The invention of money and then capital led to an expansion of investment and the development of new technologies. Before computers and communications, non-local entities transferred ownership and value over time and distance by monetising assets and developing debt. Today, communications and computing provide alternatives to moving asset ownership over distance and time. For example, to transfer existing assets like houses, we can eliminate the need to create new money with bank loans and eliminate the need to charge interest for using money by making secure, profitable remote investments with the ownership of shares rather than the physical assets.
Assets can be continuously transferred from current to future unknown owners, reducing transfer costs. Housing asset transfer costs can be close to zero, increasing financial system efficiency and freeing capital for other investments. It removes most of the advantages remote, wealthy individuals have over the less wealthy when competing for the same goods and services. Removing the advantage increases economic participation and the rate of wealth creation. Growing society’s wealth means the wealthy can retain their wealth while the new wealth is shared equitably.
Significantly, removing the need to create new capital to transfer assets speeds up investment and innovation and reduces production costs, increasing productivity by doing more with less. Doing more with less will reduce the stress on the planet’s natural systems and may lead to a sustainable economic system.
The following outlines how small local housing commons more than halve the cost of acquiring a house in Australia. Variations of local commons can reduce the costs for most common goods and services while increasing the returns on investment. It is achieved by eliminating many financial costs and increasing the speed of moving investment money.
Permanent Local Housing Markets (PLHM)
Permanent local housing markets are the most obvious, most straightforward to implement, and have an immediate “overnight” impact.
For example, ten house owners decided to work together and create a PLHM Company called Our Suburban Homes. The houses are in the same geographic area. One thousand other dwellings in the geographic area are in the regular housing market or not in the market at all. Owners of houses apply to join the company, and the house is independently valued. Existing owners agree to accept shares of the same value as the equity in their home.
The occupiers of the properties become the custodians of the houses as they live in them. Custodians have all the rights and responsibilities of an owner. They pay rent, and 40% of it becomes shares in the property they occupy. Another 40% purchase shares from owners of shares in the property who agree to sell some shares each month. The other 20% of the payment goes to the company for operating costs and to build shared wealth for the common good. Such things are insurance, selection of new occupiers, repairs, the purchase of new assets for the company, transfers of shares, operating the company and the payment of taxes.
The company never pays dividends, and the number of shares is always equal to the value of the company’s assets. Profits and Losses are accounted for by increasing or decreasing the number of shares in proportion to the number of shares held by each shareholder.
Governance is democratic, with one vote for each shareholder irrespective of the shares held. Shares are transferable between shareholders for the administrative cost of transfers.
Occupiers all pay a yearly minimum of 25% of their income or 2% of the property’s value — whichever is the lowest. All shareholders receive 5% more shares yearly but must also sell 5% to occupiers. The transactions occur in equal amounts each month. Occupier shares are not sold, and occupiers do not receive extra shares on their dwelling shares.
Non-occupiers and non-home-owners can apply to join the company as investors, but existing members must agree to accept them.
Shares are traded, but the price is fixed and the same for all.
For further information, read.
A New Era in Housing: How Permanent Markets Could Replace Traditional Loans
How Community Banks can evolve their existing home loans into Permanent Markets
The above proposes a significant shift in providing home loans. A staged implementation is for community banks to convert existing loans to lower cost or fair loans by community bank borrowers forming themselves into local permanent markets.
A community bank could increase its profit from loans by raising the interest rates, provided the mortgage holders form permanent markets. In such a scenario, the bank’s risk decreases and its profits increase because:
- The mortgage holder would pay less to pay off the mortgage, reducing the lender’s risk.
- If the mortgage holder fails to meet their payments, the permanent market takes over the mortgage, removing the need to sell the house.
- Shareholders, particularly investors, benefit from higher returns and lower financial costs from being part of a permanent market.
With fair loans and permanent markets, community banks will outcompete shareholder banks as bank members receive higher returns on deposits and lower interest rates on loans.
