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\nWhat if, instead, it\u2019s the single most important number in practical economics? What if, sitting in this country, there\u2019s 18 trillion dollars that isn\u2019t being used? 18 trillion dollars by itself looks silly, like I\u2019m talking about building a spaceship. But at least spaceships are real things. 18 trillion unleveraged dollars in the country sounds like I think I found a spaceship in my basement. Strains credibility somewhat.<\/p>\n
Where the problem lies<\/h2>\n
I didn\u2019t find a spaceship in my basement. Alas, I\u2019m not quite that smart. But some other people may have.<\/p>\n
18 trillion dollars is the estimated value of owner-occupied real estate in this country and, they say, a whole lot of it isn\u2019t being used.<\/p><\/blockquote>\n
That\u2019s the argument of a growing field of real estate investment: light-equity lending. It\u2019s one response to the unpleasant reality that despite recent rises<\/a>, experts predict an overall downward trend in homeownership in coming years. That could\u00a0only grow worse, perhaps unsustainably so, as the retired population grows and their place in the workforce is taken by millennials living with the low-equity realities of the service economy.<\/p>\n
[clickToTweet tweet=”If things continue the way they\u2019re going, some Americans might rent for the rest of their lives.” quote=”The simple fact is that if things continue the way they\u2019re going, at some point most Americans will expect to rent for the rest of their lives. That\u2019s a problem.”]<\/p>\n
But…<\/p>\n
There may be a solution.<\/a><\/p>\n
A question posed<\/h2>\n
In their a16z podcast below, Andreesen Horowitz (one of the most relevant venture capital firms on the planet) put forth a question so simple it almost seems absurd, a little like 18 trillion dollars: why is home ownership a 0 or 100 proposition<\/em>? Nothing else is.<\/p>\n
Every other form of public and private investment is protected by distributed risk. Why are borrowers and lenders locked in a terminally 20th<\/sup> century position of owner and owned, with all the equity on one side and all the risk on the other?<\/p>\n
Better question: why did our real estate market implode ten years ago, and what\u2019s being done to stop it happening again?<\/p>\n
Home equity for all<\/h2>\n
Andreesen Horowitz is advancing some examples, in the form of Eddie Lim and Alex Rampell, partners in Point<\/a>, where homeowners can sell and investors can purchase shares of home equity, the owners receiving cash they can spend or reinvest, while the lenders buy a portion of the value of their home.<\/p>\n
In the light-equity model, an investor in possession of 10 or 20 percent of a piece of real estate gains the opportunity to profit as home value rises, and the only thing they lose is the driving force behind the 2007-2009 recession we\u2019re still paying off: the chance to benefit from failure.<\/p>\n
This model, Lim and Rampell argue, puts lenders and homeowners back on the same side of the ball where they belong.<\/p><\/blockquote>\n
It\u2019s not a silver bullet, but it is a new idea, and while new ideas tend to turn out more Edsels and Segways than spaceships, this one has economists from Princeton and the University of Chicago<\/a>, not to mention one of the best fintech VC firms in the business<\/a>, willing to argue the latter. That\u2019s not nothing. Every once in a while, a smart person really does build a spaceship.<\/a><\/p>\n