"I couldn't afford for Carpentersville to become Detroit"

April 2, 2013 5:30 PM

Tom Roeser was unhappy about the decline of his town, Carpentersville, IL. So he decided to do something about it. Roeser bought some foreclosed properties, renovated them, and then rented them out for below market value.
posted by reenum (56 comments total)

Good for him.
posted by ThePinkSuperhero at 5:37 PM on April 2, 2013 [2 favorites]

Wow. What an amazing way of helping a community. Thanks for posting.
posted by padraigin at 5:43 PM on April 2, 2013

This reminds me of Popup Hood, an art project-slash-urban renewal project that began in downtown Oakland and has since spread.

(disclosure: one of the cofounders is an old friend)
posted by Walleye at 5:54 PM on April 2, 2013

That is really sweet. There's something in my eye.
posted by bilabial at 5:57 PM on April 2, 2013 [2 favorites]

But...but...that's socialism!
posted by Obscure Reference at 6:04 PM on April 2, 2013 [1 favorite]

Not socialism. Just Keynesianism.
posted by kuujjuarapik at 6:05 PM on April 2, 2013 [5 favorites]

a decent human being if ever there was one.
posted by chasles at 6:12 PM on April 2, 2013

He doesn't turn a profit on the homes themselves, but he is wise enough (according to the article) to recognize that the disintegration of his community had a long term net negative effect on his greater business. To whit, by being altruistic in regards to these condos and houses, he working to assure the continued success of his business. He's reduced crime, improved the aesthetic quality of his town and provided his employees with stable and clean housing, all of which lead potential buyers to feel welcome and positive about his company.

So, he's not just a decent human being for doing this - he's a man with vision and wisdom.
posted by Joey Michaels at 6:19 PM on April 2, 2013 [28 favorites]

This is far from socialism. He is doing it for two reasons. One, to help his own business. He was worried about how the town looked to his biggest customers when they came to visit and two, for the people themselves and the local economy. The tradesmen make money when they do the work. They will in turn stay in town and spend that money. The buyers (or renters) get a good deal and can presumably invest their savings in some way into the community even it is just maintaining the home in good condition. Roeser breaks even on the houses for the most part, but by investing in the community, he is protecting his business, the largest employer in town. To me, the beauty of it is that it is being done privately. No government handouts, no assistance and no mention of tax breaks.

Great idea. Great execution. Good Karma.
posted by JohnnyGunn at 6:20 PM on April 2, 2013 [7 favorites]

That's what's so great about it. He's interested in the big picture of his community because it relates to his business success or failure. It seems so obvious, but a lot of companies with the wherewithal would just pick up and move somewhere else. He's committed to the place and willing to put himself out there. More of this, everywhere, please.
posted by padraigin at 6:21 PM on April 2, 2013 [8 favorites]

The social / visionary part that intrigues me is: why choose to invest his time and energy in his current community vs. picking up his business and moving it elsewhere, or selling it to the highest bidder?

How do you encourage other people to take this path? Sure the economics worked out roughly even on an individual house flip, but I can't imagine that was the "largest fiscal upside" for him overall. Presumably he had options other than just sticking around while the neighborhood when in the toilet; why did he stay and invest?
posted by Walleye at 6:25 PM on April 2, 2013 [4 favorites]

This is wisdom as Joey Michaels says. He took active steps to help his community with a long term vision. Bravo.
posted by arcticseal at 6:26 PM on April 2, 2013

The social / visionary part that intrigues me is: why choose to invest his time and energy in his current community vs. picking up his business and moving it elsewhere, or selling it to the highest bidder?

