Affordable Housing Institute : US

[Continued from yesterday's Part 1.]

 

As we saw in the first half of this post, October was dominated, as several past Octobers have been, by wretched economic news.

 

Stocks fall!  Markets tank!

 

Beyond the short-term evaluations (”we’re all hosed”) –

 

 

– a less inculpatory and more macroeconomic view was provided via Martin Wolf of the Financial Times, in Awash in cash: Part 1, money pressure:

 

Where those dollars came from is the subject of a provocative and compelling Financial Times article, Asia’s Revenge, by Martin Wolf, who as the author of Fixing Global Finance knows whereof he speaks.

 

Wolf: ready to fix what’s broken?
 

“Things that can’t go on forever, don’t.”

– Herbert Stein, former chairman of the US presidential Council of Economic Advisers
 

Money is a commodity like any other, and like those other commodities, money is useless if idle, where it not only receives zero nominal return but also suffers slow depreciation (through inflation).  As Sir Francis Bacon put it, “Money is like muck, not good unless spread.“  Money is useful only if put to work – in the form of hard debt or hard equity.
 

Being a commodity, money has a demand – people who go to the money store needing it for investment – and a supply, people who come to the money store looking for yield. 

 

–         and Part 2, finding new outlets:
 

A new source of money!
 

Unbalanced global capital flows show up directly in housing – because what else can you buy with dollars but US housing debt instruments? 

 

Yet the justification is less important than the consequences. Between January 2000 and April 2007, the stock of global foreign currency reserves rose by $5,200bn. Thus three-quarters of all the foreign currency reserves accumulated since the beginning of time have been piled up in this decade. Inevitably, a high proportion – probably close to two-thirds – of these sums were placed in dollars, thereby supporting the US currency and financing US external deficits.

 

As far as I know, housing is the world’s largest asset class – that is, more of the world’s collective wealth resides in housing than in any other class of assets.  Housing is also the world’s most broadly held asset class, the one touching more people than any other.  Under-investment in housing means under-investment in cities.  The logical intra-national end state is the ultimate wealth-extraction machine – the slum – but a logical inter-national end state is the resource-exploited colony.

 

Via AHI, I’ve been to a fair number of countries with large informal housing sectors.  In each place, I’ve been struck by the high quality of banking and financial structuring talent I’ve found there, and how little of it is being directed down the affordability pyramid to the lower-income households or lower-priced homes.  Bankers like scale – the more zeroes the better.  They thus divide the world less into domestic versus foreign investment, and more into big-and-numerical versus small-and-fuzzy.  It’s so much easier to buy the sparkly new Wall Street innovation – or to apply the same technology to our own domestic formal investments – than to muck about in the financial pasture trying to grow new seedling products and markets.  That’s especially true when your own offspring, and all your colleagues’ offspring, have taken their expensive US or UK MBA’s and done their stint on Wall Street or the City of London working on exactly these high-tech gewgaws.

 

Highest quality.  No really, highest quality

Like, for instance, dot-coms (remember them?):

 

Yeah, that’ll work!

 

In the rare quiet times, I shone a spotlight on The troll under Massachusetts’ bridge and continued my six-part series, The History of US Public Housing: Part 3, the slum clearance era, with Part 4, the white flight era and Part 5, the cities hit bottom:

 

I grew up in a properly liberal Boston suburb (Marblehead) and like the junior high and high-school kids of the time, and I think it impossible to convey, to a generation reared on multicultural popular figures and diversity curricula, how fearful, vicious, and violent the busing era was. 

 

National Guard practicing to enforce school integration, 1974, Boston

 

Driving the suburbs’ resistance, I think, was not just racism and fear, but also the unhappy conflation of race with cities, extreme poverty, and crime – all of it personified in brick in the public housing projects.

Busing protest, 1970
 

In very short order, we had, played out on our television screens:
 

Court-ordered busing and public housing integration.

Boston Police escorting children to school
 

Defiant and sometimes violent confrontations between Boston’s Irish Catholics and police.

