Month in Review, August 2009: Part 1, housing is local
[Previous Months In Review available here: Jul 09, Jun 09, May 09, Apr 09, Mar 09, Feb 09, Jan 09]
By: David A. Smith
With the capital markets stunned into lassitude through repeated bludgeoning with new legislative acronyms, and Washington consumed with an infinite-regressive loop in which the words ‘health care’ are added to every conversation, I spent most of August focusing on the level of governments and markets that cannot escape housing-affordability challenges – namely, state, local, and even site-specific. I started with that noble and financially wracked institution, the Boston Globe:
So much for your business model …
The Globe faces not just a business-model threat but a real estate threat – the paper’s value today is almost entirely represented by the redevelopment potential of its wonderfully well-located site, and so as a business, the Globe is Better dead than read, Part Deux:
From one of the best-loved genres of our time
Nor does such a move preclude further layoffs. Private equity does not like to throw good money after bad.
Now we have to go in to get the men who went in to get the men who went in to get the men.
“What’s important here is that the Globe be maintained as a viable business entity, whether it’s sold or we continue to operate it, and make sure that it has the financial stability to ensure its continuity,’’ said [Times Co. publisher and chairman Arthur O. Sulzberger]. “We’re committed to that.’’
You may be, Mr. Sulzberger, but neither what you say nor what you believe will bind any buyer. That’s just a lullaby for the employees. Meanwhile, the Globe may be applying a neck tourniquet to itself: the newspaper may start charging for its online content.
Loved you in Wall Street!
Even if the Globe somehow were to stave off shutdown, there is no earthly reason why it should continue to occupy such prime real estate; as an ultimate information business, it should relocate elsewhere to lower-cost land, never mind the longer commutes for editors and reporters. Such relocation thinking also underscores two human-tragedy stories, the first about a seemingly heartless city in Reviving transportation?:
A moral-philosophy question rattling through cyberspace asks, If you were offered $1,000,000 to make someone disappear, would you?
Happy to make the stain of homelessness vanish?
Actually, as documented in this New York Times article, the cost is much less than that:
They are flown to
Outward bound: from NYC to somewhere else
The second about a seemingly noble and independent autonomous Anarcho-Syndicalist collective in Romanticizing the poor:
Leave it to snarky Gawker to explode another of those urban-homesteading myths so favored by a certain kind of press, and a certain type of author:
Today’s New York Times Page One recession-porn dispatch is so unrelentingly hackneyed that William Shatner ought to read it aloud to bongos.
And it neglects to mention that the hero – a gruff homeless-encampment leader – is a convicted child rapist.
The mug shot of camp leader John Freitas
We’re pretty sure Dan Barry’s story about a community of homeless folks living under an overpass in Providence, R.I., originally began with “It was a dark and stormy night…” because it is littered with high-school cliches of the first order and reads like the work of a 17-year-old who just put down his first Raymond Carver story.
If we are to build sound public policy, we must see challenges for what they are, not what we wish them to be, and not what moralistic tales we may be told. Heartless though this sounds, we cannot afford to romanticize the poor out of their reality. If we swallow the fables, we simply enable the tellers – and often we should not.
“Help! Help! I’m bein’ repressed!”
“Now we see the violence inherent in the system!”
Although there are some uses that should move, and some people who should relocate, most communities have other people – chiefly the elderly – whom they like to see continuing to live within their town. Elderly homeowners are a particular challenge because their lives represent two crossing lines: a rising line for their home’s equity value and a falling line representing the amount of housing they need to consume.
Time moves left to right (doesn’t it always?)
Think of ’supply’ as how much house an elderly person owns
Think of ‘demand’ as how much the elderly person needs
Elderly homeowners are generally taxed on their income, which is usually fixed in nominal terms (hence declining in real terms), not on their assets, which being expressed as a large single-family home are typically rising in value. So it’s politically natural to sympathize with cash-poor granny who’s getting socked with an ever-rising real estate tax bill. But is it equitable to give granny a break while she trundles amiably about her capacious home? Is it equitable when to make up for what granny saves, we have to tax new families more? That’s the question I posed in Subsidy or surcharge? Part 1, how much? , and Part 2, should we?:
In other words, by granting cash-flow relief at no cost, we will be subsidizing the asset-rich cash-poor elderly in the manner to which they have become accustomed – at the expense of families who probably have higher household expenses (such as raising children).
However, other groups vulnerable to overrides—say, non-elderly low-income households with severe property tax burdens—may be motivated to vote against such proposals.
[We could also detour into an exploration of 'who benefits from municipal services'. Families with school-age children obviously benefit more than do the childless; conversely, since they have more to protect, the rich benefit more than the poor from services such as police and fire. That would take us far afield, so we won't. – Ed.]
Don’t go there so late in a blog post
I don’t mind subsidies. I mind invisible subsidies, and I mind surcharges concealing themselves in the absence of subsidy.
You can look at it two ways, can’t you?
Across the Atlantic, an entirely different approach to large residential properties has been adopted in
In the city of
Not confined to the bad neighborhoods: red means vacant
Unlike our recently-profiled case of no landlord at all, the problem isn’t loss of equity leading to economic abandonment:
Unlike people facing foreclosures in other neighborhoods around the world,
Real estate, particularly well-located and well-built real estate, has long been a ‘brick safety deposit box’ for the world’s rich people. [More]
A bank of bricks, not a Bank of Glass
Most of us see home ownership as a slow accumulator to retirement savings and a life of ease, but there is one group who seldom experience home ownership appreciation – owners of mobile homes in rented mobile home parks. The incongruous combination of being able neither to move a home called ‘mobile’ nor to have security of land tenure the rest of us take for granted drains out virtually all of the property’s appreciation potential. Even worse, the park operator/ land owner can simply dial up the land rent and suck out the appreciation at any time.
That’s why many of us favor reuniting land and structure in mobile home communities, which leads to the substantial challenge of Condo-ing mobile home parks: Part 1, unofficial affordable housing, Part 2, at what price?, and Part 3, who decides?:
Two days ago, we looked at Santa Rosa’s Country Mobile Home Park, whose owner wants to condo the land (at least as reported in the San Francisco Chronicle; the owner wouldn’t talk to the newspaper), and yesterday we saw that in a forced condo conversion, land value would be a tussle. Yet why the choice of condo rather than co-op?
It has to do with optionality. Who can force or block what?
I’m blocking your conversion attempt
[Continued tomorrow in Part 2.]
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