Patriotic investment
The United-States is entering a recession at all levels of the economy. In July 2020, we already have seen large brands closing, restaurants closing and many companies down grading their projections. This is a time when investors are shifting their strategies and it may be a good time for the Domaine des Crafts to bring interest on a sustainable plan for affordable housing.
by Brian Sozzi on Yahoo Finances
Recently, Forbes released an article on “Housing Markets Turning Ugly: Cities on the Brink of Housing Crisis“. I have combined all data in the following excel file:
I have completed the data of this article with another article from Yahoo Finances, “50 Housing Markets That Are Turning Ugly“:
Mainly, we can see that some cities were already in recession before covid-19 but more intriguing, cities such Baltimore, Dayton, Waterbury and Brigeport are also cities with a high percentage on “2-year price change” and above 25% of underwater mortgages. On Investopedia, “An underwater mortgage is a home purchase loan with a higher principal than the free-market value of the home. This situation can occur when property values are falling. In an underwater mortgage, the homeowner may not have any equity available for credit.“
Alabama, California, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Michigan, New Jersey, North Carolina, Ohio, Oklahoma, South Carolina, Texas and Virginia are markets where the prices of housing will decrease what may create a migration of investors’ money where new opportunities will arise from the increase of forclosures.
On Christian Science Monitor, “Foreclosures are bad news for neighborhoods. That’s because they tend to bring down the sales prices of the homes surrounding them, even those residences not in foreclosure. Say a neighborhood has several foreclosure homes that are selling for less than market value. This makes life difficult for other sellers. “
The number of foreclosures during the 6 first months of 2020 are extraordinary low compare to previous years but this is due to federal protection programs. Projections are already expecting double number of foreclosures compare to previous years and as many people at risk of becoming homeless. Simultaneously, the United-States is at the brink of a major eviction crisis that will put families in the streets as soon as protection programs will end.
In California, sales went down in May 2020 and back up in June but “Home sales overall dropped 12.9% YTD, and 41.4% compared to 12 months ago. The Central Valley saw sales decline the least at 36.6% while So Cal saw sales plummet 45.6%.” The luxury market increased with more people leaving California for new tax heaven. California is ranked 48 by the tax foundation, a position that may affect all levels of the economic recovery. While California is ranked 4th for entrepreneurship and 1st for patents, California is only ranked at the 18th position for corporate headquarters. All those factors may change the value of housing and bring investors to make counter-productive decisions.
This situation involves a dramatic response and we know from previous crisis in the United-States and Europe how families may face the dilemma. Children and grand-children moving with the grand-parents, gathering of large families in houses which no longer fit with minimum standards. More dramatically, following evictions and foreclosures, many families may be bared for years from renting a home since landlords are over powered with excessive screenings. Without protective programs to back long term contracts, landlords will become more selective, leaving families and individuals away from suburbs. Here again, the situation might change the geographical distribution of the workforce and alter the urban economy.
The trends from 6 months pandemic have shown the tendencies that may arise from individuals:
- families leaving cities for suburban areas,
- air B&B converted in month to month rentals,
- more backyards converted with extra modular housing,
- garages converted with extra rooms,
- affordable housing pushed away from the suburbs.
- increased demand from home workers to leave in rural areas
All those trends also translate into a shift of urban planning with small businesses developing at home in residential areas. This migration to the suburbs and to rural areas may change the shape of the cities.
On an article in Forbes, “What Will America’s Housing Market Look Like After The Coronavirus Pandemic Ends? Here’s What 5 Top Producing Real Estate Agents Had To Say”
“Short-term vacation and AirBnB rentals, which briefly saw a reservation surge in popular tourist destinations and remote rural communities as people fled dense urban hotspots like New York City, were promptly banned by many local city councils fearful that their limited healthcare infrastructure and off-season supply chains would be overwhelmed by outsiders. Year over year short-term rental reservations for 2020 summer travel are now down by 75%. Hosts, many of whom rely on their short-term rentals for critical supplemental income or, in many cases, all of it, now credit Covid-19 for the “Cancellation Apocalypse”.“
(…) “Real estate is still a long-term investment, not a short term one,” she tells me. “There are many buyers that even now are suddenly empty nesters or need to downsize or the opposite—get into a larger home because they have a growing a family.“
(…) “While this is a particularly stressful time, I’m seeing people connecting with their friends and family on a deeper and more ‘present’ level,” says Rose. “I’m hopeful that, once we are all freed from our homes, we will all be grateful of our lives and the simple things that truly give it substance. I believe that there will be a consciousness towards more simplicity, so the trend may well be away from the ‘bigger is better’ mentality which has taken over many markets. And, since many of us have retreated away to remote and isolated locations, I think that people will have a thirst to be with people as opposed to getting away from them. As a result, I believe that the second and third home markets will be slower in re-gaining momentum.”
(…) “Now the desire to own property in places with a healthy lifestyle has been heightened. We are also all experiencing shifts in how we do business and even though we are all craving more interaction right now, we are also all witnessing a more efficient way to do things like working from home or remotely. I think many people will decide they don’t need to commute as much or live in a dense urban setting.”
