Month in Review, June, 2012: Part 1, Let’s not bicker and argue

August 21, 2012 | Affordable Housing, Charities, Cities, Egypt, Euro, Foreclosure, Local issues, Mobile homes, Month in review, Municipal bankruptcy, Policy, Regulation, Theory, Zoning

[Previous Months in Review available here: May 12, Apr 12, Mar 12, Feb 12, Jan 12]


By:David A. Smith


In June, we rediscovered that, as anyone knows who’s trolled Facebook or compared an executive’s bio or Web site photo with the reality, what we present is usually more appealing than what we actually are – and when it comes to winning bids or approvals for big complex urban properties, the trinkets developers use to adorn their otherwise homely and money-grubbing schemes usually include affordable housing. 


Let’s not bicker and argue about ‘oo promised ‘oo


After the successful bid, the gewgaws are returned to the box and forgotten, as I demonstrated in Discarding the ornaments:


Such a twist is worthy of Dr. Evil.  ESDC did a ten-year impact study because no one could imagine the housing taking longer than that, but the developer’s delays have rendered the previous approvals invalid, so they will have to be done again.  Once again, Norman Oder offers a catechism:


Give this man a Pulitzer: Norman Oder

Actually, Bruce Ratner
said it himself, that “existing incentives” don’t work for high-rise, union-built affordable housing.

He said that?

Yup. Of course, he proposed–and the state approved–high-rise, union-built affordable housing.

Does that mean all the promises about Atlantic Yards residential rental towers, and the approval of those promises, were bogus?

Uh, yeah.

Forest City Ratner could not have schemed this better if it were trying to sabotage the affordable housing.


Trying to sabotage it?


Though seldom does one go broke betting on the venality of humanity, several states found ways to do so, by both campaign against addiction and then profiting from the failure of their own campaigns, as revealed in Go and sin some more:


However, what could have been a beautiful friendship was crossed up by the dear public, which went and did something no one expected: people quit smoking.


Steady declines in smoking, a big win for public health, are creating problems for municipal bond investors.


You mean demonizing them and severely restricting their native habitat might change their behavior?  Those ingrates.


Tell us we’re not second-class


A handful of bonds backed by yearly payments from tobacco companies under a landmark settlement with 46 states are in the earliest stages of default, and more distress is expected.


Excuse me while I suppress a guffaw.  Just as you can’t cheat an honest man, you can’t bankrupt someone who doesn’t over-borrow, and while some over-borrowing arises through reversal of circumstances, most of it, like pension underfunding, comes from public officials adopting too-rosy financial projections that justify their overspending.


Reflect long enough, and you can justify anything


Dozens of states, counties and cities issued the bonds to receive billions of dollars upfront from the 1998 settlement.


As a demonstration of public-choice theory this could hardly be better.  If the money was to be used to deal with health-care costs from smokers, it could have been relied upon as an annuity, inflows matching outflows as people needed health care.  That would have eased the political pressure to concoct something claimed to be a curve-bending solution and wouldn’t have enabled states to over-borrow for other indulgences.  Instead the elected officials used the settlement as a windfall to patch holes in their budgets and hence not to tell the public employees’ unions that their pensions would have to be cut or scaled back.


Of such fiscal follies are financial implosions made, and American states and cities have made several cartons’ worth.  After having being delayed longer than most people expected (certainly longer than I expected), the financial collapse of overlevered American cities appears to be picking up steam, both because more cities are filing and because the experience from those that did file is showing the laggards that sooner in is sooner out, as we explored in Postcard from the undiscovered country: Part 1, from whose bourn, Part 2, no traveler returns, and Part 3, puzzles the will:


Thus conscience does make cowards of us all?


As I mentioned yesterday, shrinking government’s role – a consequence of shrinking government’s resources – means we have to redefine who does what in the bargain between government and citizen.  The more I reflect upon this, the more I want the citizenry to do, because an active citizenry strengthens society, and a citizenry that receives everything from a government might as well be as emotionally separated as Asimov’s Solarians.


Gomes, whose husband is a retired police officer, focused on public safety. The couple went neighborhood to neighborhood setting up e-mail groups and social media accounts so people can, for instance, share pictures of suspicious vehicles and other information.


Brilliant – simple, easy, and exploiting modern technology.


“There have been countless cases where ordinary people have stopped crimes this way,” Gomes said.


