An alternative interest-free home financing model

PurposeThis study aims to determine the relationship between the banking industry and home financing by conducting a regression analysis between the mortgage loan interest rates and the number of housing sales, and based on the results of the analysis, this paper proposes a new and alternative interest-free home financing model by directing the savings of the people in pension funds into real estate investment funds (housing fund), specifically established to provide a bank loan-free home financing solution. Diminishing Musharakah (partnership) is also integrated into the model from an interest-free and saving economy perspective. The model developed also provides opportunities to increase the size of the real estate investment funds and provide alternative investment tools to pension funds.Design/methodology/approachWhile the global financial crisis resulted from the mortgage crisis in the USA in very recent history, the world has been experiencing the evolution of a new health crisis, COVID-19, a pandemic that has been heavily affecting the global economy in the past two years. The housing sector is among one of the major industries that may be affected by this new global crisis because of the high dependency of the current home financing models on the banking industry, which is carrying the burden of the pandemic. The rapid increase in global debt volume, housing prices, inflation and interest rates are observed as bad signs that may increase the risks of the housing industry. A potential decrease in purchasing power because of high inflation rates may decrease the welfare of people and reduce the income level. While the total debt keeps increasing worldwide, and central banks are considering increasing the interest rates, any potential default in the repayment of the mortgage loans may trigger a new mortgage crisis as the bank loan-dependent financing system of the housing industry lacks alternatives. Thus, a relationship analysis between the banking and housing sectors is required to figure out the dependency of home financing on the banking industry, and a new sustainable home financing model is needed to protect the housing industry and the homebuyers from a negative effect of a new possible financial crisis.FindingsThe results of the analysis exhibit that there is a strong negative relationship between the mortgage loan interest rates and the total home sales. As a result, the new model is suggested and this new model is tested in an emerging country, Turkey, with the real housing sector and economic data where the interest rates are high and the home prices are booming. The results exhibit that the new interest-free home financing model provides a more economic financing solution compared with the high financing costs of bank loans.Research limitations/implicationsThe model proposed in this study is unique, and there is no such system that has integrated the pension funds, the real estate investment funds and diminishing partnership in one ecosystem. It is expected that the model may decrease the dependency of home financing on the banking industry and decrease the risks of the housing sector in the case a new financial crisis occurs.Social implicationsWhile providing a sustainable and alternative interest-free home financing tool, the model also provides individuals who do not prefer to use any bank loan because of religious or other concerns an opportunity to purchase their houses.Originality/valueThe model proposed in this study is a unique and original model that aims to provide a bank loan-free, sustainable home financing solution by integrating the pension funds, real estate investment funds and diminishing partnership in one ecosystem.

The Economic Impact of the Pandemic on Older Adults

The global health pandemic exacerbated existing economic disparities for many older adults who struggled as a result of structural inequality. Even before the onset of COVID-19, many older adults of color showed signs of financial precarity as they were more negatively impacted by the housing crisis of 2008, losing their homes at disproportionate rates or never recovering the loss of equity in their homes. Older adults of color shoulder the burden of this reality, and their lives have been further devastated by the pandemic, resulting in greater economic instability, and expanding income and wealth gaps.

The Effects of Homeownership on Wealth Distribution

Within the broader context of new dimensions of poverty such as housing poverty, energy poverty, etc., this article describes dependencies between household income, real estate ownership and socio-economic trends. We argue that income is not the principal determinant for home ownership rate, but rather recent lifestyle changes can better explain the homeownership decreasing trend in developed economies. Job mobility, family formation determinants and demographical trends seem to find well-supported basis in literature and data. Using data for the US states we have proved that the decreasing rate of home ownership may be explained by social aspects of changing lifestyle such as increasing share of population moving from rural areas to cities, age of marriage, divorce rate, career-oriented lifestyle, rather than by the frequently cited price-income ratio. We have also observed a short-term correlation between financing availability and homeownership rate, but we conclude that property prices would adjust to lose monetary policy without any long-term effect on homeownership rate. It results that government or monetary policies aimed to cushion the housing unavailability (recently increasing value of price-income) ratio may distort the housing market. We propose a new insight in the housing availability discussion.

Editorial 15-3 International Journal of Housing Markets and Analysis

The methodology uses hedonic regression and propensity score matching econometric techniques to analyse the price of single-family housing prices. [...]the study combines data about zoning changes at the parcel level with nearby housing sales transactions to study any potential externality effects because of rezoning induced by private parties. The seventh paper from South Africa examines the dynamic relationship between house prices and household income per capita in the lower- and low middle-income housing segments. The tenth paper from Australia examined the impact of the recently completed light rail on the level of residential property values.

Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership. By Keeanga-Yamahtta Taylor,. Chapel Hill: University of North Carolina Press, 2019. xiv + 349 pp. Illustrations, notes, bibliography, index. Cloth, $30.00. ISBN: 978-1-469-65366-2

Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership chronicles an often overlooked period in the affordable housing literature to show how the shift from racially exclusive housing policies in the 1940s and 1950s (where it was nearly impossible for Blacks to buy high-appreciating homes using low-cost and low-risk federally insured mortgages) to a regime of more inclusive policies in the late 1960s and 1970s laid the foundation for Blacks to lose massive housing wealth decades later during the 2007–2009 Great Recession. [...]instead of finding ways to increase the supply of public housing, the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) adopted federal housing policies, which continue to this day, that depend on public-private ventures (like Housing Choice vouchers) to house the poor. [...]the book's greatest contribution to the affordable-housing literature is Taylor's blistering account of Nixon administration decisions that forever ceded control of federal housing policies to private mortgage bankers, real estate agents, home builders, speculators, and appraisers (a cabal I label the real estate industrial complex, or REIC).

Evictions, Foreclosures, and Global Housing Speculation in Palma, Spain

Over the last two decades, the property bubble and the subsequent economic crisis and post-crisis policies have heightened urban inequalities, mainly in cities in southern Europe. The gaps between social classes have widened with the configuration of new urban spaces characterized by segregation and exclusion. Palma is the capital of one of the top tourist destinations in the Mediterranean (the Balearic Islands) and it is usually regarded as a successful tourism model and a land of opportunity for property investors. Nevertheless, serious problems of inequality exist in the city. The centre of this dual city is split between a process of spreading gentrification and the urban blight of its poor neighbourhoods. Son Gotleu is a particular case in point. The neighbourhood is home to a large number of social housing blocks (1960s) with residents from mostly migrant backgrounds. Within a global context of new redefined rent-seeking mechanisms, this article analysed impoverishment in Son Gotleu, based on three variables associated with housing: evictions, foreclosures and the property market. Our study shows that evictions were a determining feature of impoverishment, linked to the emergence of new speculative investment interests. Indeed, investment funds are very probably the most influential urban agents today.

Housing Policy Recommendations for the Biden/Harris Administration

Housing policy has taken on a heightened profile in recent years, and especially in the wake of COVID-19. Rents have increased faster than renters’ incomes, while Black homeownership has declined. And COVID-19 has hit renters, especially lower income ones, particularly hard, with many unable to pay their rent and facing possible eviction. Of course there are pressing needs that the Biden–Harris administration will need to address in its first 12 months concerning the pandemic, including the effective deployment of rental assistance, ensuring that well-designed mortgage forbearance is made available to all homeowners who would benefit from it, continuing and improving the eviction moratorium, and providing funding to high-capacity nonprofits and local governments to acquire distressed properties and preserve them for affordable housing. The High-Cost Cities Housing Forum (2020) has detailed many of these short-term policy needs. The focus here is on longer term, fundamental housing policy issues that, although brought more into the light by the pandemic, mostly preceded COVID-19.

Confronting the gated community: Towards a decolonial critique of violence beyond the paradigm of war

This article investigates the works of Dussel, Maldonado-Torres, and Mbembe as representatives of a tendency in the field of decolonial thought to assume the templates of warfare and the camp as the archetypal registers of violence in the contemporary world. Identifying this focus as the remnant of a Eurocentric vocabulary (the paradigm of war), the article proposes a shift from the language of warfare predominant in the field to a language of welfare. The article turns to the gated community (GC), instead of the camp, and the imperatives of (re)creation, instead of the logics of elimination, as new templates with which to make sense of modern/colonial violence. Moving beyond militaristic imagery, the analysis shows a form of violence that emerges as a response to the endless search for a life of convenience inside the walls of the GC. To this end, the article advances the concept of the dialect of disarrangement, the enforced but uneasy encounter between two subjectivities that inhabit the GC: the patrons (the homeowners who consume the easy life) and servants (the racialised service staff). In the GC, violence emerges in attempts to respond to this (in)convenient encounter via misrepresentations of both patrons and servants as out of their place.