Affordable Housing Institute : US

By: David A. Smith

If you get a new doctor, what’s the first thing he or she does – after establishing how you or your insurance will pay, of course? The physical exam.

We make them cold so that we know you’re dead if you don’t flinch

When we don’t know how a system works, what do we do? We palpate it.

Tell me if this hurts

We shake it and hear the rattles.

Louder sounds are better, aren’t they?

We twiddle the knobs and observe the changes.

Wonder if this detonates it?

Indeed, long before we had any taxonomic understanding of medicine, we tracked biological processes by their outputs, whether in reading the entrails of a goat or examining the patient’s stool.

What comes out reflects what went in …

… and what happened to it on the way through

In the modern era, we do the sample systemic analysis remotely, with radioactive isotopes that serve as tracers through the body, highlighting circulation and concentration, learning about the system by following particles on their way through it.

If I were you I’d worry about the glowing parts

In the same way, when we consider a housing finance ecosystem, the blood plasma is money, and its tracing is a time-honored investigative technique.

“Follow the money”

When it comes to housing, the money moves in three dimensions: homes, people, and money:

1. Homes. Providers and consumers finding each other.

2. People. Sellers and buyers exchanging money for consumption and use rights.

3. Money. Capital providers and capital consumers financing a home purchase.

Understand these three dimensions and you go a great ways toward placing an ecosystem in its space.

Thus, if you come new to a housing finance ecosystem, either because you’re visiting a country and want to buy or rent a home, or as a student, researcher, or consultant tasked with designing a new program intervention, you can learn a lot about the ecosystem if you follow the money through each of its three dimensions.

Use all three eyes and you’ll see the full dimensions

Keep on truckin’ for insight

The investigative technique

To understand each process, follow it step-by-step, actor by actor, cost by cost. Take a journey through the system, getting up close and personal with each of its elements.

Pretty fantastic voyage, if you ask me

Imagine yourself starting the journey, a hopeful fool empty of knowledge, and ask yourself, How do I encounter? How do I interact? What money changes hands, how and for what purpose?

My ignorance and my bundle are soon parted?

Question 1: Owner-consumer value chain

If you have housing (to rent or sell) and I need housing (to occupy or buy), how do we find each other and what kind of tenure relationships could we establish?

You’re new in town, and you need a place to live. Think of all the sub-questions you’ll have.

1. Can I find plenty of places, or are they scarce?
2. How much space can I afford?
3. Can I buy or do I have to rent?
4. If I want to buy, how far out of downtown do I have to be?
5. Is there enough good-quality rental?
6. Is the government in the business of providing housing?
7. Is the government in the business of subsidizing the supply side (helping create more homes)?

Now I’m going to ask you a simple question – do you feel … lucky?

This simple question – what housing is around? – gets at everything to do with the supply, flexibility, and affordability of housing:

• Ranges of tenure. Ownership, condo, co-op, shared ownership, rental, affordable rental, rent-controlled rental, roommates, public housing. Which of these are formal, which informal? What gray tenures exist (like in-laws apartments, illegal sublets, or overcrowded student housing)?
• Diversity of configuration. Apartment types, bedroom counts, flats or gardens or townhouses or duplexes or free-standing bungalows.
• Cost and affordability. What percentage of income do households pay for occupancy? How does this vary by tenure? How are utilities provided, and who pays them?

How do you the newcomer find out housing supply, configurations, tenures, and costs?

• Ask people.
• Apartment guides.
• Newspaper advertising.
• Banners and flyers and signs. (Learn how they advertise FOR RENT and FOR SALE.)
• Realtor/ real estate broker/ estate agent shop windows. Nancy and I have got into the habit of staring at these pretty much anywhere we find them. We’re always astonished at how little you get for your money in the UK or Europe.

Each window pane is another comparable

(Except the Uncle Sam, who wants You to Buy)

Remember, every form of configuration, tenure, and price point exists because somebody thinks that’s the right niche for some fraction of the market. By their homes ye shall know them.

Further, the question also opens a window into the property-transfer value chain, including what types of markets link property providers (owners and landlords) with property consumers (renters and buyers), and conveniently bringing us to the second question.

[Continued tomorrow in Part 2.]

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