Basically, folks would sign up for home ownership education, do a bunch of stuff related to maintenance, etc and shop for a two family. The housing authority (through a grant) would essentially provide a loan for 20-30% of the purchase price for down payment and some repairs. The loan would be forgiven in 5 years.

It was pretty transformative and really changed lives for the better. About 90% of the participants made it through year 5.

Habitat For Humanity[1] works in a similar way. At least in my town, families help to build or renovate the home they move into, and their mortgage payments are capped at a reasonable percentage of their income (I think 30%).

1: https://www.habitat.org/about/faq#homeownership

HfH typically provides the mortgage with a 0% interest rate also. They are a tremendous program that should be scaled up.

Like any limited (by funds or numbers) program HfH can do great good but it can also turn away those form whom it wouldn’t work (not capable of meeting the requirements/sticking it out).

Handling EVERY case is much more difficult (not that we shouldn’t expand HfH-style programs). A multitude of solutions are needed and trying to limit the types is part of the problem.

Agree entirely.

All these programs that subsidize the cost of borrowing merely drive up the price of houses. This is why things like the mortgage interest deduction or zero percent financing are not in the long term interests of home buyers when they are "scaled up", and when they are niche programs they are basically a convoluted form of charity. There is nothing wrong with that, some people like their charities to be convoluted and have a penchant for financial engineering, but at the end of the day charities, by definition, cannot scale: A large group can give money to a small group, but when the society as a whole gives money to itself then it is no longer charity, it's just spending money on yourself in a convoluted way.

Not always. The program I described was really a way to transition folks into a sustainable lifestyle. Rents in this place are more than property values, so training to let working class people afford a home and rent the downstairs bring stability to the family and he neighborhood.

Real estate is insane because we’re in an era where wealth is being shoveled into a few peoples hands, and we are literally printing money to extend a boom cycle for as long as possible without regard for the future. The house I grew up in Queens was purchased by my folks in 1976 for $15 and recently sold for $1.3M. My dad was a clerk for the city then, and my uncle, now a millionaire across the street was an able seaman.

I am not saying Habitat for Humanity (or any charity) is bad, nor am I trying to discourage anyone from giving to charity. I'm pointing out that what works in a small scale charity does not work for addressing social problems at scale, and in fact is often (more often than not) harmful when done at scale. This is because the specific things that charities are good at: giving stuff to small groups of people, is not really a path forward for problems faced by society as a whole, with the exception of the problem of poor people not having enough stuff. But when you try to use this approach for, say, housing policy, then you get bad outcomes.

We have had in this country a long term, bipartisan consensus that home ownership should be subsidized. The end result is transfers from renters to home-owners, record high homeownership rates, and many people buying homes because it's a way to make leveraged bets on asset prices at taxpayer expense. There are many people who have no business owning a home but who feel they must do so in order to not be left behind in this game of leveraged bets. The result is a toxic tangle of cross-subsidies between the real-estate and financial sectors and a whole army of various parasitical industries that has sprung up to feed on these subsidies -- everything from real estate brokers, title insurers, inspectors, appraisers, a virtual caravan of people lined up at the trough of our housing subsidies, all in the name of "helping the middle class" afford homes.

When you have such a terrible problem of mispricing and people chasing after windfall gains, the idea that the industry should be approached as a type of charity is really the last thing you want to do. If you want to give money to a poor person, then by all means do so, but that's not a path forward for national housing policy.

> There are many people who have no business owning a home but who feel they must do so in order to not be left behind in this game of leveraged bets.

Who has no business owning a home?

* Won't stay long enough to break even on transaction costs.

* Price to rent ratio very high, just need somewhere to live.

* Achieving ownership requires moving to sprawl and taking on a ruinous car commute.

* Ownership used to justify overspending on housing because "it's an investment."

* Need to go broke to scrape together the down payment.

* Don't reliably earn enough to pay the mortgage, and no savings.

* Don't have the temperament or the means to do maintenance.

>> leveraged bets on asset prices at taxpayer expense

But doesn't the tax code distinguish between a house which houses its owner and one which doesn't? I don't think investment homes are treated tax-wise the same as normal homes. I am not aware of tax advantages being extended to investments just because those investments are houses, but maybe I am wrong?

