I’ve given you every chance to move, Black

As revealed in a recent Guardian (UK) article, if the private participants don’t move, the government can find itself stalemated.

Why aren’t you moving?

It was a £1.5bn cash injection that was supposed to make a dent in England’s 5m-strong housing waiting list.

Five million waiting list?  In a country of 60 million total? 

The NHF, which represents housing associations, estimates that households on the waiting list in some areas would have to wait 280 years for a home.

I’ve got a good chance to be next up

Chief executive David Orr says: “What was already a significant problem [of demand for affordable housing] is getting worse on a day-by-day basis.”

Doesn’t that signal there is something powerfully wrong with the UK’s housing production system?

“In the short term, we have got to do as much as we can [to build], given the circumstances.”

So when housing minister John Healey announced the government’s new affordable housing drive this summer, first reactions were positive.

Want a billion pounds?

“The cash was a bit of a surprise and very welcome,” says Richard Capie, policy director at the Chartered Institute of Housing (CIH). “When was the last time you saw money coming from education, health and transport into housing?”

Capie can’t remember seeing money flowing from education into housing

But now the excitement has subsided, questions are being asked about the government’s new plans and its attempt to spend its way out of the house-building slump. Can the money really do anything to ease waiting lists?

Depends on how many homes the money builds, and at what affordability level.

And how can we provide enough affordable homes for the future once the funding runs out?  Such issues will be at the heart of the National Housing Federation (NHF) annual conference starting in Birmingham today [23 Sep 09 – Ed.].

Certainly, plenty of cash is going into addressing the development downturn: the new £1.5bn comes on top of £1bn in the Budget, including a special fund to restart stalled development projects. Housing associations are building, despite:

[1] Tougher access to finance

[2] Tightening land supply

[3] The collapse in demand for ownership that makes it impossible to cross-subsidise schemes with homes for sale.

You’re out of the building business

Tell again why they’re building?

Keith Exford, chief executive of one of the biggest developing housing associations, Affinity Sutton, says his association “is whole-heartedly open for business.”

Of course they are.  Sharks gotta swim, and bats gotta fly.  Developers gotta chase the next deal ’til they die.

But he warns that the recession is straining the system. “If you are going to do social housing without the benefit of cross-subsidy, then you need more grants and you build fewer houses out of available resources,” he says.

Cross-subsidy, which I liken to the unicorn – much pursued and seldom captured – is predicated on selling market-quality homes at market prices without having to spend  market costs (usually for land) to develop them.  Then the ‘excess’ profits resulting are plowed back in to greater affordability on the other apartments.

“We need to start thinking about the current development model as I can’t see how it can survive.”

That development model is precarious.  More than precarious.

Must answer me, these questions three

Ere the other side he see

In the US, we’ve seen that the LIHTC delivery system has been disrupted, and although it is slowly repairing, it has some ways to go.  The British system is under different but no less profound stress.

The NHF also argues the government is undermining social housing growth by insisting that housing association rents be cut by 2% because of falling inflation.

First case of mutual stalemate.  It’s tempting to scale back resident rent increases, but every dollar so saved is a dollar less of free cash flow to the Housing Associations – which, as non-profit MEEs, deploy their excess capital into building new homes.  By easing the stress on current residents, they prevent other people from becoming residents in the new homes Housing Associations would otherwise develop.

Orr estimates the cut would cost associations £260m a year, slashing development by up to 4,000 homes a year.

To save the many 2% a year, we leave 4,000 out in the cold.

If it were up to me, I’d charge them 2% more

And this is self-defeating; in the long run, lack of supply will push up rents.

“When we are expecting to see public capital investment reduce, reducing associations’ revenue capacity just makes development more and more difficult.”

What would make a real difference, associations say, is a readier supply of mortgages for those wanting shared ownership.

Certainly – but if the overall interest rates go lower, that will also push up prices.  Stalemate again?

They also urge more flexibility from councils on planning to make it easier for developers to build. Councils, associations believe, should not expect as much from planning gain – where developers incorporate affordable housing in return for planning permission – as they once did.

As I’ve previously posted, the UK’s form of inclusionary zoning, Section 106, is a zero-sum game.  Whatever the locality wins, the sponsor loses.  Every dollar of affordability grasped by the locality is a dollar less profit, land value, or risk cushion.

Councils themselves have now been put centre stage in developing new social housing. Earlier this month, the government confirmed 47 councils will share £127m to build more than 2,000 homes, with more money up for grabs in the autumn.

That’s £63,500 per home of permanent sunk (non-recoverable) cash equity out.

One per new affordable home?

There are also planned reforms to the way council housing is funded, allowing councils to keep money from rents. The Local Government Association (LGA) is urging the reforms to be pushed through quickly. LGA chair Margaret Eaton says: “Councils could build up to 300,000 new homes and improve conditions for millions of tenants if there is root-and-branch reform of the housing finance system and the government takes away the barriers to building.”

Like the love affair with greenfield preservation.

