Thursday, January 30, 2014

How to Save Your Sixteenth Century Mansion


A week or so ago we came across a plea for contributions so that some group in the United Kingdom could purchase a near-pristine example of sixteenth century “recusant” architecture.  A “recusant” was a Catholic who refused to conform to the legally established Church of England, thereby becoming subject to fines or imprisonment.

Edmund Campion, a 16th century recusant
As the notice read, “We are hoping to obtain a 16th century recusant house filled with Catholic history!! We need your prayers and support. Please visit this site: www.sawstonhallsave.co.uk.”  Okay, we could do without the “!!”, but the rest of the pitch seemed fine.

Given a choice between a government works project and a sixteenth century house (with modern plumbing, it looks like), the house wins, hands down.  We’ve probably got all the government we can use right now, and more, but we can all use a sixteenth century house.  It’s a nice place to visit, even if you wouldn’t want to live there.

The problem is, while asking for prayers is a good idea, why should people give money to some somebodies to help them obtain a house they don’t need to live in?  Why not explore the possibility of establishing the house as a for-profit enterprise?

Sir Phillip Sidney, non-recusant
As a caveat, we have no more than a vague understanding of law and finance in the U.K., so filter everything we say through that screen.

Still, our interfaith think tank, the Center for Economic and Social Justice, has been proposing a “Homeowners Equity Corporation” (HEC) as a solution to the home mortgage crisis.

Very briefly, the idea is that foreclosed homes would be purchased by a for-profit holding company using interest-free (but not cost free) credit provided by the central bank, then leased to tenants (with preference given to the former owners). The HEC would be given the same tax advantages that are currently given to S-corporations in the U.S. that are 100% owned by the workers through an ESOP trust.

Lease payments above operating costs would be applied to the purchase shares in the HEC and credited to the tenant to the fair market value of the home at the time of acquisition. When a tenant has accumulated the value of the home in the form of fully paid-for HEC shares, the tenant would have the option of exchanging the shares for title, or continuing as a tenant at a much-reduced rent.

Naturally the question came up, What about historic homes, or those that have been in a family for generations? The answer is to give such places preferential treatment. A family that has owned a place for generations can be given the option to acquire a long-term lease (e.g., 99 years), renewable under a right of first refusal on favorable terms.

Guy with weird head who might have been a recusant
The lease on a historic site would prohibit changes that would damage the historicity of the structure and grounds, and so on, and probably include a requirement that the public be permitted to visit. (A number of private homes in, e.g., Lancaster County, Pennsylvania, USA, also operate as small museums in this way.) A tenant leasing a historical house would not simply live there and pay rent, but would also have to manage the property as a “living museum” — with any profits from admissions (if charged) accelerating the purchase of HEC shares by the tenant.

Unlike a “regular” home, however, the tenant in a historical home would not have the option of trading HEC shares for title, although the tenant or his heirs would get favorable lease renewal rights. The HEC would always be the owner, although the tenant would derive dividend income from the shares once the house was fully paid for. This would ensure that the historical significance of the house would always be maintained.

If this sounds like an idea that might be feasible (or even worth discussing), it might be useful to take a look at the CESJ website, and that of our for-profit ESOP investment banking and consulting firm, Equity Expansion International, Inc.

The key, of course, is getting the necessary laws passed to give favorable tax treatment to a for-profit enterprise (which could be interesting in the current economic and political climate), and gaining access to the money creation powers of the central bank. You would need someone well-versed in ESOP law and finance as well as the politics of the U.K. to pull something like this off.

As a pilot project, however, with the backing of social, cultural, academic, and political leaders interested in new models of economic development that do not rely on tax monies or charitable contributions, it could very well be the necessary wedge of a reform program along the lines advocated by Popes Leo XIII and Pius XI.

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