Permanent local markets will halve the cost of buying and selling a home while keeping the price the same.
Few argue that the economic system needs to change to spread wealth, increase variety and competition, and diversify the power derived from money more widely. Permanent Local Markets is an incremental approach that builds on existing institutions and systems that will rapidly evolve the financial systems into a fairer and less expensive system.
Today, we differentiate between investors and consumers. With Permanent Local Markets, we empower consumers to become investors by selling them a portion of the assets that generate goods and services with every sale. Consumers become investors and have a stake in the business's performance. Humans became the dominant species on the planet because we shared our knowledge and wealth. Sharing by selling some productive assets with each purchase of goods or services will help us continue to survive on the planet.
We encourage competition by allowing investors and consumers to change the market in which they invest and buy for zero cost. This encourages the rapid transfer of knowledge. It dramatically reduces the cost of goods and services because we remove the need for capital markets, give governments reliable ways to control the money supply, and encourage markets for goods and services that its citizens want.
Comparing a Regular Real-Estate Market with a Permanent Local Housing Market PLHM
The diagram illustrates the difference between a regular real estate market and a PLHM. There will be thousands of PLHMs with houses ranging from a few to hundreds. The regular housing market contains all dwellings in Australia. With each sale, the buyer, with the help of the real estate industry, has to find their own houses that satisfy their criteria.
With a PLHM, the buyer approaches the individual PLHM markets with houses for sale in the areas they are interested in and asks if they can offer them a place. No banks, lawyers, insurance agents, real estate agents, or owners are involved. The process is zero-cost, and buying a house means agreeing to the terms and conditions of the PLHM, which are the same for all owners of homes in the PLHM.
Permanent Local Housing Markets
When setting up a permanent market, a community sets the return on investment for investors. Let us assume a 10% annuity for twenty years, consisting of a 5% return plus the sale of 5% of the assets held to occupiers.
Occupiers pay 25% of their disposable income after tax. No deposit is needed, and everyone pays the same proportion of their income. 50% of the payments buy shares in the house, and the other 50% pay for operating the market, repairs, and insurance. Those who own their house pay 12.5% of their income to cover costs.
Assume the average income is $100,000 after tax, and investors, on average, leave their investments in for forty years by repurchasing (for the same price) their 5% sale if there are not enough buyers.
If a buyer becomes a Permanent Local Housing Market member, then 25% of $100,000 is $25,000 per year. $12,500 buys shares in the house occupied. After 40 years, the buyer has purchased $500,000 of the house. If the investor is the government, a long-term investor, the house value could be anything as long as the $25,000 is enough to cover the depreciation costs, repairs, and insurance. Governments can adjust the money supply by investing in PHLMs instead of using loans given to the already wealthy. Government money would not earn extra income and is a much cheaper, more precise method to adjust the money supply.
In the current Australian real-estate market for the same house, a buyer must pay a 20% deposit and a $400,000 loan over 30 years. The interest rate would be 6%, or $30,000 a year, plus the cost of repairs and maintenance of $25,000 a year, or $55,000 a year or about 50% of their disposable income compared to 25% with a PHLM.
Australia can house all its people. There is no need for anyone to be homeless if the option of joining a Permanent Local Housing Market to buy their home is available. There will be some PLHMs in which they cannot participate because the houses are too expensive. Still, there will be secure housing for everyone, people will have more choices, and the country will have extra money to address other issues.
Why do PHLMs cost less?
Permanent Local Markets remove the financial cost of transferring assets from one party to another because half the money paid buys future returns on assets and asset ownership moves one month at a time. Real Estate costs are minimal, and there is no interest cost on money. Costs will likely remain the same, and inflation is handled by changing the number of shares. The money saved will improve the quality of the assets bought and built.
