We are purchasing the first apartment building to be a “Foundation House” in San Francisco! (More details on the building). This is a form of Endowment for non-profits in the form of usable housing and real estate investment rather than putting money in an investment fund. This blog has argued that this can provide better return over the long term and also provide a stable infrastructure for non-profit workers that can sometimes be priced out of living near their workplace. Just one of the 11 apartments in this building could be a $23,000 per year benefit to non-profit workers.
Now we are about to launch it! This post will go over the current idea.
Foundation House Structure
A separate non-profit, the Kahle-Austin Foundation House, will own the apartment building, and have 2 types of occupiers:
- Market-based rental that are normal San Francisco folks, in fact the contemplated property is almost full already and they will just be normal residents.
- Cost-based licensees at roughly 30% of market-rent that will be full time employees of the Internet Archive and other select non-profits that will have most of the use of an apartment, but must do other functions to maintain the building, and share the unit as need arises.
The license cost is set by taking all non-finance costs of running the building and dividing it pro-rata over the units. Thus if all of the units are licensed at cost, then the building pays for itself, including building a reserve fund for maintenance. There are no debt-costs in this calculation, therefore the lower costs reflect a debt-free house. If there are market-based renters, then this extra money goes to pay for a mortgage or just accumulate in the non-profit so it will be used for charitable purposes such as buying more Foundation Houses.
To ensure that the building stays debt-free, beyond an initial mortgage (if any), there will be a covenant on the building and a provision that the building not be sold or borrowed against. If this covenant is broken then a separate organization gets the house. This idea is so strict as to take away any incentive for the owner of the building to sell the property or take money out via a loan. Once the house is paid off (and it might be paid off by an initial generous donation), then this is to be a debt-free house and reflect the lower cost to the non-profits it benefits. This is the whole point– we are trying to ensure it happens for a long time.
If the original donation does not pay off the house completely then it will have a mortgage. This can be paid off by keeping market-based renters in the units for as long as it takes. By historical calculations a fixed based mortgage can be paid off by the gradually rising market-based rents in about 12-15 years. But at some point the house will be debt free and can stay that way forever.
Non-Profits are listed as Beneficiaries
Non-profits would offer lower cost housing to full-time employees to aid in attracting and keeping the best people over long periods of time. We hope that the non-profits will also benefit by being able to lower employee costs because of this benefit.
A set of non-profits are listed by the original funders of the Foundation House (and this can be changed in some way that is not figured out). In this case the Internet Archive will be the beneficiary. When an apartment unit becomes available, the non-profits may propose employees that are interested. The Foundation House selects the most appropriate to fit into and help the house, and if none are put forward or none are appropriate for whatever reason, then the Foundation House can elect to find market-based renters.
Non-profit employees get lower cost housing
Licensees are different from normal renters because it is tied to their employment,–they help with the upkeep of the property, and it is not exclusively theirs to use. So this is a bit odd, and may not be for everyone. But because it only costs 1/3 of the normal market price, it could be a very welcome benefit. We imagine that even after someone leaves the non-profit, then there is a transition period to help the former employee.
In the case of the building we are buying, it is in a great neighborhood of San Francisco and easy walking distance from the Internet Archive headquarters. By being so close, an employee might not use or even have a car which could be an additional yearly savings of seven thousand dollars.
If the difference between Market based and cost based fees are $1,500 per month, then the reduced cost to the employee could be $18,000 of after tax money, or about $23,000 gross savings per year before figuring on transportation advantages.
Original Donor
The value to a donor is to put a stable foundation under some non-profits so that they can focus on their mission rather than fundraising as much. Against the ups and downs of investments and the unpredictability of funding cycles this Foundation House would be a concrete value to the non-profits. As long as there are employees there will be need for housing, and if the non-profits do not want to use the properties, then new ones could be selected or it could just accumulate money to be used to aid those non-profits financially or build more Foundation Houses. In this way the value is never worse that a real estate investment, but could be much more valuable as stable long term housing for employees that have dedicated themselves to service.
