Affordable Housing Institute : US

By David A. Smith

 

Can you count the times you’ve moved?  Remember how much fun it was?  How long it took you to unpack the final boxes?

 

Got everything?

 

Most of us hate moving – and we understand that moving is a sunk cost that yields nothing but emotional, temporal, and economic entropy, so we try to stay in one places.  Landlords know this, which is why they like to push the rents up just below the threshold where moving becomes worthwhile. 

 

That makes the landlords rational, and us rational too.  Then there are some who are irrational, at least when it comes to moving, as revealed in this oddly sympathetic New York Times article:

 

In the nine years since he came to New York with $500 in his pocket, Martin-Christopher Harper estimates that he has moved at least 40 times.

 

Four times a year?  I’d say what Mr. Harper has is an obsession.

 

Make sure you label whose is whose

“Martin-Christopher Harper, right, at home with his roommate, Eli Schmidt, has a steady mover. (Image Michelle V. Agins/ The New York Times”

 

When he lists the neighborhoods he has lived in — in chronological order — he sounds like a bartender reciting a long list of microbrews: “Brooklyn, Chelsea Hotel for a moment, Bronx, Carroll Gardens, Crown Heights, Red Hook, Carroll Gardens, Greenpoint, Chelsea, Crown Heights, Carroll Gardens, Williamsburg, Bushwick, Bed-Stuy, Williamsburg, East Williamsburg …”

 

Don’t necessarily start with this dude.

 

Mr. Harper, 32, a hairstylist, moved to New York from Los Angeles, where he still has a share in an apartment.

 

Mr. Harper evidently has sufficient disposable income to maintain living accommodations in several cities.

 

Happy to be paid each time the insecurity strikes: Mr. Harper’s mover, Mark Ehrhardt. (Image Tony Cenicola/ The New York Times)

 

He says he moves a lot because he is always looking for a better deal, a better space, a better neighborhood. He acknowledges, though, that moving is something of a compulsion, and that after tackling the issue in therapy and connecting his feverish relocating to his moving frequently as a child, he has begun to cut down. He has lasted more than a year in his current apartment in East Williamsburg, a record for him in New York. These days he has a roommate, Eli J. Schmidt.

 

All right, we will stipulate that Mr. Harper is unrepresentative of anything to do with real estate, and will move on to more practical moving issues:

 

Whether one moves frequently or almost never, moving is an intensely emotional experience. The underlying psychological issues involved in real estate decisions are of great interest to therapists and psychologists, because housing and moving are filled with symbolism, the hope for new beginnings, crushing disappointments, loss, anxiety and fear.

 

As I’ve posted before, we associate change in living accommodations with change in sexual relationship: we move in with someone, live together, set up house (or set up light housekeeping, nudge nudge) or move out.

 

You move around a bit, eh? Move around!

 

And we know that more bedrooms means more babies, so it’s no wonder that Jung interpreted the house in dreams as an expression of the self.

 

I pray for security of tenure

 

 “Panic can really set in around your home and your apartment,” said Ronnie Greenberg, a Manhattan psychoanalyst. “It’s a matrix of safety, so moving is incredibly stressful and people don’t realize it — they mainly talk about the packing and the external part of moving.”

 

Perhaps it’s understandable that people pack in a great flurry, and then unpack at leisure.  (My new office, the one I’ve occupied for only a year, still has an unpacked box or two.)  Perhaps it’s our way of closing a chapter of our lives and then opening it in layers, like peeling an onion, reinventing ourselves by what we choose to revive and what we choose to hide.

 

Mr. Harper and others who choose to move frequently are likely to be risk takers, psychologists say.

 

Try rootless and unable to commit?

 

Some therapists, borrowing a term used in Alcoholics Anonymous, call frequent moving “pulling a geographic,” seeking external changes to change internal problems.

 

If your environment displaces you, run away from it.

 

But as Elizabeth Stirling, a psychologist in Santa Fe, N.M., who specializes in helping people make life changes, said, “No matter how much you move, you still take yourself with you.”

