Month: May 2016

The End of the Rent Trap- How to Close the Economic Gap

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Picture source: http://www.thefederalist.com

As much as I hate to focus on money, the undeniable truth is that it is what drives the majority of most of our decisions. Perhaps the only exceptions are those without the mental capacity to understand its function and those who possess it in such abundance that it no longer holds any meaning. This blog is about discussing how we could cause massive change by manipulating just one aspect of the economic landscape.

The fundamental principles of economics are based on the scarcity of resources. In particular, that money and time are scarce. We choose how to spend our share of each at the cost of not spending them on other opportunities. The way that world economies are set up, this means we have two means of wealth creation: 1) by being compensated for our labour time, 2) by investing money in various ways. To those with a passion for economics, my apologies for such a crude summary of ECON101.

This essentially means that those with money surplus to their expenses have an extra method of passive wealth creation when compared to those living from paycheque to paycheque. While the internet has curtailed this difference somewhat by reducing the need for start-up and running costs for any and all who devise clever online money streams, the divide still definitely exists. Much of this is due to the cultural phenomenon known as ‘property investment’… or buying houses with the intention to earn a rent from them and eventually sell for profit. This is strictly a game for the ‘haves’, while the ‘have nots’ get stuck wallowing in the infamous rent trap. I think Brett Sutherland sums it up very eloquently in his interview with Bryce Langston linked here. (https://youtu.be/VckbqU4kK2I?t=15m41s)

Not only this, but invested money provides the wealthy with a way to avoid paying tax on income which is already surplus to their needs. Add to this the fact that capital gains are generally taxed at lower rate and it becomes clear that the only TRUE route to real wealth creation is through capital investment. This TED Talk (https://youtu.be/CKCvf8E7V1g) outlines the fundamental folly of the current approach with great clarity. It truly is a system designed to keep the poorest poor while those with expendable income lazily profit from their plight.

The solution I propose is this: that both the bond and rental payments are returned at the end of the tenancy period. If the landlord is granted the right to earn off rental payments, bank interest alone will ensure they are able to make a healthy profit before returning the tenant’s rent payments and the tenant will not suffer the ultimate loss of a large sum of money. It is a win-win. Granted, the landlord wins a little less than the current model… but that is kind of the point. It provides a more equal share in the money flows, while respecting the investor’s opportunity to profit. A representation of the two models can be seen below in graphical form.

current model
Assumes Landlord’s rental income remains in a bank account and accumulating a steady bank interest rate of 4% (comparable to many savings accounts) and subject to 25% tax once per year. Also assumes that a bond equal to two weeks’ rent ($400) is paid into a third party trust, which is returned following conclusion of a 60 month/5 year tenancy
adjusted model
Assumes Landlord’s rental income remains in a bank account and accumulating a steady bank interest rate of 4% (comparable to many savings accounts) and subject to 25% tax once per year. Also assumes that a bond equal to two weeks’ rent ($400) is paid into a third party trust, which is returned following conclusion of a 60 month/5 year tenancy and that the Landlord returns rental payments, but keeps profit made from bank interest payments

Note that the final values of the adjusted model are NET gains (i.e. the tenant is receiving a lump sum payment of over $50,000 at the end of the tenancy! Of course, this would still be subject to tax, but it provides that tenant with the very real prospect of being able to put a deposit on a house of their own. The landlord, on the other hand, has earned nearly $70,000 on their investment by doing absolutely nothing with the rental payments. The graph only depicts interest accrued in a savings account. If they were instead to use the capital to invest wisely in other ventures, they could potentially make much greater gains. Alternatively, if they are more risk-averse, they could wait (to be sure of having the funds to return) and use the profit after tenancy as investment capital, potentially profiting further this way as well. Obviously, this is only an example model with arbitrary figures and each case would be different.

It seems reasonable that this model be combined with minimum rental periods similar to term investments at banking institutions. Perhaps also with the penalty of losing the refund of rental payments (or a percentage thereof) should the agreement be broken early with disputes being governed by a third party such as the local government agency in charge of tenancy disputes.

