As our readers well know, to be a young upstart is to be a transformational figure — someone who applies a passion for change and a knack for innovation to an industry, profession or pursuit.
Upstarts emerge in the unlikeliest of places. For some, the world of real estate investment would be such an unlikely place. Canadian real estate investor Adam Gant is disrupting this notion by joining his knowledge of real estate with a mission to alleviate the North American housing crisis with fresh ideas. And he has gone about it in some unconventional ways, such as introducing the financial concept of “shared equity” to the world in a novel.
Recently we engaged Adam Gant in a wide-ranging conversation that touched on the book, the concept and his devotion to bringing change to U.S. and Canadian housing markets.
Q: What are some of the housing issues you seek to address in your research and advocacy?
Adam Gant: In North America, the issue is not only a question of supply and demand; it’s a matter of access and affordability. In major metropolitan markets and beyond, the whole concept of a starter home or an affordable rental unit is disappearing. Banks, builders, and many realtors focus on high-end buyers, where they believe more significant profits can be made. Meanwhile, single-family homes are being bought up by large investment firms that seek not to create homes for families but revenue streams for portfolios.
The median-income family faces an array of obstacles to home ownership, and many of these barriers are relatively recent. Credit and income requirements have tightened for mortgages, prices and interest rates are high, and supply is limited. One reason for that is that homeowners with low mortgage rates, the rock-bottom rates that were typical until central banks began hiking prime rates, are reluctant to let go of their houses. Even if they’d like to move, they know they’ll never find a similar bargain in today’s housing markets. This has the effect of locking millions of families out of home ownership.
Q: In your view, what is the answer?
Adam Gant: Solving the housing crisis will require a comprehensive approach and the involvement of a variety of stakeholders, but one key, in my view, is the idea of “shared equity.” It’s a concept that I have been involved in the development of over many years, by reading volumes of books and research papers, and travelling across the globe to see first-hand how housing markets and financial models work in disparate countries. I analyzed markets from Asia and Europe and learned what works and what doesn’t. Realizing that not every aspect of a financial model is transferable in a cross-national and cross-cultural sense, I distilled the essence of a workable, practical, market-based model that can improve affordability and broaden access to housing in North America.
Q: What is shared equity, and why did you decide to promote it in a novel?
Adam Gant: It’s true that in the academic world, the normal route for a new concept is initial inspiration, subsequent development of a thesis, and then publication of a long, dense piece in a university or professional journal. The idea may cause at best a brief stir in academic circles, before fading away as it is filed away in the stacks of a business school library. I chose a more exciting and emotive approach — through the pages of a fictional narrative. The book I co-authored, A House Shared, has interesting characters, an engaging plot, all the elements of a great story, plus this gem of an idea at the center of it all, shared equity.
The CliffsNotes version of shared equity is that a prospective homeowner can enter the market with just a small deposit or down payment, ideally one percent. The home buyer does not need to qualify for a mortgage upfront. The buyer is matched with a home where the monthly payment is comfortable for their family’s income level and upon moving in, the buyer shares in the equity growth in the home from the price appreciation and mortgage amortization. The exact percentage share of the home equity growth can be dependent on the deposit size. The home buyer keeps their share of the equity even if they don’t buy the home which is anathema to the outdated rent-to-own schemes of yesterday. It’s a model of home ownership that promotes affordability and most importantly equity growth. It can open up access to potentially millions of middle-income families that are involuntary renters or may have no long-term residence at all.
Q: Can you detail, without giving the book completely away, what happens in the narrative of A House Shared?
Adam Gant: Sure, In A House Shared, the main characters find themselves in the middle of these stark realities. The narrative follows the struggles of a family living a happy and seemingly financially secure life. When misfortune strikes, they find themselves fighting to hold on, and fighting against market forces that make eviction seem inevitable and being without a home a real possibility. The idea of shared equity is woven through A House Shared, lifting the characters beyond their circumstances into a life of true financial security. The moral of the story illustrates shared equity’s potential for saving countless families from the risks and anxieties of this same situation. A friend of mine described the book as Keynes meets Capra, and as a believer in the power of fine-tuned financial and economic forces to brighten the lives of communities of people, I can’t think of a higher compliment.