notes-politics-mandatoryRentToOwn

It's sad that as land prices goes up, rent goes up, and people are forced out of their homes. And it seems weird that whoever happens to own the building ends up deciding on community rules, rather than the people who live there. And it seems weird that real estate developers end up having a lot of control over local politics, rather than the people who live there. One potential solution would be to turn everything into a hybrid co-op. Ban ordinary rental arrangements and allow only rent-to-own arrangements, in which most of the rent payment is rent but some of it is used to purchase equity. This means that by the time residents have lived in a place for a long time, they would have acquired significant equity and they would benefit somewhat from a rise in the rents, helping to make up for the pain of being displaced from one's home. If they have lived in a place for a really long time, they would own it, and they couldn't be pushed out against their will.

The law would mandate a minimal percentage transfer of equity from the previous owner to the new renter per month (note that this would not empower squatters; you have to pay the rent check in order to get this equity). I suppose the key parameter would be how long you have to live somewhere before you have accumulated 50% equity; imo you should set this so that this threshold is crossed after about the same amount of time that you start feeling really bad when someone is displaced from their home (e.g. if they have only lived there 2 months, you don't feel too bad; if they have lived there 30 years, you do feel bad; i'd set it at around 8 years, but 30 years mortgage terms are popular, so i guess that's too short; so maybe 15 years). In any case, of course phase it in slowly). The law would also mandate that the equity in these units would include title to the land they are built on, e.g. once a majority of equity had passed from the initial developer to the people living there, they would (as a group) get to set their own community rules and make decisions about building maintanence if they chose to.

Should we say that the transfer requirement only applies to someone's primary residence? That would be ideal, but it would open things up to people claiming they had another residence just to get a cheaper rate, or to the landlord arguing that they had another residence, which would be a big waste of legal resources and also unfair to residents who don't have the means to fight it. So i'd say, no, the transfer requirement applies to any renting of a residence. This means that yes, subletters get equity too.

In order to have teeth, the law would also have to prevent people from immediately selling their equity back to the developer, or securing a loan with it. Perhaps it would simply say that you cannot sell equity (or either the financial or voting components of it, or indeed any components of it) in your primary residence below 50% (which means that if you are currently at or below 50%, you can't sell any).

What about when many people live in one apartment? The equity should be split in proportion to the payment of the rent check.

What happens when someone moves out? Ideally, they would sell their equity back to the landlord or to someone else who lives there. What happens if someone moves out and does not sell the equity and cannot be reached? You don't want some of the homes to become unrentable because the landlord only has partial title, and the other owner, the past renter, cannot be found, or because they don't want to rent it out even though they aren't living there. Should we allow the landlord to mandate that if you move out, you must sell the equity back to the developer or to someone else who lives there, and if you can't be reached or refuse to do your duty here, they can just put the money into a trust account for you and then regain title immediately? But then if the other renters are poor, then wouldn't the landlord have the ability to quote a below-market price? If there is not a free market for this equity, then how would it be priced? Something needs to be worked out here but i don't think this remaining issue will prevent the whole idea from working.

What happens when someone dies? If they had dependents (or anyone living on the property with them who wasn't paying and therefore wasn't accumulating equity themself, by the permission of the rent-payer) whose primary residence was this property, then some (or most?) of their equity should pass, not via inheritance, but rather to those people via operation of law. Otherwise it should immediately pass to the landlord or other residents in the same manner as if the person had moved out or became unreachable, in exchange for a payment to the estate or if the estate is unreachable, to a trust for the estate. However, the idea that the equity passes to someone just for hanging around is somewhat vulnerable to schemers who manage to move in with someone shortly before their death, which is why i say SOME of the equity, not all of it; and maybe this whole paragraph should be abandoned and the equity should pass via inheritance as usual.

Shall we allow arbitrary covenants to be attached to this equity? If so, this would seem to give the landlord a path to gaming the system if they are not kept under control. If not, then how could you ever have co-ops with covenants. So the answer seems to be that covenants are allowed, but with some sort of restriction. Perhaps the required coventants can always be changed by a vote of the residents' equity (e.g. equity held by people ), without counting the landlord's.

extrapolating from this idea, we see an interesting political philosophy: 'compulsory egalitarianism': distributing power/stakeholding is so important that even if someone doesn't want power/doesn't want to become a stakeholder (e.g. a renter who doesn't want to acquire equity in the property that they rent), we make them.