Parallel Markets / Affordable Housing

Parallel Markets Housing is a private-sector, market driven way to ensure a complete community: that 20% of the houses remain affordable to people who cannot compete in the open market.

This is an important, technical element that requires more detailed explanation...

In the photo above, the new town of Poundbury, England has state housing mixed in with ordinary housing in an attempt to remove the stigma of state housing. But it still creates two classes of people... those forced to rent and those who build equity over a lifetime that can provide for their old age. The other alternative is to have desireable neighbourhoods where housing is expensive, and undesirable neighbourhoods where housing is affordable. Neither support the concept of a complete community.

In an attempt to solve this problem, the MarketTown proposes a different approach called Parallel Markets. It is feasible because 4,000 buildings are built at the same time, and the project is not investor driven. It is in the interest of the future villagers to have a complete community, thus the affordable subsidies are built into the cost structure.

To use the simplest example (which is actually broader), if the average teacher earns $60,000 a year, and the bank says they will finance a $250,000 home, then the MarketTown agrees to sell the teacher a home for that price, even if the open market sale price would be double. When the teacher goes to sell, they can sell for any price, but only to another teacher. Since teachers' salaries are fixed within a band, this ensures the teachers' housing market always remains affordable to teachers, and the MarketTown always has its teachers living in the community. Similar markets would be established for young people (under 26), essential workers, blue-collar workers in the industrial park and any other target groups the MarketTown deems important to ensure a complete community.

The details of this plan will be more complex, and may possibly require legislative changes to fully implement in a way that serves the public interest. However, governance of this system will be private. The MarketTown, owned by the MarketTown citizens, will own an equity interest in the parallel market home, which it will have the power to enforce to ensure that gentrification never prices-out its lower earning citizens.

Youth Housing: The MarketTown includes a comprehensive plan to enable its young people to become fully-participating citizens by the time they come of age. This includes apprenticeships and internships, but also includes affordable housing. Originally, it was planned to integrate youth housing within each village, but when surveyed, the youth said they preferred to have a Youth Zone. They wanted an area in the louder part of the noise overlay (there will quieter and louder villages), with youth housing clustered into a single area. They wanted to dance in the street til dawn and not have older folk complaining. They wanted the social atmosphere that comes with being among peers - including the very practical aspect of making it easier to meet that significant other, then sell both youth homes and have enough capital for a downpayment on a family home. This may require very different financing packages, as one important piece of advice the young gave was to require the youth buyer to prove they earned the down-payment themselves - legally and not a gift or loan from family. This requirement ensures that youth housing always remains affordable.

Elder Housing: At the other end of the age spectrum, there comes a time when old people wish to downsize into a simple home that enables them to remain independent longer. These are envisioned as small, ground floor apartments that are purpose built for elders, and age restricted. There should be little difficulty with this category, because age discrimination for the elderly is already embedded in law. These units would be owned by the elders, not subject to the complex rules of retirement homes that sometimes can deplete the elders' life savings.

Artist Housing: Cultural enrichment is a core component of the MarketTown. Studies show that the Creative Class is an extremely important target group to include and protect as part of a Complete Community. In addition to the Artist Guild Halls on each village plaza that provides free workspace, it is proposed that rent-free housing - a small flat - is provided to each guild member. The target is to have 5% of the population be guild members. The artist does not need to live in that flat, they can rent it out and keep the proceeds, if they want (and can afford) to live in an unrestricted home. The idea here comes from indigenous societies where the artists were honoured and supported by the tribe. They were fed, clothed, giving shelter and in a non-monetised society, in return the artist created the art. In a monetised society, we do not do this very well. As a result, the artists become the pioneers, moving into rough, but cheap areas. They then make it trendy, rents and prices rise, and the artists move out.

Earnings Class or Employment Class Housing: As discussed above, there are essential workers in a wide range of jobs who cannot compete in the open market. Public servants, the people who run the laundry, serve the coffee or deliver goods do not earn enough to compete with high-paying jobs, yet without them, the community becomes elite, and the essential workers commute in from the poorer parts of town. This is bad for them, bad for the community, bad for the environment and bad for Transport Auckland.

Unrestricted but Affordable Housing for Everyone: Auckland is presently facing a new housing price factor called Capital Preservation rather than capital gain; also known as the China Factor. In the Communist country of China, according to the Boston Consulting Group, China by 2013 had 2,378,000 millionaires. With the relaxing of controls over taking money out of China, these millionaires are looking not for capital gain, but capital preservation. They remember the Cultural Revolution in which those with money were persecuted and their wealth confiscated. Auckland is only one of many places in the world seeing Chinese buyers outbidding New Zealanders on property... not because it is worth more, but because even if the value drops, they still own it. This is creating a new distortion in the market.

The MarketTown will manage rental property. This policy was built into the framework in order to prevent the landlord from hell or the tenant from hell. However, it also serves a useful purpose in this new distortion by adopting a policy that can control spiraling prices. Chinese people who wish to live in the MarketTown will be welcome, indeed it is envisioned that at least one of the villages might be first-generation Chinese. However, the MarketTown may implement policies that protect the citizens from Chinese capital preservation buyers. This is expected to be a complex area that will require top legal advice, and perhaps legislative changes.

It is expected that the formula for house pricing will be cost-plus, so that the purchase price may be lower than the average for the region. This may require that the buyer own and occupy the dwelling exclusively as their residence for no less than five years after gaining title to the dwelling, and if they sell before that time, to pay a penalty to the MarketTown. Otherwise, the intent of having the villagers engaged in the master planning would be defeated as speculators would flock in to make a capital gain. Again, these are recent complications that will need to be sorted by top legal advice.

Having said this, the MarketTown is in principle committed to letting private markets work. It expects that the first project will see substantial capital gain in the unrestricted houses because the cost of living will be lower and the quality of life higher. The answer to this is for New Zealand to embrace the success and good sense of MarketTowns and build enough to meet the demand so the prices remain generally affordable by the full range of society.

Mansions: When the MarketTown book was first launched, a member of the audience in a presentation asked "will you let rich people live in the MarketTown?" with a clear bias that the questioner disapproved of rich people. Of course the answer was that a complete community includes everyone rich and poor, but it did raise an interesting question about architectural harmony. Outsized mansions would not suit the scale of villages, if for no other reason than they need too much land. However, in what is called the cosmopolitan town centre, it seemed appropriate to set aside land for mansions if the wealthy wish to build them. Grand homes become major visitor attractions; they add to the visual amenity, and their occupants often become major benefactors in the community. To be clear however, the allotment fees for mansion footprints will be higher unless there is an excess of land, which is unlikely. Mansions tend to have a lower density ratio (people per hectare) whereas the overall intent of the MarketTown is to attain higher density while improving overall quality of life.

Apartments: The cosmopolitan town centre will provide a place for apartment houses as well. Thee would be four-storey buildings for people who want a more anonymous life than one would find in the villages.