[Editor's note: As the memory of Haiti's devastating earthquake fades, we are able to see that much of the tragedy was preventable – not the quake itself, but the toll in human lives.  And we can therefore see this cautionary tale from Shanghai as not merely comic but tragicomic. – Ed.]

A building at the Lotus Riverside complex in Shanghai’s Minhang district collapsed, nearly intact, on Saturday morning (Imaginechina via AP Images)

To be stable, how far down must a building go?  As seen dramatically in this story from last June in The Wall Street Journal’s China Reality Report, that depends partly on what happens to the ground on either side of it.

In the weekend’s more bizarre news, a nearly finished, newly constructed building in Shanghai toppled over, killing one worker.

Fortunately, no one else, as the building was unoccupied.

As can be seen in the photo below, the 13-story apartment building collapsed with just enough room to escape what would have been a far more destructive domino effect involving other structures in the 11-building complex.

Good thing the adjacent lot was vacant – or was it a good thing at all?

The development, known as “Lotus Riverside,” has a total of 629 units, 489 of which have already been sold. Now buyers are clamoring to get their money back, and authorities are making efforts to reassure them.

That’s hardly reassuring

Although the Lotus Riverside property was somewhat more substantial than Monty Python’s Mystico Towers, which stood so long as its inhabitants believed in it, the developer’s credibility has now vanished as if disappeared by El Mystico himself.

I can make your credibility … disappear!

The assets of the project’s developer, Shanghai Meidu Property Development Co., have been frozen and the city officials said the developer’s ability to repay homebuyers was secure, according to a statement on the municipal government’s Web site (in Chinese).

Oh really?  I hope they have really good insurance.

A hotline has been set up for Lotus Riverside buyers, and by Sunday afternoon, more than half of them had met with a group of lawyers and officials organized to help them negotiate with the developer, according to the statement.

‘Negotiate with a developer’ is an ominous phrase.  What’s to negotiate? 

Defense of property rights is an intrinsic function of government.  If government’s doesn’t defend my property rights – against fire, against robbery, against vandalism, and against shoddy or fraudulent construction – then what is it for?  What are building permits for? 

What are taxes for, if not to provide services on which consumers can rely?

Property rights are Tocquevillean – that is, they promote the development, strengthening, and integrity of civil and democratic institutions – because (a) their defense requires an equitable and honorable government, and (b) they are expected by demanding middle-class customers.  The clamor for restitution is a promising sign; so is its focus on the city government.

Meanwhile, the cause of the accident is under investigation and nine unidentified people from the developer, contractor and management company have been detained.

Have they fallen over too?

A representative of Shanghai Meidu could not be reached for comment.

There’s nobody here!

Particularly as the building which toppled appears to be no different from the adjacent buildings, whose apartments I presume have already been sold and are now being occupied.  Wouldn’t you want out of a condominium with some zero of falling over?

According to Shanghai Daily, initial investigations attribute the accident to the excavations for the construction of a garage under [They have to mean adjacent to and lower-grade than – Ed.] the collapsed building.

An underground garage was being dug on the south side, to a depth of 4.6 meters

It takes some never to decide to build a major subsurface garage after you’ve already put up a multi-story tower, for anyone with a fourth-grade knowledge of construction knows that vertical force translates into horizontal force when it is not properly and symmetrically buttressed.  That’s the sole purpose of buttresses and flying buttresses – to deflect lateral force and brace against it squeezing the cathedral walls out, collapsing the roof.

A decade or so ago, when Boston was excavating up and down the Central Artery in the Big Dig, those with property abutting the excavation areas demanded – and got – comprehensive and well collateralized indemnities against the possibility their building would shear, subside, or crack in consequence.

The excavated dirt was being piled up on the north side, to a height of 10 meters

Large quantities of earth were removed and dumped in a landfill next to a nearby creek; the weight of the earth caused the river bank to collapse, which, in turn, allowed water to seep into the ground, creating a muddy foundation for the building that toppled.

Any real estate person knows that water is property’s greatest enemy.  Aside from roof and building-envelope leaks, it rearranges the land, shifting buildings on their buildings.

