05/22/2007 FAQ #6: Why will SwapRent (SM) help improve the quality of the neighborhood of a typical public low-income housing complex?

The ability to separate the economic ownership from legal ownership has many other advantages. For example, the moral hazard and the home improvement issues of the conventional renting will be alleviated through the economic renting concept of SwapRent (SM). Having the legal ownership will give you the alpha of holding an asset, switching to economically renting let you hedge away the beta of owning a property. Therefore a public housing project with SwapRent (SM) based economic renting will be a much better neighborhood than the one with a conventional renting only because people will invest in home improvement freely since they still legally own it no matter what happens next with the real estate markets in general. They will only give up the neighborhood appreciation/depreciation potential represented by a neighborhood or city property price index (such as the MSA level of the OFHEO HPI) in exchange for receiving the monthly subsidies. Whatever home improvement investment they have already made to the properties they will be able to get to recoup those investments when they actually sell the properties legally later on. The development of this new economic concept will have great implications for urban planning and public housing policy in the future.