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Note that most people rent, even in the US. They either rent the property itself, or they rent the capital used to buy the property (i.e. a mortgage).

With that in mind, housing associations or co-ops and the like take the place of banks, that is, they possess the capital and rent the property to the residents, but keep a portion of the revenue for future renting, as a bank does for future lending.

The difference between the two is that the housing association is typically not-for-profit, and that in a housing association the resident does not accumulate capital, which allows for a reduction in costs compared to a mortgage.

I don’t have any numbers to counter whether it is typical of “most”, but when trying to buy, I was outbid several times by people who paid “in cash”, and that was for million+ dollar homes. So it might be they do “rent” the capital, but possibly from a source other than a bank (eg from their forgone returns on stocks instead)

That kind of cash too is just another form of cost- and I think that goes to part of my point which is that especially because of speculation the sticker price of a home is really inflated.

If the buyers don't have a profit motive (neither the builder or the lender) how much lower will the true cost be? It could be low enough for a non-profit co-op to own the building instead of a bunch of investors.

Sure, some people do have "cash" to buy a property. However, the vast majority of home buyers do not, and many who offer "cash" may have pre-approved loans.

Google search say that the “true” cash purchases represent 20-30% of all purchases. Add to that the people that eventually own after a mortgage ends and it still may not be the most common, but it is not the small minority either.

People who haven't inherited wealth can slowly accumulate capital in their properties, especially if prices are rising. They can use this to part-finance further property purchases.

This is the model most Anglophone countries adopt. However, what most miss in this model is that the cost of doing so is much greater than they realize. The most obvious extra cost is the interest paid on mortgages, which can amount to 2-3 times the value of the property by the time the mortgage is fully paid.

A further cost is politically imposed, in that governmental policies will avoid making homes more affordable, as this is perceived as a "loss" by many mortgage-holders and home owners.

> People can slowly accumulate capital in their properties

I thought this is actually one of those “myths people believe about owning real estate”. In most markets, it is a depreciating asset that takes considerable time and money to maintain at the original capital value. This is why the cost is much higher, like you said, but not exactly for the reason you said. The net present value of that added interest payment is typically very low. It is a competitive market. It is uncertain whether I’d come out ahead or behind if I pay off the mortgage on day 1 or put that equivalent lump sum in the market and use that asset to pay off the mortgage instead. The political cost isn’t merely perceived loss, that is a real loss as it should cause the sale price to reflect the actual depreciation of the asset of an pre-owned house instead of being able to claim the added value of getting ownership.

You're correct that the calculations are a bit more complex in reality.

However, in a mortgage situation, the borrower does accumulate capital, whereas in a housing association scenario the resident/renter does not.

The major factor distinguishing the returns on the two options (lower rent vs mortage + depreciation) is whether the value of the property increases more than the costs of the mortgage, and what else the renter might do with their money. Note that most of the value of prime property (e.g. that in or near major cities) is in the value of the land, not the structure.

So there is substantial political pressure to support land value increases, to the cost of everyone except mortgage lenders....

Further, the notion that the cheaper costs achieved by housing associations and the like, including public housing are the result of subsidies can be shown to be incorrect. They're cheaper because of the different treatment of capital.

Everybody pays "in cash" - cash that was just borrowed with a mortgage from the bank.

That isn’t quite true, since the mortgage happens after the sale agreement (exact wording and specifics vary by state law), and the sale typically has a cancellation clause if the mortgage cannot be secured per the various terms and contingencies of purchase. That is why “in cash” offers are preferred, since then the sale and payment timing is less uncertain and risky to the seller.

I think one way forward in the US is for a housing association to get the ability to have a mortgage that is a government backed housing loan, with a favorable interest rate. afaik right now that's very hard to do.

I think San Francisco has something like this with their Below Market Rate (BMR) housing program. You have to be below a certain income to be considered, and basically you get to pay a fixed monthly rate to "own" a place that can only be sold for a fixed amount. It always just sounded like rent to me.

I think that NYC's co-ops (TICs in San Francisco) provided an interesting alternative model. They usually require owner-occupancy, can't be rented easily, and are difficult to finance.

These restrictions eliminate investors and speculators, and shields the the units from the inflation that happens from fed intervention and super low rates.

The result is that they're usually priced a lot lower and appreciate more slowly than they would be if they were condos.

TICs are a scam though. They are just condos with less legal protections for the relationships between the tenants. They don't solve any of the cost of ownership issues or deal with the idea of appreciation of the value of the real estate. afaik it's actually much worse because you're combining the appreciation of the asset, but you can't sell as easily as with a condo.

Sounds like you want a super liquid asset that's not actually an asset because it doesn't appreciate, and also it needs to be really easy to buy, cheaply. That's unlikely to happen and what we have right now is probably as close as one can get to that.

I wasn't saying that coops or TICs are ideal, just that they show what happens when you remove the speculative and investment aspect as well as the subsidy of below-market interest rates and mortgages that any idiot can qualify for. The result is prices which are lower by 10-20%.

People seem to want an engineered, top-down, state provided solution that makes homeownership more affordable. But we've already tried many of those solutions and they just inflate prices and encourage speculation and securitization.

A better approach might be to end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings. I think this would disinflate the housing market and allow it to get back to where it should be.

> end the various implicit and explicit subsidies on mortgages and homeownership, keep speculators, investors, and big developers out of the market, and focus on owner occupied dwellings

Yes, totally agree. I think my impression of TIC is that it's a legal loophole because condo-izing buildings isn't politically tenable, but offering a worse option is. A TIC owner still owns an asset but now it's just devalued because it's harder to sell.

My original thought was that a true co-op without the pressure of the owners accumulating pent-up capital in their home would be a healthier situation. Maybe that lost value can basically be recouped to make the overall cost of ownership lower. Maybe a different co-op legal structure makes it easier to pay a true market rate to live in an owner occupied dwelling, for a slightly different definition of "owner" (someone who doesn't plan to profit off the appreciation of their home, but still "owns" a place to live).

There’s a number of these types of co-ops in NYC although these are due to government legislation and I do not know if there are any less than decades old.