Housing in a Participatory Economy

March 27, 2023

Housing is a very special type of good. It is essential for society since everybody needs a place to live and it consists of buildings that will stand for a very long time, often hundreds of years. This means that from the perspective of society, housing is an important long-term asset that will affect and define communities and their character for many years into the future.

At the same time, in today’s capitalist economies, housing is often a lucrative investment for real-estate investors and speculators but also for individual homeowners, with the result that house prices in many areas reach levels that a majority of the population cannot afford. Housing today is a major source of upward distribution of wealth and income to landowners through economic rent and land inflation.

For many consumers today, the purchase of a home is the most expensive and important transaction that they will make in their lives and the development of real-estate prices has a huge effect on the economic situation and quality of life for individuals, both for existing owners and aspiring buyers. For tenants that rent a house or a flat, housing is purely a consumption good, though a very important one. 

How might housing be organised instead in a Participatory Economy? Below I explore one possibility.

Social ownership of land and housing

Housing cannot be allowed to be a source of unearned income and profit for speculators and landlords as is the case today. In a Participatory Economy, land and buildings are owned by everyone in society, under the commons, and while various entities (including individuals) will be stewards of the land and housing buildings, as will be explained below, residents will not be able to buy and own their homes in the same way as today and make a profit (or loss) when selling due to price changes. Instead, residents will pay a fee to get access to housing.

Housing will still be an important long-term asset from the perspective of society. Society, through its consumer councils, federations and political institutions, should therefore have a big say in the planning and construction of housing.

Democratic long-term housing planning

Consumers and citizens, in their councils, federations and political institutions, will play an important role in long-term city planning and urban development and in defining what buildings to build. The overall objective in society should be that residents as a collective should have the opportunity to choose between different housing arrangements, such as co-housing, communal housing, apartments and detached houses, and different levels of standards, depending on preferences and where in life one is. 

Society’s role would include zoning (dividing land into zones for specific uses such as residential, commercial or industrial use), controlling building permits, deciding on building regulations, environmental standards, providing information about consumer preferences, demographic trends and internal migration, and participating in the organisation and handling of public facilities and services, such as garbage collection, electricity grids, water and sewage, public transport systems, libraries, playgrounds, parks, museums, sports facilities, public swimming pools, etc. And it is the citizens through their institutions that, in the end, decide which plots of land become available for the development of new housing and other premises, by granting permissions for land development.

Producing New Housing

I would like to introduce two entities that are important in housing in a Participatory Economy: 1) Housing Providers, who manage and maintain housing, and 2) Housing Developers, who construct the buildings.

1) Housing Providers

Buildings, for the purpose of housing, to be produced are demanded by “housing providers”.

A housing provider is an individual, entity, or association that is responsible for management, maintenance and upkeep of a building or group of buildings, and for supplying housing in the annual planning iterations.

In a Participatory Economy, a housing provider could be any number of entities:

  • A (future) individual resident may very well assume the role of a housing provider.
  • If a group of residents share a building or buildings for housing, they can collectively form housing provider associations.
  • Neighbourhood consumer councils may, temporarily or for longer periods, act as housing providers, especially in an urban setting.
  • And finally, locally based housing or property managing worker councils, which may or may not coincide with the contractor or developer who built the housing, can assume the role of housing providers if residents prefer not to assume the responsibility for management, maintenance and upkeep themselves. 

2) Housing Developers

New housing is built by housing developers.

The producer of buildings for housing is a contractor or developer, which constitutes a worker council that controls the production process just like any other producer of goods. 

Future and present housing providers that request construction of new housing will usually be responsible for defining important parts of the designs of the requested housing. They will prepare more or less detailed blueprints well in advance of the annual planning, though they may need to consult the producers in this process. 

Contractors and developers will organise the lists of blueprints prepared by housing providers into separate construction projects and output categories for planning purposes based on resource consumption and production processes. In the construction industry output categories in the annual planning will correspond to different types of defined building components and labour hours for construction tasks. These main categories will generally be less coarse with perhaps only a few subcategories indicating different qualities of material and different work tasks.