 

“No matter where you go … there you are.”

 

On the other hand, those who never or rarely move can be frozen by a fear of change, psychologists say.

 

Those psychologists – they miss nothing, nothing!

 

The prospect of leaving the place that is the center of your universe or the one constant in your life can be frightening.

 

Perhaps, on a more serious note, this arises from the same phobias that lead to hoarding.

 

Even finding a new dry cleaner, deli or coin laundry can stir up deep worries of impending isolation and loneliness.

 

Just like hoarding.

 

“For the longest time, moving was a bitter consequence of making money when you were selling real estate,” said Michael Moshan, a real estate lawyer and a partner in Gold Scollar Moshan in SoHo. “If I was selling my apartment and buying another one, I was making money. I had to swallow the pain of moving because I was banking something significant. Now people are moving and the moving aspect becomes much more bitter.”

 

Loss of home = loss of place = loss of self.

 

Packing and sorting through a life’s worth of belongings — especially, say, if the move is the unhappy result of a divorce or other trauma — can be gut-wrenching.

 

We define ourselves by what we leave behind.

 

For Stephen Klein, 43, a renter, a single father and a librarian at the City University of New York, the process of moving is “very emotional.”

 

Stephen Klein would very much like to move from his rental in Prospect Heights, Brooklyn, because he needs more space. (Image Michelle V. Agins/The New York Times)

 

Renting is a much more flexible tenure, and is therefore associated with more flexibility surrounding our personal relationships.

 

Mr. Klein has moved nine times in the last 14 years, often as relationships — including a marriage — began and ended.

 

Move = change in household configuration.

 

Now, he would very much like to move from his rental in Prospect Heights, Brooklyn, because he needs more space. He wishes his 10-year-old daughter had her own room instead of the loft he built for her above the kitchen.

 

That’s the thing about children – even if your conjugal relationship sunders, your parental one survives.  I wonder how Mr. Klein’s daughter feels about his peripatetic lifestyle.

 

I’ve just got happy moving feet!

 

He said he would like to stay in Prospect Heights, where he has friends and a sense of community — all the more important because he is single.  [Currently – Ed.]  But the apartments with more space that he can afford are in far-off neighborhoods.

 

Mr. Klein, all living accommodations involve choice.  You can drive (or commute) until you qualify, or you can live in town in less space.  Just as markets are places where people tell the truth to each other about what they value, living choices are the tangible expression of what we value, and how much.  You are what you live in.

 

“I feel like I’m a refugee,” he said. “I really feel like I wish I could have a sense of home. I feel like I’m floating out there.”

 

Either buy something or accept what you have. 

 

 “If you say you are trapped,” said Linda Sapadin, a Long Island psychologist and a motivational speaker, “that’s like the trapping of an animal. It’s a pretty shocking visualization. It’s better to say, ‘I can’t move right now,’ and ask what can you do to make your environment safer, more pleasant. Adding the two words ‘right now’ is a tremendous liberator psychologically.”

 

Psychologically, renting is transitory, and what we will accept if “this too shall pass” can be so much less than we will accept if we have convinced ourselves it will be forever.  Conversely, ease of moving influences the dynamics of market pricing.  In equilibrium markets, where vacancies are plentiful, renters have the advantage; when they are scarce (thanks for nothing, rent control), property owners have the upper hand.

 

Will Cox’s apartment on Riverside Drive and 92nd Street has been a constant in his life — too constant. He has “walked down the same block 10,000 times,” and longed to leave the neighborhood.

 

Mr. Cox, 38 and the owner of a television and film post-production company, has lived in a rent-controlled apartment that he took over from his parents, who now live in Connecticut.

 

SHAKE-UP Will Cox and his wife, Lynn Van Lith, prepare to leave his childhood home. Their daughters, Margot, left, and Matilda, help out. (Image Rob Bennett for The New York Times)

 

Allow me a moment to become infuriated.  Even assuming that one finds rent control justifiable in the abstract – to protect some deserving group – by what reasoning does Mr. Cox qualify? 