As Brett says in his interview above, it seems very wrong that we, as a society, allow the current model to exist. To me, this seems like a much fairer model. The property investment market becomes less like a right of the rich to passively profit at the poor’s expense and more like a reward structure for wise investment. As an added bonus, it serves almost like a savings model for the tenant.

The obvious challenge is this: How do we convince those who profit from the status quo to relinquish their hold on the current system? How do we encourage a change toward a more equitable system? How could we encourage voluntary use of such a system and/or how could it be passed into law? These are all questions for which I invite your input. Any comments about the model itself are also welcome. If you know of any outlets which may serve to help spread the idea or attract people who could help make it happen, please share. I’d love to hear from them.

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Home Building- Finale

The last video about the renovation is about the tools that were most useful. Probably best to just click through to the video as is fairly self-explanatory.

Other things to consider are fasteners like screws, nails, glues, brackets and clips; safety gear like ear defenders and safety goggles; electrical or plumbing tools you may need; and specialist tools for any special applications you have in mind.

Since the renovation a number of small changes have happened. The ramps for Piccolo were abandoned completely as he was just using the wheel arch. However, it was too slippery for him with just the vinyl tiles, so carpet was added to make it an easier access way. The ramp for outside was also replaced by a more practical step than the previous one. The original step was very slippery when wet, so I added a non-slip covering (prior to the renovation). This also proved ineffective, as it came loose and also got very dirty. The most recent evolution is a hollow step with longitudinal ribs under as small steel mesh grating. It allows water to drain, dirt to fall through and both dogs are happy using it. Winning!

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The new door step. Works well preventing muck coming inside

Silicone sealant was added between all of the vinyl tiles on the main floor area to protect the layers beneath. It works, but also unfortunately collects dirt very effectively too. The finish now looks quite messy, but it also makes for a less slippery surface and the rugs which I added later on now grip quite well on it rather than slipping around (as they would have otherwise). While we are on flooring, a little door mat was also added to take the majority of debris that comes in on shoes and also as a landing pad for the dogs, who were sliding (quite comically) across the floor on entry.

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Toasty warm floor with a couple of rugs from The Warehouse

A hose extension and shower attachment were added where the second tap outlet used to be. The idea being that it can be fed out the window and used as a shower in the (yet to be completed) curtained off area. It is the type of attachment you would see on a garden hose, so it could also serve as a general purpose hose for garden watering or other uses if desired. It won’t dispense hot water at this stage, but would be good in a pinch. Should I find a more permanent set up, I would probably invest in a solar camping shower bag and may experiment with different heating methods (e.g. fired copper coils; gas heating a pot, then filling; solar dish heating).

Added a PVC pipe around the cables leading to the LED light strips. Not pretty, but effective in protecting the line. While it is not so important in situ, it’s a major consideration during transit. The rest of the electrical system is still on hold. They will remain on hold until the bank account is a little healthier and probably until I find a semi-permanent home. At that point, I’ll get stuck in and wire in another battery, a USB port and a jack to plug in the inverter, a permanent solar panel rig (with a solar panel controller) and may also experiment with a wind turbine design idea I have based on coke cans, a basic solenoid motor and something like a roller blade wheel.

Most recently, I’ve been experimenting with ideas to solve early morning condensation issues on cold days. There have been many ideas, including: netting to capture moisture in the air and feed it into the water tank; various dehumidifier options; sleeping with my head under the sheets (the idea being that the moisture would collect in the bedding instead of the air- surprisingly effective); and bubble wrap.

