The Real Estate State
June 19, 2019 12:49 AM   Subscribe

CAPITAL CITY: “Planners provide a window into the practical dynamics of urban change: the way the state both uses and is used by organized capital, and the power of landlords and developers at every level of government." Antifada Podcast: The Housing Monster w/ Samuel Stein of Capital City on the Real Estate State (89:00) 'Places where real estate is cheap don’t have many good jobs. Places with lots of jobs, primarily coastal cities, have seen their real-estate markets go absolutely haywire. " Why Housing Policy Feels Like Generational Warfare (The Atlantic) Grim New Report Shows Rent Is Unaffordable In Every State (Huffpost) Tenants Won This Round: Last week, New York tenants overcame the state's powerful real-estate lobby to win a historic package of renter protections. Next stop: universal rent control. (Jacobin) Berlin backs five-year rent freeze amid housing pressure (BBC) Lessons from Berlin (RTE)
posted by The Whelk (28 comments total) 20 users marked this as a favorite
 
I can't think of anyone, in my personal experience, who was earnestly throwing around the 30 % figure who wasn't in some way deeply out of touch with the housing reality of the last 20 years.
posted by groda at 1:38 AM on June 19 [6 favorites]


The 30% figure is carved in stone if you want a mortgage in Canada, which doesn't help rent prices at all -- you can't get a mortgage on a place because you don't make enough money, but landlords will happily take 40% or 50% or whatever they can get, so you can't save for a better down payment and so you're stuck in a rental forever -- meanwhile there's apparently like 5 million empty bedrooms in the GTA, most of which are in aging suburban housing stock that ought to be knocked down for mid-rises mixed use....
posted by seanmpuckett at 4:56 AM on June 19 [7 favorites]


I was around for the tail-end of the dot com-era madness in the SF Bay Area.

Something was rotten in the state of Denmark wrt how rents were rising to whatever the market would bear but being inculcated into the standard capitalist model I couldn’t begin to see the problem.

Then in late 2003 I discovered Georgism and the systemic inequities became perfectly clear . . . Land is a very special form of capital, so different from other forms of wealth that it belongs back in its own category, where Adam Smith originally put it.

"every improvement in the circumstances of the society tends... to raise the real rent of land."
posted by Heywood Mogroot III at 5:47 AM on June 19 [4 favorites]


Rent freezes aren't a real solution, but they do seem like a good way to slam the brakes on the kind of speculation that makes housing shortages less bearable for everyone. (And in the short term, reassure tenants that they can build a life somewhere, for five years at least.)

And credit to Germany -- it seems like having your citizens base their wealth and retirement plans on home ownership is a real mistake! One fun thing about the Bay Area is that a lot of houses are owned by middle-class people who intend to retire off the skyrocketing value of their homes. Plenty of the NIMBYism that masquerades as concern for the environment or town character is just people understanding that housing scarcity is part of why their barely-updated 70s shacks are worth upwards of a million dollars...
posted by grandiloquiet at 5:56 AM on June 19 [4 favorites]


It seems from the few links I've been able to skim thru that the key points of leverage that have worked are:

(1) Citizen willingness to politically organize in protest
(2) Public ownership of a critical mass of property in a jurisdiction

...And these just aren't really likely* in a lot of US contexts.

The biggest dissonance I see is the posture of progressives and what they focus their efforts on and then the contract with the overwhelming power of property rights as a seemingly unassailable legal structure. I see a lot of grinding of teeth and aspiration for change and absolutely no appreciation for the scope of the thing that is directly in the way.


*Maybe #1 will turn around, but tbh, if people don't come out in numbers for the existing transgressions of human rights and the exploitation of health for profit, housing seems like a non-starter.

And maybe climate change or further suburban/tier2urban decay will allow more public ownership, but who knows. It's probably just as likely that another round of recession cycle speculators swoops in on these.
posted by Reasonably Everything Happens at 6:18 AM on June 19 [3 favorites]


I can't think of anyone, in my personal experience, who was earnestly throwing around the 30 % figure who wasn't in some way deeply out of touch with the housing reality of the last 20 years.