Existing housing

When the construction of a housing building is complete, the housing provider that requested the construction of the building gets access to it.

Importantly, as a consequence, when a housing provider is also the resident, she will assume both the role of a housing provider with the responsibility of management, maintenance and upkeep, and at the same time the role of a resident requesting access to housing.

She will thus control two separate accounts simultaneously, a housing provider account and her ordinary personal expense account. In this case, when a resident decides to move, she will transfer the housing provider role as well as the access to the housing as a resident. 

A housing provider’s account will be charged with costs for making housing available. In sum, these costs are:

  1. The user-right fee for access to the building, in practice the annual depreciation of the historic acquisition cost,
  2. Costs for management, maintenance, upkeep, and repairs, and
  3. The user-right fee for the land on which the buildings sit.

Of course, a housing provider can choose whether to internalise maintenance costs or request services externally.

The current housing fee for residents’ access to housing decided in the annual planning will be credited to the housing provider account and simultaneously charged to the resident’s expense account.  

The allocation of housing

When the annual planning procedure starts the supply of housing is given and, in theory, housing is then allocated to residents and their housing fees for access decided in the annual planning. The problem is that from the perspective of aspiring future residents every housing opportunity is unique with its own unique characteristics, which need to be assessed and considered individually before entering into an agreement and taking up residency. But in the annual planning there are no face-to-face negotiations between potential individual future residents and housing suppliers and there will be no binding individual lease agreements signed during planning.

Instead, before annual planning starts, consumers in their councils and federations need to categorise the existing supply of housing in coarse categories based on differences in standard and age, which will affect costs for maintenance and upkeep, and location, which will affect desirability, with each individual housing opportunity constituting a separate subcategory. Some housing will be situated in more desirable locations, have better access to nice beaches, amenities, transport links or have a coveted view and so on, which should be considered in the definitions of categories for existing housing. 

In the annual planning, both aspiring and existing residents apply for access to a particular coarse category of housing in exchange for a commitment to paying a recurring housing fee. The tentative allocation of coarse categories of housing and housing fees are then determined by supply and demand in the same way as for other goods and services.

The actual distribution of individual housing to residents and the signing of leasing agreements during the year will be facilitated by Estate-Agent workers working for the neighbourhood consumer council or a consumer federation, which will mediate vacant housing to housing applicants, at which time each individual housing will have a derived separate housing fee.

Potential Challenges

Since a consumer’s request for a housing category in the annual planning is not a binding contract but simply an indication of intent to stay or to move to a preferred address and the supply of existing housing is fixed, there is a risk of tactical considerations when expressing one’s preferences in the consumption plan. By expressing demand for a category of housing other than the one you presently live in without having a serious intention of moving, you could potentially lower your housing fee if enough people in your neighbourhood did the same. To address this issue, there could be a limit to how many times you can express an intention to change address without acting on it.

Notable Replies

  1. I have long pondered how to treat “housing” sensibly in a participatory economy. Housing has a number of unique characteristics compared to other goods and services, which Anders usefully lists at the beginning of this proposal. I’m very interested to hear what others think of what Anders has proposed. On a first read, I am very happy with what he has come up with. I have two comments at this point:

    (1) When writing about this myself… always VERY BRIEFLY!.. I came up with the idea of “first right of refusal” as something that seemed to make sense to me. In other words, when everyone is making proposals to “consume” housing during annual planning, I thought it made sense for the present occupant to have the right to renew their “consumption” of the house they live in, before it is thrown open to others.

    (2) As best I can tell the social cost of providing a housing unit will vary from year to year even if the physical house is no different than it was in the past, and this change in its “iterative price” will happen during annual planning. In capitalism if I am a renter, my rent can, or will change as a result from year to year even if there are no improvements or changes to my housing. In capitalism, however, if I am a home owner with a mortgage, my mortgage payment will NOT change. How would this be handled in a participatory economy?

