How to save the market without spending the 700 billion dollars using an equity guarantee approach. This presentation describes a way to assure that thousands of abandoned homes and neighborhoods are reclaimed and renewed. Back in 1979 my graduate project partner Lale Guneysu and I were asked to come up with a program response to deal with thousands upon thousands of abandoned homes and damaged neighborhoods. This approach used new computer modeling techniques at the time which are commonm today. Take a look! Tom Curtin

1. Applying the Equity Guarantee Model to Resolve Today’s Crisis

2. In 1979, Lale Guneysu and Thomas Curtin, graduate
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students at the University of Rochester’s Public
Policy School were asked by the Urban League to
apply their skills to resolve a housing abandonment
crisis in the City of Rochester NY where some
y
thousands of homes lay vacant.
This presentation tells how that solution can be
applied today to stabilize housing markets without
actually purchasing the securities.
act all p rchasing the sec rities

3. Too many houses, too few buyers, thousands
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of abandoned homes in the City of Rochester
NY, with blighted neighborhoods and a
h bl h d hb h d d
declining tax base.
Growing suburbs with increasing home
values and pockets of new regeneration in
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the city.

4. Use modern econometric assessment models to fix
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each homes value based on the common measures
of value (square footage bedrooms baths
of value (square footage, bedrooms, baths,
construction, etc and location can account for most
of the resale price of a home).
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$100,000

5. Run a second valuation report that estimates
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market price today but without the LOCATION
indicator.
indicator
That creates two values, a real market price (RMP)
and an estimated value without the impact of
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LOCATION (EGV).
RMP $100,000 EGV $200,000

6. Issue an Equity Guarantee to each owner
which assures that after Five years the
agency will pay them the difference between
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the EGV and the prevailing market value five
years later provided:
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▪ The property is owner occupied
▪ The property is kept up to the International Property
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Maintenance Code Standards.
▪ All taxes have been paid

7. YEAR #1 YEAR #3
3
RMP $100,000
RMP $150,000
EGV $200,000 EGV $200,000
RMP $200,000 +/‐
EGV $200 000
$200,000
YEAR #5

8. Location –or the socio‐economic effect of
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neighborhood sets the value for many homes
‐But whenever that value of something is
guaranteed or bonded by the government, it
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tends to float with a market.
The closer you get to the redemption date,
the higher the market for the item.
h h h h k f h

9. Technically, the risk was large, say $50k in average
h ll h k l k
guarantees for 10,000 homes would be $500
MILLION DOLLARS. Technically, the paper money
MILLION DOLLARS Technically the paper money
in your wallet is worth next to nothing.
Practically speaking, things are worth what the
government says they are worth and as long as
things are staggered to smooth out market effects it
rolls along nicely.

10. Property is maintained Enhancing Values
P i i i d E h i V l
Property is occupied reducing neighborhood decline
Local Government is getting tax revenue crucial to
providing services needed to improve conditions in the
d d d d h
neighborhood.

11. Today s problem is less about urban or suburban
Today’s problem is less about urban or suburban
blight, though it could be if we don’t fix this mess…
It s about TIME
It’s about TIME
or a bubble market.
Using the Equity Guarantee modeling approach, we
add a new term to the value estimation, Time, and
add a new term to the value estimation Time and
adjust the “wayback machine” to when we want the
value and guarantee that applying the usual equity
guarantee rule, perhaps stipulating an interest rate
guarantee rule perhaps stipulating an interest rate
and payments for the loan.

12. Additional Adjustments
Additi l Adj t t
Potentially we d need to factor in the opportunity cost
Potentially we’d need to factor in the opportunity cost
or value of money to assure the flow, but the interest
rate term could handle that.
It’s possible that we don’t want some markets to
return to 100% of their heyday. We may want to
return to 100% of their heyday We may want to
subsidize overheated markets to keep median prices
at a level consistent with people’s ability to pay in the
long term adjusting for inflation.
l t dj ti f i fl ti

13. Tom Curtin tcurtin@comcast.net
Vice President of
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Borough Council –Parkesburg PA
Senior Enterprise Architect,
Senior Enterprise Architect
Large Healthcare Insurer
Philadelphia
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