Ditto. And massive student loan debt for many makes the 30% figure even more laughable.
posted by materialgirl at 6:21 AM on June 19 [2 favorites]


One fun thing about the Bay Area is that a lot of houses are owned by middle-class people who intend to retire off the skyrocketing value of their homes.

Also the case all over NY Metro where I live - in all honesty a 2 family home is a key part of my "retirement" plan (I'll never be able to retire). So another component of this is the inherent scam of modern retirement planning and the fact that even the lucky few who do have "real" jobs and manage to work at them for 20 or so years still have NO CHANCE of really retiring. So yeah they park their money in housing where it might actually create some minor wealth. Like, but obviously not like, the oligarchs who now own empty shitty luxury apartments built in NYC "airspace rights" because they have run out of other investment vehicles.
posted by pilot pirx at 6:24 AM on June 19 [4 favorites]


And maybe climate change or further suburban/tier2urban decay will allow more public ownership, but who knows. It's probably just as likely that another round of recession cycle speculators swoops in on these.

The latter is almost certainly to be the case without massive structural change. I cannot state often enough how much Sandy led to the final and complete purge of regular people out of Hoboken NJ. (I watched it happen in real time). The only people who can afford to weather these kind of events are the very wealthy. (Ugh NPI).
posted by pilot pirx at 6:28 AM on June 19


Now that NY has passed its packet of tenant protections, specifically the one locking in temporary preferential rent for the length of the tenancy, I can feel safe buying more than the minimum amount of furniture for my rent-stabilized apartment. I can finally take off my coat and stay awhile.

Everyone should have this feeling.
posted by Grimp0teuthis at 6:43 AM on June 19 [9 favorites]


So another component of this is the inherent scam of modern retirement planning and the fact that even the lucky few who do have "real" jobs and manage to work at them for 20 or so years still have NO CHANCE of really retiring.

I've been working a decent state gvt. job for 13 years now, am in my mid-40s, and we stand a solid chance of inheriting a (somewhat dilapidated and in need of major repairs) house in a strong housing market.

When I run the numbers, even with those advantages, it still seems highly likely that we will spend our elderly years in poverty or something very close to it - and the latter only if our health holds out.
posted by ryanshepard at 8:26 AM on June 19 [1 favorite]


I'm not sure I understand what's happened or will happen. I'm rent-stabilized and have lived in my current residence since 2013. When I signed the lease, it was for a preferential rent that has since gone up to 22% higher than the original rent I paid during the first year of my tenancy.

But the RGB is set to vote on percentage increases for rent-stabilized units next week, and it may be as much as 3.75% for a two-year lease. So my rent's going up next year anyway, yes?
posted by droplet at 9:23 AM on June 19


Ohhh, this is some of my favorite stuff to work on within the DSA. Fortunately, there are several local/state proposals to decommodify housing, though they take some time, money, and effort:

1) Land tax replaces property tax - penalize undeveloped property and slumlords. Don't penalize people improving upon their land. I point out that NY prevents my brand new geothermal heating and cooling system to be used to raise my property taxes because that would disincentivize green technologies. A land tax just takes that to the logical conclusion of not taxing any improvement upon the land. An old idea that I think has widespread appeal, especially among home owners.

2) Community land trusts everywhere - A community land trust is a way for a community to pool the land and help control prices. People buy the home, but lease the land from the Land Trust at a low rate. When they want to move, they can either sell it back to the Land Trust (it always gets first crack) or another buyer, but the price is controlled. In this way, homes are not turned into speculative assets and housing prices stay low. As time goes by, more and more property passes permanently into the Land Trust so eventually the entire housing market is communally owned.

