Homeownership 2.0

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Homeownership 2.0

INTRODUCTION........................................................................................................... 1048

I. THE ELEMENTS OF HOMEOWNERSHIP ................................................................. 1053

A. Homeownership as Consumption.............................................................. 1054

B. Homeownership as Investment.................................................................. 1059

C. Decoupling Initiatives, Past and Present.................................................. 1063

II. INTRODUCING H2.0............................................................................................ 1070

A. Configuring H2.0...................................................................................... 1071

B. Disaggregating Onsite and Offsite Influences........................................... 1073

C. Advantages for Homeowners.................................................................... 1078

D. Off the Rack or Build from Scratch?......................................................... 1082

III. COGNITIVE IMPLICATIONS .................................................................................. 1088

A. Barriers to Acceptance.............................................................................. 1088

B. Potential for Misuse.................................................................................. 1095

IV. LOCAL PARTICIPATION AND POLITICS................................................................. 1098

A. Homeowner Collective Control................................................................. 1098

B. Investors and Local Governance............................................................... 1103

V. OTHER SOCIETAL IMPACTS................................................................................. 1109

A. Stability andStickiness in Housing Markets............................................. 1109

B. Competitive Consumption......................................................................... 1111

C. Autonomy and Conformity........................................................................ 1113

VI. AVENUES FOR FURTHER RESEARCH.................................................................... 1114

A. Tailored Risk-Bearing: H3.0 and Beyond................................................. 1114

B. Government's Role.................................................................................... 1115

C. Beyond Housing........................................................................................ 1117

CONCLUSION.............................................................................................................. 1118

INTRODUCTION

Current legal arrangements make homeowners high-stakes gamblers.1 Homebuyers routinely take on crushing debt loads to put large sums of money into risky, undiversified ventures that are utterly out of their personal control-local housing markets.2 That these markets typically post positive returns over time offers little comfort to those caught on the downside of housing market volatility. Moreover, because rights to these expected gains are priced into the home, many would-be buyers are priced out of the market.3 The shortcomings of the homeowner's investment package have not escaped notice, and for decades scholars and innovators have tried to devise better ways to manage the upside and downside risks of owning a home.4 Derivatives markets for such risk have recently begun to emerge, due in large part to the collaborative efforts of Karl case, Robert Shiller, and Allan Weiss.5

As the technical capacity to slice, dice, and trade homeownership risk advances, this Article steps back to examine how a reduced-risk version of homeownership fits together with property theory, human cognition, and the social dynamics of neighborhoods and metropolitan areas. To explore these questions, I present a new tenure form-Homeownership 2.0 or "H2.0"-that seeks to unbundle optimally certain investment components from the core homeownership package.6 Central to my approach is a distinction between parcel-specific influences on home values, which the homeowner is in a good position to personally control or insure against ("onsite factors"), and influences on home values that emanate from beyond the four corners of the parcel, such as neighborhood changes and larger housing market trends ("offsite factors"). I argue that only those value changes relating to onsite factors are essential to the homeownership bundle as it exists today. Historical inertia in property forms has kept offsite impacts in the homeowner's standard package, but requiring homeowners to invest in these factors as a matter of course is no more sensible than forcing them to invest in some other random, localized venture with variable returns. H2.0 thus offers a reduced-risk alternative to traditional homeownership.

The basic idea behind H2.0 is simple. At closing, a homebuyer is metaphorically presented with two dials that s...

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