Our economic system is built on treating housing as a store of wealth.
If homes weren’t used in this way, they’d be about 30% cheaper.
The cost of building a house typically represents 60% of its market value, while the rest is a “monetary premium” – and that’s the problem.
Bitcoin fixes this.
Once you’re on the ladder, you’re against everyone else
If you’re home owner – you dont want a tower block built next door. And it’s not just because tower blocks look ugly. More housing supply, means a potential buyer has more options and you lose leverage in negotiations.
TLDR – Your house will be worth less. Basic supply & demand.
So, you are incentivised to do whatever is in your power to restrict or delay the construction of new builds, particularly affordable housing – the kind that would especially put downward pressure on your house value.
And it’s not just on the individual level – housing as a wealth store impacts all levels of society. The most powerful societal actors and insitutions are incentivized, and often existentially dependent, on preventing rapid increases in housing supply.
There is a systemic conflict of interest.
Let’s go through each group to understand who wins and loses in the current system.
Who stands to lose if housing gets cheaper
Existing individual & family home owners
- What they stand to lose:
- Asset Value: For the median family in the UK, their family home represents more than 50% of their wealth. If their house value goes down, this has a huge impact on their economic situation.
- Negative equity & risk of eviction: Many people take on 20-30 year mortgages with just 10% equity in their homes, meaning their debt is highly leveraged against property values. If home values fall below their equity, default becomes a rational, though devastating, choice – as seen in 2008.
- How they protect their interests:
- NIMBY-ism: “Not In My Back Yard.” In developed democracies, individuals often use local planning structures to dispute or delay affordable housing projects in their areas.
Landlords
- What they stand to lose:
- Asset Value (Same as individuals)
- Rental Income: More housing puts downward pressure on rental prices, which means lower income for landlords.
- How they protect their interest:
- NIMBY-ism (Same as individuals)
- Local Property Banking: Buying up housing in strategic areas (e.g., student housing near universities) to establish local monopolies, keeping prices high by limiting supply.
Large property developers (Land Bankers) – Also technically landlords
- What they stand to lose:
- Revenue: Lower property values mean lower revenues and profit margins on development
- How they protect their interest:
- Land banking: Many large developers strategically buy land around cities to control new development supply, leveraging this control to influence local zoning regulations in their favor. This monopolistic behavior allows them to release land when market conditions are most advantageous.
Commercial Banks & Lenders
- What they stand to lose:
- Defaults on existing loans: The mortgage business is the back-bone of a retail bank. They make revenue from spread between the central bank borrowing rate & the rate at which they can loan money to homebuyers. If housing values go down existing loans held on their balance sheet would be at risk of default.
- How they protect their interest:
- Lobbying demand side inflation: They push and work with the government to create more schemes to artificially support the demand side with ‘help to buy’ type schemes.
Investment Banks
- What they stand to lose:
- Mortgage backed securities business revenue: Mortgage debt is packaged by investment banks into fixed income securities. These fixed income securities are sold for a premium on the public markets, primarity to pension funds.
- Derivatives revenue: Mortgage-backed securities also serve as collateral in the broader financial market, enabling speculative trading. Investment banks earn fees and spreads from these activities.
- How they protect their interest:
- Systemically: Entrench themselves as Systematical Important to the point where the government has no option but to bail them out in case of defaults and failures
Pensioners
- What they stand to lose:
- Fixed income security: Pension funds hold significant mortgage-backed securities, so any revaluation negatively impacts pensioners.
- How they protect their interest: They don’t – pensioners are often vulnerable to these market dynamics and may not even be aware of them.
Who stands to gain if housing gets cheaper?
First time buyers
- They’ll be able to buy a house sooner and will have to take on materially less mortgage debt
Renters
- They’ll be able to find housing at a more affordable price
The economy as a whole
- Both buyers and renters will have more disposable income which will stimulate the economy
Why regulators have failed so far
The incentives of powerful stakeholders are stacked against the regulators.
Demand side policies like Help-to-buy and governement backed loans, just inflate the demand side and push the prices up.
Rent controls reduce the velocity of new developments.
NIMBY-ism and short term local council tenures make any meaningful government backed development very difficult.
It’s very hard to realize policy that works against the interest of land-owners.
But there is another way.
If we can separate the “long term wealth preservation” function from the “a place to live” function of housing, we will be fix the incentives that are stopping us from building more houses.
How bitcoin can solve the housing crisis
Bitcoin, as a digital, deflationary asset, offers a compelling alternative to real estate as a store of value. Its limited supply and decentralized nature make it a more predictable and transparent store of wealth, immune to many of the risks associated with real estate investments, such as government regulations, taxes, or even physical maintenance.
Bitcoin’s key advantages as a store of value
- Perfect scarcity: With a fixed supply of 21 million, Bitcoin cannot be inflated or manipulated in the same way as real estate or fiat currencies.
- Global accessibility: Unlike real estate, which is often tied to specific geographic regions, Bitcoin is accessible to anyone with an internet connection, reducing the need for foreign capital to flow into localized housing markets.
- Divisibility: Bitcoin can be divided into smaller units (satoshis), allowing investors of all scales to participate, unlike real estate which requires significant capital.
Reducing the investment pressure on housing
Bitcoin can absorb much of the speculative capital currently flowing into housing. Instead of pouring money into physical assets like homes, investors could park their wealth in Bitcoin, which doesn’t distort the housing market. This would
- Lower housing prices: As housing becomes less attractive as a store of value, the monetary premium inflating house prices would decrease, making homes more affordable for people who want to live in them rather than use them as investments.
- More efficient use of property: With less speculative capital driving prices, housing would revert to its primary function—providing shelter. This could lead to fewer vacant homes and more properties available for rent or purchase at reasonable prices.
How governments can demonitize housing in favour of bitcoin
Housing stock currently benefits from tax benefits that encourage investment to flow in – especially capital gains exemption on primary residences. This makes sense, as it promotes the idea of housing as a ‘place to live’ rather than an investment.
Long term tax advantaged bitcoin bonds
This would be a bold move.
Treasury bonds can no longer compete with real estate.
The new form of monetary policy must be backed by a superior, perfectly scarce asset.
The governement could intermittently issue tax advantantaged 10 year, 30 year bitcoin backed bonds. These bonds would attract a lot of capital and demonetize real world assets.
In order to protect vulnerable stakeholders like pensioners, they could promote pension fund allocation toward these bitcoin backed bonds.
In order as to not have price shocks that push individual and family home owners into negative equity, they can issue these bonds over a defined period of time. Perhaps even create home equity trade schemes where homeowners can trade their equity in their house for the bitcoin backed bonds.
Over time, this could lead to a more equitable distribution of wealth, as Bitcoin adoption grows across various income brackets. But more importantly, it would free housing to be housing again.
Long term tax advantaged scarcity bonds (80% Treasury Bond + 10% Gold +10% Gold)
This is the diluted, more practical version of the fully reserved Bitcoin backed bond.
The mix is conservative enough to appeal to traditional investors while adding enough scarcity elements to attract those seeking inflation protection.
Making these bonds tax-advantaged could significantly increase their attractiveness, especially to individuals and institutions looking for long-term wealth preservation strategies. This feature would allow for capital gains deferrals, further aligning with the objective of drawing speculative interest away from housing.
Conclusion
Bitcoin presents a real opportunity to alleviate some of the systemic issues caused by the financialization of housing. By offering a superior alternative as a store of value, it could reduce the speculative pressure on the housing market, lower property prices, and democratize access to wealth. While Bitcoin won’t solve all aspects of the housing crisis, it could play a key role in making housing more affordable and accessible for everyone.