Construction finance and Collective's opportunity

Zach Prater
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In this blog series, we’re highlighting some of the questions and topics covered on Cointelegraph’s “The Agenda” podcast featuring Collective founders. Listen to the podcast here.



For too many of us, the dream of owning a home remains just that. With skyrocketing prices and a shortage of supply, the struggle to navigate this housing market is real. However, amidst these challenges, innovative solutions are emerging to address the issue of affordable homeownership. In this post, we will demystify the workings of the housing market in 2023, explore the financing and construction processes, and shed light on how collectives like Home Construction Collective are striving to tackle these problems.

To grasp the magnitude of the homeownership crisis, it's important to understand its impact on wealth accumulation. On average, homeowners hold 40x the net worth versus renters. That’s because the home is typically the largest purchase most will ever make, and because the home represents leverage for its owners, off of which other wealth can accumulate. 

Traditional Financing and Construction Challenges

Historically, home construction projects have relied, nearly exclusively, on financing from local or regional banks and specialty lenders. This means homebuilders have been limited in their options to find financing for their projects. Making matters worse for potential homeowners today, the most recent regional bank crisis has further compounded the availability of financing as banks grapple with solvency concerns. Construction loans are drying up. The further shortage of financing options hampers the production of affordable entry-level homes, exacerbating the housing crisis.

The Role of Home Construction Collective

Recognizing the need for alternative approaches, Home Construction Collective provides builders with non-bank financing and provides communities with the tools they need to decide how many homes to build and how much financing to contribute. By pooling financial resources in an environment of financial transparency for all parties, we can both construct needed housing supply while generating financial returns that have been historically reserved for banking and private lending institutions. This collaborative approach seeks to increase the supply of homes, thereby exerting downward pressure on pricing and making homeownership more accessible. In addressing the challenges of the housing market, it is essential to recognize that the primary issue lies in the scarcity of available homes. Insufficient supply drives up prices and makes it difficult for prospective buyers to find suitable options. As we’ve seen during the past year when interest rates have grown dramatically By focusing on increasing the supply of entry-level homes, projects like Collective aim to bridge this gap and create a more balanced market. Greater supply would alleviate some of the barriers to purchasing a home, enabling more individuals to qualify for homeownership.

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