The building experienced uneven lateral pressure from south and north

(I still remember a UDC affordable housing property in upstate New York that had an Edward Durrell Stone design – Howard Roark designing for the masses – that might have been fine on level ground, but was a catastrophe on a hillside.  Heavy snow plus melting plus grade meant that over a very few years, the buildings began glaciating off their pads, costing millions to fix.  You’d think somebody would have connected the dots.)

This resulted in a lateral pressure of 3,000 tons, which was greater than what the pilings could tolerate.

You absolutely cannot have a massive load-bearing structure that you then undermine on one side and overpress on another – the shear forces will be massive, and unrelenting.

As a result, the building fell over.

The South China Morning Post noted that the pilings used in the Lotus Riverside development, made of pre-stressed, precast concrete piles, are outlawed in Hong Kong because they aren’t strong enough to support the kind of ultra-high buildings that are common in Hong Kong.

And concrete, though immensely strong against compression, is immensely brittle.  The pilings appear to have had no steel reinforcing, as would be mandatory in a US development – or, for that matter, in Hong Kong, which – returning to our Tocquevillean theme – has a much sterong orientation to consumer protection.

Looking like nothing so mulch as rotted piers, all snapped off at the same place.

In mainland China, they are often used because buildings there are typically much shorter (subscription required).

Also because mainland China is still the land of the quick-buck real estate developer.

Not a developer in sight

The disaster could reveal some uncomfortable facts about lax construction practices in China, where buildings are put up in a hurry by largely unskilled migrant workers, and developers may be tempted to take shortcuts.

Oh, you think?

Holes where rebar should be

In the US, as in most developed nations, buildings will have a design architect – with professional liability insurance to cover just such design omissions as this – and then a supervisory architect, independent of the contractor, who makes sure that what is build conforms to the plans and specifications, and that there are no substitutions of cheaper/ inferior materials.  All those checks on developer short-term profit-taking appear absent in the Lotus Riverside.

The air costs nothing – and supports nothing

Quality problems have long plagued construction in China, though they seem to be more apparent in rural areas and smaller cities, not in major metropolises such as Shanghai and Beijing.

When school buildings were flattened by last year’s massive Sichuan earthquake, a number of parents faulted shoddy construction for creating “tofu buildings” that fell while other nearby structures were able to withstand the impact of the quake.

Disaster vulnerability reduction is thus not just an exercise in consumer protection, it’s also national risk mitigation. 

This couldn’t happen in San Francisco

We may grumble about earthquake reinforcement, or high-rise sprinkler systems, or lead-based paint/ asbestos removal – but each time these features are added to the building codes, we incrementally de-risk our cities, and that strengthens society.

More recently, state media reported that several new dams along the Yellow River are in danger of collapse, a situation attributed to:

Shoddy construction practices

Embezzlement and

Unqualified workers.

A winning trio!

We’d have been in fat city except for you unqualified worker!

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Continuing our occasional series on the Ultimate Future City:

The Caves of Steel, by Isaac Asimov, 11/07

The Naked Sun, by Isaac Asimov, 11/07

The World Inside, by Robert Silverberg, 12/07

Diaspar, The City and the Stars, by Arthur C. Clarke, 3/08

Displaying our technology for the universe to see

The half-century in which we are living, which opened in 1975 and will close in 2025, will be without equal in human history for its urbanization.  In both its rate and scale, this fifty years will permanently remake our planet, as homo agrarius gives way to homo urbanis.  We are moving to the cities, and our world will never be the same.

Coruscant from Star Wars, modeled on Trantor

TRANTOR – At the beginning of the thirteenth millennium, this tendency reached its climax.  As the center of the Imperial Government for unbroken hundreds of generations and located, as it was, in the central regions of the Galaxy among the most densely populated an industrially advanced worlds of the system, it could scarcely help being the densest and richest clot of humanity the Race had ever seen. 

— Isaac Asimov, Foundation, 1951, Page 13.

