urbanism

US is short about 1-5M housing units and the surge in multifamily construction is ebbing. 

Solution: create a secondary market for construction loans to increase liquidity in the construction finance market. 

This would allow developers to leverage up their capital and build more affordable housing units.

US is short about 1-5M housing units and the surge in multifamily construction is ebbing. 

Solution: create a secondary market for construction loans to increase liquidity in the construction finance market. 

This would allow developers to leverage up their capital and build more affordable housing units.

https://omny.fm/shows/odd-lots/a-former-treasury-officials-radical-plan-to-create

new methods of financing construction are a GOOD IDEA, but the core problem is that construction as a business is high risk, low reward as a result of high project to project variance and a cutthroat bidding prices that drives margins extremely low

which means your idea fundamentally will lack liquidity in a market full of investors maximizing investment return

that's why financing is such major bottleneck to the industry, especially now with higher rates

my point is that there is a fundamental lack of buyers of these loans, because at scale it's just not a great investment type

even if you repackage it by dividing the loans up to average out the variance, all you'll do is either create a complex low margin derivative financial product (because the hedges will destroy your margin on loans to an industry that can't afford to pay for expensive loans) or you'll create a financial product with immense correlated risk ( because it isn't hedged against the entire industry of contractors and developers all going bust in a housing crash) like the mortgage backed securities that all had correlated risk that caused the 2008 crash

i'm not saying these financial derivatives can't be created, I'm saying they wouldn't be a very good investment and the smart money wouldn't buy enough ify them to make a big difference

worth doing though, since small stuff adds up and it's a more pro social way of investing in real estate compared to buying REITs, which makes things worse

I don’t see how the market will fundamentally lack liquidity. Isn’t the whole point of this that the government increases liquidity by providing these loans?