As urban agglomerations continue become the focus of economic activity and life in the coming decades, it is essential for real estate “products” to diversify in order to be more inclusive, providing a range of opportunities for ownership beyond what is currently the industry standard. Cities can be viewed though a wide variety of lenses to help make sense of their complexity but perhaps the most interesting perspective that rarely gets talked about is the fact that cities are where global flows of capital gets crystallized in the form of buildings. To most people, buildings are environments where people carry out the activities of life, but for the real estate industry, buildings are products to be profited from. The need to reinvest surplus profit is one of the reasons that investment in building industry and urban development is a major practice of capitalists, and is the impetus for development. To a great extent the real estate market operates like any other market in the economy with supply and demand dynamics creating opportunity for actors and their investors to reap the benefits of providing a product that satisfies consumer needs (or wants). From this perspective, rational actors and investors of course want to maximize their profit to make the most of their investment, minimizing opportunity cost, and hedging against inflation. Capital markets control to a great extent what gets built and where. The result of these market forces on contemporary urban landscapes have unfortunately created increased social disparities within cities, sometimes in extreme conditions, where to live close to jobs means being priced out of owning a home, being forced to rent (often times a high percentage of annual income).
Why are we focusing on ownership? The fact that most affordable housing conversations are focused on rental housing is ignoring the fact that for a majority of Americans’, their wealth is concentrated in the value of their homes. A conventional mortgage is a form of forced savings that creates a financial foundation for individuals and families to begin moving up the socioeconomic ladder. Without options for ownership, the 30-50% of income that people are paying for housing is essentially being extracted instead of invested. This is huge opportunity to change the conversation about affordable housing from a temporary fix (for rent housing), to a long-term solution (alternative ownership models). What does this mean for the traditional image of the ‘American Dream” with its single-family dwelling, two car garage, and yard with a picket fence? To many it simply means opportunity, freedom, family, and financial security. Limiting options for home ownership in areas with the most opportunity only stifles the “American Dream”. So for alternative ownership models and a vision for a new “American Dream” to become a serious conversation, capital markets need to be more open minded to systemic changes in traditional financing mechanisms that make ownership within core urban markets a possibility for more Americans.