But some authorities are unhappy about the house-building drive, since it means the funding they need to improve their existing stock is on hold.

Another stalemate?  Spend more to build new and you have less to rehab existing? 

That’s the consequence of the public housing dependency trap.

The authorities affected – around a dozen that have set up arm’s-length management organisations (ALMOs) –

In addition to housing associations, UK public housing is operated by local authorities.  Under the Labour government, strong coercion was applied to compel those authorities to set up professional management operations (Arm’s Length Management Organizations, or ALMOs).

I’m tickled to be an ALMO

Having relied on the government for funding, the ALMOs find themselves in the position of Flounder in Animal House: “You effed up.  You trusted us.”

– now stand to lose hundreds of millions in decent homes programme funding. Gwyneth Taylor, policy director of the National Federation of ALMOs, says the government should not renege on its promises to existing tenants.

Taylor doesn’t believe in reneging

“They are throwing all their eggs into one basket, when there’s no guarantee all the £1.5bn will be spent,” she says.

Catch the subsidy!

Block that metaphor!

For the Conservatives the answer lies in scrapping current house-building targets, which, according to shadow housing minister Grant Shapps, are just imaginary numbers. “In many ways it’s not through lack of money that we are not building enough homes… [the government] has got the wrong approach, with: 

[1] Too much targeting

[2] Inefficient ways to spend money

[3] Lots of schemes that add little, and

[4] Cumbersome administration.”

(”Other than that,” he added, “they’re swell fellows.”)

For Exford, recently appointed to the Joseph Rowntree Foundation’s new housing taskforce, which aims to develop policy options, the solution could lie in more homes for intermediate and market rent.

Basic principle: if you add supply anywhere on the income/ cost continuum, you will ease stress throughout the system.  That would be a move to loosen the stalemate.

More flexible options could bridge the gap between those who can afford ownership and those who qualify for scarce social housing. “We need a more sustainable, mixed-income, mixed tenure product range,” he says.

The CIH’s Richard Capie argues that, in the wake of a government pledge to make the allocation of social homes fairer – councils are being urged to inform communities better about who gets housing, for example – there should be a range of “price points” for affordable housing.

“Someone in a social home on £65,000 and someone next door on housing benefit both pay exactly same rent. It’s not about them being in the properties – that’s a good thing – but should we be looking at rent geared to income? That would give you more rental income and that’s how you build more homes.”

Means-testing is another form of poverty trap.  Another possible mutual stalemate.

The time is ripe, many feel, for change, and this is acknowledged by Sir Bob Kerslake, chief executive of the Homes and Communities Agency: “It is critical that the sector actively joins the debate and is open to new models. Who knows what the process will bring, but we are more likely to succeed through collaborative thinking across the housing and regeneration world.”

To make a move, you’ve got to break the mutual stalemate.

At least it’s not stalemate

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So there I was, mid-May in Dublin at the Foundation for Fiscal Studies’ 24th annual gathering, The Fiscal Treatment of Property, expanding on the topic Lessons from the United States and explaining US real estate taxation to a roomful of tax wonks. 

Class, can you say ‘locally autonomous control’?

[Click here to access my whole presentation, in pdf.]

You may not think the subject gripping, but they did, because they’re giving serious consideration to introducing annual real property taxes after thirty years without any, and they know that doing so is political dynamite.

Just propose raising taxes, and run

If you’re going to do this, I advised them, link local taxes to autonomous local control of visible local services: schools, police, firefighters.

Local control over real estate taxes also allows low dexterity in managing economic growth and property development, particularly via the use of targeted incentives, including:

PILOTs and redevelopment areas

1. PILOTs.  Payments-In-Lieu-Of-Taxes, where a municipality can structure any arrangement it

PILOTs require state-level authorization, and tend to be popular only in slow-growth already-urbanized areas with reliable high land values and a death of affordable housing, as evinced by the three states I cited (Massachusetts, New Jersey, and New York).  In lower-value states where other revenue sources are hard to come by and even the local real estate taxes are seen as expensive and hence a political risk, the tax man tends to be more aggressive with the assessments and the city council tends to be stingy with the abatements.

Even 121A couldn’t save the Jamaica Plain shoe factory

Originally these state enabling statutes were aimed at protecting industrial real estate, such as Massachusetts’ hopeless quest to keep the shoemaking business, but after those industries all collapsed in the Fifties, killed by the air conditioner which enabled them to transplant to the Southeast and Southwest, the late-Sixties saw them reused for affordable housing, which is today the dominant claimant for PILOTs.

2.  Redevelopment Areas (RDAs).  Another local-option initiative targeted to high-growth, high-density, high-value markets.  In an RDA, the locality draws a boundary around a core area, usually the central business district or an expanded downtown.  Expecting growth within the designated area, the locality seeks to assure that the rising real estate values do not totally price out affordable housing.