(…) “The post-Covid re-ordering will almost certainly have unexpected upstream effects as well, including how architects envision the new definition of “home” after months of people sheltering in place. This will take the form of more touchless technology in high-rise buildings, an increased use of remotely accessible technology like locks and thermostats, and home designs built for #WFH (work from home).“
(…) “Now that America has gotten a crash course in working from home, it will become much more of our everyday lives I think,” predicts Rose. “I’m betting that home offices which are fitted out for a digital work existence will become the newest ‘must have’ amenity. Imagine ‘his and her’ home offices built ready for the now ubiquitous Zoom conference, replete with green screen for your virtual background of choice.”
(…) “In terms of social and cultural shifts, I think that people are truly recognizing the value of home and it’s never been more apparent how much our homes matter,” McFeely tells me. “I think the weeks and months we’re spending inside are going to forever change our ideas of home. Home is where we are eating, sleeping, playing, working and homeschooling right now. Those who will continue to work from home may be more in tuned to work and home office spaces. Outdoor spaces, patios, and decks may seem like a necessity now. And I think safety and a sense of community are going to become more important.”
Past experience in the United-States and Europe have shown that to any crisis, families move to live together with 2, 3 sometimes 4 generations in the same house. Roles are attributed to grand-parents to educated the children while parents keep the family resource flowing with their work. As a result of any crisis, we see a degradation of housing standards with houses over packed while simultaneously, the real estate market is deserted.
With the demonstration program, the Domaine des Crafts and the SAB Center already address some of the issues such “work from home” and community development, but we need to do more with the Domaine des crafts in response to the AirB&B crisis. As an example, Hollywood RV Park in Los Angeles has changed strategies with covid-19. Instead of renting RV spots by the day, they have taken more residents with long term contracts. We see on Facebook numerous ads such “Neighbor” to convert a garage or a backyard with extra space for rental. In prevision of the massive housing crisis from increased foreclosures and evictions, we might see the need for more month to month rentals and specific services such Hello Landing to administrate those rentals. Local governments will certainly have to adapt with the demand of month-to-month rentals and rebuild the market from the perspective of the tenants.
Within the Domaine des Crafts, we have already foretasted the possibility to rent by the month but we can also contain the community in two separate groups to differentiate guests 100% in residence from guests who travel in and from outside. Among the guests 100% in residence, we are able to gather children in specific dormitories and contain retired people within the same residence. They both can benefit from indoor and outdoor activities without the risk of contamination from people who travel outside. We can also serve meals in covered outdoors and isolate out guests in a friendly environment where they can still participate in community activities. More importantly, we can keep our guests busy with our two maker space areas, we can assist them to develop businesses and we can engage our residents in social activities linked to our programs for the development of affordable housing.
More importantly, we can participate the efforts of our winemakers neighborhood community. With building our 12 tiny homes, building our outdoor theater, building our gardens, organizing live events on social medias and promoting our region as part of our own business, we maintain a flow to sustain our business development. In a recent interview, Rick Kushman from Bottle Talk explained how creative wine tasting experiences could keep the industry alive. With our live shows, our outdoor theater and our maker spaces, we can participate in sustaining our local industries.
Many people have suffered isolation from covid-19 and therapist already see the psychological impact of isolation on children and elderly. In the Domaine des Crafts, we break the cycle of isolation with occupational activities, allowing residents to be useful to their community of winemakers and our local families through social support and the development of affordable housing programs.
In an article from Healio, “COVID-19’s mental health effects by age group: Children, college students, working-age adults and older adults“:
“Daily structure is important to everyone, but particularly to children in their psychological and emotional development,” Lee told Healio Psychiatry. “The consistency of schedules, predictable rules and consequences, and set expectations teach children how to behave, develop self-discipline and impulse control and, importantly, a sense of safety and control. Clinically, we often see an exacerbation of behavioral problems in our pediatric patients when their routine or structure is disturbed.”
“The extent of this challenge depends on the family’s ability to provide support and structure at home, which further depends on the family’s unique dynamics, resources and stressors, Lee noted.“
(…) “Children learn from watching adults, and since they will often be at home together now, they will observe not only what the adults in the home say, but also how they implement structure, ensure consistency and deal with their own emotions,” Lee said. “Teaching parents the importance of daily structure and consistency in their responses to their children’s behaviors is a priority.”
(…) “For students who are struggling with anxiety, which has surpassed depression as the most common mental health concern on college campuses, the uncertainty regarding the coronavirus is something we really need to be worried about, since it has the potential to amplify already high rates of anxiety”.
“With the closing of many businesses and places of employment, a significant proportion of working-age adults have lost their jobs. This can be a blow to individuals’ sense of fundamental purpose in life, according to Sagar V. Parikh, MD, FRCPC, professor of psychiatry at the University of Michigan and associate director of the University of Michigan Depression Center.“
(…) “It eats at our sense of competency if we’re not at work and makes us worry whether we’ll be able to pay for essentials, such as rent and food,” Parikh told Healio Psychiatry. “It’s a very profound, existential threat. For those deemed essential service workers who are still going to work, there’s added stress regarding whether they will get the virus.”
