Every entrepreneur is familiar with philosopher Laozi’s ancient aphorism, “A journey of a thousand miles must begin with a single step.”
Less commonly remembered is the beginning of the quotation, which is just as relevant to any ambitious professional who dreams of starting a business, leading a world-changing venture or creating an idea that will stand the test of time: “Do the difficult things while they are easy and do the great things while they are small.”
That preface is the ideal prism through which to view the purpose-based mission of Canadian real estate investor Adam Gant. As a real estate entrepreneur, he has chosen to make his most transformative impact in the arena of housing. And although his academic background includes a variety of programs through several institutions, he is waging this battle not in the dry confines of university press journals, but rather in public forums.
The idea at the center of his real estate revolution is “shared equity,” a concept he devised after years of research and international travel. During these years of study and reflection, he imagined a solution to the housing affordability crisis that has limited access and driven costs upward for millions of families in North America who seek home ownership.
Below, we talk with Adam Gant about this unique idea, the book that is spreading its message, and the impact he hopes to make on markets, mortgages and the lives of real people.
Q: Why are Canadian and U.S. markets often inflexible in responding to the housing needs of prospective homebuyers?
Adam Gant: Today’s housing crisis, which affects not just North America but also many other places around the world, is an example of market imbalance, or the ways markets can become distorted. The abstract version of markets, the one in which they flawlessly create supply to match demand and precisely set prices, is not reflective of the way markets often work in the real economy.
In Canada, the U.S. and many developed nations, the housing crisis is not just a question of supply and demand; it’s a matter of access and affordability. The whole concept of a starter home or an affordable rental unit is disappearing. Banks, builders and many realtors focus on high-end buyers, where the most significant profits can be made. Meanwhile, single-family homes are being bought up by large investment firms whose goal is not what market forces should be compelling — creating new supply for willing buyers — but rather to take homes off the market and create a portfolio of rental properties that will generate steady revenue streams.
The average middle-class family faces tighter credit and income requirements for mortgages, high prices, rising interest rates, a shrinking supply of existing homes and a pace for construction of new homes that are not keeping up with demand. One additional reason for limited supply is that homeowners with locked-in low mortgage rates are reluctant to let go of their houses. Even if they’d like to move, they know they’ll never be able to match the low mortgage rate they locked in years ago. Many parts of the housing equation are out of balance, which makes it necessary to create positive incentives and remove the negative ones.
Q: How did you become interested in this issue?
Adam Gant: As a real estate investor, I’ve always had an interest in the macro forces that provide the backdrop for local property markets. I focused much more intently on this aspect when financial markets melted down in 2008 and 2009. That was the time when almost everyone suddenly realized there were significant structural problems in the world economy, and that some of the greatest instability was being generated by housing.
In the wake of the credit crisis of 2008, I travelled the world, studying markets and financial models in places as diverse as Singapore and Eastern Europe. I examined what was working and what wasn’t. Not every solution can be easily replicated across borders and cultures, but there are important lessons to be learned, and compelling ideas to consider. This is when I began to refine my concept of “shared equity,” and soon also began planning to bring this idea to the attention of a wide audience.
Q: Was that the genesis of the novel you co-wrote, A House Shared?
Adam Gant: Yes, the novel I co-authored with Patricia Nicholson was published in 2020, and it’s a good starting place to understanding the approach to shared equity via books and articles that get read, online platforms that get visited, and discussions that are dynamic and productive, not arcane monologues.
A House Shared is fiction, with the very real and profoundly practical concept of shared equity at its core. That surprised many of my fellow researchers, investors, and real estate analysts, who expected an academic text. But I know from experience that to create real change we need to reach the people who can make that happen. The goal is to spread awareness, start important conversations and illuminate a path forward for policymakers. For the general reader, my co-author and I hoped to generate critical thinking and inspire critically needed action, based on this one simple idea.
The way shared equity works, in the book and in the marketplace, is compelling: Using the shared equity model of home ownership, a buyer starts with a small deposit or down payment, ideally one percent. The home buyer does not need to qualify for a mortgage upfront. The buyer is matched with a home where the monthly payment is comfortable for their family’s income level.
The buyer shares in the equity growth in the home from the price appreciation. The exact percentage share of the home equity growth is dependent on the deposit size. Twenty percent or greater is a good starting range. The home buyer keeps their share of the equity even if they don’t end up buying the home.
The potential benefits are extraordinary, for people and nations alike. When families gain access to affordable housing, they gain stability in their lives, security for their futures, and the pride of ownership. They become more firmly rooted in their communities, and more active in seeking ways to improve them. They create ripples of positive change that radiate out from their town to the wider world. They create a much stronger — and happier — society.