RDA map

Land value being a residual, these localities know they cannot stop prices from rising, so instead they take a portion (10% to 25% is common) of the increased real estate tax revenues derived from rising values within the RDA, and siphon that into a reserved ‘Housing Set-Aside Fund’.  HSAF proceeds are typically accumulated and lent out as soft debt to fund increased affordable housing.

Linkage, incentives, and Community Preservation

In addition to those two direct manipulations of the amounts or uses of real estate taxes, I highlighted three other American taxation/ land use initiatives, all of them locally generated and locally controlled. 

3. Linkage.  Linkage, as it has come to be named, has a more controversial reputation because of its targeting.  Within a designated area – again, usually a high-value zoning-constrained high-demand section of the city, usually the central business district – the city requires any up-zoning proposal to provide new affordable housing ‘linked’ to the new development in a stipulated ratio: so many square feet of new affordable housing for each hundred square feet of increased density approved.

Linkage’s structure flows from impeccable economic logic.  Most downtown developments are non-housing uses – retail, hotel, office – which generate jobs.  Good, but with those jobs come people, and the people either need housing locally or add to the traffic burden.  Either way, unless affordable housing is advantaged somehow, the non-housing uses will increase, exacerbating exclusion and traffic congestion – unless, that is, affordable housing is ‘linked’ to each incremental non-housing development, to keep the uses mix in balance.

Linkage comes in many forms.  Some are formulaic: X square feet of new affordable for Y square feet of non-housing.  Some are custom-negotiated, like the UK’s Section 106, whose design flaws I’ve already chronicled (at length). Some, like the Union Army during the Civil War, allow substitution – instead of delivering value in kind, the developer can simply pay a surcharge of $Z per square foot of increased zoning. 

How many of them were bought substitutes?

It’s this last that gives linkage its poor reputation in some quarters, as it smacks of the papal indulgence, or a bald toll to purchase approved up-zoning (instead of having each upzoning request considered on its own merits as being good or bad for the city’s development).  Further, unlike RDAs, linkage is zero-sum; every dollar of affordability delivered (either directly via affordable square feet or indirectly through linkage transfer payments) is one dollar less of land value.  Done clumsily, or to excess, it looks less like urban planning policy and more like a gotcha tax (whose motto is the Latin for, “because we can”).

I make the rules

Linkage is the flip side of PILOTs – taxing some properties higher or lower based on their perceived contribution to or deduction from the city’s overall use-of-property balance.

Too much reliance on one thing?

4. First-time homebuyer incentives.  Like linkage, homebuyer tax-credit incentives (like the Washington DC homeownership tax credit) are a one-time rather than an ongoing payment, and perhaps could have been excluded from my talk, but I included them as further illustration of how the community, if given local autonomy over zoning and real estate taxation, can customize extensively.

5. Community Preservation Acts.  I’m on record (four years ago! how blogging time flies) as endorsing the Community Preservation Act as a case study in good incentives, although in the intervening four years I’ve cooled somewhat after posting about localities, who saw the money just sitting there, snitching it for just-any-other purpose:

Such a problem is illustrated, unfortunately, by the expenditure creativity being displayed by various cities and towns around Massachusetts as they transmogrify the original legislative purpose of the Community Preservation Act’s money into … well, whatever they can think of. As revealed by yet another insightful policy article from MassInc’s, free CommonWealth magazine:

Moving the goal posts

Designed to create open space and affordable housing, the CPA is now being used to pay for sidewalks and artificial turf

If I write the rules, there’s no rule against it, right?

Where the ring-fencing breaks down, the CPA is just another surtax – and worse, because it flows via state match to localities that voted the override, it turns out to be reverse redistributive, giving  more to richer communities and less to poorer ones.

Finally, I devoted only a fleeting commentary to the implications of a real estate downturn on local finances:

Subprime’s consequences

All strung und drang aside, US foreclosures are concentrated in five states that can be divided into three conceptual categories:

1. Weak long-term economy (Michigan) dragging down values.

2. Speculative overbuilding run amok (Arizona, Florida, Nevada) because of low barriers to entry.

3. A whipsaw of overbuilding and skidding economy (the one and only California).

In light of all that, how do the US and Ireland compare?

Through the looking-glass: two ways of taxing

Ireland’s taxation is predicated on building and reselling of housing.  When times are good for the property market, government is awash in cash.  When times are bad, the cash dries up completely.  That’s probably contra-indicated because it’s in bad times that government is called upon to do more, and in good times it probably should do less. 

In short, I told my hosts, from what I could see of the US, and what little I understood about Ireland, a move to a recurring real estate tax on residential property would be wise – and the only way to do it without committing political suicide would be to connect it directly to increased local autonomy over visible local services. 

When the institute issues its report, I’ll let you know what they recommend.

Somewhere, over the rainbow, taxes work

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No real estate tax escrows collected by your mortgagee. 

No assessments, no city assessors.

Before you smile too broadly, I have to mention some other George-Spiggott-inspired conditions of the scenario:

I want only your immortal soul

No local autonomy on schools, police, fire, health.  All would be funded from the national government in decisions where you had no input.

