Treating Houses Like Copyright… And Then Securitizing And Selling Off The Revenue From Future Resales
from the ah,-financial-innovation dept
Earlier this year, we wrote about the attempt by some housing developers to demand a cut of every future sale of the homes they built. This was similar to various attempts around the globe to add a resale right for artists, such that they get a cut every time their artwork is resold. It makes no sense for artists (and actually does serious harm to artists), and it makes even less sense for houses. But how did the folks who came up with this plan defend it? By citing copyright law, of course, saying that it was no different than an author or a musician getting royalties from the sales of their works.
Reader Mark points us to another article about this attempt to contractually create a resale right for homes. This article has a lot more details about the plans, put together by an financial firm called Freehold Capital Partners (which the last article called a Texas company, but is now referred to as a New York company — which is interesting, given that the last article also noted that Texas law probably prohibited this practice). However, this article notes that the whole plan is prefaced not on actually giving the builders a cut of all future sales, but (of course) to securitize and sell off the potential future revenues to investors. Forget securitizing mortgages, now we’re talking about securitizing a bizarre contractual resale right that means you have to pay some random investors any time you sell certain houses. Yikes.
Thankfully, plenty of folks are realizing how sketchy this is, and various states have specifically outlawed the practice. The article quotes some developers whining about how much nicer it is to be able to get a big chunk of money from these kinds of deals, but given that the chunk of money comes from a rather questionable process, they shouldn’t have relied on it too much in the first place.