  2. Thanks, Robin.

    Here are my thoughts on the issues you bring up:

    1. I agree. I also think it is fair that a resident has the right to stay as long as they pay the announced housing fee/“rent”.
    2. As I have it in the article, the equivalent of the mortgage payment is the fee that the housing provider is charged for access to the building. The resident’s charged fee for access to housing is derived from prices set in the annual planning and will depend on demand and supply. Simplified, one may think of the difference between the two as the cost of “land” or location. In any case, the difference is in the end credited to what I elsewhere call the “Society account”.
  3. I like this solution to organising housing in a Participatory Economy. One of the main problems was always how to deal with the conflict between enabling those who wish to be “home-owners” to still be able to “own” a house like today, have control over it, and yet not also be able to personally gain from any rise in its value and profit from the sale. I think Anders’ innovative solution of enabling individuals to also be ‘housing providers’ (housing providers to themselves as users in this case) solves this problem.

  4. Anders, a few questions:

    • If housing course categories are set in the annual planning, could you give an example of what that might look like? for example, what might an individual consumer have to fill in regarding housing in their annual consumption plan?

    • If the housing fee is made up of the following three costs:

    1. The user-right fee for access to the building, in practice the annual depreciation of the historic acquisition cost,
    2. Costs for management, maintenance, upkeep, and repairs, and
    3. The user-right fee for the land on which the buildings sit.

    How do these separate costs get distinguished from the coarse category housing fee demanded by consumers during the planning? Do you see the building fee as being a fixed annual deprecation every year, or can this change year to year?

  5. Thanks, Jason. These are good questions. They are a bit tricky to answer in an accessible way, and I don’t think there is one correct answer to them. But here are my thoughts:

    1. Coarse categories of housing should aim to allow for potential residents in a defined geographical area to express, during annual planning, their preference for a) location in a broad sense, reflected in a few alternatives, for instance, metropolitan, urban, countryside, coastal, b) type of housing which could also indicate size, such as studios and larger units in co-housing, communal housing, apartments and detached houses and c) if applicable, a limited number of categories identifying a more specific location, within the general location, for instance reflecting access to a coveted view. Of course, a classification scheme like this of coarse categories will not, by a long shot, be able to reflect every criterion that residents consider when looking for a house but if should be good enough for our purposes.

    2a) Without going too much into the details, the costs you list are costs that are charged to housing providers, tracked and recorded for individual housing units. The housing fee for an individual housing unit is derived from the fee for the coarse category housing that is decided in the annual planning based on supply and demand.

    2b) Yes, as a general rule, I see the fee for access to a building for housing purposes that is charged to a housing provider as the fixed annual depreciation (potentially together with a discount rate calculated on the depreciated cost).

  6. Hi

    I’m new to this forum, but not completely new to Participatory Economics. I’m not an economist though, so all my questions are going to be quite basic am afraid.

    Most of the ideas put forward within the domain of PE have always seemed sensible to me, (although I haven’t studied some of the more technical proposals to any depth, such as the iterative pricing algorithm). I think I understand the need for such processes fairly well and none of them have ever struck me as particularly troubling. This idea of charging a fee for housing however, I find a bit jarring, so I would like to get a better understanding of why it is being proposed and how it works alongside other important aspects of housing.

    As I understand it, the point of doing housing allocation this way would be to prevent the commodification of housing while also averting the need for some sort of centrally planned allocation system. Sounds good. The fees being charged for different categories of housing will reflect supply and demand, allowing price signals to do their job. My simple-minded way of looking at the fees being proposed though cause me to wonder who is paying who, for what, in some scenarios. Going to do some imagining now, about how this works in practice, to try to relate to this scheme with my layman’s understanding, (will try not to get too carried away).