It was the postwar science fiction writers who, in the 1950s, first looked ahead to that ultimate future city.  I’ve already profiled Bob Silverberg’s The World Inside, his dystopia of public housing strewn endlessly across the landscape, and Arthur Clarke’s sexless and sadly joyless Diaspar; yet the true maestro of urban imaginings was Isaac Asimov, and his ultimate Gotham, the imperial capital of Trantor:

Its urbanization, progressing steadily, had finally reached the ultimate.  All the land surface of Trantor, 75,000,000 square miles in extent, was a single city. 

Asimov presents Trantor via a stunning visual:

Coruscant (modeled on Trantor) from space

The location of an objection upon the great world of Trantor presents a problem unique in the Galaxy.  There are no continents or oceans to locate from a thousand miles distance.  There are no rivers, lakes, and islands to catch sight of through the cloud rifts. 

The metal-covered world was one colossal city, and only the old Imperial palace could be identified reality from outer space by a stranger.  Page 194, Foundation and Empire.

Tokyo’s imperial palace

The population, at its height, was well in excess of forty billions. 

For once Asimov’s instinctive numeracy failed him.  As Wikipedia calculates it:

It consisted of an enormous metropolis (an ecumenopolis) that stretched deep underground, and was home to a population of 45,000,000,000 (45 billion) human inhabitants at its height, a population density of 232 per square kilometer (600 per square mile, in comparison, New York City in real life possesses an estimated 26,400 people per square mile).  

New York City at night

A real Trantor could comfortably hold, not 40 billion people, but 4,000 billion.

Ultimately urbanized environments, Asimov rightly deduced, are information economies:

This enormous population was devoted almost entirely to the administrative necessities of Empire, and found themselves all too few for the complications of the task.  (It is to be remembered that the impossibility of proper administration of the Galactic Empire under the uninspired leadership of the later Emperors was a considerable factor in the Fall.)  – Page 12.

(Despite his Three Laws of Robotics, Asimov completely failed to foresee the right of digital computers, and hence imagined a world of filing clerks.)

“Yes, Mr. Lowry?”

They are also, of necessity, seats of powerful, whether political or spiritual.  Indeed, it’s very common to have a city-within-a-city, as in Tokyo, Beijing, or Rome.

Beijing’s Forbidden City

Vatican City,  Rome, Italy

He could not see the ground.  It was lost in the ever-increasing complexity of man-made structures.  He could see no horizon other than that of metal against the sky, stretching out to almost uniform grayness, and he knew it was so over all the land-surface of the planet.  There was scarcely any motion to be seen – a few pleasure-craft lazed against the sky – but all the busy traffic of millions of men were going on, he knew, beneath the metal skin of the world.

Such a world must be a city that never sleeps, and in such a world, the presence of sunlight is merely a temporal inconvenience:

Hong Kong at night

Gaal was not certain whether the sun shone, or, for that matter, whether it was day or night.  He was ashamed to ask.  All the planet seemed to live beneath metal.  The meal of which he had partaken had been labeled luncheon, but there were many planets which lived a standard time-scale that took no account of the perhaps inconvenient alternation of day and night.  The rate of planetary turnings differed, and he did not know that of Trantor.  – Page 13. 

As technology enables us to make cities vertical, a world of cubic will be truly efficient:

With thousands and thousands of vertical corridors

“How high up do you think we are?”

“Half a mile?”

“No.  Just five hundred feet.”

“What?  But the elevator took about –”

“I know.  But most of the time it was just getting up to ground level.  Trantor is tunneled over a mile down.  It’s like an iceberg.  Nine-tenths of it is out of sight.  It even works itself out a few miles into the sub-ocean oil at the shorelines.  In fact, we’re down so low that we can make use of the temperature difference between ground level and a couple of miles under to supply us with all the energy we need.  Did you know that?”

“No.  I thought you used atomic generators.”

“Did once.  But this is cheaper.”  Page 16

Such a world will be a maze to humans:

There was a wall ahead.  It began high in the air and extended upward out of sight.  It was riddled with holes that were the mouths of tunnels.  Gaal’s taxi moved toward one then plunged into it.  For a moment, Gaal wondered idly how his driver could pick out one among so many.  – Page 12.