Wealthy business owners like to pretend that they'll do this when they're trying to extort concessions from the rest of society, but a) most people are not actually eager to completely uproot their lives and build new ones and b) it's actually really fucking expensive to move a whole business when that business is larger than "a dude or two with a laptop". The benefits have to be very high to be worth doing.
posted by Pope Guilty at 6:28 PM on April 2, 2013

Another view: One man has the power to make investment decisions that steer the fate of an entire town, because so many of its residents are wage laborers for him.
posted by phrontist at 6:30 PM on April 2, 2013 [18 favorites]

In other words, the town exists at his pleasure. Its continued well being depends on his valuation of it. It's nice that he does, in fact, value it, but why should the choice be his to make?
posted by phrontist at 6:31 PM on April 2, 2013 [7 favorites]

I hope he succeeds but I fear that he is Canute fighting to push back the tide. Those old industrial towns in the Midwest are failing for myriad reasons. This may slow things down but I don't see how it addresses most of the reasons for the decline of the industrial heartland.
posted by Justinian at 6:31 PM on April 2, 2013 [2 favorites]

... and now the whole town depends on his manufacturing company's continued existence. It's not easy to keep manufacturing alive in the US. No?
posted by de at 6:33 PM on April 2, 2013

But - but the houses were foreclosed because the owners weren't paying their mortgages! We should instead implement a program that makes sure that everyone in the community is spending less, so that nobody else forecloses! Morally speaking, that is the right thing to do. We can make it serious-sounding and call it, oh, 'austerity' or something.
posted by suedehead at 6:33 PM on April 2, 2013 [2 favorites]

It's nice that he does, in fact, value it, but why should the choice be his to make?

The article states that he went to a number of other places and pleaded for them to do something first, and they did not.

So it seems that the choice became his to make because everyone else abandoned their chance to do so.
posted by EmpressCallipygos at 6:33 PM on April 2, 2013 [7 favorites]

EmpressCallipygos: He didn't get the financial muscle to save the town because everyone else passed when offered it.
posted by phrontist at 6:35 PM on April 2, 2013 [2 favorites]

Carpentersville is in the Chicago area, which has been hit unbelievably hard these past three or four years. I'm from there but have lived in Texas most all of my adult life, but always I could throw my tools in the back of my pickup and go back to the Chicago area for a while, rack up some big bucks, then sleaze on back to Texas. The deal always was that yeah, it's cold, yeah, there's nothing there really, yeah, it's a real yawner to live there, but always always always the working man could make a buck. Could have a house with a garage, a finished basement with a pool table maybe, tickets to the Cubs games, a couple of cars (one of them new), help his children into college.

No more. My nephew, who in good times has run his own construction firm and very good at it, can barely find any work even for himself, much less trying to put a crew out. And -- he's willing to work for almost nothing, for wages that I have never heard of in the Chicago area, and feels glad to get the work when he can find any. And he is a spectacular carpenter, the real deal, talented and willing to work hard and knows how to work fast. It's unreal. I'm 58 years old, I come from a construction family, never ever have we seen it as it is now.

So. What this guy is doing, putting these people to work -- remarkably decent. He's putting a plumber to work, an electrician, a carpenter. A flooring guy, a driveway guy. This man is a walkiing building boom; it's not just that he's helping the people he's renting and selling to, he's helping way more than that. He is a star. What a hero!

Thx for posting -- I'm going to send this to all my family member up there, they'll love to see it.
posted by dancestoblue at 6:36 PM on April 2, 2013 [23 favorites]

He could have just shrugged and moved his manufacturing business to another country, where he'd probably be able to get much cheaper labor, and never given another thought to the fate of Carpentersville while still enjoying personal success. Instead, he invested in the local economy in a big way. I feel like that's worth something.
posted by padraigin at 6:38 PM on April 2, 2013 [2 favorites]

Yet another view: since he is the largest employer in town it solves the tragedy of the commons problem quite nicely. As the article and others above have pointed out, he has plenty of incentive to invest because he personally has something to lose in the short and longer term. If there were a lot of other large businesses none of them would be able to capture enough of the good effects of this investment.

Still, he certainly had other options and it's an impressive story.
posted by ropeladder at 6:40 PM on April 2, 2013

We should instead implement a program that makes sure that everyone in the community is spending less, so that nobody else forecloses!

If the town was only surviving in the first place because of excessive borrowing that's blowing up and winding down, then that is exactly what needs to be done. Increasing borrowing just makes the blowup worse; the problem is deferred, but it becomes larger, because the new debts have to be paid back. Debts must be paid. That's why it's called "debt" and not just "income".

