PropertyDAO: Houses that Own and Rent Themselves for Cheap - Part 1
Blockchain fix to homelessness, real estate bubbles & rent-seeking
It’s no surprise that in many parts of the world housing affordability has become a running joke for the average worker and millennial generation. Inflated by government tax offsets and low-interest loans, these real estate bubbles continue to drive property prices through the roof (ayy pun).
We live in an exponential world where the basic costs of living are rapidly demonetising; all except for that one fundamental human need of shelter. For the most part, rising property prices don’t reflect simple supply and demand, and greater investment does not result in new construction.
Instead of increasing affordable housing stock, real estate has become a lucrative, risk-free investment vehicle for many to store their wealth away for retirement.
Let’s have a quick Sydney-centric look at the problems of housing affordability and homelessness, explore the decline of ownership models, then propose a zero-politician blockchain DAO solution which creates voluntary incentives to transition to a future where houses own and rent themselves cheap.
Housing Affordability Crisis
More than 60% of Australian banks’ loan books are in residential property, with only about 5% of that financing going towards new constructions. The size of US subprime mortgages in March 2007 was $1.3 trillion. The size of Australian mortgages today is $1.51 trillion, of which $589 billion comprise risky interest-only mortgages.
The median house price in Sydney now costs more than 14 times average earnings, representing a 5x increase from $233,250 in 1997 to $1,190,390 in 2017. With house prices already growing five times faster than wages we clearly have a crisis that needed to be solved yesterday.
Thankfully an Australian parliamentary committee established two years ago recently came out with a detailed economic report that made zero recommendations to improve housing affordability…. wait, what?!
So while new and minor progressive political parties have policies to solve housing affordability, it appears that the current political powers have absolutely no intention to tackle the problem. *Note to future societies: perhaps avoid giving powers to create property-related laws to a small group with vast investment property portfolios.
Homeless Crisis
The fact that homelessness exists in the “developed” world is a clear sign of sickness in the economic system. Walk through any major CBD and you’ll quickly come across homeless people camped on the sidewalk or outside luxury retail brands, multinational corporate headquarters and banks.
The visual juxtaposition is even more startling considering:
- 105,237 people are homeless (2011 census)
- That’s 1 in 200 Australians
- 27% are under the age of 18
Perhaps there just aren’t enough places to house these people? Nope. There were 1.04 million empty homes (11.2%) on the 2016 census night, up from 10.7% in 2011. There are 90,000 empty properties in Sydney. And while the nation’s capital has 1500 homeless, the government owns 200,000m² of empty space. The government is also very happy to evict homeless camps in the city and label them a “public nuisance”.
Decline of Ownership
The exponential pace of technology has resulted in a zero marginal cost society placing downward deflationary forces on the price of information-based goods and services. The advent of cheap bandwidth and cloud storage has given rise to services like Spotify, Instagram, YouTube and Netflix.
For a long time now it’s been cheaper and more convenient to rent digital services rather than buy. You don’t own songs on Spotify, you pay a subscription fee to effectively rent any of them ondemand. This has spilled over into the physical world with “sharing economy” services like Uber, Airbnb, Lyft, WeWork and bike sharing initiatives.
What these services are increasingly doing is presenting a personal economic argument against the exclusive private use of assets and property:
- Idle self-driving car -vs- making money on Uber
- Empty house or office -vs- making money on Airbnb
Projecting the current sharing economy trend into the future, it’s very likely that ownership models come to an end on the consumer side of the market. For example, if you can get an instant self-driven ride anywhere for a few cents, then you probably wouldn’t bother buying your own car.
Blockchain Commons
The problem with services like Uber and Airbnb is that they are peer-to-peer marketplaces with giant corporate entities sitting in the middle of the transaction, extracting billions of dollars for their investors. If you could pay your UberX driver directly, the fare wouldn’t include Uber Inc’s 25% fee.
Enter blockchain platforms such as Ethereum which enable the middleman to be removed. With Ethereum you can build a decentralised Uber with the same service quality but no Uber Inc. Or you could rent your home, office, bike or anything out to anyone without Airbnb Inc taking a cut.
Blockchain smart contracts or dApps (decentralised apps) are basically little pieces of code that live in a distributed cloud, can be used by anyone with internet access and run ondemand. They also manage secure financial transactions and store money in wallets without needing a bank at all.
One potential use-case is a self-driving car that owns itself via the blockchain. The car would have it’s own wallet address (bank account) allowing it to collect fees from giving rides to ondemand passengers. It could book itself in for routine maintenance, pay for recharging, request roadside assistance, and even purchase new self-driving cars.
Well if a car can own itself, so can a house.