The dark corridors of Trantor

Only the ultra-rich and ultra-powerful will be able to afford green space:

There was no green to be seen; no green, no soil, no life other than man.  Somewhere on the world, he realized, vaguely, was the Emperor’s palace, set amid one hundred square miles of natural soil, green with trees, rainbowed with flowers.  It was a small island amid an ocean of steel, but it wasn’t visible from where he stood.  It might have been ten thousand miles away.  He did not know.  – Page 15.

I read somewhere that our heavens are imagined the reverse of our neighborhoods, so if we are farmers living close to the land, we imagine heaven as a shining city on a hill; but if we are city dwellers, then heaven in a sylvan park.  Certainly those who grew a city to surround their power kept a park for themselves.

Imperial Palace, Tokyo

Asimov’s Trantor is not poor but rich:

Daily, fleets of ships in the tens of thousands brought the produce of twenty agricultural worlds to the dinner tables of Trantor. – Page 13.

Trantor … was the center of all the Galaxy and the kernel of the human race.  He saw none of its weaknesses.  He saw no ships of food landing.  He was conscious only of the mightiest deed of man; the complete and almost contemptuously final conquest of a world.  – Page 15.

Aside from the ruinous energy cost of transporting low-value weight – grain – across great distances, Asimov somehow overlooked the conservation of biomass.  We human beings are squishy tubes through which pass gases, liquids, and solids, and in general, what goes in must come out:

3. Disposing of solid waste

But the finest minds of the era were also devoted to an equally pressing question: What are we going to do with all of this shit?  Page 115

Kent dung cart (small)

Start with a dung cart?

We think of pollution as a machine phenomenon, but it was originally organic:

Manhattan may seem like a loud and gritty place now, but it is nothing like the city of tenement manufacturing, rumbling elevated trains, and horses and coal dust in the streets that confronted inhabitants in the early 1900s.

The romantic haze of moviemaking (our principal window to the past) has conveniently elided the extraordinary filth and pollution of industrial cities.  A horse produces 30-50 pounds of manure daily (that’s about a cubic foot), and at the turn of the century, Chicago had 82,000 horses producing 600,000 tons of manure annually.  Think about the challenges of moving all that manure out of a city – and where do you put it?  Often in the rivers and lakes.

London, the world’s largest city, also produced the most horseshit:

Horse_shite (small)

It’s everywhere you want to step

The extent of London’s excrement problem was universally agreed upon.  Chadwick’s influential 1842 study had laboriously recounted the repellent state of waste disposal in the city.  Letter writers to the Times and other papers harped on the topic endlessly.  A survey in 1849 examined 15,000 homes, and found that almost 3,000 had offensive smells from bad drainage, while a thousand had “privities [sic] and water-closets in a very offensive state.” 

Not just equine excrement – human waste was overflowing:

One in twenty had human waste piling up in the cellar.

Think about that until you can visualize it.  (Have a bathroom handy.)  One home in twenty had a large pile of human dung accumulating in its cellar.  Mountains of manure, accumulating throughout

For every ship arriving on Trantor laden with grain, there had to be one departing, laden with crap.

And don’t come back until you’re food again

Perhaps Asimov lazily extrapolated from the New York City he knew, where food was shipped in, mainly by rail, and garbage shipped out, mainly by barge. 

Cornelius Vanderbilt, with muttonchops worthy of the Good Doctor himself

The Good Doctor

The problem of recycling held little interest for Asimov; where others imagined technology empowering dystopia, he always saw technology’s bright side.  That matters, for the technological future is coming upon us whether we plan it or not.  As I’ve written, the twenty-first will be the century of cities, and as documented in Century of the City from the Rockefeller Foundation, we will either by a planet or riches or a planet of slums. 

We are on our way to a real Trantor, and it may be closer than we realize.

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As part of the multi-day World Habitat Day activities, AHI, along with the National Housing Conference and the Housing Partnership Network, will be sponsoring a presentation and panel discussion on a topic that we think has great relevance, both in the Global South and back home in America.