If the town economy will collapse the minute it stops borrowing, then the debts are not payable, and getting back to reality as soon as possible will greatly increase the chance that the town will survive mostly intact.

If you run a deficit today, then you need to be using that borrowed money to ensure that you run a surplus tomorrow. You need to be investing the money, not consuming it. If you don't, then eventually the economy will shrink much more than it grew from the stimulus, because of the interest load.
posted by Malor at 6:50 PM on April 2, 2013 [1 favorite]

Debts must be paid. That's why it's called "debt" and not just "income".

By that logic, what's the incentive to make good loans? If I'm able to take everything someone has, go after their relatives, etc., why bother to do any due diligence on potential debtors?
posted by phrontist at 6:57 PM on April 2, 2013

As the article and others above have pointed out, he has plenty of incentive to invest because he personally has something to lose in the short and longer term.

Let's say the company had been run democratically. Wouldn't the workers have been more able to articulate and act toward the common good?
posted by phrontist at 6:59 PM on April 2, 2013 [2 favorites]

i think it's great that this is happening in carpentersville. however, based on it's location in chicagoland i think this guy is also making some pretty good investments. i think he's going to come out ahead in the end. that's really a nice little slice of chicagoland.
posted by lester's sock puppet at 7:37 PM on April 2, 2013 [1 favorite]

Clearly the work of beautiful human.

However, as a landlord, I fear that this is a good way to find the limits of one's altruism.
posted by cmoj at 7:47 PM on April 2, 2013

It's fair to call him a chump because he's destroying the value of his resources. He comes out "whole," but only if you ignore the opportunity cost of not investing that money at a growth rate.

Those who say this is economically smart because he's shoring up the future of his own business: no, not really. He's not acting in an especially smart way, from a sheer economic point of view. He's doing something nominally altruistic, because it doesn't make great business sense at all. I think it's pretty hard to mount that argument. But it's not really altruistic either. My read is that it's a trade-off of financial success for concentrated, localized power and legislative and policy control.

Whether this town is the best place to make his interest-free loans to the working class, I can't say for sure. I do think this is much more complicated, from any point of view, than "nice guy supports a town single-handedly." What happens when he dies and the company folds or moves?

Backing up the camera some more, Jack Roeser, Tom's father and company founder, also founded the anti-tax radio/internet news service Champion Newsand runs the Family Taxpayers Foundation, a "school choice" pro-voucher group in favor of using "free-market" principles in public education. According to Wikipedia, Jack illegally funded a series of attack ads supporting Alan Keyes against Barack Obama in his IL Senate race, and also funded these ads attempting to out Mark Kirk as homosexual. Much much more on Jack's blog. Oh, and by the way, what's the top story on Champion News today?

Lest we think the sins of the father should not be visited on the son, however sympathetic the two must certainly be to have remained in co-direction of the company together, there are still some troubling components to Roeser's own political activities. He seems to have been the focal point of many contentious city government conflicts, and went so far as to suggest on camera that an opponent was a domestic abuser.

He was embroiled in a pretty messy election riven over the issue of immigration which, despite his pro-legal-immigration stand against anti-immigration candidates, isn't really completely morally satisfying to read about:

During a tour of Otto Engineering, a family-run business, Tom Roeser, its president and owner, saw that I had noticed alarm signs, which were in both English and Spanish. “Those are going,” he assured me. Roeser prohibits bilingual signs in his factory, and these signs, which had been put up by an outside cleaning company, didn’t sit well with him. Nearly half of Otto’s 502 employees are Hispanic, and Roeser insists that they learn English. Prospective hires must first pass a language test. He requires supervisors to give instructions in English. He also has a full-time instructor on staff who offers English-language classes to employees; they won’t receive pay increases unless they have achieved a certain proficiency. “If you learn the language, it’s the first sign you’re assimilating” he told me....Hispanics, Roeser told me “are more social. They’re more in your face. So if you live next door to a Hispanic, they probably have more levels of family living there. I’ll call it overcrowding. They may live in a low- income house, so they have only one bathroom, and the men go outside and urinate on the tree. You live next door to this family, and you don’t like that the man urinated outside, and you don’t like the fourth car in the front yard. And you don’t like the loud music and the picnicking, and so what you say is they must be a bunch of damn illegals. But once they’re all legal, you still have the same problem. You need to assimilate them.” And for Roeser, the quickest way to assimilation is to learn the language, which is why he’s so insistent that his company not operate in both Spanish and English. English, you might say, is the official language of Otto.