 

He took over the apartment from his parents, so in effect inherited wealth from a non-property right.

He is in no sense indigent, as the owner of a television and film company.

He has not needed the money for living expenses, instead saving it (see below).

 

He has never lived anywhere else, except for the four years he was away at college in California.

 

The inherent subsidy of Mr. Cox’s apartment has reduced labor mobility – look how long he has stayed – and not coincidentally, transferred wealth from the property owner to Mr. Cox and his family:

 

The place has allowed him and his wife, Lynn Van Lith, who have two daughters, ages 1 and 3, a bit of a financial cushion.

 

But in some ways it has also been a burden: Giving up a $1,200 two-bedroom apartment in Manhattan is not an easy decision, even if you are eager to go.

 

Such a burden, being weaned off the subsidy teat at 38.

 

You’re too old for this, junior

 

“I have all these memories of the neighborhood, these sorts of ghosts that follow you around,” he said. “And for me, it doesn’t at the moment feel entirely like my own life. I still feel like I’m under the shadow of my parents. That rite of passage of finding your own place to live in New York, that experience, I had never had it.”

 

It was always available to you, sir, had you chosen to pay market rent.

 

The logjam broke when Mr. Cox was offered an incentive by his landlord.

 

Yes, I can see where being paid would knock the sentimentality right out of your head.

 

He is moving today to an apartment he and Ms. Van Lith bought in Fort Greene, Brooklyn. And beneath the financial calculations of the move, and the uneasiness that comes with putting all of their savings into the apartment, they have complex feelings. One is excitement: They are off to start “a new history,” he said.

 

When you move, you choose.  Choice = life. 

 

I chose to drop it

 

Drop a pebble in the water

And the wave will reach the shore

Light a candle in the darkness

Someone somewhere finds a door

Turn your eyes away from people

And they’ll turn their eyes from you.

It’s a lesson hard to learn that

What you are is what you do.

– Shadowfax, What Goes Around

 

Whatever choice you make, you cannot make the same choice again.

 

You’re not the same reader/ and it’s not the same blog post?

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By: David A. Smith

 

[Continued from yesterday's Part 2 and the previous Part 1.]

 

As we continue reviewing where urban Indians live (a companion to my previous two-part snapshot of India’s housing situation), and where they will live in the future, we started at the bottom, where the poor are making their own housing and communities entirely independent of government, then looked at all the affordable homes being delivered, in one way or another, with some government assistance. Now, finally, we come to the purely market solutions:

 

Ad for Ambuja cement: such billboards are ubiquitous throughout India

 

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

 

7. Market walk-up

 

Most Indian cities are expanding rapidly.  The market’s fastest means of creating additional formal housing is for low-skilled labor to build two and three-story homes.  Neighborhoods like this are common all over Gujarat and Rajasthan:

 

Indian sprawl: expanding Jaipur

 

Sprawl is nothing unique to America – it happens whenever people have the chance to urbanize across land that is not too expensive:

 

Like many Indian cities, Jaipur keeps expanding until it hits natural barriers like mountains

 

When land is cheap, by far the easiest form of construction is a walkup, and in India, with its wealth of cement and sun, walkups are easy to build, hence cheap to buy:

 

However built, that’s a structurally credible three-story house

 

Once built, they become homes and neighborhoods:

 

Pride of ownership in the paint and stucco, and more homes coming behind

 

In most of the world – and for that matter, throughout most of history – a home is a process, something to be continuously improved:

 

Behind the streetscape, people keep building informally

 

The home is also the boundary of private space:

 

People make their own private urban spaces

 

8. Middle-income high-rise

 

As the city grows, its core becomes progressively more valuable, and that means it has to go further up:

 

High-end apartments, Mumbai: protected by concertina wire

 

Much of these are high-end:

 

Your enclave in the air: Mumbai

 

Much of Indian affordable housing is in the form of co-operatives, and judging by at least this one sign, the problem of free riders is universal:

 

A remarkable testament to ineffectuality: co-op fee defaulters

 

Throughout India, we see mid-rise and even high-rises springing up in the newer districts of growing cities:

 

High-rise, Ahmedabad

 

I didn’t go inside so I cannot be sure, but I expect these flats to be much larger than the low-income, perhaps 45 square meters to 70 square meters:

 

Balconies, piazzas, wide staircases: external signs of luxury

 

The goal is always the same: ownership.

