AFFORDABLE HOUSING IS MIXED IN WITH FULL-PRICED HOMES

Parallel Real Estate Market

In this town, affordable housing is mixed in with full-priced homes.

Parallel Housing Markets - One of the most difficult challenges governments face is how to make homes affordable without creating segregated stigma-zones. Typically, they end up as state housing managed by a costly bureaucracy.

The VillageTown approaches this from a different perspective. It creates parallel markets. It identifies a disadvantaged buying class and determines why they have difficulty competing in the open market.

The ideal is to designate a particular home as restricted to age ranges, occupations or professions (such as a teacher), where the organizing company sells the home at a discount, keeping an interest as opportunity cost. When the buyer goes to sell, they can sell at any price, but only to buyers in the target market, where the fixed salary band or typical earnings power necessarily creates a maximum price range that may be significantly lower than the next-door, identical but unrestricted home. In this way, the market operates with a minimum of bureaucracy, while still accomplishing the objective of assuring the VillageTown remains a complete community.

A teacher, for example, is in a fixed pay band; if the average teacher’s salary is $50,000, the bank will loan on a $200,000 home. But if the VillageTown becomes desirable, that home could sell for $400,000, meaning the teacher has to commute or live in subsidized housing. In the parallel market, the VillageTown sells the teacher the $400,000 home for $200,000. It retains a partial interest in the home that requires when the teacher goes to sell, they can sell at any price, but only sell to a buyer in the target market – another teacher or a civil servant whose fixed pay band is the same. This guarantees a stock of affordable homes.Since market value is driven by what the bank will loan, the selling price is automatically inflation-adjusted.

The organizing company may find that whole villages are so designated in some cases. For example, to assure the blue collar workers in the Industrial Park can afford local housing, they may have a whole village where to buy, one must work in a non-managerial job in the Industrial Park.

Young people, say under the age of 26 have limited earnings power. If the rule requires a youth home be sold to a buyer under 26 who must then live in the home (no long term rentals allows), this will establish the market where older people cannot bid up the market. The buyer can live there until they are 100, but if they sell, the next buyer must fit the youth age test. In addition to the rule, such homes will be very small, designed for a single person starting out in life - not suitable for a couple or a family. Additionally, one will encounter social pressure if such homes are in a youth zone - they will appeal to youth, and folks will feel a social pressure to move up and out when their earnings power permits. This age restriction may require special legal attention to not run afoul of anti-discrimination laws.

In contrast, it should be easy to create parallel markets for elders, as most countries have precedent. Such homes would also be purpose-built: ground floor, no stairs, stoops or thresholds, compact and simple, with safety features and complete handicapped access design.

In some cases, parallel homes will be obvious, such as in the youth zone. But in most cases, unless the owner discloses it, no one will know. This is to remove the stigma that sometimes comes with living in state housing, and to remove the segregation that comes when laws require developers set aside a percentage of affordable housing, which they usually build somewhere else.

Of course, not all eligible for parallel homes will participate in the plan, and they are under no compulsion to do so. The parallel markets exist to offer more choice; to assure that the community remains complete. Such a system may not always work perfectly, but should work better than what is on offer today. It uses market forces to regulate the prices, but creates parallel markets to maintain affordable housing. The details will be worked out by the organizing company when it implements the systems.

Keeping all economic classes of people in a Village Town is important enough to consider alternative housing, but without the government bureaucracy.  We need to build one in Eastern Missouri.  Let me know if you are interested.