It's hard to cast a successful, moneyed businessman who first tried to wring dollars from public coffers and nonprofits designed to deliver a specific mission (which isn't rebuilding foreclosed houses) to people in needn in order to shore up his underpaid workforce, before becoming an unprofitable but self-serving real estate developer himself, as the altruistic mastermind of a noble enterprise. It looks like Tom's involvements with "the village" are a lot more complicated than just the threat of "becoming Detroit." It's a bid for real estate power giving him, essentially, a degree of vertical control. This isn't a 21st century solution, it's a 19th century company town in operation.

In short, this feel-good journalism about him is irresponsibly lazy, and this guy is no George Bailey. As always, the full story is a bit more complex, and we should all be a bit more critically inclined. If we had something resembling real newspapers, we might have gone in with a more complete picture. But that doesn't play nearly so well on Facebook.
posted by Miko at 7:50 PM on April 2, 2013 [45 favorites]

Employees get their rents taken directly from their paychecks.

You don't say!
posted by Miko at 8:08 PM on April 2, 2013 [2 favorites]

Hey, he should buy up some of the shops and pay the employees in scrip which can only be spent at those shops!
posted by Justinian at 8:25 PM on April 2, 2013 [3 favorites]

... and now the whole town depends on his manufacturing company's continued existence. It's not easy to keep manufacturing alive in the US. No?

No, that's not correct. The US is the largest manufacturing country in the world. What's happened is that a lot of the manufacturing work has been automated, so there are fewer jobs. Just like there are far fewer agricultural jobs now then at the turn of the last century.

the problem is deferred, but it becomes larger, because the new debts have to be paid back. Debts must be paid. That's why it's called "debt" and not just "income".

What are you talking about? Debts don't need to be paid, they can be defaulted on. The whole reason this guy was able to buy these houses is because they were foreclosed on, because people didn't pay their debts.

If the town economy will collapse the minute it stops borrowing, then the debts are not payable, and getting back to reality as soon as possible will greatly increase the chance that the town will survive mostly intact.

This doesn't even make any sense. It's not the town borrowing, it's one guy. A town borrowing money is a different situation then a nation borrowing money because they don't have their own currency.

It's fair to call him a chump because he's destroying the value of his resources. He comes out "whole," but only if you ignore the opportunity cost of not investing that money at a growth rate.

Invest it where, exactly? If he does things this way, he's in control. If he were to just buy he would have no control at all, he'd just be trusting that the stockmarket overall will do well, that any profits won't get eaten into by high frequency trading, etc.

He also has a full-time instructor on staff who offers English-language classes to employees; they won’t receive pay increases unless they have achieved a certain proficiency.

How is that even remotely legal?
posted by delmoi at 8:38 PM on April 2, 2013

It's hard to cast a successful, moneyed businessman who first tried to wring dollars from public coffers and nonprofits designed to deliver a specific mission (which isn't rebuilding foreclosed houses) to people in needn in order to shore up his underpaid workforce, before becoming an unprofitable but self-serving real estate developer himself, as the altruistic mastermind of a noble enterprise. It looks like Tom's involvements with "the village" are a lot more complicated than just the threat of "becoming Detroit." It's a bid for real estate power giving him, essentially, a degree of vertical control. This isn't a 21st century solution, it's a 19th century company town in operation.

Lots of automated responses here!

That 2007 NYT article paints a pretty complicated picture of Roeser that defies the typical metafilter snark. He hardly comes off as the mustache twirling villain carving out his own Pottersville.

Roeser doesn't strike me as any real altruist, but I also don't think he'd be all that disappointed his investment didn't pay off handsomely. And in fact it looks like he may actually be doing OK by his town and employees. Go figure.
posted by 2N2222 at 8:39 PM on April 2, 2013 [2 favorites]

So, he's running at a deficit in order to boost the economy, put people into work, provide housing and create a social good. Or, he's being fiscally reckless, not solving the underlying issues, and storing up problems for later.