 

A universal happy face: homeowner with keys to the new home

 

9. Market-plus subdivision

 

Name that country?

 

By now you might be forgiven for thinking that something in the Indian national character compels either a small flat or at minimum residence in a high-rise.  Prepare yourself for a surprise:

 

You’d think you were in Abilene, not Ahmedabad, wouldn’t you?

 

These apartments not only look Western-style on the outside, they are the same in the inside – anywhere from 80 to 120 square meters (850 to 1,300 square feet), laid out in a form and with amenities that would make any American feel completely at home.

 

These will still be quality homes in twenty years: Ahmedabad

 

I was personally agog at seeing them, they seemed so thoroughly incongruous – but then I asked myself, what housing will still be market-quality in twenty years?

 

High physical density but low people density: Ahmedabad

 

10. Havelis and palaces

 

Back in the eighteen and nineteenth century, when India underwent its first wave of urbanization, the great textile merchants and import-exporters lived in sumptuous townhouses called havelis.  Bikaner and Mandawa, two towns in western Rajasthan, have large concentrations of them.  Most are today crumbling into ruin – the caravan routes having been severed after the India-Pakistan partition created a barrier to land traffic – but a few are being restored, such as Haveli Nadine Le Prince:

 

Urban luxury, nineteenth-century style

 

A few have been converted into historic or heritage hotels:

 

Pal Haveli, Jodhpur

 

They are right in the center of town, meaning all of organic India is just outside the front door:

 

Pumping water right outside Pal Haveli, Jodhpur

 

Inside is private serenity:

 

In the afternoon cool …

 

And that is my takeaway from housing in India.  The outside is nothing, it is the grimy and weatherbeaten face one shows the world at large.  One keeps one’s soul inside:

 

Urban luxury, nineteenth-century style

 

Yet, just outside the gates, lies rambunctious India:

 

Exit your gated community, and you’re back in India

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By: David A. Smith

 

[Continued from yesterday's Part 1.]

 

Does Does it matter where they live if they all go to the same school?

 

In yesterday’s post laying out a typology of where urban Indians live – a companion to my previous two-part snapshot of India’s housing situation – we started from the bottom up, looking initially at the purely private, purely informal solutions that people create out of necessity.  The photos demonstrate that given enough incumbency, people acquire an implied political legitimacy, and the municipality takes small steps to rationalizing the public-space aspects of the urban infrastructure. 

 

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

 

4. Slum-relocation community

 

As slums are a place where private investment outpaces public infrastructure, with continuous urbanization there usually comes a moment when the informal settlements have overrun the available transportation or utility infrastructure, and a portion of the slum must be demolished to create space, such as for a railroad right-of-way.

 

Alleyway through a slum: that’s a train going by

 

Commuter train, Mumbai – the municipality required ten meters right-of-way either side of the tracks

 

Under Indian law applicable to Mumbai, the slumdwellers had a right of access to housing, meaning that to relocate them required their consent, and to obtain it, the government promised to build them new affordable high-rise co-operative flats (which we’ll see later in this post).  But that would take time, and in the meantime, the right-of-way had to be cleared, so the municipality built relocation flats – transitional housing:

 

Relocation flats, Mumbai

 

Naturally, people living in transitional housing have little motivation to beautify their public space:

 

Relocation flats, Mumbai, the trash does tend to pile up

 

Yet they keep clean their interior space:

 

Flats arranged around a courtyard, and it is fairly clean

 

When in their relocation settlement, they conduct business.