3) Build/acquire community housing - Instead of renting through landlords, renters will be be enabled to collectively buy their apartment buildings from them and create housing co-ops. The Land Trust mentioned above will also buy up apartment buildings from landlords and lend them out at a controlled price and the chance for renters to buy up their apartments (or condo owners to sell back their places to rent/sell). Finally, homeless shelters and housing will be promoted to make short-term/short-notice housing available to all.

All of these are doable at the city level. Eventually, while your house will be owned and controlled by you, housing will be jointly administered to prevent it being seen as an investment instead of a place to live. Gentrification can be countered while also preventing urban decay. We have the housing needed to make sure everyone has a comfortable place to live. The question is distribution. This would be a start.
posted by Lord Chancellor at 9:33 AM on June 19 [10 favorites]


I love love love the idea of community land trusts.

Property tax in general (hello from NJ) is a disaster so I like the idea of reforming that as well, but, based on the morass we have in NJ... is there really a path to fixing it. Herculean task.
posted by pilot pirx at 9:56 AM on June 19 [2 favorites]


So yeah they park their money in housing where it might actually create some minor wealth.

The numbers don't actually bear that out, in most circumstances. From a strictly financial point of view, much of the time, you're better off putting your down payment/the difference between rent and ownership housing costs into the market. (Of course, this always requires that you be able to guess the future, which we can't actually do.) There are obviously other reasons to buy a place, but basing your financial planning on one weird windfall scenario of the past 20 years is...not so wise.
posted by praemunire at 10:22 AM on June 19 [1 favorite]


From a strictly financial point of view, much of the time, you're better off putting your down payment/the difference between rent and ownership housing costs into the market.

I'm sure that is true in general, but places with incredibly high pressure markets like SF and NY, which grandiloquiet and I were both talking about respectively, houses can seem like great investments.

People who bought a 100k dollar house in Jersey City in the early aughts or Brooklyn in the late 90's now own million dollar homes that generate over 2k a month in revenue. Not a bad return, AND they have a place to live. It's also part of their retirement plan, so keeping housing costly is to their benefit. And they act that way. I think that's the point we were getting at.
posted by pilot pirx at 10:47 AM on June 19


People who bought a 100k dollar house in Jersey City in the early aughts or Brooklyn in the late 90's now own million dollar homes that generate over 2k a month in revenue.

Jersey City NJ had a median home price of $350k in 2011 and are worth about $460k now, so the baseline you are working from is not $100k, but closer to $200k in the early 2000s.

Anyways, since then house prices have gone up by 4% per year, but there are also taxes. Best as I can guess, someone who bought a median house in Jersey City in NJ has made about $100k in excess income (not including maintenance) since then. That's also ignoring remodeling costs, which if wasn't done you get example like 4 Grieco Dr, Jersey City, NJ: OOF! It was sold for $204k in 1997 and now is a $304k foreclosure (highest price was $350k). Subtracting taxes that's only an extra $50k in 20 years of ownership.
posted by The_Vegetables at 12:31 PM on June 19 [1 favorite]


4 Grieco Dr, Jersey City, NJ
If these people did really any regular maintence, they lost money.
posted by The_Vegetables at 12:38 PM on June 19


I'm sure that is true in general, but places with incredibly high pressure markets like SF and NY, which grandiloquiet and I were both talking about respectively, houses can seem like great investments.

I live in NYC. Does "basing your financial planning on one weird windfall scenario of the past 20 years is...not so wise" really require additional unpacking?

now own million dollar homes that generate over 2k a month in revenue. Not a bad return, AND they have a place to live.

If they're living in it, it's not generating revenue for them.

This is a great example of why I'm down on mortgages generally--far too many people are incapable of running the numbers, much less of making even semi-informed guesses about the future.
posted by praemunire at 1:04 PM on June 19




If they're living in it, it's not generating revenue for them.

