Real Equality for America Today (REAT)

Whitepaper

Disclaimer: This document does not constitute accounting, financial, legal, or tax advice. It is intended solely to provide a summary introduction to the T-Homes ecosystem, and accordingly, it may not contain a full description of all relevant facts and circumstances. The conceptual framework described within this document is based upon our insights and conclusions as of the most recent revision date. Naturally, our current analysis of the crisis and our proposed solution may evolve as future circumstances warrant.

Summary

There is an escalating housing crisis in America of rising rents and decreasing homeownership for millions of Americans, particularly younger generations. One approach to resolving this crisis is to introduce alternative housing options for home ownership. However, homeownership is not for everyone, so a solution for affordable rental housing is needed. To make a significant impact on the spiraling housing crisis, there is a critical need for a faster, better, and self-sustaining solution. This solution can, and will, be fueled by Web3.

$REAT will be launched to support both affordable rentals and homeownership on a new ecosystem using the Stacks blockchain. The Stacks crypto network provides the necessary sustainability, power, and security to serve as the foundational support for this new ecosystem.

This new ecosystem will include the $REAT token, T-Homes, and a non-profit entity: Real Equality for America Today (REAT). This ecosystem, a self-sustaining machine to accumulate real estate, is expected to have a positive impact on the housing crisis by maximizing the ability to provide affordable rentals and homeownership to as many Americans as possible.

Figure 1: Illustrating REAT, the Next Phase of DeFi

Background: The Housing Crisis in America

Shelter is a basic need—the foundation of Maslow's Hierarchy of Needs—and is the highest expense for most American families. Since a small increase in price can strain a family’s budget, and a large increase destroy it, housing must be affordable and sustainable.

Sustainability entails costs not exceeding 25% of family income. However, the average housing cost-to-income ratio is 33% in California, which is often a leading indicator of nation-wide housing trends. If these trends continue nation-wide, at current rates1, America will exceed the cost-to-income levels observed immediately prior to the 2008 financial crisis in seven years.

Since the 2008 financial crisis, wealth inequality has risen sharply. A recent study by the Federal Reserve Bank of St. Louis Center for Household Financial Stability reported that millennials have ~35% less wealth than would have been predicted from the experience of earlier generations at the same ages. Nationwide, ~70% of millennials cannot afford a house due to rising prices.

Thus, there is a critical need to reduce housing costs. Without stabilizing housing costs at a sustainable level, the US risks another financial meltdown or prolonged catastrophe.

Prior Attempts to Solve the Problem

The primary approach to controlling housing costs—government intervention—has historically failed in its implementation.

Rent Control

Rent control is most often justified as an anti-poverty strategy. Yet, the costs of rent control fall most heavily on the poor. A recent study from Stanford shows that rent control accentuates income inequality and drastically reduces available housing supply, a lose-lose outcome.

In its ripple effects, rent control limits consumer mobility, forcing tenants to live far from their workplace or in problematic situations with few options. Rent control creates grey markets, which promote excess costs, cascades into housing discrimination, and serves as a barrier-to-entry in certain middle-class communities. Landlords and the local community are hurt by rent control because it promotes the deterioration of the existing housing stock and disincentivizes new construction while reducing property taxes.

Direct Compensation to Tenants

The government’s other tool, direct compensation to tenants, is a band-aid at best. This compensation is vulnerable to, and often stimulates, inflationary pressures, which make long-term compensation untenable. A combination of COVID-induced supply/demand imbalances and government stimulus has caused inflation to rise sharply in 2022 with no end in sight. Inflation has cascaded into the housing market in terms of asset prices and rents.

One-bedroom rents increasing 27% (vs a 5% increase to wages) creates a negative feedback loop that is unsustainable, pushing rent levels above survivable levels for the lower and middle class. Thus, government stimulus policies often hurt the people they are designed to assist.

Private Markets

Private markets, to date, have also failed to solve the housing crisis. While private markets geographically serve large portions of the US, they are incentivized to maximize profits. Income from real estate is driven by either the receipt of rental payments or the receipt of interest from debt. Rent increases directly contribute to the housing crisis and can price the lower and middle classes out of housing. Due to a softening economy, rising interest rates, and rampant uncertainty, lending standards have tightened, which further exclude families and increase the difficulty of finding a way out of this crisis.

Non-profits

In contrast, non-profits have helped provide sustainable housing to American families. However, the non-profit space is inherently fragmented, has duplicated efforts, and lack of meaningful coordination. These current non-profit structures have limited ability to scale and require large efforts in chasing funding. These limitations have prevented non-profits from having a nationwide impact on the housing crisis.

