There’s no shortage of opinions on who or what is to blame for the housing crisis in North America. On business channels, panels of pundits argue their theories and push their agendas, but skirt identifying true causes or real solutions.
The general outlines of the present crisis are clear: a perfect storm of limited supply and rising interest rates that has sent prices soaring, and out of reach for many middle-class families. But access to affordable housing was a growing problem even before the pandemic. It has been gathering force for years, and the trends have long been moving in the wrong direction.
What’s required are real solutions, not more theories and opinions. The issue demands innovation and decisive action, but fortunately, there are corners of academia, policy institutions, and the real estate industry itself where new and fresh ideas are percolating.
Canadian real estate investor Adam Gant is one such example. His out-of-the-box thinking took him beyond his profession to major cities around the world, where he analyzed the ways housing markets work in different places, economic systems, and cultures. Based on these observations, supplemented with deeper research into North American markets, he began to develop a new concept he calls “shared equity.”
This unique perspective on housing access and affordability has caught the attention of leading thinkers, including economists, policymakers, business journalists and investment bankers.
What’s surprising is that others have been learning about Adam Gant’s “shared equity” concept, not from academic journals, Barrons, The Wall Street Journal or a broadcast documentary. A thoughtful writer, Gant chose a novel as the vehicle for spreading the word about his imaginative solution to the housing crisis. In 2020 he and his co-author, Patricia Nicholson, published A House Shared, the fictional story of a family at risk of losing it all, as the once-abstract housing crisis becomes very real for them.
The book was fortuitously timed, appearing at a moment of incredible change for the economy, financial markets and indeed society itself. It was the year when the world awoke to the dangers of a pandemic, and when governments flooded their economies with fiscal and monetary stimulus. The spending was rocket fuel for prices that had already been headed to the stratosphere in many markets. At the same time, banks added new obstacles to the mortgage process, and supply chain interruptions slowed the construction of residential units.
Rising interest rates further reduced affordability, while mortgages that had locked in low rates before central banks began hiking interest rates compelled many homeowners to hold onto their units, keeping needed supply off the market.
Although it was researched and written before some of these variables began to cause severe market distortions, the book addresses each aspect of the crisis, in detail and with a surprising degree of prescience.
According to Gant and his co-author, “shared equity” creates a financial model in which a home buyer would be able to gain access to housing with a deposit or down payment of approximately one percent. The buyer would not need to qualify for a mortgage upfront but instead would be matched with a home where the monthly payment is affordable for the family’s income level. As the home price rises over time, the buyer would share in the equity growth, based on a multiple of the initial deposit. Home buyers would keep their share of the equity even if they later chose not to buy the home.
In A House Shared, this concept is a lifeline for the fictional family whose financial security vanishes almost overnight. Several misfortunes had brought them to the brink of eviction. The family reclaims financial stability through shared equity, saved by recalibrated market forces that incentivize greater access and affordability, rather than restrict it.
As one reviewer of A House Shared wrote: “Innovative business minds can solve the greatest challenges of our time, and Gant’s writing catalyzes the reader to keep thinking big.”
In the end, that is what it will take to improve housing access and affordability in the U.S., Canada, and beyond: Practical solutions that are global in scope, from creative thinkers who are not content to color inside the lines.