 

Pipe scavenging and recycling business

 

5. Affordable co-op

 

Because housing – its location, quality, production, and affordability – will be a driver of Indian global urban competitiveness, at some point a government – usually a municipal government – decides as a kind of civic economic self-defense that it must create affordable housing. 

 

Mankhurd co-operatives, funded through World Bank Loan repaid by railway surtax (see below)

 

As cities densify, there is only one direction to go – up. 

 

Oshiwira 1, affordable co-operative built by SPARC, Mumbai

 

The city becomes vertical, and to become vertical, that requires structural framing, which implies formality. 

 

The scaffolding may be casual but the building is reinforced concrete

 

Similarly, cities mean traffic jams, and bad cities have worse traffic jams, so the municipal competitiveness – to say nothing of quality of life – requires the addition of public transportation, and depending on location, that often means railways.

 

In Mumbai, for instance, people relocated away from municipal infrastructure (previous grouping) benefitted from affordable new-construction high-rise co-operatives whose principal loans were repaid through a surtax on railway tickets – thus drawing a direct financial link between the improvement of middle-class infrastructure (in this case, the railroad right-of-way) and increased affordability for the poor.

 

Once the government is involved, formality also implies certain basic amenities.  Even though the flats are tiny, they have all the necessities, such as a flush toilet:

 

Toilet, which will be two footprints in the floor

 

The toilet lacks fixtures – for the time being, it is merely a ceramic hole into which people make their deposits – but the configuration allows for a later retrofit of an individual seat toilet.  The apartments are extremely small, averaging 25 square meters (about 270 square feet), which compels design-size limitations such as showers rather than tubs:

 

Bathroom: designed for just a handheld shower

 

Concrete, though strong, is brittle, and extremely difficult to retrofit.  (Ever try drilling into concrete?) 

 

Wiring running outside the structural concrete, Oshiwira 1

 

[We see a similar phenomenon in pre-WW1 English homes and apartments, where the plumbing and electrical run outside the structure because there is no room inside the building – and its narrow walls – to accommodate hiding the piping.]

 

Because increasing lower-income Indian affluence changes people’s housing consumption expectations, the embryo apartment that is an acceptable size today may be functionally obsolescent in a decade, and if so the retrofitting will be a challenge.  Even though I am delighted to see these high-rise flats going up, I worry just a little about their eventual economic or physical obsolescence. 

 

6. Affordable high-rise market flat

 

With such an enormous shortage of housing – of all configurations, particularly the affordable ones – it’s no wonder that major Indian conglomerates are rapidly entering the field of new housing production, such as with the Tata nano-house.  Sometimes it seems as if the entire nation is one gigantic construction site:

 

Affordable high-rise in construction, Ahmedabad, January 2010

 

Built, building, and planned to be built: Ahmedabad

 

)

Affordable new-construction high-rise flats, south Ahmedabad

 

Affordable new-construction high-rise flats, south Ahmedabad

 

Remarkably, much of the construction is being done by women:

 

Women are a large portion of the construction workforce

 

The goal is a fully formal, mortgageable house in the price range of Rs 150,000 to Rs 300,000 [Roughly $3,500 to $7,500 US – Ed.], an income band for which there is already a huge demand, one showing no signs of abating.

 

)

Recently built affordable market flats, Ahmedabad

 

The developments are well designed and highly dense:

 

Site plan and floor plate, Ahmedabad affordable high-rise

 

Though small, the apartments are fully formal:

 

On the inside, it’s fully formal

 

They have a modest but serviceable toilet:

 

Two footprints today, a ceramic bowl tomorrow?

 

In addition to the utilities – water, electrical, and heat if required (often it is not) – there is a fully practical if tiny kitchen:

 

Everything including the kitchen sink

 

Indeed, so rapidly is India urbanizing, and so inexpensive is large-scale small-apartment construction, that just above the government’s level, the marketplace is exploding with new housing:

 

[Concluded tomorrow in Part 3.]