As we saw with postmen, ordinary people connect to each other as last-kilometer counterparty to government.  Give people something they can do that is doable, visible, helpful, and collaborative, and they will do it.


The number of neighborhood watch groups jumped from 15 to 350.


I’ve got my eye on you


In so doing, they rediscover community and the psychic and social benefits of delivering service in kind. 


Citizen volunteers came together monthly to paint over graffiti and do other cleanup work.


A visible reclamation of the streets by civility.


And the city council struck an unusual deal with residents — if they agreed to a one-penny sales tax increase, projected to generate an additional $9.5 million in revenue, they could vote on how the money would be used. The experiment in participatory budgeting, which began in April, is the first in a North American city.


My God, you mean this democracy thing works?


We should’ve thought of that


My various gloomy predictions of unpleasant discontinuous events has been fulfilled faster in US cities than in European nations. 


I’ll be right eventually


Perhaps because the latter are proportionately much bigger than their sovereign, perhaps because the Europeans haven’t decided whether they have  a sovereign supra-national government, and if so who constitutes its decision-makers and what the rules are, Grexit is still a prediction, not a reality, though I think It will happen this way, Part 1, not much future there, and Part 2, leave open the door to the car:


And someone you know

Maybe even trust


You want to know something? They won’t want us to ask them. They’ll just want us to get it for them.


Yesterday’s post predicting the imminence of a massive Eurozone recapitalization – and expulsion of one or more countries from the common currency – had used as source text an instructive and prescient 2009 article by Edwin B. Reeser, whose first laid out nine warning signs of impending failure, proceeded to describe, step by step, how the implosion will occur.


Will get out of the car


Europe’s problem, you see, is bigger than any individual country; the aggregate social expenditures of all the European countries together are much greater than their governments’ aggregate revenue-raising capacity.  Socializing the debts, therefore, simply assures that everybody will go down together, so either the money-losing countries will somehow swiftly get their operations in order (as Ms. Merkel and others evidently believe or hope to believe) or a moment will come when they have to be cut loose.


Europe’s citizenry, however, appears to have lost confidence in the leadership, and undoubtedly they have been suffering from bailout fatigue, with each new headline trumpeting a solution, only to be superseded in a few days by a new crisis.


A headline we could have read any time for the last 1½ years


Still, none of that deterred me from responding to a Bipartisan Policy Center blog posting request and blitzing out twenty housing-program-design principles, or rather as commandments, as Ten housing-policy commandments – times two: Part 1, systems and scale, Part 2, who should develop and own, Part 3, program and products, and Part 4, change and resilience:


Can I get another ten, O lord?


C. Everything influences everything else.  By their nature, ecosystems are open-ended, with everything influencing everything else.  (Today’s newspaper reports that El Nino may influence Pacific monsoons, and of course the monsoons will influence many things.)


Which came first?


Further, complex systems are unpredictable, and the most complex systems are those involving human beings, because our cognition makes us want to influence our environment in ways that are mathematically impossible to model.  Indeed, in markets and politics, reaction can precede action, and try modeling that. 


All this adds up to a policy principle: Try small things first and see what they do, or, to quote the great Buckaroo Banzai, “Don’t tug on that.  You never know what it might be connected to.”


Don’t tug on that … you never know what it might be connected to


When it comes to national politics, tempests roil the headlines as politicians and generals dominate, but underneath, at the level of markets, people aspire to simpler goals, like achieving a better life for their children, a happy family for themselves, and a home to protect and nurture both, as we saw in Affordable housing in Egypt:


Sprouting in the desert: October Gardens townhouses


When it comes to understanding affordable housing, nothing substitutes for actually seeing the product, as built, in its location – and so, when I had a free day in Cairo a few weeks back, I naturally enough spent it not crawling through the pyramids (which are at the end of Pyramid Street just past the Pizza Hut) but seeing affordable housing. 


Would you like fries with that, mummy?


A few weeks back, I spent three days in Cairo, two of them teaching an executive-education course in affordable housing for the American University of Cairo,   Affordable housing makes sense only in the context of market forces, and Cairo’s residential markets are among the world’s least functional.  It is experiencing massive urbanization and seemingly endless sprawl – the city is estimated at 18,000,000 people … but nobody knows.


It goes on and on and on …


And then suddenly, it stops at the desert


[Continued tomorrow in Part 2.]