 

Anti-busing rally and protest at Boston City Hall
 

While America was having urban housing troubles, the Soviets were experiencing their own freezing family gulags of awful Soviet-era housing, whose probable role in the collapse of Communism I explored in Revolution begins at home

 

Did The Hunt for Red October begin in dingy Soviet flats?

 

Here are authors Gregory Young and Nate Braden describing Soviet housing (pages 63-68)

 

If there is one thing Russians can remember with crystal clar­ity, it is the housing they lived in and how long it took them to get it. Privacy was a scarce commodity in the Soviet Union, almost as scarce as decent housing. With the state involved in nearly every aspect of their lives, it is hardly surprising that a married couple with a child would do all they could to find a little place to call their own.

 

Blog readers know that along with several other University of Maryland adjunct faculty, I’ve participated in teaching Army housing staff about the Army’s Residential Communities Initiative (RCI) privatization of on-post military housing, and in that context I’ve visited roughly a dozen large posts around the country.  As they say in the US Army, “housing is a readiness issue.”   

 

Housing is a readiness issue, not just in military families, but in any kind of worker families.

 

Housing for servicemen in other areas of the Soviet Union was better but not without problems. Members of the military, particu­larly officers, were given priority on the list to receive new housing in urban areas where a shortage existed. When he reported to a new duty station in the western Soviet Union, Viktor Belenko [The Mig defector mentioned above – Ed.] expressed his excitement over getting a new apartment in a building only one month old.

 

“To be promised an apartment was one thing, but to be given an apartment as promised, quite another. Eagerly and expectantly, I unlocked the door and smelled dampness. The floor, built with green lumber, already was warped and wavy. Plaster was peeling off the walls. The windowpane in the kitchen was broken and no water poured from the faucet. The bathtub leaked; the toilet did not flush. None of the electrical outlets worked…. Another lieu­tenant and I confronted the first party representative we could find, a young political officer in the same building. He was cynical yet truthful. The building had not been inspected as they had been told. The military builders sold substantial quantities of allotted materials on the black market, then bribed the chairman of the acceptance commission and took the whole commission to dinner. There the acceptance papers were drunkenly signed without any commission member ever having been inside the building.”

 

All apartments certified in tip-top condition

 

Further to the point of the physical space, we looked at more follies of over-engineering in Windows and the biological thermostat and the responsibility for not bothering the neighbors in Quiet Enjoyment:

 

Behavior modification.  I admire the parents who try to teach their kids to behave like adults.  As a former child myself, I think they’re doomed to failure.  Children have to be kids, and they have to be hyperactive.

 

Even in a monsoon, we have fun!

 

Soundproofing.  What technology taketh away – space – technology can giveth back – sound dampening.

 

“Fifteen years ago or so, it used to be that the noise complaints were all about loud stereo and TV equipment,” said Stuart M. Saft, a real estate lawyer at Dewey & LeBoeuf in Manhattan, which represents about 100 full-service co-op and condominium buildings in Manhattan. “Now it’s kid noise more than anything else, and I think it demonstrates the changing demographic of the city. You have more kids living in the apartment buildings, and parents who feel their children have the right to be children.”

 

‘Rights’ are tricky things; As Justice Oliver Wendell Holmes memorably put it, your right to swing your fist ends at my nose, and your children’s right to be loud may end at my eardrums – or, even better, at the walls of your apartment.

 

I have a right to be heard!

 

Despite the noise and the smells, proximity makes cities engines of wealth, engines of advance, and engines of democracy, as explored in Richer city, better government; Part 1, moving back in, and

Part 2, civic engagement:

 

Arriving in a decrepit or inefficient city, the affluent immigrants have set about transforming it.  Home ownership changes behavior for the better, and makes residents into demanding customers.  They demand clean air and clean water – and they can pay for it.  As they do, the cities clean up.  They demand better schools – and get them either through reforming the public system or through a workaround like charter schools.  Housing makes people into investors in their communities.  They use their money to make change directly, and the political equity of their votes to make it indirectly.  In so doing, they clean up their environment – ecologically, sociologically, and politically.

 

Making another investment of political equity

 

Richer city, better municipal government.  Better municipal government, eventually better national government. 

 

Richer world, more democracy. 

 

And around the world?

 

Once again, America makes global history

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