    Let’s suppose we are in a participatory society, and some group of people get chatting online. They are all city folks who find that they all share a desire to move away from the hustle and bustle of city life. So, they decide to start looking for a spot of land to build their dream community on. They are all very ecologically conscious so they aim to design their housing themselves. They want passive solar heating, solar panels and small wind turbines, sand batteries, the works! They also design the layout of their community such that they can do water retention and permaculture planting all over the land. If all goes well, they would be basically self-sufficient for food, water, energy and much else. They plan to have a small workshop with some computers and 3D printers, to do some socially valued work they can be remunerated for, (so they can still have an income from society to buy things like internet services and holidays and so on). They don’t plan on doing too many hours in that workshop though, because as I said, they have a food forest to look after, and want a good work life balance. They are realistic about how self-sufficient they can be, but are aiming to meet as much of their own needs and wants as they can while living in harmony with the land and so on.

    Let’s say there are 50 of them, and they have been working hard in the city in technical jobs, including construction, design, agricultural science and so on, so are more than capable of pulling this project off.

    Am trying to think through how they would realize their dream in a participatory economy under this scheme. They presumably look up some register of land, which some institution maintains, and find a piece of land which they would be allowed to develop. They find a remote site in the register that looks promising, so they visit it and do a rough topographical survey and confirm it is perfect for what they want to do. So they register as a housing provider and a housing developer with some institution… They create the blueprints for the housing and I guess they submit them to someone to ensure that no building regs are being violated, right? So, which institution is that in a PE?

    Assuming there is no problem with their plan, they start construction. They hire some porta cabins and caravans to take to the site, and buy an electric pickup to get back and forth with materials from the nearest town a few miles away. Am assuming that since they are doing valued construction / development work, that they are able to earn an income while doing this as construction workers, right?

    I guess they get some sort of loan to purchase the building materials and hire the heavy plant they will need. Which institution will loan them the capital in this case? Do they have to apply to a nearby credit union? Lets say all that is taken care of and they get the building up. It gets inspected presumably by some local authority? It passes all checks and gets categorized as “Grade A - communal housing”.

    So they move in and now start paying their fees. Who are they paying the user-right fees to? If some credit union provided the loan which gave them the money they needed to pay for construction materials, then would the user-right fee for the housing not just be a repayment of that loan to the credit union? Supposing they pay that fee for a number of years, then the loan would be paid off, and they would no longer have to pay it, right? If not, what are they paying that for?

    Let’s assume that they are doing all their maintenance and repairs themselves, so they would have no costs in that category.

    Who are they paying the land user-right fee to? How would that fee be calculated? What incentive do they have to keep paying it after a while? Am guessing they would be removed from their homes if they stop paying that right?

    Suppose they live in that housing for 50 years and create a really nice setup, like some sort of garden of Eden almost, and most of their children stay in the community, so every so often they seek permission to build more housing in their community. Would you not say that after a while, these people have earned the right to stay there without paying a fee to the rest of society for the right to live there? That is more a moral question than an economic one I suppose, but it seems pertinent. The reason I ask is as follows:

    Maybe many years after moving in and developing the land, they get fed up with making designer widgets in their fab shop to deliver to the rest of society. For that work, they were being remunerated, and have used the money to import all kinds of good stuff. Fancy fruit trees, computers, glass making gear, construction equipment and all kinds of other stuff which means that they basically don’t need anything now. How are they going to pay their land user-right fee if they don’t do “socially valued” work though? They do lots of work of course, but for themselves, growing their own food, and keeping on top of their water management and so on, but they don’t get paid for that surely, because they aren’t providing anything to society. Just looking after themselves…

    So here are some implications of this scenario I think: If they need to raise money, to pay this land fee, either they have to keep working for others, for the right to stay on the land, or they have to do some creative accounting and claim for labour hours doing their own gardening. Either option doesn’t seem very ideal to me. In the former case, well… they essentially have a landlord, it just happens to be the rest of society… They aren’t asking anything of the rest of society, they look after themselves, but they have to keep working, doing “socially valued” work or they will not have the money to pay that fee and will get kicked off the land they themselves developed… In the latter case, they are doing a lot of fake accountancy just to justify themselves to the rest of society… which seems a bit of a waste of time and more importantly, an intrusion of sorts into their community.

