Fractional ownership is a concept that might appear a bit intimidating at first glance, but it's relatively straightforward. It's essentially a method of property ownership where multiple parties share the rights to the property, splitting costs and responsibilities. It’s not a new concept, but it's use has generally been relegated to scammy timeshares or influencers attempts at social proof through renting luxury. However, the existing structure of ownership has highlighted a problem regarding incentives between the three main parties involved: the owner, the renter, and the maintainer1.
Broken incentives
In the current system, the incentives for each party don't align with optimal outcomes. The owner isn't incentivized to improve an asset unless it's going to increase their revenue. Why invest money into improving a property if it won't lead to larger future cash flows?
As someone living on the property, the renter stands to gain the most from improvements. Yet, they lack the incentive to improve it, as any enhancements they make would ultimately benefit the owner, not them.
Lastly, there are the maintainers: the people who provide essential services like plumbing and electrical work. In the current system, they have no incentive to go above and beyond, given that neither owners nor renters typically put effort into maintaining the property themselves and couldn’t recognize a shoddy job if it fell to pieces in front of them.
Rewarding Actions with Ownership
This systemic incentive problem leads to a situation where none of the parties involved adequately steward the property. Is there, dear reader, a way to solve this? What if, as renters perform their duties or maintainers fix issues, they're awarded a portion of ownership?
This idea certainly adds an extra layer of complexity to already ownership laws. The question becomes: how do we attribute these actions? How do we quantify the value of maintenance tasks or renting actions? In the words of my friend and consigliere Vijay, these are simply “details”.
The proposal here is that renters could start accumulating fractional shares of ownership as long as they're renting. Similarly, service people could earn some degree of ownership for their work on the property. These portions of ownership could be negotiated within the contract at a rate comparable to a monetary value, creating a more balanced incentive structure.
Public Spaces: Parks and More
This concept isn't just for private property. It could also be applied to public spaces like parks. Maintaining public spaces often gets neglected, especially in areas lacking the necessary resources. By allowing those who perform maintenance actions to gain fractional ownership, we could incentivize more people to get involved.
Ownership doesn't necessarily need to be tied to money. Instead, it could be about recognizing and rewarding effort. As you accumulate ownership, you could become part of a board managing a park. With approval from a few local citizens, you could claim fractional ownership as a reward for your maintenance efforts.
Blockchain and Beyond
How would this play out in reality? I think it’s on brand to mention blockchain at this point. Private property ownership may be easier to track because terms are negotiated beforehand and there will be a limited number of owners. Public spaces, however, could be more challenging.
There’s also probably a lower complexity, still compute-based solution of endorsing members of the community, publicly displaying that they in fact deserve shares. This creates a sense of community ownership, but also raises questions about practical implementation and management.
The Future of Ownership
The idea of fractional ownership of property, extending to renters and maintainers, opens up a world of possibilities. It presents an innovative way to align the interests of all parties involved, fostering a sense of community and shared responsibility. While it comes with its own set of challenges and complexities, it's an exciting concept that could reshape our understanding and experience of ownership.
I believe this will have the following important results:
primary homes *will* generally only have two owners - the bank and the homeowner who is steadily buying greater ownership of the house from the bank. If payments stop, the homeowner still retains fractional ownership of the property that gets paid out.
investment properties become more dicey. In most cases there will be three or more owners. The bank, the “homeowner” and the former-renter turned fractional owner. The contract between the bank and homeowner is the same *but* the lease terms between homeowner and renter is more like a loan to buy a fractional stake in the house.
abandoned property in the middle of cities can be cleaned up and revitalized all without having to actually buy the spot. The original *owner* who didn’t improve it, or let it fall into disrepair keeps a share of the money.
public property is owned by numerous people and while not economic, successful stewards of community land will have a storied legacy.
By now I believe I have alienated both the staunch libertarian as well as communist. My job here is done.
I borrowed the owner, renter, maintainer trifecta from this ribbonfarm article about getting to gnome mode. An interesting concept in it’s own right.