FairGo Housing Pty Ltd buys and sells homes where residents own the title and buy the dwelling incrementally without needing a loan.
People who have a house to sell put it into FairGo Housing Pty Ltd. The owner keeps the title, but the occupant has veto power over FairGo's sale and modification of the house. Each dollar of value becomes a share in FairGo Housing.
Each month, the occupant pays the company a minimum of 25% of their disposable income or 2.5% of the house value to occupy the house — whichever is the smaller. 50% of the payment buys shares in the home, and 50% goes towards the operation of FairGo Housing. Occupants can pay more than the minimum, and any purchases beyond the total value of the house they occupy are treated as shares in another home and are treated like any other investor.
Occupants buy shares from non-occupants who must sell 6% of their shares each year and who receive another 6% to compensate them for the sale. This ensures the number of shares in FairGo Housing remains the same as the value of the houses.
There are no capital gains or losses in FairGo Housing unless the properties are revalued, in which case shares are increased or decreased in proportion to shareholders' holdings.
Example
FairGo Housing has one house valued at $1,000,000. The current occupier puts the house into FairGo Housing and pays 25% of their income of $50,000 or $12,500 to FairGo Housing. However, repairs and maintenance and the cost of operating FairGo Housing are $50,000, so the occupier sells $50000 and spends it on repairs. The occupier shares are $950,000. This first year, the depreciation is $25,000, and let us assume 50% of the $12,500 collected from the occupier is spent on operating FairGo Housing, which means it will make an accounting loss, but its asset value will stay the same.
The investor has to sell 6% of their shares, or $3,000 worth, to the occupier, so they collect 6% as a capital return. This is paid from the $6,250, and the investor receives another $3,000 in shares as a capital gain.
The occupier has paid $12,500 to occupy the house and increased their ownership by $6,250.
The investor has received a $3,000 return of capital in cash and $3,000 as a capital gain.
If the occupier borrowed $50,000 from the bank at 6% to be repaid in ten years, it would cost the community of investors and occupiers treated as a single entity $84,920. The $50,000 would be unnecessary new money from the bank that is destroyed when repaid, and the $34,920 would be interest payments. With FairGo Housing, the $50,000 would be the existing money used to purchase $50,000 worth of existing housing. The savings are $34,920 that is money that the community did not need to spend. The distribution of the savings are organised by the community and most will probably share approximately equally between the investor and occupier.
FairGo Housing allows investors to sell a house to other investors or occupiers and receive an annuity of 12%, of which 6% is a return or capital gain, and the other 6% is a capital gain. Buyers pay at least 25% of their income for a house of about ten times their salary.
For buyers, a house costs 25% of their salary with Fair Go Housing. Buyers with loans are unlikely to buy a home for less than 50% of their salary plus a deposit.
Typical investors receive the equivalent of a 12% annuity for 17 years with Fair Go Housing. Investors who obtain a pension from superannuation funds would get a 12% annuity for 8.5 years.
Applying the Same Idea to the Wider Economy
The community of FairGo Housing uses existing money to transfer assets between parties, saving the need for a lot of money. The same principle applies to the broader economy. We should not use new money to transfer existing assets. Instead, we should use existing money.
FairGo Housing shows one way of eliminating the need for new money to move existing assets, and it can be applied to all assets, including companies. Community infrastructure, start-ups, or expanding companies should use new money created by the government and given to community organisations like Fair Go Housing to build new houses.
Read more at Funding the Commons, Economic Sustainability and Bringing Finance into the 21st Century.