Nevertheless, your property would not be free from tax.  On sale, you’d pay a transfer tax fee, collected by national government, which rebated money back to your community. 

Would you be happy or sad?

There is such a place.

Irish revenues have fallen off the cliff

The Republic of Ireland. 

In 1978, Ireland abolished local property taxes, and substituted a 6-7% ’stamp duty’ (real estate transfer tax).  From the mid-1990s onward, with the EU, the Euro, and the common European marketplace, immigration swelled Ireland population by 35%, adding about 1,500,000 people and over 500,000 new homes.  Prices boomed, and as they did, the state’s coffers bulged with stamp duty revenue.

Now prices have busted.  Every property-related statistic out of Ireland is gloomy.  With sales stopped dead, the government is receiving minimal revenue, yet it has obligated itself to provide high-quality local services throughout the country.  The party in power has miserable approval ratings and got walloped in the June local and European Parliament elections.  Should Ireland – might Ireland – could Ireland re-introduce recurring taxes on real property (as it was described by Chris Heady of the University of Kent)?  Is such a move good policy?  Is it political suicide?  If it is good policy, how can the government prevent political self-immolation?

I’m different and I don’t care who knows it

When I heard all this, I was agog, the more so because I learned about it via a request from the Irish Foundation for Fiscal Studies (FFS) to address their 24th annual gathering, The Fiscal Treatment of Property, on the subject of Lessons from the United States.

[Click here to access my whole presentation, in pdf.]

Now, gentle reader, you may think this an easy thing to rattle off, but I invite you to pause a moment.  You will have 45 minutes to explain the American property tax system to a nation that has not had one for thirty years, a nation whose area is roughly that of New England and whose population smaller than Massachusetts’. 

When everything is different, where do you start?

They asked me and yes I said yes I will Yes

What can you convey that may be useful in an utterly different context?

(By the way, in 1978 something occurred equally monumental to US real estate taxation.  I’ll let you ruminate for a while on what it was, and for extra credit, how it might have lessons for the Irish situation today.)

I started with the most basic point of difference – the triune government and its multiple ways of extracting taxes from the citizenry.  Have you ever counted them up?

Who’s got their hands in your pocket?

After I put this chart together – it’s a composite, an educated guess of the ranges – I was surprised that while the federal government gets the lion’s share, it’s local government that has the most diversity, with two guaranteed sources (real estate taxes and water/sewer) as well as the ability to levy other little pickups (and I didn’t list taxi-meter surcharges, soak-the-tourist hotel taxes, and speed cameras). 

I was also surprised that more than likely, you pay more in local taxes than you do in sales taxes.  Did you know that?  I didn’t.  I suppose it’s because the real estate tax bill is computed for you, whereas you have to do your own state taxes. 

Your mileage may vary because you may be in a high income-tax or sales tax state (like New York), and as a general rule, state taxes are high when real estate taxes are low, and vice versa.

[Any reader who has a chart of both, please email me the data or the URL; I'll be really interested. – Ed.]

How localities make ends meet

The reason is simple: localities that don’t get revenue-sharing from their state government have to make it up on their own.

Localities also like homeowners, preferably richer homeowners, preferably with fewer children, and it will surprise you to learn that the US lags more than ten points behind Ireland in homeownership: 68% to 79%.

Are higher numbers better?  Ownership percentages and mortgage debt relative to income

Not too surprisingly, when the homeownership rate is very high, so too is the relative level of mortgage indebtedness relative to income.

Yet the correlation’s not linear, with the US at 101%, Ireland 116%, Australia 120%, and Britain 130%.   Fortunately, debt is a balance sheet number, and payments are only a percentage of the debt, so that a ratio above 100% isn’t necessarily evidence of insolvency  Still, these are not statistics to be proud of.

They do mean that residential homeowners form the backbone of local tax revenues, including state tax revenues.

The importance of recurring taxes nationwide

While I confess surprise at the outliers of Illinois and Wisconsin, and the anomaly of Texas, overall the nation shows a pattern, with highest tax rates in the Northeast, lowest in the Confederacy (Georgia and Florida get a boost because these states have been urbanizing and gentrifying.

One state defies the trend: California.

Why’s California so light?

Any guesses why, readers?

As this was only of secondary importance to my Irish audience, I went back to the basic real estate tax budget algebra:

Seen in a blog post near you!

Real estate taxes: basic budget algebra

Having explicated this at length previously, I won’t rehearse it here.  The main point I wanted this audience to grasp is that taxation can be calibrated by millage rate, and sounds not too expensive: so many dollars per thousand. 

Further, when there’s a hole in the budget, you can plug it by fiddling the millage rate:

– Budget hole gets bigger? Raise the millage rate

– Real estate values drop? Raise the millage rate

– Got asset values you want to favor? Change their fractional assessment

You can also discriminate against some asset classes by discriminating in favor of others.

