Piggyback
On the playgrounds “Piggyback” is riding on a friend’s back or shoulders. In the housing market “Piggyback” means selling your unused living space or space above your house to an outside person to reduce your overall debt.
The 1990’s have brought large value gains in the housing market across the USA. In some areas house values have been rising at well over 10 percent per year. Banks have greeted homeowners with open arms in the form of home equity loans. They don't even ask you why you need the money. Stop a minute! Does this look like the bubble that just hit the Stock Market? Example: Yahoo! was around $10 in 1997, went up to $250 by January 2001 and back down to around $14 today. There was even a movie a few years ago in which a son was able to talk to his father in the past on a ham radio. One of his messages to his father was to buy Yahoo!. If the ham radio was still working, he would give his father a message “Sell Yahoo! before 2001”. I am not saying that Yahoo! is a bad company. I personally like their products. We need to understand that when the value of Yahoo! was at $250 only a few investors purchased Yahoo! stock at that price.
Even if your house is valued at two times your purchase price, your house’s true value is based on when you sell it. Houses have on average been a very sound investment over the years. This is why the banks are willing to lend you money on your equity in your house.
The “Piggyback” program would be a new way to remove equity from your home at the same time helping reduce urban sprawl in the major metro areas. Cities cannot continue to spread farther and farther out. We need to move up not out when it comes to residential housing.
Homeowners with unused living space could sell the space to an outside party. Example: You own a two-story house but only need the first floor to live. You sell the second floor to a person who then converts the space into a separate living area. You are turning a house into a duplex. Each person has his or her own entrance, kitchen, bedrooms, bathrooms, and living room. Why would you do this? You purchased your home 10 years ago for $120,000. Your home’s current value is $280,000. Your remaining mortgage on the house is $100,000. The person purchasing your second floor gets a mortgage of $150,000 to purchase your second floor plus convert it to a duplex. $50,000 goes to the building contractors to covert your second floor into a separate living space. $100,000 goes to your mortgage company to pay off your home. You can still sell your section of the duplex at any time plus you are now living without a mortgage on your house.
Homeowners who have a single story home could sell the space above their home to an outside party. You are turning a small house into a duplex. It is the same goal as above.
The above proposals are based on large metro areas where land is very limited.
How do we make the above “Piggyback” solution a reality?
Currently most local city zoning ordinances will prevent you from converting your home into a duplex. These ordinances can be changed. Cities looking for affordable housing should also look at the “Piggyback” program in helping them increase the numbers of affordable housing units. To get the “Piggyback” program to become a reality will take individuals willing to sell their unused living space or space above their house to a buyer to reduce their overall debt.
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How to find your elected officials: TownHall.com has a section where you can find out who is your elected officials in your area.
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