Being hosted in Washington for the first time

Mission Entrepreneurial Entities:

Essential Actors in Affordable Housing Delivery

Thursday, October 8, 2009 ? 9:00 am to 10:30 am

National Housing Conference ? 1801 K. Street Suite M-100 ? Washington, DC

Attendance is free, but space is limited.

[For those impatient among you, click here to register. – Ed.]

We’ve organized the panel (which I’ll be moderating) to announce the publication and present the principal findings of AHI’s landmark new study, Mission Entrepreneurial Entities: Essential Actors in Affordable Housing Delivery, which examines MEEs’ characteristics, role in housing delivery, importance, and principles of success.  Using extensive case analysis of US and UK MEEs, it develops a theory of what makes successful MEEs or puts this ‘keystone species’ at risk, in which environments MEEs can flourish, and where lie today’s challenges and opportunities.  These insights apply not just in the US and UK but around the world, including the Global South.

I’ve previously posted about Mission entrepreneurial entities; we see MEEs as a distinctive species in the ecosystem, whose role is critical to ecosystemic success.

A definition that reveals a new species and opens a new field of inquiry

Other terms (e.g. Non-Governmental Organization, Community Development Corporation, Housing Association) are imprecise and obscure fundamental similarities of this distinct species.

We commissioned the study more than a year ago, and in that time an extraordinary amount has changed globally and in the UK and US housing finance ecosystems. 

Today’s affordable housing sector is undergoing great change.  Even as need is rising, the current delivery system – the value chains by which policy and resources are converted into tangible properties and successful outcomes – is under pressure, in the UK and here in the US. 

The UK has restructured its housing regulatory scheme. 

Formerly known by many names

The US LIHTC pipeline is disrupted by demand drops.  This sea change is redefining not just how individual deals are done, but which types of actors are most effective at doing them.  Effective MEEs represent innovation platforms that can deliver transit-oriented development, energy sustainability, and asset recovery – activities that urgently need to be converted from intangible goals to tangible properties and results.  Embracing the MEEs’ distinctive role can bring palpable value to funders, policy makers, and government agencies.

Our study is built around detailed profiles of more than twenty MEEs in both countries, compiled and analyzed by our two principal authors, one from each side of the Atlantic:

Ray Christman, former CEO Federal Home Loan Bank of Atlanta

Ray Christman, study principal co-author

Ray Christman is a business leader and senior executive whose thirty-year career spans all aspects of affordable housing and community development, including leading and managing large and complex financial services, housing and economic development organizations. 

Appointed by Mayor Shirley Franklin as chair of the Peachtree Corridor Partnership, Mr. Christman is leading Atlanta’s public-private partnership to implement the first phase of proposed $1 billion investment program to transform Atlanta’s main corridor into one of America’s great streets.  As interim president and CEO of the Georgia Trust for Historic Preservation, he is providing day-to-day leadership and management for the nation’s second largest statewide historic preservation organization, while search occurs for permanent head. 

For nearly a decade, Mr. Christman was president and CEO of the Federal Home Loan Bank of Atlanta, one of a dozen such federally chartered, for-profit companies that provide funding and liquidity to the nation’s retail banks, thrifts and credit unions. 

Gaynor Asquith, Principal, arc⁴ Consulting, Manchester UK

Gaynor Asquith, study principal co-author, arc4

Gaynor is a co-founder of arc4, a housing and regeneration agency that works with the public, social and private sectors to find solutions to any regeneration challenge. She leads work in areas from innovative research and stakeholder consultation through the development of fresh policies and strategies– all to make sure good changes happen.

Gaynor had over 25 years experience before setting up her own company, abra, in 2002.  This, she merged with DCHR in 2007.   Gaynor has since helped to create one of the largest independent specialist consultancies of its kind in the UK.  arc4 helps organisations and individuals to help secure sustainable communities through:

We particularly sought out parallel expertise in two countries to enable paired comparisons.  When two nations have convergent evolution or similar forms, that tells us something.  When they have evolved in highly different ways, that tells us something as well.