Personally, I want to help several non-profits, but I worry about the debts that some are putting on themselves because this can be destabilizing in a downturn. Further, I am not that excited about having the endowment go into a big investment fund that is managed by people I don’t want to pay and often they invest in many ventures and companies I do not want to be a part of. Therefore, investing in housing that has no middle-man and is something that theoretically will keep aiding good works for decades or centuries, I feel very comfortable with this approach.
Let the experiment begin!
can someone please contact me bout this
housing program kiellshua90@gmail.com
Another first for Kahle-Austin! Congratulations and here’s to more innovative thinking around SF living which for a variety of reasons has become expensive and untenable.
Cheers,
Sim
Congratulations on getting the building and making the experiment real! It seems like a very good way to invest in an organization, and in crazy overpriced cities like San Francisco and New York could make a big difference. My main concerns are:
– having to “share the unit as need arises.” Having some control over one’s home can be crucial to mental health. Depending on the demands of “sharing,” being at the mercy of “as need arises” could be extremely stressful. People vary in their need for stability at home, but this could cause real stress (and lock out those employees who know themselves enough to recognize that). Even at a super-groovy nonprofit, people need to get away from work to a safe home sometimes.
– “do other functions to maintain the building” – if that were a requirement for a building in New York I’d run screaming. Maintenance needs spin out of control very quickly, and competence in building maintenance is very different from competence in the nonprofit job. There’s a reason building maintenance and management are their own professions. The employee-tenants are already working for the nonprofit and accepting the apartment in lieu of higher wages; “other functions” could easily become a second job.
Of course paying through the nose for a cramped apartment is stressful too, so these will surely be acceptable tradeoffs for many. But the work required of the tenants could easily exceed the apparent money savings if not strictly limited. I’m looking forward to hearing about how it works out.
“…but must do other functions to maintain the building, and share the unit as need arises.”
This is a very bad idea. Housing tied to employment *and* to janitorial duties *and* to there always being the possibility that you have to entertain houseguests?
Are you assuming that everyone who wants a place in these residences is a young, childless worker with no intention of starting a family? Because I can assure you, if my residence were contingent on cleaning up anything other than my toddler’s messes, I would be out of a home.
You’re also setting up the residence community for resentment and divide.
But I dunno, maybe making non-profit folks the de facto indentured servant class of San Francisco was what you were going for.
So, there are a few problems with how you’re envisioning this. I know you’re responding to what really is a housing crisis in SF, and you want to help, but this isn’t going to work the way it is.
A salary represents agency, not just the ability to pay for the bare essentials of life – it means saving, tradeoffs, and whatever else someone decides they want to do with it. Fixing the wage gap between NGO employees and for-profit employees like this means that the NGO employees (or who ever is eligible here; I’m using that as a catch-all word) don’t have the same agency in the world and don’t have the same labor rights that an employee at a for-profit company would have. This is obviously kind of problematic. So is the assumption that because you’re working at an NGO you have the time to be a janitor for everyone who’s paying market rates — the people I know doing NGO work tend to have much less, not more, time than people working at for-profit companies. If nothing else, their jobs tend to demand much, much more of them.
Tenant legal protections are very important. I know you’re a good guy and really care about people — that’s why you’re doing this — but it’s still really critical that tenants in a place like this have full legal rights. Having your housing depend on your employment is a serious problem here. Likewise, not having a right to privacy in your own space, if you’re expected to share it with others, isn’t ok. Also, quite specifically, SF has rent control laws, and something like this would mean that if someone changed jobs, they’d lose rent control seniority. I’m not saying that that system is perfect, but it does likely make this illegal.
