Affordable Housing Institute : US

[Previous months in review available here: Dec 06, Nov 06, Oct 06]

 

New years require Predictions for 2007 (guaranteed right until proven wrong!) and I obliged, of which this is one of my more pessimistic:

 

8.         Public housing recapitalization will be debated … and not enacted.  Even as the public housing delivery system continues to break down, the program-design task of reinventing public housing is large, complex, difficult, and far-reaching.  (Who knows, maybe the US will consider UK-style stock transfer, or escaping the dependency trap?)  Building an enactable political consensus is the work of more than a single year, and has yet to begin.

 

Congress may be too busy discovering gerrymanders

 

Mobile homes dominated the January agenda, as stories from all around the country — California to Florida to New Hampshire — revealed how the challenges and negotiating leverage dynamics vary dramatically from state to state. 

 

Starting in New Hampshire, I explored a tale of two states, where state laws allow home owners a right of first refusal to buy their land if the owner elects to sell, even as in California’s Central Valley (Modesto), residents are coping with very large increases in land rents, in (Im)mobile homes: Part 1, owners and landlords, and (Im)mobile homes: Part 2, laws and court cases.  Indeed, so value-extractive are some land lease structures — capturing all the equity buildup and even eroding resident affordability — and so lacking in the normal attributes of ownership are the mobile home occupants, that at month’s end I asked if they are really renters?

 

“Some dude wants to know if mobile home owners are really renters.”

 

Put these three factors together and you find that virtually every one of the six homeownership attributes can be compromised, or entirely confiscated, by an unscrupulous mobile home park operator. 

 

1.       Unlimited appreciation can be eaten by higher space rent.

2.       Right to sell can be economically neutered by higher space rent to an incoming tenant.  (Many states have laws prohibiting move-in or move-out fees, but changing the rent on turnover accomplishes much the economic same thing while conforming legally.)

3.       Financeability.  I have heard numerous horror stories that, in general, lenders will not refinance an existing mobile home because the aging collateral is not economically recoverable.

4.       Controllable occupancy cost.  Clearly absent in any year-to-year space rent situation.

5.       Improvability.  Available to some limited degree.

6.       Secure tenure.  Only if you can cope with rising space rent.

 

If these mobile home owners are economically renters, the 75% rural homeownership is economically 65%, and as Mr. E [My anonymous source — Ed.] commented, “leaving rural America with a self-inflicted rental population.” 

 

A rental population, I may add, that is generally white, older, lower income, and often on a fixed income — in economic serfdom to the mobile home park operator. 

 

 

Why isn’t mobile home affordability a bigger policy issue?

 

In southeastern Florida (Briny Breezes), I covered the Mark-Twain-esque tale of residents who formed their own town forty years ago and were being offered the opportunity to sell it, and the 488 mobile homes on its tiny site sandwiched between the Intracoastal Waterway and the pristine white Atlantic beaches for the astonishing price of just over half a billion dollars, in The developer and the deep blue sea: Part 1, and The developer and the deep blue sea: Part 2, with this personally anachronistic observation:

 

Investment is not romantic.

 

Business, Joey, is business.

 

Once upon a time, Nancy and I stayed for two nights in a Honolulu beachfront hotel called the Waikikian on the Beach.  Though it was an incredible bargain — the reason the Careful Shopper had found it — it was, the travel agent warned us after a cautious throat-clear, “primitive”: a row of ground-level units, with painted cinder-block walls, decor a la early Elvis, a shower that would not have been out-of-place in a county jail, and a rickety wooden jalousie door that flexed when you turned your key, and air conditioners that if turned on rattled and wheezed like playing cards between a boy’s bicycle spokes.

 

Kicka pooka mok a wa wahini

Are the words I long to hear
Lay your coconut on my tiki
What the hecka mooka mooka dear

 

Invisible from the main street, the Waikikean was wedged like a mouse between the concrete redwoods of much more modern hotels, but when we wended our way through its tiki-lamped paths to its cheesy patio bar, there was that beautiful small stretch of pearl-white sand, and the blue Pacific beyond.

 

The Waikikian is gone now, replaced by a 35-story hotel, and I cannot say I regret its passing, for truth be told the accommodations were antediluvian.  Yet I can remember our nights there even as I have forgotten dozens of better hotel rooms in Honolulu and elsewhere on our travels.

 

In many ways, Briny Breezes (even the name is anachronistic!) reminds me of that vanished Waikikian.  Look at its statistics:

 

Unromantically but pragmatically, the owners sold paradise.

 

“And a big yellow taxi took away my old man.”

 

Meanwhile, in tangentially related news, I enjoyed myself vicariously in describing the bruising big-bucks battle of Blackstone versus Vornado as they slugged it out to buy the Equity Office REIT:

 

Hey, no fair! I was destroying the temple first!

 

I covered this in a series of posts, starting with Barbarians at the REIT?, then Barbarians: the gathering, See you, raise you?, and Barbarians: who’s playing whom?, speculating as to who was the real conductor of this little financial symphony:

 

Let us hypothesize that:

 

·         Mr. Zell realized the public markets were undervaluing Equity Office relative to the properties’ best value. 

·         Because of his personal strong identification with Equity Office, few could imagine him simply cashing out.

·         As a result, he could not get Equity Office on the big private-equity firms’ radar screens.

 

What to do?

 

Get someone to make a bid, any bid, so as to attract attention of the observant voracious herd, and encourage them to stampede:

 

… by setting the breakup fee low enough so that other bidders would enter the contest.

 

Again I ask the question, Who is playing whom?

 

You think I can’t charm two private-equity snakes at once?

 

As usual, I spent time looking at the American housing financial system, this time through the eyes of HUD, in American housing finance history according to HUD, Part 1, Part 2, and Part 3:

 

In terms of growing a successful housing finance ecosystem, the report’s broad message could be distilled down to yet another Yogi-ism:

 

When you come to a fork in the road, take it.

 

Three posts and you’re out!

 

Affordable housing basics were covered in The home pricing equilibrium and The production paradox, and we could not let the month go without taking a look at the evaluation that Congress should make when assessing the GSEs’ performance: The GSEs’ fundamental value equation and Testing the fundamental policy value equation:

 

Congress chartered the GSEs in the belief that the policy benefits outweigh the policy costs.  What do the GSEs cost taxpayers?  What do we get?  Since costs include both expenditures made and risks incurred, the equation has three terms, as follows:

 

 

Let’s examine the three elements one by one.

 

I covered news tragic (Starvation is bad for you), comic (Back to rentals?) and tragicomic (Kofi Annan’s affordable rental):

 

Tenacious Claudia Rosett, who’s made something of a specialty of plumbing the UN’s murkier depths, in a New York Sun article reveals that the Secretary seems to have hung on to an apartment to which by all rights he is no longer entitled, passing it along through his extended family:

 

As Secretary-General Annan prepares to leave his post at the United Nations, a mystery is surfacing surrounding his apartment on Roosevelt Island, subsidized by New York taxpayers, which is still in use by the family of his brother, Kobina Annan.

 

To me the story’s interesting not so much as it concerns the outgoing UN Secretary General, about whom most people have long since made up their minds one way or another, but rather because Ms. Rosett’s inferences are entirely plausible since the behaviors they describe are very representative of the practical challenges of designing and maintaining means-tested or income-targeted housing affordability, especially in tight markets like New York City.

 

Until next time, keep seeing things in black and white

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