Affordable Housing

Kevin Cox
5 min readMay 17, 2023


The ACT Government Build to Rent initiative aims to increase the supply of affordable housing. It will achieve a limited supply of new affordable housing, but it will take many years to make a significant difference. It will mainly benefit developers and investors who rent the housing rather than the occupiers needing assistance.

This proposal addresses the underlying reasons for unaffordable housing and applies a scalable solution to existing and new housing.

Housing is unaffordable because most renters need help to obtain and service loans. The underlying reasons for this are

  1. Bank lending is only available to those with assets, including a cash deposit.
  2. Bank loan repayments are higher than the renters can afford.
  3. The profit from creating money is not shared with the party who worked to create it.
  • Lending to a Community rather than an individual removes reason 1, as a Community has assets against which loans are secured.
  • Changing how interest is calculated improves loan productivity, reducing repayments so that more renters can afford to repay a loan.
  • Lending money is just another business; profits from creating loans can be shared with the borrowers who worked to find the money to pay the interest.

These changes will reduce the costs of homeownership for everyone in a Community and not require any subsidies from the government to make housing affordable. Loans created with these principles are called Community Loans.

A Comparison of Community Loans and Bank Loans

The following compares the repayments between a Community Loan and a Regular Bank Loan. The interest rate is 5% in both cases, and the loan is repaid over ten years.

When a loan is issued, the lender transfers the requested amount to the borrower's bank account, expecting to receive the original sum and interest. The borrower utilises the loan to generate income by producing goods or providing services and repays the loan with the accrued interest.

Both loans come with an identical interest rate, and the borrower must pay back the borrowed amount of $100 and the interest. However, the distinction lies in the accounting agreement of the loan. The interest in the conventional loan was not shared, despite the borrower taking significant risks to obtain the funds to repay it. Additionally, it is unjust and unnecessary that the Bank charged interest on interest, despite the borrower assuming all the risk to generate the interest.

The shared interest loan is more productive as it costs $111.84 for sharing and $129.50 for a regular loan. If the Bank gets 100% of the interest, the shared interest loan is $128. The Bank should get some interest to cover its costs and risk. The following graph shows the effect of sharing.

The blue bars represent the share of interest going to the Bank. The red bar represents the share going to the borrower. The yellow bar represents the savings as a reduction in interest. When the Bank (or any lender) receives 0% of the savings, the interest generated goes to the borrower and is the minimum possible.

The yellow bars represent unnecessary or unearned income to the lender or extra interest produced by the borrower that is given to the lender. The higher the yellow bar the greater the productivity of the financial system in transferring assets.

Suppose the loans are between a Community entity and its members. In that case, 0% of the interest needs to go to the Community, and it minimises the cost of transferring a dwelling between houses. This is the main reason why Community Loans make housing affordable.


The Build to Rent initiative of the ACT government assumes standard financing, so it precludes Community Loan financing. Developers or community groups will only attempt to use this approach if they obtain the property tax liabilities concessions.

Suppose the ACT government says it will allow Community Loan financed Build to Rent to be eligible for the concessions. In that case, prospective Occupiers and Investors will form and own shares in a Community Group Company (CGC) with financing and governance rules approved by the ACT Government.

  • A CGC will engage a developer who may receive shares in the Community Group Company as payment for their services.
  • A CGC will approach lending organisations and other investors for Community Capital loans.
  • Prospective Occupiers can sell their homes to the CGC, receive shares in the Company, and pay rent to continue living in their homes.

A possible set of loan rules are:

  • Occupiers pay 25% of their disposable income (which can include rent assistance) as rent each month. 50% of their rent payments become shares in the CGC as their share of the interest.
  • Occupiers with shares up to the value of their home do not receive a dividend on their shares. Shares beyond the home value are treated as an investment.
  • Each month investors receive at least a minimum repayment of a 10% inflation-adjusted annuity, and if required, investors reinvest their funds.


  1. The ACT government permits Build to Rent proposals to receive property tax concession if they establish a CGC and maintain affordable housing by limiting rent payments to 25% of a person's disposable income.
  2. The ACT government permits homeowners and landlords to apply for a property tax concession if they form a CGC and make their houses affordable by keeping rent payments to 25% of a person's disposable income.
  3. The ACT government works with Community Groups to establish regulations governing the operation of a CGC.

Possible Outcomes from the Widespread Use of CGC.

Imagine a city that includes many CGCs. Collections of CGCs are autonomous entities with housing, services, and employment opportunities. It's like many connected neighbourhoods within the city.

In these neighbourhoods, people are not just occupants of their homes; they are investors too. They don't choose their homes based on how much they can afford but on their needs. A single mother with two kids might choose a CGC near a good school and her workplace. An elderly couple might choose a CGC near healthcare facilities and their extended family.

People don't have to worry about excessive moving costs when they need to move. They move from one CGC to another or within the same CGC. This easy, low-cost mobility allows people to relocate where their needs can be best met.

Over time, the overall rental rates decrease as more people gain full ownership of their homes. The savings from reduced rents can be invested back into the community for better services like cheaper electricity, improved transportation, and community recreational facilities.

The CGCs also play a significant role in city planning and development. The government doesn't make decisions in a vacuum; they engage with the CGCs to understand the specific needs of each community.

The result is affordable housing, and people's needs are at the centre of decision-making. The capital value of the homes stays stable, reflecting not just the physical property but also access to the community's services. It's a city built not for investment but for the people living in it.

This is the potential outcome of the use of CGCs.



Kevin Cox

Kevin works on empowering individuals within local communities to rid the economy of unearned income.