At a moral level, however, it’s more problematic. If this is only housing for the employee, it means that people who have families or children can’t live there. Likewise, the lack of privacy means that if you’re not young, straight or out, and male, a space like this is very unlikely to be welcoming to you. This means that by providing those people with an easier time of finding housing, you’re actually increasing the exact same kind of discrimination that this project is intended to stop. Because this is coming from within the tech community and because the tech community is the part of the SF NGO space that has enough money to fund stuff like this, these spaces are more likely to end up serving tech community NGO employees — like the Internet Archive. This means making the housing inequality in SF even worse, if it scales.
There’s a ton of work that needs to be done in SF around affordable housing, and I’d be really delighted to see you working on it, for the good of everyone. Likewise, I think there are absolutely things that can be done specifically for NGO employees to make things easier for them — transitional housing is definitely one area where things could help, because even if someone is going to find cheaper housing, it’ll take them a while. Likewise, something that’d help them with loan qualifications and payment structuring such that people who wouldn’t be able to get into a condo in SF would be able to would be amazing, especially if it’s structured such that if they move out of NGO work but don’t immediately start making tech industry dollars they can keep their house (because working at low wages in an NGO does change your long-term earnings curve).
I look forward to hearing about how this scheme can be made to work *for* the folks it’s trying to help, and how they can be protected inside it. Likewise, I’d love to see a real commitment for fair-market pay for tech (and other NGO employees).
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First, sorry to hear about the fire in the Internet Archive scanning room. Glad no one was injured in it.
You have another more general blog post related to housing idea from July 6, 2011, called “Really Owning our Homes: Home/Land Security”, focusing on the “perpetual debt” aspect of the problem. Good to see the success of “Foundation House” in a later blog post, with success along some of those lines. You could also look at the “Albany Free School”, which is a non-profit alternative school in Albany, NY that has supported itself in part with the rent from real estate purchases nearby early on, and which could then also provide no-or-low-cost housing to staff. Certainly many universities have programs to make housing cheaper for faculty, staff, and students. So, it is a model that can be useful. But ultimately, as much as this success will help some people, which is to be praised, I don’t think such projects are a long term answer for helping most non-profits in the USA. People have already pointed out some practical issues above, but even if they could be worked out, the plan itself just won’t scale to the size of the need even if it may work well for some specific situations and donors. A better broader answer might be something like a “basic income” for all US residents or other broader changes to our economic landscape based on changes in values. I feel the answer is more likely a new enlightenment as part of a paradigm shift in how we look at post-scarcity economics. I write on my own site about how there are at least five major types of economic transactions: subsistence, gift, exchange, planned, and theft. The balance between those five types of transactions is some reflection of a society’s guiding mythologies and available technologies. We need to think more about the moral basis of our economic models. Below are some rambles in those directions.
There was a time when the Earth seemed so big and there were so few people (just millions), that one could take for granted the availability of resources from the land for anyone willing to make the effort to obtain them. Although even then, the knowledge of how to turn raw materials into useful resources was a product of generations of accumulating collective wisdom from experimentation. C.H. Douglas’ “Social Credit” idea (a forerunner to a “basic income”) is based on the idea that all humans have some equity in our common cultural inheritance.
From Wikipedia on “Social Credit”: “Douglas disagreed with classical economists who recognised only three factors of production: land, labour and capital. While Douglas did not deny the role of these factors in production, he saw the “cultural inheritance of society” as the primary factor. He defined cultural inheritance as the knowledge, technique and processes that have been handed down to us incrementally from the origins of civilization. Consequently, mankind does not have to keep “reinventing the wheel”. “We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the property of all of us, without exception.”[8] Adam Smith, David Ricardo and Karl Marx claimed that labour creates all value. While Douglas did not deny that all costs ultimately relate to labour charges of some sort (past or present), he denied that the present labour of the world creates all wealth. Douglas carefully distinguished between value, costs and prices. He claimed that one of the factors leading to a misdirection of thought in terms of the nature and function of money was economists’ obsession over values and their relation to prices and incomes.[9] While Douglas recognized “value in use” as a legitimate theory of values, he also saw values as subjective and not capable of being measured in an objective manner. Thus he rejected the idea of the role of money as a standard, or measure, of value. Douglas believed that money should act as a medium of communication by which consumers direct the distribution of production.”
