jra6

I think when I came to California, I shared your position on Prop13... namely that it was a unnecessary market distortion that distributed wealth from the new to the old that ultimately worked against the apparent intent of the legislation (to make California more affordable).

I've sinced developed a more nuanced view. I believe Prop13 for owner-occupied, primary residences is perhaps flawed, but something I believe two reasonable people can disagree on (happy to explain more fully). I believe Prop13 for anything else has absolutely no rational justification and needs to be overturned at the earliest opportunity.

In California, I would eliminate Prop 13 for landlords (which would increase teacher salaries 20%-30%). To me, that's a no-brainer. The other no-brainer is decreasing political barriers to additional density.

Everything else requires trade-offs. - If you allow educator salaries to track property values instead of CPI, you create massive inequities between school districts. Maybe a regional inflation index that includes housing costs? - If you raise salaries, you have to raise taxes. - If you build teacher-specific housing, you're just passing the buck to the next profession.

Regardless of all the above, I think you'll need mechanisms for people to share the investment risks of expensive land ownership. I'm not sure mortgage insurance is the best mechanism -- hence Landed.

Our investment follows our educators regardless of what they do afterwards. I do think that less educators would re-train if they had more financial security in their chosen profession.

I similarly struggle with that pessimism. I mentioned below that our primary goal is to even access to homeownership across people who make similar incomes.

A big component of housing-related credit is equity (ie. collateral). Many parts of that dynamic are very rational -- having equity is a proxy for financial responsibility (you know how to save money, or have access to other people who don't mind occasionally gifting you equity). Having equity also buffers the lender from loss when housing prices cycle, which is a very important part of building resiliant financial infrastructure.

I think our high-level argument is that for a very specific group of people (tenured employees) in very specific places (urban diversified economies that are resistant to land bubbles), there is opportunity to push the edges of the box.

The hard data is piss poor. It's largely self-reported data collected by media agencies. Just google "Bank of Mom and Dad", there are lots of poorly done studies. This one is okay: http://paa2005.princeton.edu/papers/51443

The reason it's poor is because everyone has an incentive (bank, broker, parents, you) to under-report the parental funds. Parents send the gift money in advance (3 months to be exact), banks look the other way to meet equity requirements and the transaction takes place.

Shamefully poor tech competencies! Come help us! :)

I don't disagree -- I definitely struggle with this. The problem we are solving shouldn't exist. We should live in an society where people with equal incomes should have equal access to credit.

The reality is though that intergenerational wealth transfer are the primary way people acquire the necessary equity to buy homes (they get help from Mom and Dad). So I think you need both... both higher incomes, and mechanisms that create intermediary stages being renting and owning.

And on being a stretch, don't disagree. I feel the incentive is to be provocative beyond reasonableness, so apologize for that! Public schools in America are suffering death from a thousand cuts. I will tell you though that when urban school turnover (largely as a result of rising housing costs) is now up to 25%/year... it becomes your primary issue pretty fast.

[One of the co-founders of Landed]. This post doesn't really talk much about what we do. What we do is run down payment assistance programs for private schools and public school districts to help their teachers become financially secure near the communities they serve.

That's a mouthful! The economic problem here is that if you're a median wage household in a city like SF, NY, DC, etc. you will struggle to save enough money to make a conforming down payment while paying rent. Most of our teachers get trapped in a cycle of their wages increasing at the exact rate of their household expenses.

Homeownership in cities is not for everybody. But for those community members who are making a very long-term commitment to a place with very predictable salary schedules, locking in your housing payments is an important part of your security. In the absence of rent controls (which we can talk about at length on why they are often misguided), homeownership is the only form of insurance on rising housing costs.

As an owner (especially in California thanks to Prop13), you can be protected from the failure of all levels of government to build sufficient housing for rising economic activity in cities.

I'll be the first to advocate for higher salaries for educators, nurses, firefighters, police officers and essential public employees. I think they provide an absolutely fundamental service to our communities.

That said, Stanford has a similar housing support program for its professors because when you're moving from Iowa to Palo Alto, it doesn't matter how much your pay has increased. You're going to need equity support to buy a home.

Land is like any commodity of fixed supply. It is increasingly valuable as incomes and inequality grows. Until such a time that the supply/demand dynamic in cities is significantly altered, it will be valuable (whether it is properly priced is another matter altogether).

I guess I'd rather live in a place that has more distributed ownership of land, rather than less :)

I don't disagree with your comment -- none of us are necessarily great blog writers :).

I would say the way we think about this is that there is both a cyclical and structural housing problem in American cities. The structural piece is that: 1. there is a limited supply of land in near proximity to economic opportunity -- most of this land is concentrated in cities. 2. cities need a wide variety of people to live in them to function properly. 3. even if we paid all of those people a median wage, the median person will struggle to accumulate significant wealth while paying rent. 4. the banking system cannot be expected to take low down payment risk without making the entire system vulnerable to another housing crash. 5. therefore if no 3rd party equity exists, then the only people that will be able to acquire any land holdings will be the sons/daughters of those with existing land holdings (intergenerational wealth transfers)

You certainly have to be a dual income household to have a chance of making it as a teacher in the Bay Area. That said, educators in Mountain View are paid reasonably well ($80,000 - $130,000). Two educators can still afford to buy a home reasonably close to Mountain View, they just can't save money fast enough for a $200,000+ down payment while concurrently paying rent.

One of the first homes we did was a principal in Oakland. He was just able to make it work on a single income.

Hi, I'm one of the co-founders of Landed. Some great answers below. Some additions: 1. The only thing I'll add is that schools that have implemented similar programs have largely done so out of necessity/desperation. Given the choice, they'd much prefer to not have dedicated internal resources managing housing financing for their staff. 2. Companies can also provide benefits of scale that could make all of these programs better off. The biggest weakness of a shared-equity investment product is a lack of liquidity (no market for resale). Each school having its own program with different rules and investment structure provides no opportunity for a standard institutional product. A standard institutional product would bring more competitive pricing because investors wouldn't have to be worried about holding positions for indeterminate periods of time. 3. The idea is that this is not subsidized housing. The idea is that there might be an opportunity to take existing real estate private equity capital flows and direct them to cooperate with buyers instead of compete with them.