(…) “Perhaps the most difficult mental health concern for this segment of the population, according to Parikh, is increased anxiety associated with having to suddenly provide additional care for family members, such as school-age children or elderly parents, combined with potential work-related responsibilities.“
(…) “With this virus shutting down the workplace, people have lost not only social interactions with best friends who don’t happen to live in their home, but also interactions with the wide variety of supportive, friendly, casual relationships at work and in public that make for a rich social texture,” Parikh said. “I think loneliness, despair and a sense of drifting are going to be prominent.”
(…) “With social isolation measures in place in much of the world, loneliness has become a familiar facet of everyday life. Research has shown that loneliness increases risk for depression and anxiety and heightens feelings of stress — factors that contribute to worsening physical health and poor health behaviors, including substance abuse, poor nutrition and more sedentariness, as well as poor sleep quality, according to Louise C. Hawkley, PhD, of the National Opinion Research Center at the University of Chicago.“
(…) “It doesn’t take a pandemic for some older adults to feel what many younger adults are only now appreciating viscerally and emotionally,” Hawkley said. “We need to care for our communities by caring for the social health of all individuals, across the life course.”
(…) “I suspect there will be a growing need for professional help for people struggling with the emotional toll the pandemic is taking. However, in some instances, for some people, a solution could be as simple as linking them with others through virtual means, internet or phone-based, and offering suggestions on what they can do to help others.”
“COVID-19’s mental health effects by age group: Children, college students, working-age adults and older adults” By Joe Gramigna, MA
Instead of buying a home, the Domaine des Craft offers the possibility for families to invest in a community where they will find support and outstanding services to maintain a sense of normality. They will own a share of the company and participate our demonstration program through their “patriotic investment”. One residence will host home-schooled children, elderly and 100% home-working parents. This residence will have access control to prevent any entry from contaminated people. The 12 fantasy tiny homes will play a role for transitioning to the residence with 2 weeks quarantine rule. Only residents cleared from covid-19 will have access to this area of the Domaine des Crafts and the outdoor around the fountain will exclusively be accessible for children, elderly and 100% home working parents. The concrete area will be transformed into a playground for home-schooled children.
The other residence will host all “in and out” activities such remote working parents, the restaurant, the tasting room and air B&B guests. Social distancing will be the norm and the two residences will be completely separated to contain the risks from covid-19. Parents will live separately from their children unless working 100% remotely and complying with the quarantine rule. Still, parents will have the possibility to see their children in the gardens and interact with them through activities. Home working parents who comply the quarantine rule will have contacts with their children.
Buying a share of the property is a patriotic investment to support a local winemakers industry and participate a wilder program on affordable housing where 115 affordable housing units will be able to emerge from the initial investment on the Domain des Crafts and continue to generate profits to franchise the concept, build more affordable housing units and help more people.
To respond covid-19, we have drafted a way of community living with outstanding services, a farm, wonderful gardens, a pool, a pond, an outdoor theater, two maker spaces, business services, and incredible activities with hand crafts, wine cooking, the creation of spirits, home goods and home movies. Adults and children can enrich their experience with community services to help other people in a time when hardship has struck the most fragile communities. By participating this program, families are giving a fabulous impulse to support affordable housing, combat homelessness and keep spiritual values a priority.
HOW DOES IT WORK?
- An initial investor buys the properties $$7,078,702 in August 2020.
- A venture capital LLC is created with 7700 shares of $1000 each.
- The Domaine des Crafts can host 20 families after construction of 12 fantasy tiny homes and the creation of 2 dormitories for children.
- Each family living on the site buys 385 shares of $1000 for a total of $385,000.
- $385,000 * 20 = $7,700,000. The initial investor gains $621,298 from selling his shares to the families.
- The Domaine des Crafts has 7 years to buy the shares back from the venture capital LLC. It will be paid with 5% of the profits of the company:
- 2020: $63,728 x 5% = $3,186.4
- 2021: $523,588 x 5% = $26,179.4
- 2022: $1,350,361 x 5% = $67,518.05
- 2023: $1,132,166 x 5% = $ 56,608.3
- 2024: $1,243,695 x 5% = $62,184.75
- 2025: $1,243,695 x 5% = $62,184.75
- 2026: $1,243,695 x 5% = $62,184.75
- 2027: $1,243,695 x 5% = $62,184.75
- TOTAL: 402,231.15
- During those 7 years, the families will be allowed to live on the site and will benefit from all the services to increase their protection and their health. In the meantime, they will participate in a program for the construction of 115 units of affordable housing and will gain 4.47% ($17,231.15) interest on their initial investment. At the end of the 7 years, the Domaine des Crafts becomes the sole proprietor of the properties and the company to manage them.