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“The Bubble Wrap Experiment” It actually seems to be working pretty well. If I was to do it again, I’d back myself and put some double-sided tape in a few spots throughout the span to hold it up better

Bubble wrap on the ceiling is the current experiment and it seems to be working pretty well. I put it off for ages because of visions of water pooling between the ceiling and bubble wrap, only to fall down in a wet mess on my face. On further research and thinking though, I gained confidence in the idea. Condensation forms when a cold surface meets moisture in the air. As long as the moist air is effectively excluded from the ceiling space, (currently using duct tape and have a couple of desiccant sacks up in each cavity) it shouldn’t form even if the roof is cold. Gravity is the main challenge here, as the bubble wrap weight tends to slowly work at the duct tape holding it up. I am very open to suggestions you may have on the condensation issue, as caravan forums mostly talk about fully airtight caravans/motor homes, not a pop-up camper with gaps between panels.

Should bubble wrap fail me, I may try a duvet inner on top of the roof, with either a tarp or the caravan cover fixed on top. Again, this is a less portable solution, but should prevent the fibreglass of the roof from getting cold enough to allow condensation… in theory.

Next plan is water catchment. I plan to rig a basic gutter/spouting system. It will likely drain into a bucket or barrel and be manually emptied into the on-board water tank. Won’t be fancy, but hopefully will be effective.

Thank You

This blog has been getting a lot of attention recently and I’ve really been enjoying seeing all the sharing, emails and comments.

Just thought I would take a moment to say thank you to everyone who is reading and sharing in the adventure. So… THANK YOU

If you are enjoying reading and you think others may enjoy it too, please do share. My version of freedom may not be the same as others, but many of the barriers to may be.

Stephen

Blood, Sweat, a Yurt and the Kiwifruit Alpacalypse

April 12th 2016 – ?

This WWOOF (official site) was a desperate leap into uncertainty. In the end, it came up roses… as long as you point your nose away from the composting loo.

It’s always a gamble when you accept a WWOOF position. This one was a little bit special though. After several experiences of WWOOFers looking for a free ride and not being very competent workers, this host had decided to put up quite a confronting profile. The plan: to deter useless WWOOFers and prevent the need for mothering them. Fair enough.

Still, arriving at the gate, I found myself thinking, if there were any other WWOOF hosts wanting WWOOFers at the time, I’d be going there instead. Turned out to be a case of who dares, wins though. For a number of reasons, I’m glad I came. It’s a kiwifruit orchard being converted (slowly but surely) into a permaculture farm. It’s in the very early stages, which in itself is a valuable thing to experience. It’s all well and good seeing mature properties, but in all likelihood, if I ever get my own plot, it’ll start out pretty rough.

The first thing that jumped out was the relationships the animals have with one another. As a budding permaculture farmer, Lynda believes in letting nature take its course wherever possible. That includes having animals intermingling despite species divisions. She also takes a gentle approach to managing them, which is nice to see. I’ve NEVER seen fully grown sheep that are so friendly and personable. Not hard to see why though, when you consider the usual way a mob of sheep is handled (and when). While most are chased around by dogs and man-handled to be drenched, wormed or castrated, Lynda’s had been hand-reared and trained using reward-based handling. Granted, this approach would not be very practical on a larger scale, but it is nice to see nonetheless.

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Francesco with an assortment of animalian friends

The weather! The hours of work just kind of breeze by when the sun is shining, the air is still and there’s not real noise but the occasional person falling out of an airplane. Actually, just the whole vibe of Motueka. It’s a slow-paced and very calm sort of place. The moon and stars shine brightly and unobscured. It’s the sort of place where people really value face-to-face meetings and community. In fact, in following up a few leads on potential onward WWOOFs, I was pleased to be asked to come by in person rather than talk on the phone. Many songs have been sung while fencing the days away. Many f*&#ing wires have sprung back and cut or bruised my hands. Many fences have also been built. In fact, that’s really all I have done with myself on the farm for the last three weeks except the odd lap of the farm, picking up horse shit. Well, there was that one time where the alpacas escaped into the neighbour’s orchard, but there’s nothing like pretending one is a sheep dog (alpaca dog?) to wake one up in the morning. Life is good.