Isn’t something there about cultural inheritance in harmony with the global value of the Internet Archive project? That cultural inheritance is making possible so many amazing things (plus some really scary ones when technology of abundance is misused out of fears of a need to fight over scarcity).
These days, there are billions of humans on the Earth, with an average of about one person per five acres of land. So, there is more pressure to compete over access to specific spots of land — even though some real estate with good climate like the Bay Area may have been in demand and struggled over thousands of years ago. Increasing population both creates competition for fixed resources (William Catton’s argument that people consume resources and take up space) but also increases the collective wisdom and imagination to create new resources (Julian Simon’s argument, that people make resources and make spaces worth being in). However, we know so much now, and that total available knowledge is increasing so quickly as we share it via the internet, that we can do more with what we have, including make more of marginal lands. For example, California produces a lot of food now because of the diversion of rivers and tapping underground aquifers with modern technology (admittedly, a set of controversial and potentially unsustainable practices). In the future, solar or fusion powered desalination plant and rock grinding plants (search on “Remineralize the Earth”) might make more arid lands bloom indefinitely across the globe. We also know enough to make machines like robots to do more and more labor. We might soon be able to make space habitats that duplicate themselves from sunlight and asteroidal ore and which together could house trillions of people in “Elysium” style comfort. Our solar system is, in that sense, vastly underpopulated, whatever one might say about the Earth.
This improvement in collective know-how even includes making better and better scanning robots. For an example, at the demonstration level with University of Toykyo’s BFS-Auto book scanner, a smartphone camera could soon scan the entire contents of a book that is just quickly flipped through at 250 pages per minute. This technological advancement continues in all areas and makes most human labor less and less valuable in the marketplace. That in turn stretches to the breaking point the “income through jobs” link which guarantees the right to consume in a capitalist society. See the 1964 “Triple Revolution Memorandum” for more on that theme. More and more people, like Marshall Brain, Martin Ford, or even Nobel-prize-winning economists like Paul Krugman are pointing out how new technologies of automation are leading to greater wealth concentration in US society (since wealth can buy laws to defend it). The increase in homelessness and rough living across the USA is part of that trend.
Getting back to non-profit housing and economics, people who choose to devote more of their time towards the “gift economy” of the non-profit sector are not going to be paid as well as many other workers. They are not going to be receiving from their labors as many debt-created Federal Reserve fiat dollar ration units which dominate most of the US exchange economy as many workers in the exchange economy. In general, exchange-oriented businesses strive to privatize gains and socialize costs, whereas many philanthropic efforts try to privatize costs (to the funders and workers) while socialize gains. So, non-profit efforts generally (not always) pay a lot less than for-profit efforts. So, non-profit workers will be at a disadvantage in the exchange economy when doing things like bidding on housing. Yet, there are many places where exchange-based markets fail, in particular because of positive or negative externalities (like community or pollution), or unaccounted for systemic risks (like nuclear or financial meltdowns), and similar things. What is the best way to address that concern?
