What Is Fiat Housing and Why Does It Matter?

Housing in the United States has become ridiculously expensive. Over $400k for a home made of plywood, sheetrock, and 2x4s. Walls so thin you can run right through them. Rather than seeing housing as a utility for a basic standard of living, a place to start a family or live peacefully alone, we treat housing as an investment, built at the lowest cost and sold at the highest price. 

And we don’t have to accept that reality; we can change it. But how do we divorce our homes from the banking system without destroying the economy? 

It is a simple idea that is already used around our world for various other financial assets and tools. 

Most people know what fiat currency is, even if they have never heard the term. Think the U.S. Dollar.

A fiat currency is money that has value not because it is backed by a physical commodity like gold or silver, but because a government declares it to be legal tender and we as a society agree to treat it that way. 

The US dollar is fiat currency, and its value is a function of economic output, institutional trust, and collective agreement. 

Fiat Housing is the future. Instantaneously freeing homeowners from their mortgages while allowing banks to keep their financial assets completely separated from the physical home and land deed. 

Their value is retained by the legitimization of the federal government and the trust of the market.

But back to the homeowner.

Fiat housing severs your home from your mortgage, giving you debt relief. A mortgage is made up of two legally distinct instruments: a promissory note, which is the debt obligation itself, and a lien, which is the legal claim on the physical property that gives the note its collateral value. Under a fiat housing system, those two instruments are separated. Freeing you and your home.

The bank will no longer require your monthly payments because the note is converted into a time-accreting government instrument, the same class of financial tool as a zero-coupon bond. 

In simple terms, this means the bank earns the value of the note automatically as each month passes. The note accretes toward its full value on a fixed schedule over the course of the mortgage's original date of maturity. 

The household receives permanent occupancy rights to their home. The home no longer has a speculative market price because it is no longer part of the speculative market. This means the home value will be lowered significantly to match the real value of the home rather than the bloated market price. 

This would be an entirely optional pathway for homeowners to take. Imagine waking up, and your mortgage is gone. The single largest financial obligation most American families carry is lifted, and the money that was leaving your account every month to service a debt is freed up. For the average enrolled household, that is $2,000 or more returning to the budget every single month. 

Fiat housing gives people a chance. The psychological weight of carrying a 30-year debt obligation is something most homeowners have simply accepted as the permanent background noise of adult life. Your home value will reflect the real-world value of the land plus the cost to build the home. For some homeowners, the reduced value of the home may not be appealing. Whatever the reason, I believe it is best to make this program voluntary.

These ideas are meant to increase freedom and opportunity for people after all. Now you are free to use that money for other needs or desires. Life, Liberty and the pursuit of happiness.

Three Things to Remember

01  Your mortgage and your home are not the same thing. 

The note and the lien are two separate legal instruments. Severing them does not erase the bank's asset. It frees your home from the speculative market while the bank keeps full value on its books.

02  Enrollment relieves homeowners from debt. 

Once enrolled, you carry no mortgage and no financial obligation to a lender. 

03  This is voluntary.

Nobody is forced into fiat housing. The private real estate market continues unchanged for anyone who wants it. Fiat housing is simply an exit ramp from the speculative market.