Life was especially good in that first week, when I discovered my brother from another mother. Perhaps one of my parents found a little hanky-panky near Naples at some point. Who knows? But somehow, the advent of Francesco, the super-WWOOFer happened. This dude loved to work more than anything. I like a good honest day’s work as much as the next man, but that’s not where we hit it off. This guy was just as obsessed about the impending zombie apocalypse… nay… MORE obsessed with it than me. (FYI, I jest. As does he. I know there’s no chance of zombies. Alas, I’m dead serious about the inevitable collapse of the system of things as we know it) It was very satisfying to see someone pay the correct amount of reverence to the “Zombies, Run!” app which is so often blaring from my bum (i.e. my pocket). Anywho, it was one of those times you just find a friend who you really hit it off with. Here’s to serendipitous meetings and single-serving friends. So far all of my co-WWOOFers have been good sorts here actually. Perhaps there is something to be said for scaring away many potential WWOOFers with discouraging profiles…

By far the best thing though, has been the opportunity to catch up with a wing of my family that I have not really known well for the rest of my life. In particular, I was incredibly fortunate to be offered an opportunity to take part in some disability support (through Manawanui) work for my cousin. Not only do I get to hang out with my cousin (who is lots of fun) but I can do so without the feeling that I should be finding ways to make money. My cousin gets help bridging the gap between school and adulthood. His parents get a much needed helper while they put in an incredibly hard slog running their business. I get to hang out with my cousin and get to know him better. It’s a triple win situation and to be honest, I really enjoy the challenge.

There is also a yurt. I’ve been curious about yurts for a while now. I’d heard of them and seen a few from a distance, but never properly experienced one. Yurts are cool.

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Yurts. Choice.

Something I’ve been meaning to cover for a while is poo. It’s a bit of a shit topic (you’re welcome) but it’s very important to pay attention to your poo. Oprah and Dr Oz told me so once. This transition to living off the fare that is served up to me (largely organic, basic and grown on the property or within the local community) has had a big effect on my digestion. I know this because I am also mostly living with compost toilets, so my ‘donations’ look up at me an give me a little wave every time I drop the kids off at the pool… or at the sawdust mill? There is much to be said for whole grains, unrefined fruit and vegetables, fresh herbs and (in my case although opinions vary on this) a meat-free diet. My poo is wonderful. It’s the perfect model of intestinal health. And given that this and oral health (haven’t had a filling yet –at age 33- and don’t see the need any time soon) are said to be two of the most important indicators of overall health, life is looking very healthful indeed.

With ‘health corner’ or ‘the poo diaries’ finished, the other thing here has been the number of opportunities. You may recall a particularly stressful week a couple of weeks back (see “The Worst Week So Far”). Since then, life has gone from strength to strength. From no income, I actually somehow managed to be overwhelmed by too many jobs. There is also an abundance of opportunities for communal living here. Two in particular seem to be options for the near future. One guy who has a strong background in farming and a lot to teach me about a lot of different aspects of a successful sustainable life is my likely next host. The feminine half of the hosting equation also has a lot I can learn from too. A Steiner school teacher and all round positive and lovely person, I feel like they (and their family) are going to be a great WWOOF experience.

Riverside is another unique opportunity. New Zealand’s oldest sustainable community (and previous home of 15 years to the aforementioned WWOOF hosts), this place is an important place to have visited. It shows me a model that works. It’s one thing to be idealistic and imagine utopian communities living off the land. It’s another to see people living the life. It’s encouraging. It’s also something I intend to check out more thoroughly. There are several intentional communities in the area. That was, after all, the sole reason for making this trip south in the first place. I’ve checked out a few directly and have learned a lot about a few more through talking to locals. The isolation of Tui Community really appeals. The apparent anarchy of The Graham Valley (Graham Downs Renaissance) Community is interesting. A couple of others are buy-in types of places that are prohibitive to me. Riverside feels different. Watch this space. I have a feeling there is some type of future there.

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Riverside at a glance. Doesn’t hold a candle to actually being there

If you were paying attention to the top of the post, you may have noticed it is open-ended. That’s because a one week stay has turned into something else. Motueka is home for now. We shall see how it all unfolds. There’s plenty more still to come.