What many Californians desire is of course that American dream of "home ownership, which remains quite far too elusive even in time of recession."
Of course what many Californians desire is of course that American dream of "home ownership, which remains quite far too elusive even in time of recession."
So what are the effects of recession on housing prices, and the future of affordable housing in general?
Current projections suggest the United States population may reach 500 million by the year 2050, bringing an increase in demand for housing. Recessions and the effects of individual incomes, taxation, an aging population, or other factors will doubtless impact the pursuit of affordable housing. Rising interest rates might create a shortage of buyers, without pressuring the typical owner to sell. Existing homeowners are unlikely to yield in hard times, and generally not absent pressure to do so, such as job loss. Hence seller resistance is a major factor in maintaining price stability, meaning don't expect prices to drop!
Instead difficult economic times produce a stagnant market, driven only by necessity, rather than by the principle of fair market price set by the willing buyer and seller, where neither is under pressure to buy or sell. Some transactions may be motivated by job transfers, death, divorce, etc., providing a minimum transaction volume. Quite simply put, an economic downturn does not a priori create a stampede of panic selling due to a shortage of able and willing buyers. Even when economic conditions create a shortage of buyers, many units simply become rentals, seller price resistance being what it is.
The market might therefore create a different type of buyer. An increasing population provides this, whether we like it or now. We don't like to think that someday children might be forced to live with their parents until they themselves become grandparents. Such crowding may be unpleasant, but will be what goes with the territory if alternatives are not developed. In a serious economic downturn there are perhaps many obsolete, oversized luxury homes with a dozen bedrooms, which being hard to sell because of the time, which might yet become the family homes for hard working families with dozens of cousins willing to aggregate their resources in pursuit of the American dream.
I have not addressed the role of the rental housing market, or the ominous socio-economic impact of "two families sharing one apartment", yet the conclusions would be similar: Population pressure is going to maintain housing demand and therefore provide price support - meaning high prices almost regardless of other economic pressures.
What about domestic partners housing rights and Co-operative Housing?
Lending institutions traditionally have been reluctant to write home loans to unrelated co-borrowers. In 1980 I bought a condominium where the anticipated loan, tax and homeowners dues exceeded the lenders guidelines with respect to what they thought was a reasonable percentage of my income. In that case the solution was simple: my mother co-signed for the loan. Of course the lender demanded that we provide a copy of my birth certificate and/or an affidavit of relationship! The situation encountered today by unrelated "co-borrowers" who seek to purchase property together has quite rightly changed for the better.
Yet the situation of unrelated "co-borrowers" may actually a much larger issue than lifestyle choices, given the housing affordability crisis. Co-operative housing agreements for example are a way for a group of persons to acquire real property that they might not otherwise be able to afford. In the days of high interest rates, I often wondered if it would be possible for a group of 5 friends, who might each have a 20% down payment to pool their funds and buy a piece of property for cash!
One problem of course with these types of arrangements is the matters of conflict resolution in circumstances that might arise that friends become no longer friends. That and of course the need for reasonable lending practices to promote such arrangements when all cash is not an option. However, with no house payment to the group might easily over the course of a couple of years be able to save up enough money to buy another one, as a group and for all cash of course! In a traditional arrangement, over time the members of the group might decide to marry, move due to lifestyle changes or job transfers, etc. Over that time the group also develops a sufficient degree of wealth that they, if necessary become that much more able to move on, if need be.
Such arrangements may even make it possible for each to have "to each his or her own" in a much less time than is normally expected in the more typical buy down programs or equity sharing subsidies. There are however more variations of this theme that can be addressed. Is it possible to extend this idea of saving up a down payment by buying property as a group to the broader concept of transforming traditional Real Estate Investment Trusts into pathways tohomeownership? A tax break might be a good idea here,i.e., permitting a tax-free rollover of capital gains from a REITinto a down payment for a personal residence.
Do we have or should there be a State Commission tofacilitate co-housing, promote the group ownership of apartmentbuildings or the formation of so-called "IntentionalCommunities?" If the State becomes involved in promotingsuch arrangements as pathways to home-ownership then a lot aquestions must be addressed as to such a matters as preventinglitigation, domestic violence, etc. This is especiallytrue if the government becomes involved in promoting means by whichpersons who otherwise don't have a long standing relationship witha group of like minded persons to form such groups for the purposeof developing innovative housing arrangements. That isto say also that affordable housing needs to be safe housing.
So what can be done?
The State should therefore investigate, develop andpromote practical, realistic models for establishing alternativepathways to traditional homeownership or other tangible andpersistent rights to have an affordable place tolive. To the extent that such models are observed to besafe, feasible and attainable - the State might therefore providestatutory forms and process to these ends. This would ofcourse be more than simply providing the kinds of forms like theso-called "statutory will" or "living trust" documents that haverelevance in other areas. Rather there much also be themeans for the consistent facilitation of achieving the specificgoals. There is just simply something quite wrong ifthere are 144,000 organizations promoting as many programs foraffordable housing, and not enough affordable housing. The people have the power to change that!
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