As the federal government continues to curtail funding for affordable housing development nationwide, the city of Berkeley, California is moving to create its own cryptocurrency in an effort to potentially replace outlays for affordable housing from Washington with municipally-backed crypto-bonds.
The so-called “crypto-impact” proposal is the brainchild of Berkeley city councilperson Ben Bartlett and Berkeley mayor Jesse Arreguín, who have partnered with the University of California, Berkeley’s Blockchain Lab and municipal public financing firm Neighborly for the effort. The proposal would create a municipally-controlled blockchain system that would back bonds issued by the city to help fund affordable or supportive housing and other city services, CityLab reports.
Explaining the need for the cryptocurrency, Bartlett told CityLab, “The federal government has committed itself to [tearing] us apart, to dividing people by race and gender. And through its fiscal policies, it’s taking away the ability for cities to fund [things like] affordable housing.” Bartlett’s response is to remove some amount of fiscal control away from the federal government and place it instead in the hands of like-minded private investors with digital money.
If successful, Berkeley’s Initial Coin Offering (ICO) planned for later this year would make the city the first municipality in the country to enter the risky cryptocurrency sphere. The plan would allow investors to use blockchain—a digital, crowd-sourced ledger that underpins cryptocurrencies like Bitcoin—to purchase digital currency backed by city bonds. The program, according to Bartlett would augment municipal services and could potentially be used as a day-to-day currency by residents at some point in the future, as well.
The effort comes amid the recently-passed, Republican-backed tax overhaul, which public accounting firm Novogradac & Company estimates could whittle the future production of affordable housing by close to 235,000 units over the next decade, Business Insider reports. The regressive tax bill would exacerbate the regional housing crisis that has overtaken Berkeley by putting a dent in the city’s ability to develop affordable housing. The new tax bill also comes amid growing—and concerning—threats on the part of the current administration to cut off federal funding for so-called sanctuary cities like Berkeley.
Bartlett told Business Insider, “We have a jobs explosion and a super tight housing crunch. You’re looking at a disaster. We thought we’d pull together the experts and find a way to finance [affordable housing] ourselves.”
Estimates for how much total funding or how many housing units overall could be created using the proposed cryptocurrency have not been released. It is also unclear if the municipality will change its restrictive zoning policies to make room for more housing units and better instrumentalize the new funding.
The risky scheme could potentially play a role, however, in taking advantage of a recently-proposed state law that would loosen density, height, and parking requirements around transit in an effort to boost housing production in the state. The law—still in its draft form—could increase zoning capacity across California to the tune of millions of new housing units. A traditionally-financed $3 billion state-issued bond initiative is currently in the works, as well, as are various municipally-led housing bond initiatives.
A committee dedicated to the cryptocurrency scheme is currently working to implement the city’s ICO by May of 2018.