The topic’s importance and relevance is highlighted by the remarkable group of panelists we’ve assembled to discuss the report and its finding, including two MEE experts, and two national experts involved in working with, funding, and growing MEEs:

Carol J. Galante, Deputy Assistant Secretary for Multifamily Programs, HUD

I was a DAS before she was a DAS:

Carol Galante, Deputy Assistant Secretary (DAS) for Multifamily Housing Programs

As Deputy Assistant Secretary for Multifamily Housing, Ms. Galante spans the critical new production and refinancing insurance programs; is responsible for the multifamily inventory; and leads HUD’s efforts on multifamily preservation (a current portfolio of over $58 billion).  She is also integral to several new initiatives that promote sustainable development.

Before joining HUD, she spent 22 years at BRIDGE Housing, the largest nonprofit developer of affordable apartments and homes in California, specializing in the development of family and senior affordable apartments, rental and ownership housing, and an array of revitalization, transit-oriented, urban infill, and mixed-use/mixed-income developments.  She joined as Vice President from 1987 and President from 1996. Prior to BRIDGE, she was the Executive Director of Eden Housing, Inc., where she developed affordable homes and formed a property management subsidiary. She has also worked for the cities of Santa Barbara, Richmond and Philadelphia.

Galante has received many honors including: Multifamily Executive magazine’s 2008 Executive of the Year, California Homebuilding Foundation Hall of Fame 2008, Builder magazine’s Top 50 Most Influential People in Home Building 2006, San Francisco Business Times 2003 Deal Maker of the Year, Most Influential Women in the Bay Area, and the 2002 U.C. Berkeley College of Environmental Design Distinguished Alumna Award. She is a licensed real estate broker and holds a B.A. from Ohio Wesleyan and a Master of City Planning from U.C. Berkeley.

Debra Schwartz, Director of Program Related Investments, MacArthur Foundation

Social lender to the multifamily arena: Debra D. Schwartz, MacArthur

Debra D. Schwartz is Director of Program-related Investments for the John D. and Catherine T. MacArthur Foundation where she oversees a $300-million portfolio of below-market loans and investments used principally by economic development and affordable housing organizations. She also co-leads the Foundation’s $150-million national initiative, Window of Opportunity: Preserving Affordable Rental Housing.

Schwartz joined MacArthur in 1995 as Senior Associate to the President.  She became a member of the Program on Human and Community Development in 2000 and assumed her current post in 2002.  Previously, Schwartz was an investment banker in public finance for John Nuveen & Co. where she structured tax-exempt bond issues for municipalities and nonprofit health care organizations.  From 2002 through 2006, she served as one of nine presidential appointees to the US Treasury Department’s Community Development Advisory Board.  She is a founding member of the national PRI Makers Network steering committee and frequently speaks at philanthropy-related meetings on the topics of social enterprise, nonprofit sustainability and program-related investments.

Schwartz graduated summa cum laude from Yale University with a bachelor’s degree in history. She earned a master’s degree in finance and nonprofit management from the Kellogg Graduate School of Management at Northwestern University.

In addition to the two benefactor/ regulatory entities with perspective on MEEs, we’re featuring two MEE representatives, one from a network perspective, one a direct actor:

Thomas Bledsoe, President, Housing Partnership Network

A man who envisioned and oversaw creation of a network:

Tom Bledsoe, Housing Partnership Network

Tom Bledsoe is the chief executive officer of the Housing Partnership Network and three affiliates – the Housing Partnership Fund, Housing Partnership Ventures, and Housing Partnership Insurance.

Founded in 1990, the Network currently has 95 members, all of which are mature nonprofit housing partnerships with strong track records in development, financing, and management. Collectively, they have developed or financed more than 500,000 affordable homes, helped lower-income families improve and repair 175,000 homes, and served as homeownership counselors to 400,000 families.

Under his leadership, the Network has become the leading voice for the high-capacity, partnership-based nonprofits in the affordable housing industry; has launched innovative, high-impact efforts and business enterprises; and been repeatedly recognized by Fast Company magazine as one of the leading social capitalists in the country.