Time to Build

As we have seen, previous attempts have largely proven ineffective. So, what do we do about this rapidly approaching train wreck? Do we continue to do what our governments and traditional institutions have done for decades and simply treat the housing crisis like something straight out of Harry Potter, e.g., that which ”shall not be named”?

We believe that knowing what isn’t working has helped us identify what might work. America’s early efforts amounted to little more than tinkering around the edges and achieving only a miniscule positive impact.

We realized we weren’t going to get help from the traditional institutions that serve as gatekeepers and benefit mightily from the continuation of the status quo, nor were the traditional non-profits that are stuck in the horse-and-buggy era going to forge a path forward.

So, we decided to start from scratch—to develop a conceptual framework that would generate a solution to this crisis.

Blockchains and Proof-of-Transfer Lite (PoXL) Mining

One potential solution to the housing crisis is to remove inefficiencies in the system by harnessing new technologies.

One new technology that has not been previously used to solve the housing crisis is the decentralized blockchain ledger and programmed smart contracts that securely interact with and write to the blockchain. Blockchains are immutable ledgers that are cryptographically secured by a variety of consensus methods in a process called mining.

For example, one mining process used by the Stacks blockchain is called “Proof-of-Transfer” (PoX). PoX builds on top of the Bitcoin blockchain, using a token called Stacks ($STX). Stacks has since been expanded to a larger ecosystem including “Proof-of-Transfer Lite” (PoXL). In PoXL, miners spend $STX to mine (receive) a new token. New token holders help secure the network by stacking their token. These stackers receive a portion of the $STX spent by miners, while another portion of the $STX spent by miners can be used to drive protocol function. This creates a powerful incentive structure for miners to continuously contribute to the network.

By combining PoXL mining with the acquisition of real estate, a new approach to solving the housing crisis can be provided that is more scalable, more self-sustaining, and more effective than previous attempts at solving the problem.

Figure 2: $REAT’s larger ecosystem

Introducing the $REAT Token and the $REAT Flywheel

T-Homes is launching a new cryptocurrency token, $REAT. This token will support the creation and existence of affordable multifamily rental properties, potentially leading to a path of sustainable personal finances and homeownership for millions of Americans.

In order to maximize the benefits of the STX ecosystem, T-Homes will create a mechanism, which we call the “$REAT flywheel,” in order to acquire more affordable housing units and sustainably grow the ecosystem. We believe this will be the best way to scale affordable rental housing to as many Americans as possible.

Purpose

T-Homes has designed the $REAT flywheel to accomplish multiple synergistic purposes:

• Attract $REAT miners to donate, accelerate the flywheel, and put it into perpetual motion. Given that becoming a miner is a permissionless process, anyone who believes in our mission and holds $STX can participate.

• Utilize the inherent existing incentives built by the Stacks community to provide sustainable $STX rewards to $REAT stackers—also a permissionless process. Sustainable incentives are critical for a healthy network to propel the mission of REAT forward.

• Capitalize on a continuing, self-sustaining basis, the non-profit entity REAT, “Real Equality for America Today,” with a portion of mining proceeds from the flywheel.

• Fund its own homeownership-focused products with a part of mining proceeds received from the flywheel.

How the $REAT Flywheel Works

Figure 3: The $REAT flywheel

Step-by-step, this is what happens within the $REAT flywheel once capital has already entered the system and multifamily properties have been purchased.

• REAT converts the USD received from tenant rent payments to $STX.

• REAT uses the converted $STX to mine additional $REAT.

• Miners that believe in our mission and want to help solve the housing crisis will spend $STX to mine $REAT. The $STX transferred by miners in PoXL during $REAT mining will be divided between $REAT stackers, REAT, and T-Homes.

• Stackers that believe in our mission will stack their $REAT in order to earn $STX.

• When sufficient $STX has been accumulated by REAT, the $STX will be converted to off-chain USD.

• REAT uses the USD to acquire a new multi-family property and provide affordable rents to new tenants.

With sufficient $STX flowing to REAT from the $REAT flywheel, REAT will have the capitalization needed for its real estate acquisition to scale across America. To ensure the sustainability of the system, contributions from the $REAT miner community will be distributed as follows:

• 80% - $REAT stackers (Community)

• 15% - REAT non-profit (Rentals)

• 5% - T-Homes (Homeownership)

The main participants in the REAT flywheel are miners, stackers, REAT, and T-Homes.

Participant #1: Miners – The Accelerants

Miners are the accelerant in the $REAT flywheel. Their sending $STX during PoXL mining will fund the ecosystem and expand REAT's mission. Miners are incentivized by earning $REAT tokens.

As more miners participate, the $REAT flywheel spins faster. More miners provide increased network security and further acceleration in acquiring multi-family affordable housing.