It is possible to partially address this issue of non-profit workers having trouble affording housing through creating housing specific for non-profit workers through some form of planning or other philanthropy. Congrats on just doing that! But it unlikely such ideas will grow very large. Part of the issue will be the limited funds available for the non-profit sector to begin with, making it hard to scale. The idea will likely have problems of determining whose work is “worthy” enough to merit subsidized housing. In general, that is a problem of all such merit-based programs that try to selectively support some people and not others. Who decides? And on what criterion? You rapidly run into issues of popularity contests, social networking, luck, vested interests, nepotism, fashion, and a variety of other problematical issues. In general, it can be hard to evaluate the future value of any labor today, since there are so many aspects to what labor produces (including learning by the individual and society). I remember reading in 1997 a not-very-complementary article in Wired magazine about the sadly late Michael Hart, the founder of Project Gutenberg, “Hart of the Gutenberg Galaxy”, including a mention of how his basement toilet did not work and making him out to be somewhat loony including for scavenging in dumpsters for discarded electronics. Would the next Michael Hart in some newly emerging area of volunteerism qualify for this cheaper housing? I’d suggest probably not. Some people may think digitizing books is worthwhile. Others might think telling people to eat more vegetables or get enough vitamin D is worthwhile. Others might argue advocating for political change towards a basic income is worthwhile. Who is to decide which activists are worthy of low rent today? Also, home ownership discourage social mobility in some ways, such as taking a new job in another location because of the difficulty of selling a home. Likewise, ideas like “rent controlled” apartments discourage people from moving when they might otherwise want to, and encourage people to game the system in various ways. The big NYC apartment at the heart of TV show “Friends” was, as backstory, supposedly an illegal sublet from Monica’s grandmother, given a waitress and a caterer otherwise could not afford some place as nice as that in NYC. How soon before there are illegal sublets in non-profit housing?
I have the same reservations about ideas like what Ron Shaich, CEO of Panera Bread, does with “Panera Cares”. That charity has a handful of stores where you can pay as much as you want for Panera products and which provide Panera job training to disadvantaged people. That shows someone’s heart is in the right place, and no doubt does help thousands of people on a daily basis. But the idea doesn’t really address the magnitude of the issue of hunger in the USA. Tt is good to bring attention to the problem of hunger in the USA, but it does not scale. An like most such ventures, unless they are everywhere, eventually high demand may find the limited supply and things may start to collapse for whatever reasons as the charitable impulse becomes overburdened and “compassion fatigue” sets in. While I don’t agree with everything he says, including his dismissing of a “basic income”, in “RSA Animate – First as Tragedy, Then as Farce”, Slavoj Zizek makes some good points about the limits of “charity” as a band-aid for inequities fundamental to capitalism-as-we-know-it. I feel, at least in the short-term, we need to explore ideas like G. William Domhoff writes about in “Planning Through the Market: More Equality Through the Market System” — even as long term we may see broad increases in other types of transactions beyond exchange ones, whether producing local power through 3D printed solar panels, planning cities better through the internet and computer modeling, or facilitating giving away stuff we no longer need through a global automated material handling logistics system such as Dr. Michael Kay suggests.
An alternative to dealing with these broad issues one building at a time is to go back to the moral roots of the economic issue and to think about recent changes in technology. In the 21st century, individual human labor is now a very small part of most (not all) value-producing activities. It may be essential, but it is the collective know-how, our collective usually tax-funded infrastructure like for roads and weather satellites, and the Earth’s total resources that make most high individual productivity possible. But even as most human labor has less exchange value, human labor still has great value in the gift economy (like by volunteerism including helping raising the next generation well) and in civic participation in the planned economy (like by voting or running for public office). That realization leads to making the moral argument that every human by right of birth should get some equity in the Earth and our collective know-how, and as an equity owner, should get some fraction of the fruits resulting from all that (even without having to provide labor). People who provide the labor or other needed items for production might get more perhaps, but they should not get it all. On that moral basis, everyone would have a right to shelter, such as already is, say, the NY State Constitution. However, planned solutions often (not always) go badly and expensively because they are out of touch with real information from human needs in a capitalist society. For example, in a recent New Yorker article on NYC homeless, it says it typically costs over $3000 a month per a family in New York State to provide shelter to the otherwise homeless, which is far above market rates for what they get. So. it makes more sense just to give people money so they can get their own shelter at market rates, because the market can be very efficient at telling people things about relative choices. In this case, the high cost of housing in San Francisco is in part perhaps saying something about failed urban planning policies or community development practices or so on elsewhere. However, that runs into the problem that if you give money to some people, more and more people may begin to game the system to get something. So, what can we do about that?