Prior to joining the Network, Mr. Bledsoe was the executive director of the Metropolitan Boston Housing Partnership (MBHP), one of the nation’s first public/private housing partnerships. He facilitated the merger of two nonprofit housing agencies, creating a comprehensive regional organization that operates a continuum of programs from services for the homeless to homeownership.  He holds a BA from Wesleyan University (CT) and a master’s degree in public policy from the John F. Kennedy School of Government at Harvard University.

J. Michael Pitchford, President and CEO, Community Preservation and Development Corporation

Acquiring and developing in metro Washington DC: Mike Pitchford, CPDC

J. Michael Pitchford, President and CEO, is responsible for the overall strategic direction and management of the real estate development and community development programs of our affordable housing communities.   Since 1989, CPDC has developed 27 properties, over 4,000 apartments, with over $300 million in real estate value.

Having spent a decade serving on the Board of the National Housing Conference, including a three-year stint as its president, Pitchford has developed a strong understanding of how national and local policy impact housing affordability. This, along with his leadership skills in generating a shared vision with employees, has helped him build infrastructure for stable and rapid growth.

Pitchford also has participated in or led associations, workshops, conferences, and forums on policy, networking, and the sharing of best practices. He has served in leadership roles with the National Equity Fund, the Urban Land Institute, the Washington Area Housing Partnership, the District of Columbia, Northern Virginia, and Maryland Building Industry Associations, and the Old Dominion University Board of Visitors.

Previously Pitchford led the Community Development Equity Group at Bank of America Corporation in Charlotte, NC. The Group developed or rehabilitated 23,000 units of affordable housing since 1994 and increased equity commitments 3,000%. The development of these affordable housing communities included Make A Difference Centers , community life programs tailored to the needs of the resident population. These programs included computer training for residents of all ages, career and academic mentoring, and on-site health clinics.

And then there’s myself, whom I list for completeness:

David Smith, Founder, Affordable Housing Institute, and CEO, CAS Financial Advisory Services

This is an event you won’t want to miss.  Attendance is free but space is limited.  Click here to register.

It’s a good thing I’m speaking or I might not be able to get in

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[Continued from yesterday's Part 1.]

In yesterday’s exploration, we suggested that if you want to understand a housing finance ecosystem and lack the statistics or reference resources to compile a proper survey, you can do well by conducting a simpler ‘physical exam.’

Is that all I am to you, just a pretty johnny?

Any given housing finance ecosystem processes activity across three dimensions – homes, people, and money.

Locate yourself in space and you define yourself relative to others

By poking and prodding the system as it processes residences, occupants, and money, you can deduce its functions.

I’m sure one of these links to her motivation

Yesterday we covered the concept and Question 1, how do I find housing, and what types are available?

Once you’ve found your desired pied a terre, you have to secure possession. 

Question 2: Selling and buying

If I own housing and you want to own it, how does the system recognize transfer of ownership from you to me?

You’ve found a place you want to own – my place – and I’m ready to sell it to you for an agreed price.  I need your cash; you need evidence that you’re the owner now.

A Turkish title deed: note the owner’s picture!

Between us and the transfer stand a host of professionals who specialize in these handoffs.  Who handles what, what documentation (pieces of paper), what do they say, how are they prepared and signed, who holds them?  What certificates, what protections, what recourse to authority?

You’ll have questions like these:

1. How do you know I own it?
2. What defines my property?   Does it include land, outbuildings (garage, shed), furnishings and fixtures, utilities and systems?  How are its boundaries specified, and why is that specification accepted in the wider world?
3. How can you later prove that you have now acquired ownership from me?
4. Via what piece of paper (if any; in some places, understandings are verbal) is my ownership currently documented?  A deed of title, a purchase receipt from a previous owner?
5. Where can you expect to find or examine my documentary proof of ownership? How do we designate a neutral repository (escrow agent, lawyer, realtor) to hold the valuables – money and certifications like title deeds – while we’re preparing for the closing?