$REAT mining is permissionless; anyone who owns $STX can use them to mine $REAT.

Participant #2: Stackers – The Stabilizers (80%)

Stackers are the stabilizers in the $REAT flywheel, consisting of the community that helps stabilize $REAT. They stack $REAT to earn $STX, secure the network, and incentivize more miners by reducing the circulating supply of $REAT. 80% of $REAT mining proceeds are distributed to stackers.

T-Homes aims to be a significant stacker and further support the $REAT flywheel.

$REAT stacking is permissionless, anyone who owns $REAT can stack them to earn $STX.

Participant #3: REAT (15%)

As the $REAT flywheel spins, REAT’s wallet will be supplemented with 15% of the $STX from $REAT mining activity. In addition to the $STX from the $REAT flywheel, REAT will also convert all USD generated by its properties’ rent payment cash flows to $STX. It will use this $STX for mining in the $REAT flywheel or to market purchase $REAT, whichever is more cost-effective at any given moment.

This innovation is key and is necessary to make REAT self-sustaining. By relying on this flywheel for capitalization, REAT will be able to limit rental increases. Limiting rental increases allows REAT to provide affordable and sustainable housing. Without this action, REAT would be unable to provide affordable housing and grow its mission.

As REAT acquires more properties, the $REAT flywheel will speed up over time. This will accelerate the rate at which REAT is able to provide affordable housing across the US.

Conceptually, each multi-family property acts as its own $REAT miner with an individual contribution to the network every month. This contribution subsidizes all properties on the network. This stabilized network helps scale the mission to provide affordable housing to more families.

Participant #4: T-Homes (5%)

The final component of the $REAT flywheel is T-Homes itself. Whereas REAT focuses on affordable rental housing, T-Homes instead focuses on converting renters into homeowners. T-Homes provides the optionality for all tenants in REAT’s buildings to become homeowners and purchase their unit directly for as low as 2% down. This relationship assists REAT’s ability to impact more Americans. The non-profit REAT purchases the buildings, and T-Homes will sell the units to residents.

T-Homes will receive 5% of the $REAT mining proceeds, which it will use to make its homeownership products more affordable. T-Homes will also assist REAT with real estate acquisitions, advising, and property management.

Through the REAT and T-Homes partnership and the $REAT flywheel, both affordable rentals and accessible homeownership are brought to bear to solve the housing crisis.

$REAT Launch

$REAT will be a fully-fair launch token. $REAT will not be allocated in advance to inside investors, venture capitalists, founders, or any core team members. $REAT will be globally and permissionless available to everyone worldwide via PoXL mining once mining commences. We anticipate that REAT mining will begin in Q3 of 2022.

The first two weeks after $REAT launches will be a sponsorship period where 100% of all mining proceeds go to the REAT non-profit instead of the community or T-Homes. This will allow REAT to bootstrap its $STX holdings in order to build the funds necessary to begin the acquisition of affordable housing.

Mining Emissions

To ensure that the $REAT protocol maintains its level of stability, the mining emissions will progressively decrease. Emissions in $REAT will start at 30% and will go through a halving schedule paired with Bitcoin (Figure 4). This will continuously drop the inflationary rate in the system.

The emission rate will evolve as follows:

• 30% 2022-2024

• 15% 2024-2028

• 7.5% 2028-2032

• 3.875% 2032-2036

This progression will continue and eventually flat line at 1% in perpetuity until mining ceases in 2204. In 2204, we anticipate that real estate income and debt will be sufficient to continue to scale REAT’s non-profit mission.

Figure 4: The $REAT emission schedule

$REAT Token Supply

Once $REAT mining ceases, the fully diluted token supply will be 1.9 billion tokens. This will correspond to 1 REAT token per acre of land in the United States* (Figure 5). The token supply amount was chosen to convey REAT's long-term goal of providing sustainable and affordable housing to everyone in the US.

Figure 5: At full dilution, there will be one $REAT token per acre in the US. *This correspondence is an arbitrary and symbolic number and is not meant to be compared to the valuation of acreage in the US.

Expected Outcomes

Once the $REAT flywheel has reached scale and REAT has a meaningful presence in the real estate space, we anticipate that REAT will reduce the rent-to-income problem in each property that it buys. Reducing this problem is expected to allow people to save more and eventually transition from renters to home buyers which causes a direct positive impact in the local communities.

Conclusion

The faster REAT and T-Homes scale, the faster we start making a dent in the housing crisis. The faster a dent in the housing crisis is made, the faster individuals can buy their own home. The faster individuals can buy a home through T-Homes, the better millions of Americans will be able to sleep through the night without the constant fear of losing the land they stand on. And that’s our long-term goal.