It’s not so hard, really. It just takes some coordination. There are two elements: city financing with limited ownership, and barebones unfinished construction.
Like many cities, San Francisco already has in place a program that assists people with modest or low income to live in their own apartments. One of its important elements limits the resale price. Buyers cannot expect to profit greatly, as they might on the open market. Nor can they “flip” a unit, because they must personally live in it for several years.
Now imagine some changes to that program. To make a home affordable, the mortgage must cover only the bare bones of construction. The cost of everything else you put on the mortgage, such as appliances, will be tripled. That is because you will pay interest on them, and they will not last for the duration of the thirty year mortgage. The mortgaged apartment must therefore consist of rough plumbing, electric, unpainted drywall, baseboards and sub-flooring. No kitchen cabinets, no bathroom cabinets, toilet, or tub/shower, no appliances. In other words, it’s a pretty naked place that’s not yet livable.
It is this naked construction that the mortgage pays for. Its nudity is what makes it affordable.
Now, the buyer is expected to separately purchase everything else needed besides the mortgage. Because this cost will be considerable, the required mortgage down payment must be minimal or zero, and the buyers must prove they have the necessary savings. The buyer will be approved when a level of savings sufficient to buy what is needed for move-in is achieved.
The city can and should assist in many ways. First, the city must have skilled manager/inspectors for such units. Second, the down payment and finishing cost should be through an agency or bank that can be monitored by the city’s manager/inspectors. Third, the city should have suppliers for every part of finishing at a discounted price.
Buyers have a range of city-approved options for finishing their apartment. If the buyers are skilled, they may be able to do every part of the finishing themselves. This is called sweat equity; the physical work a buyer puts in makes the cost lower. Some buyers will be able to do literally everything. At the opposite end there will be buyers who are not able to perform the necessary work, for various reasons. Therefore, they must use approved craftspersons. This may require them to save additional money to pay for skilled workers.
Manager/inspectors for the program have an important role. They must monitor the buyers’ financial details to assure their ability to carry through their financing. They must consult with the buyers to select everything to finish the apartment, including bathroom and kitchen fixtures, cabinetry, and lighting. They must arrange for the apartment finishing, monitoring the progress and quality of buyer’s work, and scheduling timely construction with approved workers when needed. The completed work must pass construction codes and be of high quality. Besides the benefit of city arranged financing, cost savings are had with high quality construction goods vetted by program officials.
Construction workers are often aware of ways to save money that are not commonly known. In San Francisco, for example, the local recycling agency collects unused paint. The recyclers are able to supply paint in large amounts, tinted to order, and available to residents for free. In other instances, recycled wood flooring from a tear-down may be available only for a brief period. Carpet made from 100% recycled fiber may be available. Like-new used cabinetry, sinks, and appliances, may be available on short notice. The manager/inspector must be able to determine the suitability of such products.
So, the buyers of such units have a number of advantages that will bring the cost of ownership within reach. This will be of great advantage to a city, because it will reduce commute traffic, and make it possible for people who work in the occupations that are needed, such as teachers and sales persons, but do not earn large salaries, to live near their work.
Contrast these apartment units with the sort of units we commonly see in San Francisco. With such units, developers have an incentive to maximize the cost of the apartment. Apartments are always completely finished. Every element of construction is the most expensive available. Plumbing fixtures, for example, are the most recent fashionable types. Countertops are always marble or some other rare stone. The bathroom and kitchen are always finished with fashionable—and expensive—tile. Likewise with shower fixtures, and the toilet. Appliances are top of the line, and often include things like controlled-temperature wine cellars. No expense is spared.
The goal here is to make the unit as costly as possible in order to maximize profit. In San Francisco, the cost of an otherwise unremarkable unit passed a million dollars some time ago, which throws it completely out of the range of the average worker, who is then forced to live at some distance from work and battle a long and unpleasant commute every day.
The program I have imagined, which is already present in parts, would allow people who are locked out of home ownership in expensive markets to live in modest but decent apartments.