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By: David A. Smith

 

Where do urban Indians live?  In almost every configuration and tenure imaginable, from living in ramshackle sticks-and-tents to Texas-style-subdivisions, with everything in between.

 

Tents in the foreground, gated subdivision in the background: Ahmedabad

 

A little while back, returning from my three-week trip to northern India, I posted a two-part snapshot of India’s housing situation, focusing on the confluence of events across political, economic, and urbanization dimensions.  This mainly visual post will slice through the onion by income and tenure configuration levels, giving a typology of the different forms of housing now present in Indian cities.

 

At the South Asian Housing Finance Forum, Delhi, January, 2010

 

[Unless otherwise noted, all photos in this multi-part post were taken by David Smith on visits to India.]

 

In a country of a billion-plus people, undergoing what is probably the highest rate of urbanization (measured in total population moving to cities), we can certainly expect to discover every imaginable type of urban residential accommodation – and that the nation is in fact greatly short of quality affordable housing.  Indeed, the Government of India officially estimates a ‘quantitative deficit’ of more than 25,000,000 homes. 

 

Further, because housing demand is elastic, as India becomes richer and as more new homes are created, people will consume more housing, household size will shrink, and households will increase much faster than the population does.  The result is that over the next 10-15 years India will have the ability to absorb the all-but-unthinkable number of more than 100,000,000 new homes, mostly in urban and urbanizing areas. 

 

Where does he live?  Where does his family live?

 

The India we see today is a nation in transition – exploding through the carapace of nineteenth-century soot, filth, pollution, and bustle into a twenty-first century powerhouse. 

 

If slums are a phase through which rapidly urbanizing cities pass – as I think they are – then we have to expect and calibrate India’s urbanization from the bottom of the pyramid on upward, starting with housing built entirely by poor people, for poor people, in the face of government indifference or hostility:

 

1. On the streets: pavement dwelling

 

We start with those who have come to the city despite having nothing whatsoever, and who live on the streets.  In Mumbai and in Delhi, one can find small or larger families some of whom live on the streets.

 

Family gathered on a Mumbai sidewalk

 

In America and the European cities, one can find the homeless, but in these developed nations, being homeless is always accompanied by a mental or behavioral problem; in India, it can be a condition of simple urban poverty. 

 

I’ve taken only a few photographs of Indian pavement families, because there is something so intrusive about using a long lens to peer into a household’s workings, even if the family has chosen to live their lives in public.  Still, there is also something homelike and practical, such as cooking:

 

Pavement family rice pot

 

Living on the street necessarily means evacuating on the street:

 

Man urinating discreetly into the gutter, Bikaner, Rajasthan

 

Men and boys urinating in public are so commonplace that a convention has evolved: if you turn your back to the street and hold yourself still, it is somehow understood that people should look away.    But male urination is the least of the sanitation challenges, for it can be done relatively discreetly and relatively hygienically.  More challenging is the effort to protect women and the related campaign to eliminate open defecation, which is not just a matter of esthetics but also of health – both for the evacuator and for the water supply, a risk that has been known since the dawn of history.

 

2. Impermanent slum (’landing paid for urban immigrants?’)

 

Pavement dwelling is the lowest economic form of urban existence because it is the least safe, the least private.  One notch up is the ramshackle urban slum, made entirely of found materials, and invariably located on publicly owned low-value land – usually next to the river, the stream, the paper mill, the cement factory, or the dump – where people can settle and create their own intra-community, a world of their own inside the world of the city.

 

I profile one such in A day in the life of a slum [Post to come – Ed.]:

 

Ahmedabad and the Sabarmati River

 

Throughout history, people have been lured to cities by the promise of higher money income, a promise that is usually true, and they imagine that when they move to the city, they will be able to keep the animals they have raised in the countryside.  That was true of the Irish who came to Boston during the Potato Famine, and it seems evidently true of the Gujaratis coming to Ahmedabad whom I photographed outside my hotel room window:

 

Keeping goats, most likely for milk

 

Critical to these households is that by moving to the city, they can earn money, give their children a better education, and expand their horizons, if not for themselves then for the next generation.

