Foreword
Capitalism does a decent job of allocating limited resources based on a balance of want/need/contribution - but this is a trait of currency rather than actual capitalism. The problem with capitalism is, when a limited resource such as real estate becomes more in demand than supply, the difference in its price goes into the pocket of someone not making contributions of comparable value - which then unbalances their ability to claim further resources.
The goal of this entity is to provide housing with the same resource allocation benefits as under capitalism, but without the exploitation or profiteering.
In support of this goal, the following rules for a new financial entity are established. In order to establish an actual entity, a generous benefactor would be required to seed either the funds or the property holdings of the entity. (Perhaps as a bequeath.)
Charter
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The entity has money, hereafter referred to as The Fund.
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The entity may own real estate. Property owned by the entity may be either rented or long-term leaseheld by tenants.
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A rental agreement with the entity:
- Starts at whatever price the market will bear. (Why?)
Making the rent below-market would defeat the goal of having a working resource-allocation method - the properties would be rented out first-come-first-served and nobody else would have a chance to get one. Renting at market also allows the entity to expand its reach, which increases the longer term societal benefit.
- The rent will increase annually in accord with inflation (not market rates which generally increase faster than inflation - so a long-term renter will be advantaged compared to normal landlord relationships). (Why?)
Raising rent faster than inflation is part of the exploitative system we aim to avoid. Rent that doesn't rise is an additional incentive to rent from the entity rather than a regular landlord. The entity has no profit goal.
- In the event that market rates fell, the rental agreement with the entity may also be lowered in price, at the discretion of the entity's agents. (Why?)
To get lower rent a tenant could simply leave and re-rent at new market rate. Part of the entity's goal is to improve housing security, so making people jump through bureaucratic hoops and inconvenience should be avoided.
- The rental agreement will not be terminated by the entity unless the tenant is in violation of the terms of the agreement, and the entity's agents should always try to come to a reasonable resolution (ie. agreements should never be terminated on an accidental technicality, only on a persistent violation. The entity should have no profit motive, so terminating an agreement on a technicality to escape the 'rent control' should be avoided).
- The rental agreement may be terminated by the tenant at any time after the first six months, with one month's notice.
- All rent collected accrues in The Fund.
- The most important term of all agreements is that the property may not be sub-let, and the agreement is not transferable. (ie. if the primary tenant leaves, a new agreement should be formed at market rates, any previously locked in rates are lost.) (Why?)
Our goals are opposed to inheritance and nepotistic wealth transference. Old rent controlled property at a rate vastly below what other people pay is a kind of wealth, similar to owning property. Allowing sub-letting, similarly, would allow a long-term tenant to charge more than they pay, profiteering.
- The entity is responsible for maintenance and general wear and tear, while the tenant may be held responsible for negligent or deliberate damage.
- Commercial entities may also rent property from the entity, under similar "no sub-let, no transfer" conditions. (Why?)
If the entity acquires a large amount of land, making it possible to mix commercial and residential properties in proximity makes for a more practical living situation.
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A long-term leasehold agreement with the entity:
- May be purchased at whatever price the market will bear. The purchase price goes into The Fund.
- May be purchased with the property itself, if the entity has sufficient available funds to cover estimated liabilities.
- This agreement is not transferable or sellable, it is an agreement solely between the entity and the tenant. (Why?)
Transferring a leasehold would be similar to transferring a property - if one can sell it one can profit from rising values, while if one can give it away it amounts to perpetual ownership in a family line.
- The leasehold agreement lasts for the lifetime of the tenant, and grants sole use of the property.
- Commercial entities may not purchase leasehold agreements with the entity, only individual humans may do so. (Why?)
Commercial entities don't die. The leasehold option is designed around a lifetime price, not a perpetual ownership price.
- At any time after the first six months, the leasehold agreement may be terminated by the tenant, who will be able to reclaim the price they paid ("buy-back"), minus what they would have paid in rent had they been renting the property for the duration of their holding, minus any costs of returning the property to its previous state if necessary. This way the leasehold does not 'trap' the tenant like ownership might, but conversely the tenant cannot in any way make a profit from the leasehold. (Why?)
The aim is to make a leasehold more desirable than renting, for those who can afford to do it. The entity benefits more in that it holds the money and can be reasonably guaranteed that the occupant can't just stop paying rent by surprise. The occupant having the option to leave as if they had rented keeps the leasehold from being significantly worse for them than renting.
- If a leaseholder wishes to improve the property, they may petition the Committee to fund the improvement (if it adds to the value of the property such an improvement will generally be approved).