I don't think we'll sort that one out on this thread. If we do, does mathowie get to keep the Nobel, or do we all get a bit?
posted by Devonian at 8:45 PM on April 2, 2013 [5 favorites]

Invest it where, exactly? If he does things this way, he's in control.

My point exactly - he's not interested in a 5% return or even a 1% return, he's interested in local control. You can't praise him for being a pure business genius and maximizing profit - he does that poorly. But that's because he's after something else.

He hardly comes off as the mustache twirling villain carving out his own Pottersville.

I agree it's not entirely simple one way or another and that the NYTimes piece offers at least a substantial and somewhat thought-provoking portrait of this person, which the CNN piece utterly fails to do. I hope it's easy eough to see that I'm attempting to at least complicate what was originally presented as a very shallow story, because it is not an easy thing to call "good" or "bad." But I do think it would be rather hard to be a democratically minded independent citizen or independent business owner in this city. I'm not sure that creating greater dependency on a single employer, whether it's in tax base, political control, or ownership of housing stock, is ever a recipe for a resilient community. My aim is simply to get beyond the relatively uninformed "what a humanitarian!" response and examine this a little more deeply, in the light of American history, if possible. This kind of financialelite involvement in city planning, using the power to employ as a political stick, and rentier management of property is not a totally unmitigated good and that's worth thinking about.
posted by Miko at 8:48 PM on April 2, 2013 [4 favorites]

Yours wasn't one of those automated responses! Sorry if it read that way.
posted by 2N2222 at 8:51 PM on April 2, 2013 [1 favorite]

I didn't think you meant that, but I don't want it to look like I'm entirely against him and just picking nits, either. It's complicated. Thanks for the benefit of the doubt.
posted by Miko at 8:52 PM on April 2, 2013 [1 favorite]

How is that even remotely legal?

Why wouldn't it be? I don't think raises are legally mandated after all. Guy could decide not to give you a raise because he rolled a d20 and it came up 17, and he hates the number 17. Not-speaking-English-well isn't a protected class.
posted by Justinian at 8:53 PM on April 2, 2013

Oh hmm. for some reason I read that as "won't receive pay" not "won't receive pay increases"
posted by delmoi at 8:58 PM on April 2, 2013

"however, based on it's location in chicagoland i think this guy is also making some pretty good investments. i think he's going to come out ahead in the end. that's really a nice little slice of chicagoland."

Yes, it struck me as quite odd that the story talks about Carpentersville being in "northeastern" Illinois (no such place! That's Chicagoland!) and talks about it as if it's an independent Rust Belt city like Rockford or Peoria, rather than a city that's been absorbed into Chicago's suburban ring and is WELL within the commuting range for Chicago, and butts up against (or is quite close to) other suburbs with considerable wealth (Barrington) or large suburbs with a lot of jobs (Elgin, Schaumburg). (I mean, unemployment is still high, but it's not like these places have no employers or are dying cities. Lots of things are there, and he's 30 miles from O'Hare, and it's not like people are going to stop buying property in Kane County; it's not like Jo Daviess County or somewhere.)

I don't think that negates what the guy is doing, but the story is certainly oddly and incompletely framed by acting as if this is a Rust Belt city in (downstate) Illinois rather than a Chicago suburb.

There's a dude near me attempting something similar on a much much smaller (1 house) scale, attempting to renovate and revitalize local housing by shopping and hiring for the reno at local businesses, hoping to expand into more properties if the first one works out. I hope it works.
posted by Eyebrows McGee at 9:06 PM on April 2, 2013 [3 favorites]

"If the town was only surviving in the first place because of excessive borrowing that's blowing up and winding down, then that is exactly what needs to be done. Increasing borrowing just makes the blowup worse; the problem is deferred, but it becomes larger, because the new debts have to be paid back. Debts must be paid. That's why it's called "debt" and not just "income". "

So, you start out with kinda a cranky assumption — that this town was built on "excessive" borrowing — then compound it with another cranky assumption, one that's often made from the pro-austerity side, that re-investing won't allow them to overcome temporary difficulties and get back to a sustainable (even if it's smaller than previous) level of debt and return.

