Good. Suburbs are a delusional fantasy that every nuclear family is a financially independent island who's lives can be air-gap'd off from the rest of the world. They were built for boomers and should die with boomers.
For anyone outside the very rich, housing is not a consumer-driven market.
When you're looking for housing, your choices are basically to move into something that exists, or living in a van by the rive. You don't get to put a construction crew to work to build your dream home.
So when millenials move into the burbs, that's not an indication that they want to. Suburban housing exists in enough quantity. Urban housing does not.
> You don't get to put a construction crew to work to build your dream home.
If you want to you absolutely can, without being "the very rich." It just takes more work, and the availability of vacant land. Yes, I understand vacant land doesn't exist in NYC or the Bay Area but for most of the country it's trivial to buy a half acre (or larger) lot with water and sewer hookups already, and get a construction loan for the building of a house.
Yes it's more logistics and you need to management the mortgage for the land and the construction loan(s) separately but if you're not in a very concentrated urban area it's doable for anyone in the middle class or above who actually wants to do it.
> most of the country it's trivial to buy a half acre (or larger) lot with water and sewer hookups already
Not really. Having just gone through this process myself in the midwest, we found it impossible to find land within a reasonable commute to the city that was not already owned by a major developer. The handful of plots a year that we came across were basically the undesirable ones that you'd have to be desperate to build on, or that required a private road to be constructed for access.
We got lucky and a town close to the city parceled off an old park. But it took years of looking to stumble upon this. We were honestly beginning to look into the cost of demoing an existing house.
The article headline especially here but also on the original article is misleading even if not actually inaccurate. It encourages you to assume there's going to be a narrative about millennials abandoning the suburbs but, as you say, it's really more about the high rents in a lot of large cities pushing people out to smaller cities and the suburbs.
ADDED: This is consistent with data showing the supposed urbanization trend mostly being about a certain demographic (mostly college-educated millennials) moving into the cores of a relatively small number of popular cities.
I live in one of the communities this article is talking about in Las Vegas. I am 10 minutes from Downtown Las Vegas, and 20 by bus. I wouldn't even call it a "suburb" like most people think of it, just the normal city of Las Vegas.
What the article is really about is how when 3/4 of the houses in my community went up for foreclosure they were all purchased by real estate investors. In my neighborhood these investors were almost 100% Chinese.
The person I bought my house from owns 7 houses on my street, and he has never even visited the United States. He is not a great land lord obviously, and the renters who live in these houses don't keep them up and the area is very different than it was before 2008.
I think the neighborhood will recover eventually, but people don't realize it will take decades before the owner occupancy rates return to what they were. The investors aren't bad people, but they profited from a bad situation so much that even their investments aren't exactly what they thought they were anymore. The investors thought they were investing in super safe bonds of the "American Dream TM", and now they own a majority of the shares in "New Suburban Ghetto Inc".
What they didn't realize is that real estate isn't like another stock you can own anonymously. It's value depends a lot on who owns it. The market can absorb some amount of real estate investors without changing much, but the consequences of crossing a certain threshold will completely change what the investment is.
1) Absentee landlords are terrible. I can't say I know what the solution is, but perhaps simply lowering the price of the houses until the (low income) workers could afford to buy and therefore take stake in the community is preferable?
2) Unfortunately the sprawling layout of Hemet in particular is unconducive for creating the kinds of businesses that could at least mark the beginning of a more dense mixed use area. In this case there will have to be pain to raze some of the houses at the very least to help things go in that direction.
3) Broken window effect seems to be in full force with the absentee landlords only throwing fuel to the fire. Ideally the city would help some of these residents sue these landlords to resolve some of these issues, which would help slow the downward spiral of non-maintenance by the residents.
As a landlord (I don't like that name, it kinda has a negative connotation) I can see first-hand in dealing with new potential properties the lack of care most landlords have towards their investments. They approach it as an entirely passive income without ponying up the relatively small amount for someone to actually maintain it (Since they're too old or bothered to do it themselves).
I think a major windfall could be had with better regulations and rights renters could have protecting them from abusive landlords.
The rental regulations in my city are laughable and I have to deal with it almost every time we look at a potential property when I "assess" how much care has been put into its structure, mechanical, appliances, etc. That's even assuming the previous owner permitted the property for such use.
Some more incoming personal anecdotes from California
I briefly rented a small single family home from an 85 yo woman (managed by her son who lived a few towns away). We quickly found out there was black mold everywhere from a bad leak in the garage and a small one in the kitchen, and that she smoked her whole life in the place. She had no interest in keeping it up, she just "wanted to rent it out." Her son had no interest in dealing with it either as he readily admitted to us. I don't think he had seen the place in a long, long time considering the state of the damage.