 

Slums adjacent to Mumbai Airport

 

3. Permanent slum (’informal settlement’)

 

Slum community built on the infill outside a truck distribution warehouse

 

Slums improve, though; given time, people gain a perception of security of tenure, and as they come to expect that they will be there longer, they bring more durable found materials into buildings and rebuilding their informal settlement.

 

Informal settlement, Mumbai

 

The house is made into a home, with a waterproof roof, laundry drying on the line, and herbs being cultivated in plants:

 

Note the plants being grown in pots

 

Characteristic of these slums is that they are, in general, ground-floor:

 

Self-built settlement, Oshiwira neighborhood, Mumbai

 

Buffalo yard in the Oshiwira informal settlement

 

People keep animals immediately outside the family home.

 

After a while, the slum becomes sufficiently permanent that people invest in structural materials to add a second story:

 

Work on the ground, live a flight up: Mumbai

 

Often a residence over a business:

 

New urbanism, home-grown: Dharavi, Mumbai

 

Given time, these neighborhoods become physically formalized:

 

Would you call that a slum?  After having seen the previous photos?

 

Sometimes the municipality also recognizes the legitimacy of a long-standing urban settlement, by adding public infrastructure like paving:

 

Jadibanagar, Ahmedabad: note paving and water tank (blue)

 

Jadiabanagr, Ahmedabad

 

Have you noticed what’s happened in this sequence of photographs?  All within the realm of purely informal housing – self-built, self-organized, self-perpetuated – we have the first faint stirrings of a civic response.  It starts with tolerance – visual aversion of their presence – and then rises to the gradual formalization of public space, for community hygiene or out of charity, it moots not.

 

What happens when the community decides it has a duty to these urbanites, whether or not it wished for them to arrive?

 

Ahmedabad: community center in informal settlement

 

[Continued tomorrow in Part 2.]

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[Continued from yesterday's Part 1.]

 

By: David A. Smith

 

In yesterday’s post featuring a well-titled New York Times story, we focused mainly on the upside of premarital homebuying – how it tends to precipitate the decision to marry. 

 

Honey … I guess we’ve got to get married

 

Since it does, policy makers like to incentive the buying of first homes:

 

Pete Flint, the chief executive of Trulia, a real estate search engine, points out that people who have never bought a home make up a demographic tending toward the young and unmarried.

Enabling people to marry sooner ties to population growth, which ties to desirable national demographics.

 

And then there’s the federal tax credit for first-time home buyers [spotted as a worthwhile initiative by AHI in 2003 – Ed.], to expire on April 30, 2010, which will provide several thousand dollars in income tax relief.

 

With this tax credit, we multi-ethnic models were able to pretend we’re a family!

 

[Unless the recession turns around quickly, expect to see Congress extend the tax credit yet again – Ed.]

 

It offers federal income tax relief equal to 10% of the purchase price of a home — capped at $8,000 — for couples earning less than $150,000 and individuals earning less than $75,000.

 

As we saw in Great laws from little blog posts grow, the first-time home buyer credit really works – and now is an excellent time to be providing a stimulus to encourage young couples to move into home buying.

 

That deadline is lighting a fire under some couples in the serious, or almost-serious, stages of a relationship.

 

As we saw yesterday, the relationships’ degree of seriousness corresponds directly to whether the parties are willing to co-invest in a long-lived, illiquid asset of much more value to them jointly than individually.  Come to think of it, isn’t that a fair economic definition of marriage itself?  A long-lived asset.  Illiquid (hard to get out of).  Of minimal value separately. 

 

They worry that if they don’t act now, they may squander the best property-buying opportunity they will have for a while.

 

Or your mother won’t fund your down payment.

 

I’ve posted before on the many reasons why single-family homes are resistant to massive price drops; one reason is buyer anxiety about the availability of long-term secure tenure with investment potential.