Tax ‘em too much and they revolt

But you have to be careful, or the taxpayers will revolt.  And that, I pointed out, is a dangerous backlash:

No taxation without representation!

Our first tax revolt came in 1773 and was a flashpoint in our eventual revolution and independence from Britain, on the memorable and valid slogan, “no taxation without representation.”  At the same time, in 1978, the citizens of another great republic expressed their revolt over too-high taxes by passing a statutory cap, Proposition 13, which single-handedly blocked the growth of California’s real estate taxes as a source of state and municipal revenue.

Personally, and from the safe distance of 3,000 miles, I think Proposition 13 one of the worst solutions ever forced on a government – a neck tourniquet for growth.  No matter how profligate California’s state and local governments were – and I am fully prepared to believe they were and are, particularly in light of recent events – blocking one revenue source is like damming one bank of a river, it just shunts the flow in another direction.  Worse for California, by giving non-movers a tax break relative to movers, it gradually develops into an embedded implicit subsidy of the elderly at the expense of the younger, more economically mobile and vital.  It’s torqued the state’s growth, shoved taxation toward more growth-inhibiting forms (like sales tax), and not stopped the bloating of government. 

[In Massachusetts, we have a similar real estate tax cap, Proposition 2½, the brainchild of Citizens for Limited Taxation.  Superficially similar, Prop 2½ is very different because its cap is higher, it's self-adjusting being tied to annual revaluations rather than progressively worse by virtue of being revalued only on transfer, and it allows for safety-valve overrides.  I've posted before about Prop 2½ and will likely return to it sometime soon. – Ed.]

Sounding the same note for thirty-plus years: Barbara Anderson

Take a lesson, I suggested to the Irish audience.  When you don’t tax owned property fairly on a continuous and recurring basis, and instead you rely on transactions to drive revenues (which Proposition 13 did because of revaluation and Ireland currently does with stamp duty), then you give the illusion of low taxes without local accountability.

In fact, that was my recurring theme to the Irish: You can get the populace to accept annual real estate taxes if and only if you tie them to locally autonomous control over visible local services like schools, police, and firefighters.

Indeed, it might be said that strong local real estate taxation is the means by which local government can and must grow, taking power away from an overly centralized national government.

Or their local governments

[Continued tomorrow in Part 2.]

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Though housing is the output of an enormously complex, ever-changing, hugely capitalized value chain, unlike other abstract capital-markets products like Credit Default Swaps, we all connect to it because we live in its results, and we all care about it because the equity in our owned homes drives our new business formation, our self-esteem, our family formation – you name a major life milestone and it is likely accompanied by a change in housing configuration or tenure, and hence in housing finance.

In that spirit, we looked in May at three very micro-level dramas, starting with that invisible informality, the in-law apartment, via Outlaw in-laws: Part 1, symbiotic replication, Part 2, creeping densification, and Part 3, quiet amnesty:

Ma, maybe you should have your own entrance?

“When in-law apartments are outlawed, only outlaw in-laws will have apartments.”

– Bumper sticker from the National Relatives Accommodation Association (NRAA)

Despite all the emphasis we bestow on the visible and regulated forms of affordable housing – LIHTC, HUD Section 8, even inclusionary zoning – there are more forms of invisible affordable housing than are dreamt of in the typical policy maker’s philosophy.

Spot the affordable housing?

To mobile homes and triple-deckers we must add the modest creature with the unlovely name of accessory dwelling unit (ADU), more commonly known as the ‘in-law apartment,’ and featured in a bland but nevertheless thought-provoking little briefing primer, Accessory Dwelling Units: Case Study, prepared for HUD’s Office of Policy Development & Research by Sage Computing [Why them? No particular expertise in housing. – Ed.].

Even more fundamental than expanding or subdividing a house is building it or tearing it down, and in both cases the production paradox applies – whatever you want to do, your neighbors will oppose it.

We’re against it! … What are you proposing?

In England you can’t built it up, as we saw with the Travellers, who are blatantly exploiting British government’s inability to move quickly, in Whose side are you on? Part 1, the invasion, and Part 2, choose your side:

The Daily Mail provides a link to a previous article showing exactly the same tactics:

A Daily Mail photograph of Crays Hill in Essex, a Travellers’ community

Travellers tarmac a new camp in a bank holiday weekend as helpless villagers watch

Marching to the faster-than-government beat of their own drummer, the Travellers were determined to finish all their structures before the opening of business Tuesday morning.

Farm worker Matthew Davies, who lives near the site, said: ‘They changed what was a pretty meadow into a building site overnight. Who knows what it will look like a few days down the line?’

It’ll look like a community of people – informal, unzoned, but not unplanned.

Local councillor Len Lawton said: ‘Villagers were told the field’s owners only wanted to build temporary accommodation for horses.’

Horses yes, people no? Is something out of whack here?

‘When the owners started making small engineering changes earlier this year, such as laying pipes, the council reminded them that major building work required planning permission.’

