eureka! we've been published

bring down the house has been published online as an article about the global common equity housing economy (GCEHE) project. there are also some very positive comments that have been left by readers, some of them including questions that i intend to address here, and further questioning and conversation and debate is welcome here on the blog. all comments can be viewed along with the article using this link: http://www.eurekastreet.com.au/article.aspx?aeid=7726#. it has been the lead article for the past week. thanks to eureka street and especially the editor, Tim.

"hi chris, this is a big problem. good to see alternatives being sought. while interest rates have to be a problem sure desire is a greater. people around me are paying huge amounts for houses that are closer to the city. the interest rates are the same aren't they whether you buy in northcote or caroline springs. as i see it the auction system with its % fees to real estate agents is a bigger driver. if all houses had to be sold rather than auctioned then the speed at which prices accelerated might slow. what do you think? i am not an economist. "

i’m no economist either, so am happy to be corrected by better information. i see auctions as just a slightly different way of getting the best price you can when selling your house. auctions only contribute to accelerating housing values when they get surprisingly high results, generated by vigorous competition between buyers as a result of housing shortages. it is market parameters set by industry and government that create high demand and force buyers to play the ‘who pays the most, wins’ game (either at auction or sale). the greatest disadvantage is for those, not even playing the game, at the bottom of the market – the homeless and those at risk of being homeless. as the market goes higher, more and more people have to sit out the game ‘on the bench’ (welfare and public housing) and these structures are not coping.

"i enjoyed your article. if you are looking for a model that circumvents the interest trap investigate the Muslim solution, which does not charge interest."

i had heard of this solution many years ago, and haven’t researched it much. what i heard is that a mosque will provide interest free housing loans to anyone! does anyone else know more details? i don’t know how limited their funds are or how they distribute it, but is it extensive enough to provide enough loans to affect the market long-term? some of my first ideas were about interest free loans, but the government/churches/corporations etc are not that generous with their surpluses/equities/profits, otherwise they would be doing it.

"sounds good but where does the owner (?) in this common equity housing gain equity for future loans etc.... as normal appreciation kicks in - and what about inheritance issues - what happens to 'my' equity i've invested into the property and may someday want to bequeath to children?"

this concept is about housing, not equity.

"wealth should be created elsewhere, small to medium business, commercial property development, intellectual property et al, fields of endeavour that have real worth. if you want to speculate play tattslotto."

"wouldn't it be much similar to remind traditional welfare oriented governments to invest in public housing stock to take the energy out of the heated housing market"

they haven’t/won’t/can’t or whatever. perhaps even the government can no longer afford to manage the run-away market, or perhaps they don’t want to because they gain more from the ‘top’ than they lose from the ‘bottom’.

"great idea chris. have you also looked at the new the land rent bill?"

i have now, thanks. what we need is a long-term challenge to the status quo of the housing market, which i’m not sure this, and many other ideas like it succeed at this. [ the GCEHE has the persistent questioning of my great friend Bryan to thank for the ability to challenge the status quo] the land rent bill might squeeze a few more people into houses, and good for them, but that adds a few more points of pressure to prices and still leaves out many more.

"it is good to recognise that the cost of building a house has not increased. in fact with new technology etc. it may be cheaper. it is the price of land that has skyrocketed to alarming levels at this time and so this is the area that needs attention."

of course it’s land that goes up. if it were the buildings, it would be the builders that benefit. it is worthwhile reflecting on whose hands the value of the land is in, and who benefits most from it. on the other hand, people are building more expensive ‘mcmansions’ because conventional ‘sense’ (and possibly financiers conditions) is that you shouldn’t build under-valued houses on over-valued land.

housing conference resources

a good resource for ideas on housing can be found at http://www.nationalhousingconference.org.au/browse.asp?ContainerID=program_2008
it is the full program of the national housing conference held in sydney, and has links to many papers and presentations from the conference. The conference covers a wide range of housing topics from planning and investment to delivery of services in the welfare sector.

here it is... the global common equity housing economy

the following is a dot-point description of the global common equity housing economy, which itself is the result of some ideas i've been kicking around for a while, including on this blog. I will also try to put up some pictures and graphs, but have never done that before... yay!

sustainable
affordable
stable
housing for life
local needs and levels
set payment for term of occupancy
based on property value
values based on CE housing, by CE valuers
property owned by CE, lived in ‘as though owned’ by occupants (legal issues to address)
residents pay rates, maintenance, improvements, insurance, etc
properties can’t be bought or sold outside of CE for profit
to provide a % of low income and supported properties etc.
guidelines set type and value of houses, especially in the beginning
as values are locally based and payments are value based, the CE can be global
many more people can be housed O/S for the same amount that houses an Aus household.


start up, growth and sustainability stages.
Start up require no interest investment
Growth phase – investment continues, added to payments being made
Sustainability phase – investment not required, payments provide sustainable growth to challenge conventional housing markets / economy


Cash in or contracted minimum payments?
Can buy conventionally or create new arrangements with builders etc
People can sign over existing homes/properties/liabilities (details to be addressed)

A very basic numeric model shows that with an initial no-interest investment of $2 million, invested in 10 properties, and people paying $200 per week to live in them, and a new property added whenever a balance of 200,000 is reached, shows that after 50 years there will be 115 properties in the common equity, and after 100 years there will be 1446 properties.

Think about it… me-and-my-mate buy a house each and pay them off over 25 years each. That’s 50 years and we have two houses (instead of 115). No wonder so many people are in housing crisis, and many more are stuck in housing in-affordability and housing stress.

woz