We ended up recouping our costs and moving after a few days. She bought it for $150k 20 years ago, pays $600/year in property taxes so there's no incentive for her to give it up (prop 13). It's valued at $500k and was renting for $2500/mo.
Our new place is owned by chinese investors, and also has issues which they aren't interested in fixing. They haven't responded to a single email (I think they are in their early 20s, live in china, and i'm not entirely sure they speak english), we also tried to go thru the property manager who said he won't fix stuff since the landlords are unresponsive. We gave both of them 30 days notice that we need about $500 worth of things fixed. We never heard back, so we did the repairs and just deducted it from the rent, as you're legally allowed to do... come to thing of it, I could propbably not pay rent and squat the place and I'm sure they couldn't give less of a shit.
The assessed value is $61k, the estimated value (according to zillow) is $480k. Property taxes in 2016 were $640. There is a law where 55+ can transfer valuations if they move within counties that participate. https://www.ocgov.com/gov/assessor/programs/55plus#2179
You can probably create a separate bank account, put your rent in there on a monthly basis, and if/when they ask for rent, you have the good-faith evidence, and be legally protected. IANAL.
> At this point, the property should be razed (roof issues, structural issues, mildew, pests), but that costs money too.
And when this sort of thing gets truly out of control, you end up with Detroit syndrome. A city with a tax base so small it can't even afford to tear down unlivable properties - and consequently can't encourage reconstruction that might expand the tax base.
Hell, Detroit got to the point where serial arson was one of the major ways of cleaning up abandoned properties. I think people underestimate the degree to which this sort of disuse is not just a missed opportunity but an active harm.
So, in the same area I mentioned in my previous post, there have been several arson incidents.
All that remains is the shell of the structure, and the property owner cannot be contacted (some other state/country), the municipality cannot pay for the removal and dumping of the debris, and the EPA considers the property an unauthorized dump/landfill.
Particularly in areas with basements, the basements collect the debris and all the rain and snow, and become, as you say, an "active harm".
The arson seems to have been done to get rid of squatters, drug dealers, and places children might try to go play. So it's lowering the community impact of the building, but doing nothing (or less than nothing) to make actual cleanup or development there possible.
Previous landlord was a nightmare, and renter's rights in VA are non-existant. He was clearly well versed in the law but because he didn't own an absurd amount of active rental units all the normal rights didn't apply. He lived pretty far away and I wasn't legally able to withhold rent or anything (unless doing it through court and paying into an escrow) for the numerous issues that came up.
Since then he's tried to withhold the full security deposit, largely for issues that existed when I moved in that he'd (verbally) promised to fix (but refused to commit to over email). I submitted it to small claims around the same time one of my roommates from that house put him down as a (required) reference for a new place, and he called her directly to blackmail her, claiming he would give her a negative reference unless she submitted in writing that she believed all the issues he cited in keeping our deposit were justified.
I don't even understand how some people live with themselves. Oh well, court date approaching.
I wish more states did what Oregon does for termed leases. Specifically Oregon rent code makes it so that a renter can never be liable for more than 1.5 months of rent due to a lease break (although correct me in the exact amount). That was something that made it much easier to sign a lease in Oregon just in case it turned out the state's largest gun range was behind the house. I love guns but damn I don't want to hear them go off 10 hours a day. The neighbors were crazy and no longer heard them. shutters... I have since moved out of Oregon because too many Californians have moved in (LOL).
You prevent this by taking photos and video before you sign the lease agreement highlighting the condition of the place. You can also annotate a document on condition at move as well. Landlord usually has to countersign lease agreement so attach copies of said things to lease. Also send things registered mail to where your landlord accepts checks.
Matthew Desmond’s Evicted is quite good on this topic. It points out that slumlords can get around any tenant protection by being lenient to poor tenants who inevitably get behind on the rent. When they invoke tenant protections, evict for non-payment.
Unfortunately real estate deals like the one described in the article are exactly what a lot of landlords are looking for. They are so attractive because many of these landlords live in expensive big cities where the margins are lower.
Could taxes be drastically increased on rental properties in this area to incentivize owner-occupied homesteads?
It seems like neglect by absentee landlords is a big part if the problem, so the money could also be used to increase enforcement against neglected properties.
Yeah, it's how it works where I live too, but what I had in mind was cranking the taxes (and the homestead savings) even higher to drive out bad landlords and up enforcement against the ones that stay.
