A New Era in Housing: How Permanent Markets Could Replace Traditional Loans

Kevin Cox
5 min readNov 15, 2023


The article Reciprocal Capital for Efficient Asset Markets shows how sharing the profits from Bank Loans results in lower-cost loans for borrowers of Community-owned banks. The model can extend to remove all interest costs and replace returns on interest by purchasing more shares in the assets purchased with the loan.

The savings in interest are more significant than the cost of the purchased shares because no new money is created to move an asset from one person to another. This means the community can give a higher return to investors — including banks who decide to finance the assets. This article outlines one possible arrangement for housing assets, models the market and compares it with regular Bank Loans.

A Permanent Housing Market

100 people in a suburb who own, partially own, or have rented their properties decide to set up a market cooperative for their houses. The houses are sold to the Cooperative, and in return, the owners get $1 in shares of equal value to the equity they own in the house. They do not get any cash — just shares. If they have a mortgage, the mortgage is transferred to the Cooperative, and the Cooperative itself is an investor and owns shares. Private individuals can invest directly in the Cooperative and purchase shares.

Every occupant in the cooperative pays at least 25% of their income, even if they own shares of equivalent value to their homes. If a resident owns their home (they have shares of the value of their home), their payments go towards purchasing shares in other resident homes from other investors or residents who wish to sell some of their equity.

Each investor shareholder receives new shares worth 5% of their existing shares divided by 12 every month. If an occupier's share value exceeds the value of their house, they automatically become an investor. However, they do not receive any income from the shares in their house since they already benefit from living there.

This arrangement removes the need for bank loans, removes the cost of transferring ownership each time a new occupier arrives and gives investors a 10% annuity for twenty years a 15% annuity for ten years or any other annuity for n years where the annuity is

Shares * (1 + 5% * n) / n

A similar value annuity lasts twice as long as an allocated pension from the average Australian Superannuation Fund.

The annuity is not in cash, but in shares the receiver can sell to other investors or occupiers buying their home.

The cooperative will charge a percentage of the funds exchanging hands to cover costs. It will be a fee for the transfer of funds between members. In the model, it is set at 20%. There are no interest charges.

The cooperative model offers additional savings, particularly in the transfer of housing ownership. The capital moves incrementally with reciprocal capital rather than in one large amount. Typically, the costs associated with selling, buying, and transferring a house and loan establishment fees can be 10% of the cost of a house. With a cooperative, these are less than 1%.

There are several other advantages of all working together. But with too many people in a cooperative, reaching an agreement on contentious issues becomes more difficult.

However, the approach works with any size group from two to 100,000. If a group is too small, it is easy to combine with another group, and if a group is too large, it is easy to split the group.

Permanent Markets Compared to Regular Loans

The NetLogo simulation “Permanent Housing Markets” was developed from the simulation “Reciprocal Capital for Efficient Asset Markets”. If you have not read this article, please do so before continuing, as it explains why Reciprocal Capital costs less than Regular Capital.

Permanent markets eliminate the need for debt loans to transfer assets, benefiting both buyer and owner.

Reciprocal Capital showed how sharing interest benefited a Fair Bank — it out-competed Regular Banks because it made loans less expensive for the Borrower while still giving the Fair Bank a fair return.

The simulation Permanent Housing Markets takes the same idea further and eliminates the cost of moving existing Capital. We know what the price of a house is, and we do not need to use a Capital market to tell us what it is. In this simulation, we match Regular Bank Loans against the same set of houses and people who use Permanent Housing Markets to exchange houses.

Figure 1 — Regular Bank Loans versus Permanent Capital Markets

Those who have read Reciprocal Capital will recognize the diagram on the right. Permanent Housing Markets allow everyone to purchase the house in which they live. The other important factor is the Cost per $ to move the equity in the first year is 2 cents, while the Regular Bank Loan is $6.38.

Figure 2 — After 30 years

After 30 years, 42% of the houses with regular loans are purchased, the rest are rented, and the money paid in rent has gone to the landlords. With Permanent Capital Markets, purchased or still being purchased, and on average, the owners have paid $700,000 less for their houses than they would have if they used Regular Loans from a Bank.

The same will happen with all assets, including all infrastructure assets such as roads, rail, schools, and hospitals. It also happens with private companies if they agree to share their profits with their customers.

Rolling out Permanent Capital Markets will remove most of the cost of Capital and profoundly change the way the economy works. It will be hard for monopolies to control the market because many small federated markets can outcompete a monopoly.

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Kevin Cox

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