Right now, between social security, welfare, unemployment insurance, and public schooling, the US transfers about US$500 per month on average to every resident. Of course, that money is not distributed evenly. But what if it was? What if we raised it to say US$2000 a month per US resident? That would be about half the current US GDP. That money would replace the need for those other institutions. Part of it might be perhaps dedicated to funding single-payer universal health coverage. One could make an argument that at least half the value of anything produced in the USA is due to access to the land and collective knowledge. The US GDP was about half the current size in the mid 1990s. So, that amount of GDP was enough to motivate entrepreneurs in the 1990s. At the same time, the USA could dispense with many laws related, such as minimum wage laws, and most of entire bureaucracies like those devoted to welfare or unemployment or public schooling (since families would now have the time to homeschool or the funds to hire teachers of their choice in the marketplace). In practice, we would see income taxes starting at 50% or more, maybe 70%, as well as probably wealth taxes like real property taxes. But, most people who chose to work would still come out ahead because, for example, a family of four would start out with a tax-free income of US$8000 a month, which is more than most US millionaires have to live on these days. So, immediately many families in the USA could spend like millionaires, and the real economy would start booming again with all that new demand for real goods and services (as opposed to just having most money in the casino economy of the finance sector).
With a basic income of US$2000 per month per person to all US residents, I’d suggest we’d see a huge increase of volunteerism. We’d see more people scanning books. We’d see more people with time for being more involved parents. We’d see people with more time for being good neighbors. We’d see an increase in educational alternatives. We’d see more free software and more free content. We’d see more well-fed Mimes on the streets. We’d see more people with time to focus on learning how to be health. We’d see more people growing their own organic vegetables in local gardens. We’d also see a lot of people deciding to take that money and do their technological volunteerism somewhere with cheaper rents than San Francisco. 🙂 We might even see addictive behavior like alcoholism go down because, as the “Rat Park” study showed in the 1970s, much addictive behavior is the result of stress. A basic income would address a lot of root causes of problems in our society. For more on that, search on “US BIG” or “BIEN”. Or, to try to look at the benefits of a basic income from the perspective of other than poor people, search on my essay: “Basic income from a millionaire’s perspective?”
Is it really that much more effort to work towards a basic income for all than it is to work towards one or two local housing projects that will help just a handful of people and leave the deep problems unsolved? Still, “thing globally, act locally, plan modestly” as Rene Dubos said. On the other hand, would we have many of the national labor protection laws we have today or things like the five day 40 hour work week if people had only tried to fix bad workplaces just in their own specific hometowns? So, there will always be conflicts in trying to decide where to put our time and energy. It’s understandable to want to put that close to home, and there is great value and good psychology in that approach. But I’d still suggest that we have to move beyond the moral argument of the Protestant “work ethic” and an “income through jobs” link to the moral argument that every human by right of birth has a right to Franklin Roosevelt’s “Four Freedoms”. Those are “Freedom of speech, freedom of worship, freedom from want, and freedom from fear”. In a capitalist society based around exchange transactions, and with robots, AI, and other automation rapidly proliferating, the easiest way to ensure freedom from want is simply to ensure every person has some money (since the market only hears the needs of people with money) and let the market sort out supplying what people need and want (until we eventually all get Star-Trek-like 3D printers, “Mr. Fusion”, and organic gardening robots). Yes, a basic income requires things like the government taxing and redistributing money. However, as with Alaska’s Permanent Fund, some of that money can be from royalties on things the US government controls like mining rights, fishing rights, the broadcast spectrum, the granting of monopolies and limited-liability corporate charters, and so on. It really comes down to what mythology of wealth we choose to believe in that can be made to work well enough for enough people.
See also, for more on the “Mythology of Wealth”:
http://web.archive.org/web/20051229193225/http://conceptualguerilla.com/mythologyofwealth.htm