Since the Obama administration it seems the US government is actually moving in the opposite direction, discouraging home ownership and encouraging massive concerns operating multiple properties -- the latest example is the tax code eliminating tax breaks for home owners while creating more tax breaks for multi-property landlords. If you're interested in the topic Matt Stoller has explored it a lot.
From what I've read, economists argue that the Mortgage Interest Deduction is skewed towards benefiting the rich. Rich people buy more expensive houses, which leads to more interest, and a larger deduction. In that respect, the republican tax plan sounds like it was a step in the right direction.
I could possibly believe that, in a vacuum, the home mortgage deduction doesn't serve its stated purpose and should be replaced with something else. But I find it easy to be cynical when it's paired with tax breaks for all the costs associated with being a landlord for up to 10 properties. https://www.cnbc.com/2017/12/12/republican-tax-plan-poised-t...
Yeah, overall, that plan was terrible, but the point stands that the US spends billions for the deduction and most of it goes to people who are already pretty well off.
the mortgage interest deduction should be phased out over some period of time (like 5 years), rather than capped like it was in the trump tax bill. economically, it's taxpayer-funded gift to the real estate industry (in the form of higher home prices, higher building costs, higher commissions, more interest, etc.).
You should have led with, “In my opinion,”, because it’s hard to take your remark at face value.
For example, one could argue that by removing the incentives to lend to buyers with sub-prime credit, Obama actually hurt the ability for the lower and lower-middle class to buy a home.
But primarily, I don’t think the tax bill, a few weeks old at this point, and in effect for less than 10 days, has had its effects studied adequately enough to conclude that it is the largest problem with developing home ownership since GWB.
> But primarily, I don’t think the tax bill, a few weeks old at this point, and in effect for less than 10 days, has had its effects studied adequately enough to conclude that it is the largest problem with developing home ownership since GWB.
Not my claim, though -- rather my claim is that it is the latest signal of the intent to stop promoting home ownership, which was also signaled by Obama's murmuring about ending the 30-year mortgage and failure to prevent foreclosures despite avenues to do so.
Why is home ownership a net good? A home is not an appreciating investment - it's an expensive asset that requires regular upkeep, maintenance, and property taxes. Using that as your main store of value seems imprudent.
That depends a lot on where you live. I agree that a home is not an ideal investment vehicle, but where I live, even accounting for upkeep, my home has increased in value at a rate similar to my income for the last five years. It is ultimately your home and not an investment unless that is your specific goal, so it's not a good idea to put all of your eggs in that basket, but the idea that real property isn't an investment simply is not correct.
Well, the paper I linked lays out what I found to be a compelling case, but to summarize the major beats quickly: from the New Deal era to 2008, besides giving owners a place to live and freeing them from abusive landlords, the vagaries of the housing market, etc., homes provided an agreed-upon, relatively stable source of value (particularly for retiring people) and gave their owners an incentive to maintain them (to a higher standard than an absentee landlord) and made them more invested and participatory in their communities. This also provided a measure of political stability (people who feel like they have a lot to lose don't generally want to tear the system down). During the financial crisis supporting that system was in some measure abandoned (since little effort was made to arrest foreclosures), but without any plan to replace that stability-generating mechanism with a different one.
Yes, perhaps you could dream up a better means of delivering these benefits, and certainly home ownership was not equally or equitably distributed among Americans, but I feel like those objections are more compelling in a vacuum than in the reality we actually inhabit.
I guess I wasn't clear. Why is it a net good for the individual? Society _might_ be better off, but for the individual, deluding him to the long term inherent fiscal benefits of home ownership to maintain societal stability seems to short change the individual.
Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now.
And it's not clear that it's a net societal good in other countries. In Berlin, a lot of people are lifetime renters. In Japan, housing is a depreciating asset that becomes worthless after 20-30 years. When you buy a house it's generally for the land and the house is generally demolished by the new owners.
> Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now.
Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). After all, you not only get the option to sell the home -- you also have the ability to seek HELOCs, reverse mortgages, etc. Those options are not available to renters.
Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
> Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation).
There are a few things I'd like to address. First, for a mortgage, most of your money for the first few years goes straight to interest. You're not building equity, and it's only the amount of money you're paying in interest is tax deductible. The amount of equity you're accumulating with mortgage payments in the beginning is laughable.
Second, you're also paying for maintenance and property taxes, two things that the renter does not care about. When the water heater breaks, if you're the renter you call your landlord and take a shower at the gym, and the next day things are magically better and you don't have to worry about dry rot and stuff. If you're the owner, you're on the hook.