    Am I way off the mark with these speculations? I could construct other scenarios, but this is the sort of one which interests me the most, because it involves something I consider quite crucial to the creation of a better society; the formation of non-alienated, sustainable, community life. Housing and land allocation is central to the viability of communities for obvious reasons, so I would like to see a way of allocating housing which actually encourages self-sufficiency within community, but am not sure if this fee proposal achieves that or does the opposite. In an urban environment, some level of alienation is a given I think, even in a participatory society, but that’s why I would hope that in the future more people form such communities, and are able to live in settings where they can have a more intimate partnership with nature and each other.

    It also brings to mind the issue of indigenous lands, because in a way, this hypothetical community would be attempting to live with that same kind of relationship to the land. How would a participatory economic system relate to people who have that sense of “ownership” over the land? They consider themselves as a society, with their own land, even if that doesn’t quite mean what it means in western culture.

    It also brings to mind travelling people, who need access to land, but don’t stay on any one piece of land for that long. Would a participatory economic system be as hostile to a nomadic life as market allocation of land has been I wonder?

    Here are some further general questions then, about the housing fee proposal in relation to the above (slightly elaborate) scenario:

    Do you think people would find it easy to pursue that kind of community under this scheme?
    Would this system incentivize or disincentivize people building their own homes and communities in this way?
    Do you think this scheme, combined with the other institutions of a participatory society, would make the pursuit of self sufficient living more or less viable as a way of life?

  7. I see. So for the housing provider, are these three combined costs their social costs (SC) and the housing fee they receive from the resident their social benefit (SB)? And, in this case, would housing providers, need to have a SB > SC?

  8. Yes, a housing provider’s combined costs are his social costs (SB) and the received housing fees are his social benefit (SB). And yes, in principle, the SB has to cover the SC.

    Though, I have said elsewhere that I think that a housing provider’s charged fee for access to land, in the end, will be calculated as the difference between the housing fee, from the annual planning, based on supply and demand, and all charged costs except the land fee. The fee for land will be the residual. This means that SB will equal SC so long as someone is willing to take up residence and pay the determined fee.

  9. Hi Richard,

    I don’t think I will be able to answer all the many questions you raise above in this short answer but I want to make two quick comments:

    1. If a housing provider (or anyone else in a PE) wants to get access to resources and/or supply goods or services to the economy, there is only one way to go about this in PE and that is to participate in the annual planning. I don’t think there should be any exceptions for housing residents or housing providers.

    2. The question about fees for access to land, buildings etc. and who receives them is a fair question. I focus on this question in my article about financial flows elsewhere on the site. In short, fees for access to land, buildings and capital goods in general, for that matter, and also any surplus (difference between benefits and costs), end up in what I call the Society Account, since there are no land or capital owners. The fees become part of Society’s income. (I suggest an answer to how the fee for land could be calculated in an answer to another question below)

  10. Understood. Thanks for clarifying.

    I wonder how accurate the demand data from consumers for housing will be from the annual planning. As a consumer, preparing my consumption plan, I know with much more confidence, based on my past behaviour, what I’m likely to consume regarding food, clothing, transport, utilities, etc. However, with housing, I think it’s much harder to give a meaningful answer every December about, if I would like to move, which location I would like to move to, until I have done some research into it, and even then I may have a few different options. As the annual planning will set land use prices, I’m thinking about how the interface may need to be designed to better help with this, or if this might need some further special treatment, or how we might be able to get more useful demand data.

    Is this an area you have some concerns or thought about too?

Continue the discussion at forum.participatoryeconomy.org

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