Not if they help generate new housing, which it seems some of them do.

This is why Phillips's full program is based on three tiers: supply (addressing the amount of housing available), security (tenants' rights), and subsidy (assistance to those with specific needs).

You need at least all three components. I'd suggest wage support (UBI / employer of last resort) being another leg that would help, given the relationship of rents and wages economically (wages tend to or below subsistence, rents to all consumer surplus).

But this seems a damned good start.

based on my experience volunteering for habitat, the hard part of scaling the model is finding affordable and buildable infill in cities (which is where the highest need is). it typically takes years for each project to go from ideation to purchase to design to zoning variances to enviromental review to groundbreaking. the construction itself is only on the order of months. everything that comes before actual construction is what makes it expensive.

Is it replicable in today's yield chasing world?

And what level of gov't buy-in do you need? US Congress, State, County, City?

Was just speaking with my dad about programs - he has a ton of ideas because our hometown area is characterized as one of generational poverty and working poor.

What do you mean? Yield chasing usually stems from a yield starved market, and it usually results in investors expecting a lot less returns. If anything that would make it way more replicable now than it was when interest rates were presumably a lot higher.

In order for this to truly offer some of the benefits (more freedom of movement) it would have to be a national program.

The first half of the article lambasts the current conflicted interests of homeowners, who are obsessed about wealth-building through their property purchase and thus super-sensitive about increasing housing supply in their zip code. Boo wealth-minded howeowners!

But few paragraphs below under his proposal those who choose to participate are awarded “the opportunity to begin generating wealth immediately, from the minute they form their first household - a leap forward for both racial and generational equity”.

That’s a possibility, sure, but what about the property potentially losing value due to supply pressure or changing job market conditions? Aren’t the homeowners under his program as likely to develop hardcore NIMBYism as under any other financing scheme?

The chief wealth generating event that most home owners experience is when the deed is yours. Then you aren't paying the bank "rent" any longer and only have to worry about property taxes and maintainence. Then you have the start of intergenerational wealth and or a hard asset you can sell for example, old people selling homes and buying a smaller they're better able to manage.

Nt saying the article is not contradictory, maybe it is, just pointing out that "wealth" is a flexible concept.

The author's proposal is laid out in his book, The Affordable City. Unlike many policy books, the table of contents, available at the publisher's site, is both detailed and descriptive, and does convey the outline of his proposals:

https://islandpress.org/books/affordable-city

The ebook is a $5 download, which I'd strongly encourage for the curious.

$3.82 for the ebook on Amazon.

Feed the chart.

https://nitter.cc/ShaneDPhillips/status/1380643298612715520#...

Exactly, the problem is that the government is supposed to own the property, but somehow the tenant should also retain a share. If the government buys the share back, then the government basically ended up gaining net 0 dollars, the full mortgage is still due.

The only way this could work is if the property was sold to a third party and the profits of the sale were distributed according to how much you paid in, the obvious problem with this is that the government won't own the property anymore.

Thinking about the principles laid down in the article: a) Do not require significant initial funds for buying b) Do not have other people profit of the housing

A simple solution congruent with these principles could be:

Selling the house should be restricted to yield the amount of money you put in. This excludes money spend on repairs, etc., and is to be adjusted for inflation.

You can keep living in the house as long as you are alive. Once you are dead, you lose the house and the inheritance will be the same money you would get from selling the house/apartment under the regulated terms.

The next renter of the regulated public housing apartment would just pay rent again until they have enough in their portfolio and then stop to have to pay rent.

> Once you are dead, you lose the house and the inheritance will be the same money you would get from selling the house/apartment under the regulated terms.

Where would this money come from, though? You only make money on the property when you sell it to someone else, so who is buying it? Not the next renter, because they are supposed to be buying into equity, not paying someone else's profit.

there in lies the problem - the payment in lieu of rent in the proposal is not meant to be equity, but is treated like that.

I think there's some cognitive dissonance in the proposal. The idea that you can live for free is just not possible in the modern, capitalist world. Rent is something that every entity has to pay - including owners (which is the imputed rent, or the opportunity cost of the capital placed into the building/land, or the interest payment).

