Antiparochi

A train between Polikatoikies in Athens

It sounds like an Italian dish, but antiparochi is a financial device used in post-war Greece to spur the construction of millions of homes. A variant of this device could kick-start homebuilding in San Francisco and other high-cost American cities.

Antiparochi emerged in Athens from the wreckage of two world wars, after successive invasions by fascist Italy and Nazi Germany left Greece devastated. The idea involved homeowners in postwar Athens trading their land with apartment builders in exchange for a few condos in a new building, in lieu of cash. These buildings, typically four-story to six-story structures called polykatoikía, came to symbolize middle-class Athens.

Most new city housing in modern-day America involves the developer buying high priced land from a homeowner, who pays large capital-gain taxes and typically moves away. The developer earns a profit by building two or more houses, condominiums, or even an apartment building; none of these structures is low-cost because of the high-priced land.

As your humble blogger understands antiparochi, the homeowner exchanges his property to the developer in return for one or more new units. The developer, who no longer pays a high price for the land, doesn't need to sell the other new units for as high a price. Under Greek tax law, apparently, antiparochi did not result in taxes to the original landowner.

Key to making the structure work in the U.S. is the non-recognition of capital gains by the homeowner for tax purposes. Under current law only investment properties can be exchanged for other investment properties (under IRC Section 1031) without triggering capital gains taxes. A homeowner who gives up his personal residence experiences a taxable transaction, whether he receives back cash or another real estate property. (It may be true that clever tax lawyers can come up with solutions using partnerships or other entities, just as they did with a limited number of high-income individuals to work around the $10,000 SALT limitation.)

Antiparochi would only constitute part of the solution in California, however, who still would have its notorious red-tape problem. Nevertheless, kudos for creativity.