You put those two cranky assumptions together, then compound it with some cod Iron Price "Debts must be paid," and expect that to be taken like a serious economic insight instead of the equivalent of front porch jibber-jabber? All to justify blasé cruelty as economic truth?
posted by klangklangston at 10:42 PM on April 2, 2013 [6 favorites]

Piling onto Eyebrows McGee, it's worth noting out that Carpentersville is on the outskirts of Chicago's massively sprawling suburbs. It is hardly a struggling urban area in desperate need of reinvestment, ala Detroit. Roeser is being dishonest by comparing the two. I also doubt that Carpentersville ever had the industrial and manufacturing labor force of a rust belt city. Schaumburg is nearby and is home to a number of corporate headquarters, and Naperville, a major suburb, isn't far away either. So this can't be a one-company town.

That said, the outer 'burbs have really gotten slammed in the last five years. Carpentersville is very likely experiencing all of the problems described in this article. I have family that lives in a similar area, and it's bad. Despite being an hour from a major urban center, outer suburban areas like this are often highly dependent on a few major local employers. The Roesers are a shady bunch, but I hope for the sake of the locals that their quite likely quasi-evil plan to buy up real estate at least dulls the recession pains for a while.

(Chicago side-note derail: Are these Roesers the same Roesers that own the bakery at North and Kedzie? Or distant relatives?)
posted by deathpanels at 10:43 PM on April 2, 2013 [2 favorites]

It seems great, but one of the first things I thought of was that he's just destroyed the rental market, or at least his competition. How are other landlords in the town reacting to a sudden glut of rental property at below market cost? I'm not one to normally say 'won't someone think of the landlords!' but here I am, wondering how screwed annoying owning rental property is in Carpentersville.
posted by Ghidorah at 10:49 PM on April 2, 2013

It strikes me that for all his foibles, for all of his motives, that there is something in this story that aims to capture the lost art of being a Main Street Republican.

Used to be, back in the day, that many Republicans were upstanding members of their community. Community mattered to them, there was a bigger picture, they were compassionate and tolerant and generally responsible and not afraid to help out a neighbour. They were good.

Then along came George HW Bush in 1989 and captured their imagination with the idea that conservatism could be compassionate. And they voted for him and he won and then he started to change what conservatism was all about. Pretty soon Clinton came along - an ACTUAL compassionate conservative - and then the right wing sprouted horns and started whistling steam through their noses and Rush Limbaugh ascended and then Bush Jr. got elected and then the Tea Party and then "get off my lawn" and "God hates Fags" and Fox News and war war war...

Meanwhile back on Main Street, there were a bunch of people getting older who remembered a different time and they were sorely put out by all this rhetoric and windbaggery. They were the kind of people who stood FOR something and not against everything. And they got quieter and quieter, and faded away.

I know this because I have met and worked with many of these people in the rural mid west. What can I say? I don't share their politics, but we are connected because we both have a sense of each other as GOOD PEOPLE. And that is enough common ground to do some interesting things together for a little while under the radar of the sturm and drang of what passes for politics in the USA today.

People like Roeser, in all their complicated-ness are still out there, preferring to use their wealth and influence to drive some social benefit rather than tear down the world for even greater profit. He may not be a saint, but people like Roeser are pretty far from the enemy.
posted by salishsea at 11:13 PM on April 2, 2013 [11 favorites]

Despite Carpentersville being near Barrington and the general prosperity of suburbs, doesn't change the fact that there has been economic chaos in this area. My dad's retired as a union plumber in the Chicago suburbs, they have over 30% of their guys bone idle unemployed at best.

Also, Carpentersville was always a little rougher, its more like the Fox Valley towns, the schools a little less ambitious, and the thing about gang graffiti isn't crazy.

The suburbs are full of more than desk jockeys, there are loads of small manufacturing operations all over them, and loads of people who've made a living making things or making the exurban growth that has meant a working man can get that garage and Cubs tickets.

