THIS WEEK'S FEATURED MEMBER POST COMES TO US FROM JUSTIN GOLBABAI'S BLOG, The New Localization.
Three years ago Paula and I became first time homeowners and landlords when we purchased our central Austin duplex. Despite all the paperwork (I never knew I could sign my name so many times), it was all pretty thrilling. But looking back at it now, I can see more clearly than ever that this process, more than anything else we have done so far, helped us better secure our financial footing by giving us the ability to make payments as if we were renting, but build equity in the process. And of course, it gave us a sense of ownership and control over our own little piece of the American Dream.
I could not help but reflect on this home ownership experience while reading Marjorie Kelly’s book Owning Our Future. This book illustrates the importance of who owns the structures of our economy. Companies that are publicly traded on Wall Street have very different motivating factors than those that are locally owned, and this motivation directly affects how customers and employees are treated. One of the best points she makes in this book is distinguishing between extractive and generative ownership models. In Kelly’s words:
“Generative ownership designs are about generating and preserving real wealth, living wealth, rather than phantom wealth that can evaporate in the next quarter. They’re about helping families to enjoy secure homes. Creating jobs. Preserving a forest. Generating nourishment out of waste. Generating broad well-being.
These designs are in contrast to the dominant ownership design of today. To make the distinction clear, that design also needs a name. We might call it extractive, for its focus is maximum physical and financial extraction. Our industrial-age civilization has been powered by twin processes of extraction: extracting fossil fuels from the earth and extracting financial wealth from the economy. But these two processes are not parallel, for finance is the master force. Biophysical damage may often be the effect on the system’s action, yet extracting financial wealth is its aim.”
The “Local Movement” has generally done a great job of exploring these questions of extractive vs. generative ownership as it pertains to business ownership (local versus chain businesses). As an example, Civic Economics conducted the leading studies in citing that in a study of 10 communities supporting a local business generated 3.7 times more returns for the local economy than if that same dollar had been spent at a chain store. As we previously discussed here, this is because local businesses are generative by nature – generally paying their administrative costs locally, paying workers better, and are more likely to invest profits locally.
But what about land? Applying these same principles of extractive and generative ownership to land use planning appears to be a blind spot in the world of city planning. Just as local ownership matters in business, so too does it matter when it comes to who owns the land and the buildings themselves. If the land and buildings are not owned locally, then the profits from the rents are being extracted from your City. I think this is a point that is often missed by city economic development and planning departments. Yes, it’s exciting to see when and how the global economy picks your city for investment. But what isn’t really considered is the extractive nature of this outside investment. The cost of the deal is rental income flowing out of your City and into the global economy instead.
So let’s suppose your City was aware of this fact and wanted to prevent or slow down this type of extractive investment in order to encourage generative ownership. What could the City do? In my opinion, the answer is to think small. Global extraction companies tend to operate in large investment chunks. They consolidate land and put up a major, oversized building that maximizes their return on investment. Unfortunately, this consolidation and bigness puts true independent ownership outside the realm of possibility for individuals. The bigness puts increased pressure on individuals to either rent or accept ownership terms that have additional regulations and fees attached (such as being a member of a property owner, homeowner or condo association).
On the other hand, small human-sized building lots with small human-sized buildings on them make independent ownership attainable for the average person. As such, a city focused on generative ownership would be appropriately scaled to allow individuals to own the building and land at all income levels. Such a scale might start with RVs and tiny homes, ascend to small lots and houses, and then scale up to well-to-do homes and larger land parcels. Similarly, there would be a parallel ownership options for businesses. This might start with the farmers market, and then scale to the food trailer, small shop, before also including regular and large sized shops. The key point is that a path to upward mobility and generative ownership would be a part of the physical built environment itself.
Recognizing the difference between extractive and generative ownership within the city planning and economic development circles would go a long way toward improving their relationships with the public. For too long these professions have found themselves at odds with their own citizenry who see the detrimental effects on the affordability and generative ownership opportunities caused by attracting outside investment in order to increase taxable values. It doesn’t have to be this way. On the contrary, in a generative ownership city, the role of city planners and economic developers would identify and address gaps in upward mobility and independent ownership in both the built environment and the job market.
In the case of our duplex home, I realize that this purchase was only possible because the land and buildings available were appropriately scaled to be within my price range. I needed something bigger and more family-friendly than a single apartment and smaller than a single family house. Thankfully, the mix of housing types in my city provided that incremental ownership step that enabled my family our incremental foothold into the American Dream.
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(Top photo by Steven Martin)