That shivered their timbers.

Not another council reminder!

No, no, shooting an elephant, not an elephant shooting!

In America you can’t tear it down, as newly liver-transplanted Steve Jobs found out in Shooting a white elephant: Part 1, the elephant, Part 2, the blunderbuss, and Part 3, the human shields:

After this exhaustive exercise in proving the blindingly obvious, the Environmental Impact Report found that:

Things physically feasible cost lots more money

Things that didn’t cost more money neither

Built a new house nor

Stopped the current house from crumbling.

Ladies and gentlemen of the electronic Town Council, you have now heard the staff’s report.

How would you vote?

Remember, then Friends of the Jackling House will be watching:

On May 12, 2009, the Woodside Town Council may vote to wiggle around a string of Court rulings AGAINST granting demolition of this historic mansion. There is still no adequate evidence to grant demolition.

Before you vote, let me add the most ironic part:

It is important to point out that in acting on this application, the Town Council’s authority is limited. The Council may approve or deny the demolition permit. The Council does not have authority to direct that one of the restoration alternatives described below be implemented.

Because directing such an action would be equivalent to a taking, and that would cost the town a lot of money.

I wonder, did Mr. Jobs realize that if he submitted plans for a big new house, such a projection might cost a high enough figure that it would make salvaging the Jackling house economically feasible? Might he have gamed the new-house price down?

Council members asked why cost estimates for renovation of the Jackling House appeared so high, while projected costs for a proposed new house for Mr. Jobs appeared preposterously low. Will there really be very low-grade surfaces in the new master bathroom? many wondered in disbelief.

Now you see it …

Remember, the demolition approval has nothing to do with the application for a new house. Mr. Jobs could then change his mind.

… Now you don’t

It’s my mansion and will die if I want it to

Die if I want it to.

Die if I want it to.

The end?

Housing affects health, both mental and physical, as we saw in Check out of the roach motel

Asthma is an urban disease, possibly affecting as many as one in four urban children, a much higher toxicology rate than in rural areas.  So naturally we deduce that something about urban buildings triggers asthmatic responses – but the causes have been much debated until a recent study fingers a likely culprit:

Hiding in plain sight?

During May, it was our great privilege at AHI to be favored with two of the three parts of Sherlock Holmes’s long-lost and definitive Socratic dialogs on What makes a good consultant? Rules of engagement, Part 1a, Part 1b, and Part 1c, throughout which Holmes first established that though the consultant may be expert, the client is the decider:

A5. Never makes the client’s choice for the client

Although Holmes never truckled at setting himself up as judge and jury where John law was concerned, he had no delusions of grandeur concerning his clients.

“Well, it is not for me to judge you,” said Holmes as the old man signed the statement which had been drawn out. “I pray that we may never be exposed to such a temptation.”
The Boscombe Valley Mystery

He once said to me, in the course of the case of the politician, the lighthouse, and the trained cormorant, of whose particulars we were sworn to secrecy, that “a client, Watson, is owed our energy, our insights, and our wholehearted commitment to her problem – but neither our reproof nor our foreclosing her options. No client thanks us for superseding her right to choose for herself.”

The first thing I knew about it was when I saw you two gentlemen driving back in her dog-cart.”

“And I had my doubts about you gentlemen, I should add.”

Holmes rose and tossed the end of his cigarette into the grate. “I think, Watson, that in your medical capacity, you might wait upon Miss Smith and tell her that if she is sufficiently recovered, we shall be happy to escort her to her mother’s home. If she is not quite convalescent, you will find that a hint that we were about to telegraph to a young electrician in the Midlands would probably complete the cure.”
The Adventure of the Solitary Cyclist

More truths will be revealed in due course

Good God, Holmes, they’ve posted your essay without paying for it

Later that month we offered the world the second volume, What makes a good consultant? Services and activities, Part 2a, and Part 2b:

B1. Protects his client’s interests

Clients, he once told me with great exasperation, have the annoying habit of acting despite our advice. Then he chuckled.

I heard a sharp rustle, the night air blew into the heated room, and the avenger was gone.

On occasion those ruined by evildoers received vengeance.

If they did not, if they always acted wisely, why then there would be no clients for me, no emerald stick pins, no continuing stream of challenges.

When given the opportunity to do the right thing, he acted:

Hardly had the woman rushed from the room when Holmes, with swift, silent steps, was over at the other door. He turned the key in the lock. At the same instant we heard voices in the house and the sound of hurrying feet. The revolver shots had roused the household. With perfect coolness Holmes slipped across to the safe, filled his two arms with bundles of letters, and poured them all into the fire. Again and again he did it, until the safe was empty.

The Adventure of Charles Augustus Milverton

When I later asked Holmes why he had done this, at some risk to ourselves, he looked at me as if I were daft, and said merely, Common decency warrants no surcharge.

Common decency warrants no surcharge

New York and Boston are an endless source of entertaining housing or real estate stories:

Good source of baseball stories, too!

