When a family purchases a house in the Australia-wide real estate market, they do it independently and through a bank. The bank supplies and charges for using the money with interest on a mortgage over the house.
When a family purchases a house in a Community Housing Market (CHM) they do it with other community members financing the home without a bank. The community collectively takes on non-payment risk and uses “internal” money when it can.
The article A Netlogo Model for a Community Housing Market (CHM) shows how removing the bank is a low-cost way to buy and sell homes. To make it a reality requires setting up a CHM as a compatible entity with the existing real estate market. That means houses can move freely between the existing market and CHMs. A CHM must obey the rules and regulations of the real estate market and use the same administrative and legal tools as the existing system.
The following outlines how to do it and the advantages of the approach.
The Rules and Regulations for a CHM
Community Housing Markets are organised as a set of independent Companies. In the existing real estate market, they act as though the Companies each owned a set of Houses. A House can exist in only one CHM market. People can be part of many markets and be associated with many Houses but have one principal place of residence.
The Company holds house titles, and like a Company town, families occupy and have ownership rights and responsibilities. These rights are embodied in the Company rules and regulations. These rules and regulations are the same as individual ownership, including the right to sell the house.
Within the Company, the ownership is measured by shares. Each share represents one dollar and is tagged and associated with a given home. The number of shares is the same as the value of the houses on the open real estate market.
Members hold tagged shares, and Occupiers accumulate shares in the home they occupy. When they no longer occupy a home or sell their shares, the shares move into the pool of Company shares and are moved to investors. Investors have a set of shares that are randomly associated with homes.
Taxes
For tax and regulatory purposes, authorities and the company differentiate between the two types of shares held by occupiers. Occupier shares earn money, and the other set representing the occupied home is treated as equity in the home and is not taxed because it does not earn income.
This approach simplifies tax accounting and the movement of capital. It allows the tax authority to use the same rules on share investments that they use today. All the existing negative gearing and capital gains tax rules only apply to investor shares.
The simplified system makes Community Housing Markets an attractive vehicle for retail investors in housing. Instead of purchasing a house to invest, a person buys shares in the Company or sells a rented house to the Company and collects a 10% 20-year annuity instead. It also becomes an attractive investment for superannuation funds.
Community Housing Market Companies purchase services from Companies with the same structure of Investors and Buyers. When a buyer pays for a service, they receive a percentage of their payment as shares purchased from investors. They can use their shares to pay for their services.
Who Benefits and How
In summary, a Community Housing Market benefits the following:
- The Australian Taxation Office has a simpler tax collection on house rentals and Capital gains.
- The Australian Titles System has fewer title transfers and a secure method of title registration through Community Housing Markets.
- Renters pay a fixed 25% of their income, and every payment gives them equity.
- Investors, including superannuation entities, get a secure, relatively high return on investment of 10% Annuities over 20 years.
- Investors no longer depend on Capital Gains to make a profit.
- Homeowners work together to obtain low-cost, reliable services from a services market that they own.
- Service Providers have secure continuous work.
- Communities because people move to the CHM that best serves their purpose, such as living close to work or school.