- If a leaseholder wishes to alter the property in a non-approved way, they may, but doing so may reduce the "buy-back" if the change needs to be undone after the holding ends.
- In the event that the tenant stays long enough in the property that the leasehold is "fully paid off", and its 'buy-back' value is zero, the tenant may still choose to remain. (Why?)
This is the bit that really encourages a tenant to leasehold rather than rent - if they plan to stay forever, it will be a significant win for them. While it seems problematic for the entity to have to continue to pay maintenance while the tenant is no longer contributing, realistically the purchase price of a home is significantly more money than the maintenance cost on a home for a lifetime even in the worst case; on average it will very easily be able to cover these costs.
- In the event of a tenant's demise or permanent departure from the property, the lease agreement is terminated and all rights are transferred back to the entity.
- In the event of a tenant's demise while the leasehold still retains 'buy-back' value, 20% of that value is retained by the entity, and the remainder is returned to the tenant's estate. (Some tenants may wish to specify in their wills that all residual buy-back in the leasehold may fully revert to the entity.) (Why?)
It is polite for a tenant to let the entity reclaim the leasehold - the original funding of the entity was through contributions from a generous benefactor. Adding to this in death is a nice way to say thank you and help future generations as the tenant themself was helped.
- A leasehold may be transferred to another property owned by the entity, as if the full paid amount had instead been paid on the new property at the original time (ie. the leaseholder need not 'lose' the value of the tenure of their existing leasehold in order to move). Any subtractions for restoration of the original property would, however, need to be paid at the time of transfer by the leaseholder. (Why?)
One possible problem that might arise is a conflict between neighbors that cannot be amicably resolved. Being unable to move out without a significant financial impact would be problematic and might cause conflict to escalate. Easing the process of removing oneself from a problematic situation would improve the sense of housing security for the leaseholder.
Subtractions for restoration would need to be applied because otherwise a lease with no remaining 'buy-back' value could be transferred at no cost, or a lease with remaining 'buy-back' value could be unfairly depreciated across multiple properties before its time by a negligent leaseholder.
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The Fund:
- Must at all times be maintained such that it contains enough money to perform the 'buy-back' of all leasehold agreements. (Why?)
The entity should never be put in a position where it may be forced to become bankrupt, as this would be deeply problematic for housing security of all its tenants.
- First priority of money beyond that amount is maintenance and upkeep of all properties, to at least the standard at which they were when any agreement was made related to the property. And any required taxes.
- Second priority is funding for all agents and required materials of the entity (ie. employees, contractors, computer servers, offices, Committee compensation). This should be a reasonable salary for the hours worked on behalf of the entity, as determined by Committee. (Caveat)
There may need to be an aggressive protection against an exploitative "paying themselves" class of bureaucrats forming around these jobs. Having all roles be subject to Committee oversight may be sufficient to achieve this.
- Of funds remaining beyond those limits and expenses, between 10% and 50% should be allocated into a secondary fund for purchasing more property (the specific percentage may be adjusted by meeting agreement, but may not fall outside this range). Agents to decide on and pursue appropriate properties are elected by the Committee. (Why?)
The goal of this entity is to help bring the out of control exploitative housing market back into line. Being limited to only what it can achieve with the property funded by its original benefactors would not do much for this goal, but over time, with this expansion clause, a real impact would eventually be seen.
- The next priority for The Fund is maintenance of things previously agreed as discretionary community improvements. In the event that the fund cannot cover this maintenance, the Committee must vote to discontinue enough discretionary improvements that The Fund does not fall below its mandated thresholds. (Why?)
Too many high-maintenance amenities could force the entity into bankruptcy under the letter of this charter without this clause. Hopefully it wouldn't even ever come close to that, but better safe than sorry!
- The remainder of the fund not already allocated must be spent on improvements for members. Improvements should be things that impact the largest possible part of the community, ie. community wifi, private road improvements, or community autonomous vehicles would be appropriate uses, while "cable for Bob's house" would not. Specific uses for this discretionary part of the fund may be proposed and voted upon in Committee. (Why?)
What else should be done with the money people pay in rent? We have to spend it somehow, and spending it to benefit the people who are renting is a great way to make renting from the entity more desirable than renting from a regular landlord. Imagine having a regular landlord who, instead of personally profiting from the rent you pay, spends nearly all that excess money on making your home better!
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The Committee:
- Anyone with an agreement with the entity is considered to be a member of the Committee, and may participate in monthly meetings; specifically they may propose and vote upon what constitutes reasonable salary and necessary work for agents, appropriate properties to pursue, who the agents should be, discretionary fund uses, etc. (Why?)