They are 3 or 4 family homes. The mortgage and property taxes are under $1000/month total. They are ... recognizing revenue?
posted by pilot pirx at 2:06 PM on June 19


>making even semi-informed guesses about the future

St Louis Fed’s CPI housing series
posted by Heywood Mogroot III at 4:48 PM on June 19


Black Poverty Is Rooted in Real-Estate Exploitation
A new study in Chicago shows how the dream of homeownership was converted into a poverty trap.
posted by The Whelk at 8:42 PM on June 19




Hi from Berlin Germany. My neighborhood was recently added as a sort of protected area, so that luxury renovations that would raise the rent cost are forbidden. And the city has first purchase rights if the owner wants to sell. We were thrilled when we got the letter that this was in effect.

Unfortunately, as soon as the price cap came up for discussion, many owners increased rent immediately. Including my apartment. It was the first rent increase we've gotten in 10 years, so I can't complain much.

I think many here in Berlin would agree that profit-seeking on housing needs to go away. If anyone does profit, it should be the people and companies that actually do the work of maintenance and cleaning, since they're providing a service and hard work that we actually need and use.

This is why I personally support something like 90% city/state owned housing in cities, or at least in the city I live in. Essentially this should limit speculation to an amount more it less equivalent to the population that can afford it, and keep speculation out of everyone else's home.
posted by romanb at 12:23 AM on June 20 [1 favorite]


Singapore's housing is in sharp contrast to our almost entirely speculative system of real-estate. The vast majority of units are owned by the government and long-term leased to residents.
posted by seanmpuckett at 6:25 AM on June 20




The Whelk: They built their dream homes ... and now they can't sell them

Oh look, here come a solution, thanks to A.I.? Meet the A.I. Landlord That’s Building a Single-Family-Home Empire -- Data science helped Amherst Holdings CEO Sean Dobson make a fortune in the housing crash. Now he's deploying A.I. to profit from properties that most investors wouldn’t touch. (Shawn Tully for Fortune, June 21, 2019)

When people can't afford to buy homes, investors are swooping in to buy them up, and rent them.

Making homes an investment commodity is social poison
Let me start with a simple yet undeniable fact: There is no inherent reason why a house should appreciate in price. Unlike, say, a share of Apple stock, a house has no prospect of increasing in productivity to provide more shelter services. On the contrary, all it does is slowly fall apart, requiring progressively more maintenance and updating over time. And almost certainly it will eventually have to be torn down and rebuilt. In many countries, like Japan, homes are a declining asset — something like a car that many do purchase, but with no expectation they will be able to sold for a profit down the road.

No, American housing markets are created to be profitable through a twofold policy process of subsidies and supply restrictions. There is the 30-year mortgage itself, which did not exist before government loan insurance. There is the secondary mortgage securities market, again created by the state-backed mortgage giants Fannie and Freddie, which frees up bank capital to make more home loans. And there are numerous other smaller federal and local programs that incentivize home buying.

Meanwhile, almost all residential neighborhoods have very restrictive zoning to prevent quick increases in home supply — some 75 percent of all residential U.S. land only allows detached, single-family homes. (Indeed, many cities have been so heavily down-zoned in recent decades that much of their existing housing stock would be illegal if you tried to build it today.) Now, these zoning codes often make property less valuable than it would be if you could build apartments on it, but they make the homes themselves more valuable.
Fascinating, thanks for sharing.
posted by filthy light thief at 10:29 AM on June 22


When people can't afford to buy homes, investors are swooping in to buy them up, and rent them.


This is what happened during the mortgage collapse, for a brief moment the US government owned ALL of these foreclosed and underwater homes, rather then negating the debt and selling them cheaply they handed them over to private equity firms like Blackrock who made them rentals. So we just handed a huge money sucking void millions of tiny money sucking voids that they’ll never ever sell.

Home ownership is going to rapidly become (and increasingly is!) a very small minority in this country and we need to have a long discussion about if it’s even worthwhile if more public minded models like CLTs exist.
posted by The Whelk at 11:03 AM on June 22 [1 favorite]


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