this post was submitted on 12 Jun 2024
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This sounds extremely effective at shifting housing stock. My only question is what happens to people who can't get mortgages yet? You can't just give out a mortgage to anyone who asks. The banks did effectively that in the lead up to 2008 and we saw how that worked out (granted the specifics are far more muddy, but it is a period in recent history where many people qualified for mortgages they shouldn't have qualified for, and a ton of people ended up foreclosing
You can give a mortgage to anyone who wants it, just not the type of mortgage that you're thinking of. Private mortgages don't have the follow on effects that traditional mortgages have. Private mortgages aren't bought and sold on a secondary market. Private mortgages aren't wrapped up into CDOs or other derivative investment products. A lender who issues a private mortgage can't turn around and sell it to a different lender. They can't package up a bunch of garbage loans into a new security and sell it to an unsuspecting buyer. The 2008 housing market collapse wasn't because of bad mortgages. It was because of the entire house of cards that was built on top of them.
Whether Adam rents a home to Bob, or Adam issues a private mortgage and sells to Bob, Adam is taking substantially the same risk on Bob. Adam is already prepared to take that risk as Bob's landlord; there is no valid reason why he shouldn't take that exact same risk as Bob's lender.
Land contracts are another option.
A land contract is, effectively, a rent-to-own arrangement. The tenant/buyer earns equity from day one. But, if they default on the contract on the first 3 or 5 years, they lose that equity. After that 3 or 5 year period, the equity they built is, effectively, the down payment on their mortgage.