– as we saw in Spot the culprit, and Better dead than read?:

As the unionized employees of the Boston Globe debate among themselves whether they will accede to the $20 million in annual wage cuts demanded by their owner, the New York Times Company, they might do well to ponder a grim real estate reality, as presented with clinical dispassion by the Boston Business Journal:

The Boston Globe might be worth more dead than alive to the New York Times Company.

A dismantling of the Globe’s assets could yield roughly $85 million.

Worth 85x that dead?

One who was worth much more alive regrettably died: Jack Kemp, 1935-2009:

Kemp was, I think, the first American who rode sports success into politics. Nowadays we think nothing of having Jim Bunning in the Senate, or Steve Largent and J. C. Watts in the House – back in 1971, for a football to win elective office was either a joke or a novelty (and, as Jesse The Brain Ventura later showed us in Minnesota, sometimes too much a novelty) – but his real success, at least in housing, was his single term as HUD Secretary under President Bush 41.

“Pro football gave me a good perspective. When I entered the political arena, I had already been booed, cheered, cut, sold, traded, and hung in effigy.” – Jack Kemp, 1996

Not to mention, “chewed out by the best”

Kemp’s predecessor was the narcoleptic Samuel Pierce, on whose soap-opera-fueled watch HUD experienced its worst scandals ever (and that is saying something), and he entered the building, under Pierce’s tenure as a place for being quietly irrelevant, in much the manner of the Tasmanian Devil in a Bugs Bunny cartoon. He was a whirlwind of ideas, including:

1. Reorientation of public housing toward residents as principal customers.

2. Lobbying for an American version of UK stock transfer. Kemp promoted Homeownership and Opportunity for People Everywhere (HOPE), under which public housing would be sold to tenants. (Congress appropriated only a tenth of what he sought.)

3. Creation of Empowerment Zones.

4. Welfare reform with a temporary rent-increase freeze for people who get jobs, to get them out of the means-testing poverty trap.

Too bad more of them weren’t implemented consistently or sufficiently.

I’ve still got ideas!

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In yesterday’s post, via a this-can’t-be-happening breathless story in the Memorial Day weekend Sunday Daily Mail, we encountered a group of British Travellers who, in the manner of worker ants setting out to build a new colony, have been industriously working nights and weekends to lay out, grade, service, and occupy – in short, to develop – a large green field in Newent, Gloucestershire, for their new spontaneous community.

Homestead: The Travellers used diggers to create the site

Actually, the nascent community is definitely not spontaneous.  Speedy, yes, spontaneous, no.  The operation has been meticulously and strategically planned, and the Travellers’ actions make abundantly clear that they are moving in, like it or not. 

Their leader, who gave his name as Richard, said: ‘There’s 50 men here working so we don’t have time to talk to you. You’ll have to come back on Tuesday when we are done.’

All right then, whose side are you on?  I mentioned yesterday that there are three possible sides, with my utterly unofficial soundbites of their positions:

1. The Travellers.  “We just want a place to live our way on our own land.”

2. The government.  “We have land use policies for sound reasons, and they must be respected.”

3. The local community.  “We play by the rules and expect others will too.”

While you’re pondering the rights and wrongs of this, let’s follow out intrepid Travellers as they beavered away.  Start with their impressive pre-launch planning and coordination:

Last week they persuaded energy firm E–ON to supply electricity to the site on the pretext that they needed it to light planned stables.

Readers, do you see the problems here?  At least two are obvious:

1. Britain has zoning and land use laws that presuppose everybody will act honorably, and be leashed when government wants them to be leashed.

2. Fine distinctions among permissible uses.  Growing horses on the land is permitted; growing people is not.  Yet both people and horses need power, water, sanitation, and structures.

They then diverted the site’s existing water supply – which had fed a horse trough – to a standpipe.

Zoning means horses yes, people no!

Four legs good!  Two legs bad!

Locals, who said a stream of lorries had been going to and from the camp for 15 hours a day, added that the Travellers do not have planning permission for the site.

Obviously not, and they’re making a deliberate decision to flout those laws. 

At Easter Travellers who had bought a three–acre field in the village of Blackmore, Essex, moved on to the site on Good Friday with 60 men and started laying 1,000 tons of hardcore.

Judging by their behavior, the Travellers are a complex interconnected community that feels it receives nothing from the machinery of formal government.  They coordinate among themselves (one invasion over Easter, another over Memorial Day), therefore they communicate among themselves, which allows them to use each successive land invasion as experimental data to inform and improve the next. 

It seems clear, therefore, that Britain is facing an organized and deliberate challenge to its land-use legal system by an far-flung and enterprising tribe determined to achieve extra-legally what it must have concluded it cannot achieve legally.

[In Blackmore], villagers were helpless until council planners went back to work on Tuesday and started the lengthy legal process of eviction.

The audacity of it relies on the Travellers’ judgment about the probability of response times the cost of lost investment, versus the value created by non-response.  Let’s express it in simple algebra:

Can you solve these equations?

