THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Tuesday, September 30, 2008

Residential Homesteading for Every Citizen?

For quite a few years BB (in this case "Before Blog," not "Before Billionaire Bailout Bonanza") we've advocated empowering ordinary Americans with the means to acquire and possess wealth-producing assets. Abraham Lincoln's 1862 Homestead Act made it possible for thousands of people who had previously owned no land to acquire it relatively easily. As an advance on this, we've been pushing a program we originally called "Industrial Homesteading," which we changed to "Capital Homesteading." With the probable acquisition by the U.S. federal government of thousands of residential properties, we think it's time to add Residential Homesteading to the Capital Homesteading proposal through the Homeowners' Equity Corporation.

You might reasonably ask whether this is a change in our stand on using credit for nothing that does not in some way produce a good or service that results in income that can be used to pay for the asset. Not to sound flip, but that is a very good question.

Ordinarily, you'd be correct. Using newly-created money to purchase a home in which you live instead of renting out would be an explicit violation of our principles regarding money and credit. What the HEC would do, however, is use newly-created money to purchase the federal government's soon-to-be portfolio of distressed properties, and rent them out.

As "rentable space," the homes would be capital investments. That is, they would be "self liquidating," generating a service (a place to live) for which a tenant makes a monthly lease payment. Using capital credit to invest in rental property is as legitimate as any other capital investment.

The difference is not in the asset — rental properties — but in who owns the asset. Ordinarily, an owner of rental property does not live in the rental property and make lease payments to him- or herself through the real estate holding company he or she owns. Using the HEC, however, allows the tenants to build up equity, not a faceless owner somewhere upstate. The equity is not directly in the home being rented, however, but in the company (the HEC) that owns the home being rented. The home itself is a capital asset, not a directly-owned consumer item. The tenant owns part of the company that owns the home, not the home itself.

If you stop to think about it, who would make better owners of the rental properties than the people who are renting? The HEC, the commercial banking system, and the Federal Reserve could bring this about quite easily.

On the other hand, should the federal government divest itself of the properties it seems ready to acquire in the usual way, the only beneficiaries will be the Billionaire Boy's Club as they reap another windfall bonanza from one of the biggest short sales in history.

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