Third, the thing about HELOCs and reverse equity, generally you can only borrow on the equity already in the house. You could easily save that money, especially since with closing costs, agent fees, and the 20% down payment means that if you didn't buy the house, you have options not available to the buyer. Especially as a renter, you can up and move for a new job whenever you want. Would you rather have money sunk in a house and a home equity loan or liquid money in the financial markets?
> Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
In most housing markets, rents are above mortgages.
I'm sure there are investment reasons, especially if you already have a lot of money and want to diversify. Plus if you're truly wealthy, you would diversify into some real estate, commercial and residential in different housing markets, and pay for property managers. Putting all your eggs in one basket is generally not the winning play. Would you put all your money in Amazon for 30 years? Then why would you invest heavily in land in one particular market with the great majority of your capital for 30 years?
I am a home owner so you are not giving me new information here. But the house is an investment and provides utility at a time. I can't live in a bunch of Amazon stock.
Generally the advice I see is if you intend to stay in the same place at least five years it makes sense to at least consider buying.
You can certainly sell the stock and rent a house. Also, stocks don't have maintenance fees and ownership taxes, only taxes when you sell. Housing has both those fees and is highly illiquid, you have to pony up a couple of hundred thousand up front, and the transaction fees are not inconsiderable.
I'm not sure what your point is. My assertion is that rent and housing prices should be tightly correlated, with rent higher than housing prices because of the maintenance, HOA (if applicable) and property taxes. When rent is lower than an average mortgage of the same type of property, definitely rent. For example, if rent for a two bedroom condo was 500 dollars a month and it was selling for 600k, would you still decide to buy?
A better solution is aggressively fining absentee landlords who don't take care of their property and placing a lien on the property if they don't pay the fines. Replacing landlords who don't care to do the upkeep with low income homeowners who can't afford the upkeep is absolutely not a solution.
The article mentions gated communities... that means there's an HOA right? Are these absentee landlords just ignoring the fines? Would there be any consequence of ignoring an HOA fine? I'm not a homeowner so my knowledge of HOAs and their role is very limited.
I don't know if gated communities have an HOA by definition but if you don't pay money you owe to your HOA depending on laws of the state and HOA agreements, they could put a lien on your property as well.
However, it's possible to have an HOA that just doesn't give a shit and does no enforcing.
It's already illegal to not do certain maintenance on your house (blight, etc.) especially if you have tenants living there. (tenant protection laws)
> I don't know if gated communities have an HOA by definition
Almost every new/private development (as opposed to houses built along public roads or something) has one. That's how the resources to build up the common area are marshaled.
I think of the definition of "gated community" as a little squishy so I wasn't sure of absolutes. Now that I think about it more though, the "gate" part pretty much necessitates private roads as public roads would be open to the public. Kinda feel silly, "public" is in the name.
HOAs essentially operate similar to governments in that regard. The HOA can fine owners for failing to comply with community rules, place a lien on the property if they don't pay, and eventually get a court judgment to foreclose on the property and sell it to pay the debt. But that process typically takes years. And it's a huge hassle and expense for the HOA, so most will let things slide for a long time before taking the nuclear option.
You are exactly right, but I will add those fines eventually DO get paid.
The HOA bill keeps increasing until it could be tens of thousands of dollars. When the landlord eventually sells the property the HOA is then able to get payment from the new buyer before the former owner receives the funds.
Since legal action is so expensive, this is almost always how the HOA eventually gets their money. Of course if the bill goes over 30k, then it might be worth their time to go through litigation to get their money.
Fine them all you like - the result of this will be less affordable housing. Landlords who don't want to invest in or can't afford the upkeep will simply sell to someone who will.
And with that investment comes a more attractive property which commands a higher rent. And that means the housing becomes less affordable for the low-income renters.
Well it's what's happened here in Dallas. Housing is cheap in areas nowhere wants to live whether that be because of location or blight or demographics. It doesn't matter. It's more expensive in places where everyone wants to live. Improving housing makes that housing more attractive.
There's no escaping the economics of it no matter how hard you govern it.
Zoning laws are mostly to blame for lack of affordable housing. That, and the usage of houses as an investment.
When you spruce up a house, that attracts different renters. The other renters will take up housing otherwise they wouldn't have bothered with, and it goes on down the ladder.
The argument that market rate housing causes lack of affordable housing is just not true. Look at San Francisco. They have strict zoning laws, laws against construction of market rate housing, and rent control laws. Is it a paradise for low-income renters?
In the landlord business properties are given a letter grade based on rent potential, neighborhood, area schools, etc. These are likely C and D properties and in the due diligence phrase the current rents will be revealed. Improvements to a property in a low income/low rent area destroys cash flow since the ceiling on rents is only so much given the area. A "good landlord" probably isn't going to touch these with a 10 foot pole.
