A Calculation Example

Earlier we have discussed on this blog some aspects of the economic structure of space settlements as part of our ideas of social reform. In particular we have defended the introduction of a basic income as well as the promotion of housing cooperatives. In this post we just give a calculation how things might work out.

Under our proposal the main procedure the finance home ownership is the hire purchase rather than mortgage loans. In order to stimulate this, the government should provide interest free loans to housing cooperatives, so that those cooperative can build houses.

In this post we will assume that the basic income guarantee is set at 1,200 Stella* per month per person. Suppose that Alice hire purchase a home worth 150,000 Stella, and the next 30 years she pays every month an instalment. This means that Alice has to pay 30×12=360 instalments, and the amount of money she has to pay each month is hence 150,000/360=416.67 Stella (rounded up). Which is slightly more than a third of her monthly basic income.

The clever reader might have noticed that 416.67×360=150,001.20 Stella. Hence Alice has paid 1.20 Stella too much in the end. How could we solve this? My guess would be to subtract that 1.20 Stella from the first (or the last, if you want) instalment, which would be 415.47 Stella instead.

*Here we assume that 1 Stella is approximately 1 Euro.

3 thoughts on “A Calculation Example”

  1. I think of another alternative. Is it possible the government or the housing cooperatives could build enough houses, charge a rent that is sustainable allowing them to meet the demand and people don’t have to own the houses per se.

    1. That’s certainly a possibility. However, the idea of a housing cooperative is that the renters are also the members of the cooperative, hence they would still own the houses, albeit indirectly in that case. From a strict legal point of view, under a hire purchase contract property rights are only transferred when all instalments are paid, which in my example would be after 30 years.

      I am personally not in favour of the government being directly involved in housing. First of all, the government will already own the land upon which the houses will be build, and private persons can only lease land from the state. Second, the essence of a liberal space settlement is to keep government interference as minimal as possible. Therefore we want to promote housing cooperatives, which are association of private individuals rather than government organs.

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