This question gets to the roles and services in the title transfer value chain, both the governmental side (recordkeeping, recognition of transfer, and neutral enforcement) and the private side (professionals involved) and will touch on all these real or potential professionals:

• Closing attorney to prepare the new title deed (and the purchase and sale that precedes it).
• Registry clerk who places in the new title in the great big book and gives you the filing and recordation information.
• Title insurer.  Warrants that your new title is good, and will pay you the property’s value if that proves false.
• Real estate broker or estate agent.  Match-makes between sellers and buyers.  Brokers always face the question of who works for whom.
• Mortgage broker.  Represents you in searching for the best financing.
• Surveyor makes a detailed and personally inspected map of your demesne (pronounced domain), so as to provide the metes and bounds. 

Everything inside the rock wall is my demesne

(Love that Middle English!)

Whan that blogger with his essayes wroote
The metes and bounds hath posted the Web soote,

Depending on where you are in the world, and what type of residential property you’re seeking to transfer, you’ll encounter more or fewer of these folks.  Each check you write, at the closing table or before it, pays for a link in that value chain, a link done by a professional who is (usually, or at any rate supposed to be!) more expert than a generalist, and a vast leap over your effectiveness if you tried to do it yourself. 

The more checks you write at the closing table, the better your ecosystem; while I won’t claim this postulate as absolute fact, that’s my instinct. 

That’s pretty basic, isn’t it?

How do you the newcomer learn about the mechanics of property transfer?

In most developed nations, that’s pretty simple – just Google “home purchase closing” or similar phrases.  Further, many countries have consumer-protection or consumer-disclosure laws that make it easy to learn what you need to know.  In the US, for instance, we have:

The Real Estate Settlement Procedures Act (RESPA), which has been around for 35 years (since 1974, holy moly) as a consumer protection statute:

We need settlement procedures

1. RESPA requires that borrowers receive disclosures at various times. Some disclosures spell out the costs associated with the settlement, outline lender servicing and escrow account practices and describe business relationships between settlement service providers.

2. RESPA also prohibits certain practices that increase the cost of settlement services. Section 8 of RESPA prohibits a person from giving or accepting any thing of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed. Section 9 of RESPA prohibits home sellers from requiring home buyers to purchase title insurance from a particular company.

Additionally, any professional association (like the US realtors) will have extensive exposition, and a little bit of poking around will reveal dozens of law firms eager to let you download standard agreements.  Indeed, looking for the forms will also surface the types of practitioners who specialize in transactional services, and they in turn will lead you back to the sequential steps.

Similarly, the settlement statement – a standard form listing what costs for what services might be paid at the closing – acts as an effective checklist of possibilities.  A good example is the HUD-1 settlement statement (link in .pdf), which zeroes in on possible costs, as shown in the large image below.

If HUD thinks you might be paying these, there’s probably a good reason why

Well-developed (and typically higher-income) ecosystems have these mechanics down pat, so much so that everyone takes them entirely for granted.  As a result, first-world investigators who travel to developing nation environments often presume they know how the system works when in fact they don’t.

Hence it’s important, in less-developed ecosystems, to forget everything you think you know about the property transfer value chain, and start from first principles.  One learns by asking the same questions, over and over again, walking step by step through the imagined process and collecting samples of the documents along the way.  Most significantly, how the process works in the formal world of mortgages and electronic records often differs dramatically from how it works in the informal world of unregistered property, cash transactions, and verbal rather than written rights.

Tracing the mechanics of a transfer of ownership, and the recognition/ enforcement of that transfer, also expansively touches everything to do with the broader society and property rights – and that, being one of the pillars of a liberal democratic society, provides a window into government’s functionality, integrity, and legitimacy.

Somebody’s worried

However, such speculations into political philosophy would take us ‘beyond scope’ (as the compleat consultant would say), so let us stay with the more prosaic element of that single dwelling unit.  You’ve located and chosen it, you’ve agreed with its owner about your occupancy.  Now you have the last piece – you have to pay for it.

“Hamburgers!  The foundation of any nutritious breakfast.  Do you know what a quarter-pounder costs in France?”

[Concluded tomorrow in Part 3.]

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