Risk = Investment x Probability-of-Loss

Gain = Value x (100% – Probability-of-Loss)

The Travellers’ Investment is (a) their time, plus (b) the non-recoverable costs of (i) improving the site and (ii) defending themselves in court.  (The land is a recoverable cost; they can always sell it.)

Their Value is the use-value of the homes they will make – including security of tenure, controllable occupancy cost, improvability and so on.

Despite locals’ repeated pleas for help from both the police and the Forest of Dean District Council, yesterday the Travellers continued to work unhindered.

The mail provides a link to a previous article showing exactly the same tactics:

A Daily Mail photograph of Crays Hill in Essex, a Travellers’ community

Travellers tarmac a new camp in a bank holiday weekend as helpless villagers watch

Marching to the faster-than-government beat of their own drummer, the Travellers were determined to finish all their structures before the opening of business Tuesday morning.

Farm worker Matthew Davies, who lives near the site, said: ‘They changed what was a pretty meadow into a building site overnight. Who knows what it will look like a few days down the line?’

It’ll look like a community of people – informal, unzoned, but not unplanned.

Local councillor Len Lawton said: ‘Villagers were told the field’s owners only wanted to build temporary accommodation for horses.’

Horses yes, people no?  Is something out of whack here?

‘When the owners started making small engineering changes earlier this year, such as laying pipes, the council reminded them that major building work required planning permission.’

That shivered their timbers.

Not another council reminder!

‘The owners were asked to respond but never did.

The wheels of government then ground slowly along …

‘I have nothing against the Travellers’ lifestyle. My concern is that the legal system seems unfairly weighted against local people.’

Does, doesn’t it?

No one from Forest of Dean council was available for comment.

It being the weekend …

Another local said: ‘Nobody wants them here because it’s an illegal operation but our main gripe is with the council because we warned them almost half a year ago.’

Complacency in the face of threatened non-compliance is a less-desirable feature of bureaucracy.  Somehow it never penetrates that people willing to flout substantive laws will have no compunction about flouting procedural ones.

‘It’s because of their ineptitude that these people can do what they have done.   They will never get moved away now – it’s too late.’

Remember, in this story, you have to be on somebody’s side.  Whose side are you on?

Pick one!

How about, which side are you against?

The Travellers.  For.  They have a lifestyle that (we presume) they cannot achieve via the formal system.  They’re taking the land-use law into their own hands.  Against.  It’s illegal, the law applies to everybody.  Get the bulldozers onsite and knock everything down.

The government.  For.  It must uphold the rule of law and it will, since an illegal occupation can be reversed via eviction and enforced demolition.  Against.  When law-abiding citizens have to watch illegal activity because they have ceded enforcement powers to a locality that is not at home, government has failed its essential function of keeping the peace.

The local community.  For.  They’ve played fair and warned government, yet it is they who will suffer.  Against.  The very same anti-development rules that exclude the Travellers benefit the current locals as a righteous cloak for NIMBYism.

Don’t like any of those choices?  How about a fourth choice?

The policies are wrong.  What price greenfield?  As we saw in the case of Steve Jobs and his attempts to shoot his white elephant, land-use laws and bodies tend to adopt a Joshua-stopping-the-sun approach to the use of property.  Mr. Jobs sought to tear down his own home because it was, in his view, economically and physically obsolescent.  Richard the Traveller sought to build his own community on his own property.

Just lookin’ for a home, lord, lord just lookin’ for a home

Both were blocked by the do-nothing lobby, the committee of neighbors, those who have a vision of aggregate land use that in turn entitles them to say what may change on other people’s property.

In America, we think of land use as virtually unencumbered; for us, zoning seldom bites because America is a nation rich in land, and with a frontier-settlement tradition.  Even eminent domain, a staple of governments around the world, is in America a flashpoint for passionate arguments about what it means to be American and to be the owner of real property.

As society becomes more interdependent, we adopt conventions that reduce entropy; and to ensure compliance, we give them the force of law.  Because drive-on-the-right is a convention that adds value for all motorists, we can make it illegal to drive on the left. 

As society urbanizes, land use becomes interdependent.  I am downwind from your skunk farm; you are downhill from my tannery.  To cut down the adverse externalities of urban living, we choose to surrender bits and pieces of our libertarian freedom on land use because propinquity produces conventions that add value. 

As Justice Oliver Wendell Holmes in a landmark Supreme Court case (Pennsylvania Coal, 1922), “the general rule, at least, is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”  The law being an empire, it expands until thwarted – by Suzette Kelo, by Steve Jobs, or by Richard the Traveller. 

Travellers have nowhere to live.  Exercising the classic remedy of the slum dweller, they’re flouting the established law, changing facts on the ground and daring the authorities to enforce against them.  Are they wrong, or has Britain’s regulation of land use gone, in the words of Justice Holmes, too far?

It’s not obfuscation when the Supreme Court says it isn’t

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