Fixing Politics by Fixing Real Estate
A response to Peter Thiel
Peter Thiel wrote an email that has a habit of resurfacing on the internet every few months—primarily because he’s right. The next generation is angry and reaching for solutions, often socialist ones, that have a history of not working. While these solutions are misguided, they are reacting to a genuine problem. Better answers are needed, both to address the problems themselves and to prevent the damage caused by inappropriate policy responses. We present one such solution here.
Thiel correctly identifies that “the system” is having some PR issues as of late. Donald Trump and Zohran Mamdani soundly won their respective elections with promises to shake up dysfunctional economic and political structures that have left voters unhappy with the status quo. While not the only cause of this discontent, economic misalignment within cities is a major factor here–both renters and homeowners have interests that are significantly out of sync with broader urban economies, resulting in myopic, anti-growth policies that serve no one well in the long run.
This is a structural problem that thwarts the best policy routes to solving these residents’ problems. Since governments are blocked, at least in many of our most important cities, private solutions are necessary.
Our solution is called rentvesting: a way to give renters skin in the game, building a new class of residents with a broad ownership stake in the city, and therefore a class that will vote with the long term in mind. Notably, it does so without harming landlords, taxpayers, or homeowners—in fact, these groups should benefit as well—and, for that matter, without needing government policy change of any kind.
How it Works
Rentvesting gives renters ownership in a portfolio of institutional-grade residential real estate without requiring them to spend any more money each month than standard renting. Each month, the renter invests their monthly rent payment into the Groma Real Estate Trust before paying rent. In exchange, Groma covers their rent for as long as the renter holds those shares. The renter can repeat this process each month and hold their shares for as long as they want. When they sell, Groma is paid back for the covered rent, and any growth is the renter’s to keep.¹
The key here is the division of the real estate into three parts: the initial equity, the income stream, and the appreciation upside. Assigning the appreciation to the renter gives them ownership of a steadily growing asset without the need for an upfront down payment; like a mortgage, but even more capital-efficient. Meanwhile, the creation of new real estate equity provides a stable asset against which Groma can borrow, funding the rent payments. This borrowing requires Groma to cover ongoing interest payments, which we do with the dividend stream from the purchased shares. There’s no recourse to the renter here; it’s our job to make sure that the real estate revenue exceeds the cost of debt so that we make money too.
This is designed to be a no-brainer for renters: if the value of the real estate goes up, they get 100% of the increase; if it stays flat or goes down, they’re no worse off than if they had just rented. And for Groma, banks, cities, and society at large, it has the potential to be transformative.
Why it’s Important
There are 100M renters in the United States, spending $650B each year on rent. If even a fraction of them—and once word gets out, we expect it to be a large fraction—enroll in rentvesting, it will be transformative for them as individuals, for Groma as a company, and for the political/economic structure of cities.
Renters get a durable source of wealth that grows with the value of real estate in their cities. Rent stops being a pure liability and becomes a core–or, in some cases, the only–part of their long-term investment strategy. Young professionals get an accelerated path towards a down payment, while older renters get a boost to their retirement savings.
Groma gets an untapped source of growth capital, turning rent from just an income stream into an investment in our ecosystem and an income stream (investment from renter + income from the capital borrowed against that asset). This enables us to scale our assets under management faster than even the largest and most established real estate investment managers. It’s great for our bottom line and also for our relationship with our renters—we’re not just providing them a service for a fee, we’re in business together with them. When they do well, we do well.
And cities get aligned incentives. Rentvesting turns a class of tens of millions of renters without an ownership stake in their cities into one with a concrete financial reason to support economic growth. If you own part of your apartment and a part of thousands of other apartments around your city, you’ll be less likely to support negative-sum policies like rent control or NIMBYism and more likely to support policies that enable economic growth, much of which will be capitalized into higher property values.
In today’s knowledge economy, cities are our primary growth engines. Unshackling them from the constraints of bad policy should be among our highest priorities. Rentvesting is a scalable, positive-sum, highly efficient way to do this—a capitalist way to restore support for capitalism.
FOOTNOTES
1 — Any shortfall is Groma’s responsibility—we’ve designed this to be as simple and low-risk as possible for renters.
by Chris Lehman and Seth Priebatsch