The entity needs someone to make decisions. Giving that power to a board of directors invites abuse. Giving the power to the people who could be victims makes sure they won't be victims.
- Participating in these meetings is also a paid activity, at an amount between minimum wage and minimum wage * 3 (the specific amount may be adjusted by meeting agreement recorded in a separate document, but may not fall outside this range.) The wage may vary by the type and complexity of participation. (Why?)
One way homeowners associations become cliquish and problematic is by having meetings at times when everyone else is at work, or just having a lot of meetings so people don't feel like making the effort to attend them all, so the vote always goes the way of the clique. Some people with strong community spirit feel obliged to attend and contribute to all meetings, and then feel unfairly put upon because they're doing all the work. Compensating people fairly for contributing ensures that everyone is financially encouraged to participate, and for those who "do all the work", they are compensated accordingly so shouldn't feel exploited by the community.
- Committee meetings are not traditional meetings - rather they are an online interface in which proposals may be made, votes cast, and discussions had. This need not be in real time, so members with different working hours can participate together. This also allows the entity to become increasingly geographically distributed without disenfranchising the more distant members. For the purposes of determining time spent on the meeting, for the meeting salary, an algorithm is used measuring the amount of activity of the member, and a cap may be applied to prevent exploitation of meetings as a source of income.
- All committee votes are voted in the form of stacked ranking and resolved by a condorcet method to select the "least disagreeable" option. (Why?)
Most voting systems discourage considering more options, as problems arise with votes being split between similar options and the less similar option 'winning' as a result. Stacked ranking solves that problem. Resolving by condorcet eliminates a number of other tactical voting solutions. Specifically using a condorcet method that selects "least disagreeable" rather than "most favorable" minimizes the likelihood of actively upsetting members, which seems more desirable than making the largest number actively pleased with the outcome.
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This charter may only be altered with a 90% agreement of all voting members. (Why?)
To avoid a small majority voting to decide to sell off all the property and pocket the difference. The charter deliberately places strong limits on the activities of the entity to prevent it from driving a profit to any individuals. Allowing a change with a large enough majority allows for adaptations to societal change (eg. maybe some concepts are simply no longer applicable), but only allowing a change with a large majority prevents a small set of people from actively driving it away from its goals. It is our hope that members will be in favor of the goals!
Comparisons
Renting from the entity vs renting from a regular landlord
- Cost-wise, renting from the entity would initially be comparable to renting from any other landlord.
- You get most of the benefits of "rent control" - the rent won't escalate dramatically, and you won't be pressured to leave to free up the landlord to increase rent.
- The entity has no incentive to aggressively minimize maintenance, so you can be confident the property will always be in good repair.
- You would also get other benefits from the 'discretionary' part of the entity's Fund.
- Can't think of a single advantage of renting from a regular landlord, other than there are more options available.
Buying a leasehold from the entity vs renting from the entity
- Buying a leasehold has a much larger up-front cost, which may be a significant opportunity cost.
- It's a one-time payment - if you stay long enough that renting would cost more than that, you save money on the tail end.
- A leasehold's value is transferable to other available leaseholds, whereas with renting if you move you lose the rent control aspect. (ie. leasehold offers more freedom of movement between the entity's available properties.)
- If you leave, it's the same as if you had been renting, as the difference is refunded (apart from possible opportunity cost).
Buying a leasehold from the entity vs buying a property deed
- Does not function as an investment - you won't make money if prices go up.
- Does not function as an investment - you won't lose money if prices go down!
- Mortgage is not an option - if you can't afford it free and clear, you can't do it.
- You can't rent out a property that's leaseheld.
- Your inheritors can't inherit the property (though if you still have cash value in your leasehold they can inherit that).
- Maintenance costs are covered by the entity for your lifetime.
- You would also get other benefits from the 'discretionary' part of the entity's Fund.
- If you sell back and move out, it's as if you've been renting - you will most likely have lost money compared to buying a property deed.
- You aren't participating in exploitative landownership.
- Mostly only advantageous if you plan to stay long-term.
Transferring your property deed to the entity in exchange for a leasehold vs keeping the deed
- Same differences as the section above.
- Only possible if the entity has sufficient funds (in the "new properties" section) to cover the estimated maintenance liabilities your property would incur over your lifetime.
Bequeathing your property and/or money to the entity vs charity
- Fights capitalist exploitation.
- Probably doesn't do whatever the charity would have done.
- A kind of redemption for any capitalist exploitation you may have done. :)
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raven@ravenblack.net
