This project seeks to fund the development work for a new financial product called a Price Gap Agreement (PGA) facility that addresses a critical gap in the American housing ecosystem. Despite a strong network of community development corporations and nonprofits, most local programs focus on rental housing or permanently restricted ownership for households below 80% of area median income (AMI). As prices soar, moderate-income families with stable jobs are increasingly priced out of homeownership. The PGA facility introduces a new equity-based instrument to bridge that gap. When a household qualifies for a mortgage that is smaller than the home's purchase price for example, a mortgage for $300k on a $400k home, the PGA provides the missing capital as a second lien. Borrowers contribute a 3% downpayment on the purchase price of the home but make no monthly payments on the PGA. Repayment is due upon resale of the home or refinance, and the payoff includes the original principal of the PGA plus the IRS breakeven rate (~ 4% to 5% per year depending on length of the loan period), which ensures the homeowner equity growth through the borrowing period.
This request is for $250,000 which will be for the cost of hiring Second Muse Capital, through its Future Economy Lab, to perfect the documentation of the PGA and prepare an Offering document that will be used to raise capital to fund the proof-of-concept phase (~ 1,000 to 2,500 homes). Estimated time to market: 1 year
This project will work because the homebuyers will credit qualify for the mortgages they can afford, and the PGA will fund the gap to purchase a home that will be fitted for energy efficient heating & cooling systems and renewable energy electricity. There are many American households who want to buy a sustainable home but are unable to do so because of the current home pricing.
This project is scalable.
Phase I - 1,000 to 2,500 homes [Proof of Concept] = Up to $250M in capital for PGA [raised by Second Muse from private investors & charitable organizations]
Phase II - State-wide Eligibility [i,e, Oregon: 38,000 Annual eligible homebuyers] = $4B [raised from the Sustainable Debt Market (2024 funding = $1.74T)]
Phase III - Nation-wide Eligibility - Supported by Federal Guarantees [like the SBA 504 loan program]