Suburbs have not been spared in the US, I think the new growth suburbs of Las Vegas, Inland Empire LA, Florida, and Arizona have been the leading edge of the mortgage boom and crash in the US.
posted by C.A.S. at 1:35 AM on April 3, 2013 [1 favorite]

along came George HW Bush

You really have to go back at least to Reagan, and more accurately the Nixon/Atwater brain trust, to see the seeds of the self-interest-above-all ideology developing.
posted by Miko at 5:59 AM on April 3, 2013

> and then rented them out for below market value.

So has the IRS been there to tell him he has to pay taxes on what his income would have been if he charged full market rate? They do that on below-market loans.
posted by jfuller at 6:00 AM on April 3, 2013

Good point, jfuller. The renter also has to declare the differene as income, which at $200 a month could certainly raise you a bracket or two without improving your cash flow at all.
posted by Miko at 6:09 AM on April 3, 2013

*not two, that's not literally true.
posted by Miko at 7:12 AM on April 3, 2013

It's a bid for real estate power giving him, essentially, a degree of vertical control. This isn't a 21st century solution, it's a 19th century company town in operation.

You can go to the Pullman neighborhood on the far south side of Chicago to see one result of this kind of operation. George Pullman wanted people to think of him as an altruist, like this guy. And certainly there worse things he could have done—the worker housing in his (then-independent) company town was of pretty good quality, it's a nice little walkable place with a little town square, in its heyday it had lots of amenities. But controlling both the jobs and the housing allowed Pullman to attempt to exercise paternalistic control over his workers' domestic lives, and it also allowed him to squeeze workers by cutting pay without cutting rents.

Really, pointing out the dangers of the company-town model should not be controversial.
posted by enn at 7:50 AM on April 3, 2013

salishsea, I believe you just put into words the exact reason that I'm not registered as a Republican. Well said.

That being said, this guy is taking the Stanford Marshmallow Experiment to a whole new level. He's essentially sacrificing the short/medium term to benefit in the long term.

It is amusing to see how many people have come down on the guy. One would have thought that just because something is written down does not always mean the spin is correct.
posted by Blue_Villain at 8:18 AM on April 3, 2013 [1 favorite]

Those who say this is economically smart because he's shoring up the future of his own business: no, not really. He's not acting in an especially smart way, from a sheer economic point of view. He's doing something nominally altruistic, because it doesn't make great business sense at all.

Compared the the frills and perks Silicon Valley companies use to draw employees, I'd say cleaning up blight in the local area is far less frivolous and makes more business sense. If the area is not blighted, more people will want to live nearby, and be willing to work for this guy for less.
posted by ocschwar at 9:35 AM on April 3, 2013

Really, pointing out the dangers of the company-town model should not be controversial.

He says he wants to unload the properties, including that apartment building. He might still stumble into running a company town, but give the guy credit for not wanting to do it.
posted by ocschwar at 9:40 AM on April 3, 2013 [1 favorite]

I grew up in C'ville, and my parents still live there (and, worked at Otto a long time ago) - kinda crazy to see it on the front page.

When I was in high school, I remember huge banners posted on Otto advising people to vote against a referendum that, if not passed, meant that my school would have to cut all extra-curricular activities, and slash the much-beloved music dept.

There are a couple of these houses on the street my parents live on. I'm glad they're there to drive up property values a little bit, but some have been on the market for a while now, since there are many many other foreclosures and short sales around for about half the price.
posted by Fig at 8:26 PM on April 3, 2013

So has the IRS been there to tell him he has to pay taxes on what his income would have been if he charged full market rate? They do that on below-market loans.

All he has to do is advertise a few of the properties at the supposed market rate and see if he gets any takers. If nobody wants to rent them at $875, then that is by definition NOT the market rate.
posted by gjc at 8:03 AM on April 4, 2013

That sounds nice! But in real life, no, you actually need to have FMV calculated by an appraiser. IRS Pub 561:

Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary.

The appraiser must be thoroughly trained in the application of appraisal principles and theory. In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions.

The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant.

Not that you can't buy an appraiser, of course.
posted by Miko at 9:10 AM on April 4, 2013