 

There are also signs (or at least a feeling in the air) that the housing market could be picking up (including word that this [2009 – Ed.] may be a good year for Wall Street bonuses).

 

As we know, it was.

 

Mr. Flint said that trulia.com had received numerous e-mail messages from unmarried couples asking about the logistics — and wisdom — of buying a home together.

 

 

Many of the queries are about the first-time home buyer tax credit and how or whether it can be divided between people whose marital status doesn’t allow them to jointly file a tax return.

 

(The answer from the Internal Revenue Service: only one of the two people can claim the tax break if they are unmarried at the time of the sale. It cannot be divided, even if the couple marry later in the year.)

 

Things get dicey when you try to undo it

 

Marriage creates a legal institution – the marital couple.  It is an economic joining. 

 

Trulia posts such questions on a message board called Trulia Voices, and real estate professionals often chime in with answers. One of the notes on the board contained the following cautionary tale from a couple who split up, rather than marry, six months after buying a new house.

 

That’s why you should cohabit before you coinvest – you can dissolve the relationship a whole lot more easily than you can dissolve the economic partnership of co-owning a house.

 

One person in the pair had provided a 10% cash down payment on the home; the other borrowed 10%; and they both signed a mortgage for the remaining 80%. Once they decided to break up, their only recourse seemed to be to try and sell the house.

 

“Yet,” the e-mail post says, “only being six months into the house it would be difficult to break even (right?). He is in no financial position to take on the home himself and I would be strapped if I did.”

 

Ergo, don’t buy unless you’re sure.  In my case, I closed on a condo, got married days later, and then went on honeymoon.  We lived together only after we got married.

 

Real estate lawyers say that there are more complications for unmarried property owners who part ways than there are for married property owners who divorce — and a less clear process for resolving them.

 

Marriage’s economic fusion can be replicated with domestic partnerships; what cannot as yet be replicated are the favorable tax and health-care treatments accorded the legally married.

 

Is that a rhetorical question, or what?

 

“By default, our laws are suited for married couples acquiring assets,” says Luigi Rosabianca, a real estate lawyer in Manhattan.

 

Because if you’re not married, you’re unlikely to be sharing assets, and the assets you’ll be sharing are chattel – portable – hence subject to a ready division.

 

Under New York State law, he explains, a husband and wife are considered “tenants by the entirety” when they buy property.  

 

State laws vary, but in general, they are construed for the benefit of surviving spouses – an important default benefit not generally extended to civic domestic partnerships.

 

That ensures, among other things, that the property will automatically transfer to the surviving spouse if one person dies.

 

Marriage, in short, is a bond accorded a higher status than a simple partnership.  That principle is believable and logical (and a refutation of the claim that civic domestic partnerships can give all the same benefits).

 

“If you are not married, you have to fill in the blanks,” Mr. Rosabianca said. Toward that end, he recommends that unmarried couples consider signing what amounts to a pre-prenuptial — legal agreements specifying the unknowns, including “who contributes what percentage of the expenses, mortgage, taxes, common charges, utilities.”   He added, “You also have to account for capital gains — what percentage goes to whom.”

 

All of these are simply negotiating contingencies against the exit.  If, when being married, you pledge and mean the ’til death do us part, then none of them matter.  But if you’re buying property and are not married, then the question is – Well, why not?  You must be contemplating the possibility of sepaqrating.

 

And there can be other issues. “Say this house is close to your mother,” Mr. Rosabianca said. It may be wise to sign an agreement saying, “If we break up, you have to buy me out, because I don’t want to live near your mother.”

 

Uh … even if we don’t break up? 

 

This would be less of a problem if I had no one in common with you

 

Couldn’t that be a problem for a married couple going through a divorce as well?

 

“With a married couple that would probably be handled with the divorce,” he said. With an unmarried couple “it’s almost more prudent to be proactive in addressing these concerns.”

 

No, I get the villa, you take the mansion

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