If the gov't fronts the capital to build, but don't receive rent, then it's the same as tax payers footing the interest cost of that capital. So those who would be in this public-ownership housing is effectively receiving an interest free loan for the house, and their payment represents equity, and that's such a good deal that there'd be unlimited demand for this sort of housing.

Yeah, this would be even worse than the debacle that led to the housing bubble in 07. This is basically letting people 'invest' in housing with zero risk. You get all the upside of housing prices increasing with no risk if house prices decrease. This means there is zero downward pressure on housing prices, which is going to lead to even worse housing prices in the future.

You can't solve skyrocketing housing prices by simply increasing access to capital... that is just going to exacerbate the problem

Case in point: Student loans

The interesting problems in a price cap system are about allocation. You’ve torn down one way of deciding who gets the house next. What do you replace it with?

Do the neighbors vote on their next neighbor? The city council? An impersonal bureaucracy? What factors does it consider? Are there priority quotas for people meeting certain criteria? What criteria? How many people? Who decides? Who decides if an individual meets the criteria? How do we keep them honest? Can their decisions be appealed, can normal people afford to appeal them?

I don’t think it’s impossible to come up with good answers here, but that’s the work. The mechanism design here is extremely important, and it’s not “simple.”

There's an element of rental housing which is an act of pure consumption. Real estate taxes (either paid or foregone), maintenance supplies, maintenance labor, common area utilities, paying the bond used to build the building, insurance, etc.

Plus, there is a notion in the article that this would be an incoming-producing asset and that income is presumably coming from the rents paid. Unless this is a massive Ponzi scheme, there's consumption going on (and therefore you're not building equity with all of the rent payments).

There's no realistic way you're going to have 100% (and likely not even 50%) of a rental payment going to building equity.

I think it's closer to a

1) You take a bunch of public funds and buy houses.

2) You rent those houses out at market rents

3) You pay off all expenses with the rent

4) You take what's left over (the profit) and use that to increase the renters ownership share, and pay a dividend to other people who have the ownership share

It's just a super weird inefficient way to give renters money. Instead you should just give them money...

A similar program on a municipal level might look something like this:

1) Public funds provide capital to build or buy a dwelling. Public owns dwelling outright.

2) Individuals rent dwelling at market rate. Part of this money goes towards paying off inflation and the time value of money (equivalent to paying down mortgage interest), part goes to a fund in the individual's name (equivalent to paying down mortgage principal).

3a) Saved funds reach price paid for home. Ownership is transferred, public keeps the funds.

3b) Individuals leave early. The chunk of their payments that went to their fund is refunded.

The proposal in the article looks like it's much more ambitious, and designed as a national program. This allows the fund to follow the individual, instead of being tied to a property. Instead of having the refund/buy option, it always pays back a dividend. So if you've paid enough rent that you're getting $200/month back, and you move, you still just get $200/month back.

Sounds vaguely similar (but not identical?) to the UK's shared ownership scheme:

https://www.sharetobuy.com/guides-and-faqs/what-is-shared-ow...

"The purchaser pays a mortgage on the share they own, and pays rent to a housing association on the remaining share. [...] The purchaser has the option to increase their share during their time in the property via a process known as ‘staircasing’, and in most cases can staircase all the way to 100%."

Isn't this limited to one residence per person? So if you do sell it or rent it out, you still need another house, which you won't be able to obtain using this scheme.

When you sell the outstanding loan is paid off by the purchase price, the lender and owner take their respective share of the price

The new landlord would raise rents, because he has to get his money back somehow. It would be better to just let the government pay the full mortgage and pass on the costs for the first 30 years and then lower rents to rock bottom prices based on maintenance costs after it has been paid off.

What is more likely to happen is that the housing association that helps with the mortgage then offers it to someone else who is in need of this type of social housing. The risk becomes less for the housing association each time as more of the principal is paid off. But even when it is paid off they can offer the loan service to new buyers.

This happens frequently in new build housing in the UK but it is not without its problems.

IDK but property rights can be modified, e.g. to exclude alienation (so can't be sold or inherited). You only get a lifetime right to occupy. Then, can be sold to the next person.

Nicely, this wouldn't address intergenerational poverty, nor threaten the landed gentry.

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