Section 8 isn't helping either. I've noticed a trend, whenever a neighborhood goes section 8, the crime tends to sky-rocket. This happened in a neighborhood near where I live too.
Ironically, this is exactly the problem of ghettoization of the low income that Section 8 vouchers are supposed to mitigate; the problem is because landlords have the option to participate or not, it still ends up with concentration.
I went looking for a house about four years ago. That was in 2013, a full 5 years post recession. I was surprised to see how many foreclosures were still on the market. I asked my realtor to show me, despite his misgivings about possibly buying a foreclosed property.
It was pretty much exactly how the article described it. I looked at about five or six lower priced large houses (5-6 bedrooms, 4-5 bathrooms, in the 4-5k ft range) and all were the same. They were all totally run down. Gutters falling off, carpets destroyed, holes in walls, kitchens in total disrepair. All kinds of stuff were left behind like there was a fire and the owners just fled.
My realtor also pointed out a few of the houses where the workmanship of the house was way below where it should be. The houses were built quickly for the boom. Corners were cut and it was clear even after five years, the houses would need a ton of work.
One other thing the article didn't touch on was the huge availability of retail and commercial space. There's a bunch of suburbs around where I live where businesses went under during the recession and nothing has filled those buildings yet. Retail is the same thing. There are businesses that either moved out or closed shops and those spaces remain empty, almost ten years after the recession.
It was and I was surprised at how far the costs of houses in that range had come down. I guess the balance of the cost of work needed, essentially then pushed them back into the proper range. As you noted, the upkeep would've killed me.
I ended up with a 2500 sq ft mid century modern that was in rock solid condition that I got for a steal. I haven't had to do anything substantial in the last five years. Some things will be due in the next three years (windows and HVAC) but otherwise, it's been easy to maintain.
I'm on the edge of Sacramento, and retail especially is still dead across the board in this city. Commercial has picked up, but it's the seat of one of the largest governments in the world.
Drive around from downtown to way out here, though, and you'll see an extremely high vacancy rate for retail. And it's clear that it's been that way for some years.
Given that residential has a shortage and commercial is booming, I don't know if retail is ever coming back, ever.
> They were all totally run down. Gutters falling off, carpets destroyed, holes in walls, kitchens in total disrepair. All kinds of stuff were left behind like there was a fire and the owners just fled.
Great opportunity to renovate and get everything done the way you want it? Dilapidated properties should cost much less, so you can use those savings to renovate. Updated floorplan, drywall, electrical, plumping, windows, floors. Everything designed exactly how you'd want things.
- Open floor plan- efficient use of space. Tons of storage.
- Enough electrical outlets where you need them.
- Cat6 ethernet ran to every room.
- Proper insulation and quality windows for energy efficiency.
I guess if you don't want to wait 2-3 months for a renovation, then you'd want to avoid these properties. But after watching enough Property Brothers it's something I think would be great.
Decentralization of bigger cities is one of the key things where govern should take action in the foreseeable future. I live in Buenos Aires, Argentina, which receives 2 million workers every day. Govern should pass laws to incentivize companies to move out of the city, banks to give credits on underdeveloped areas, and heavily invest of public transportation to those areas. We are reaching a level bigger cities are not capable to scale any longer.
And transit can't really pick up the slack since there is no core target that large numbers of people want to reach. Successful transit can take a dispersed residential population to a central core or a centralized population to dispersed employment zones but not both.
In addition to what others have said, it's common that the suburbs of sprawling American cities are unwalkable, and completely impossible to live in without access to a car.
I grew up in a Suburb in Colorado where the only buildings for miles were other houses. It was impossible to walk to the grocery store or any other amenity. It's extremely isolating, and a hostile and depressing living experience in my experience
Yes. In a previous life I lived in an area that's mostly a spread out suburb. I got so depressed that I couldn't walk anywhere, I mean, absolutely nowhere. I felt pretty housebound during the summer and yet I felt at the same time there wasn't really any place to go. Jumping in the car every time I needed to leave the house was just not relaxing!
Now I live in a small town and boy do I love it! Since it's a small town there's not really any huge roads and very little traffic. The streets beyond the major thru fares are quiet and the neighbors are friendly. If I'm bored and feeling restless I can walk to the park (half mile, maybe), the local watering hole (2 blocks), the coffee shop (1 block), or even the convenience store (about a quarter mile). I mean, just getting up and taking a short walk to the convenience store seems to be really beneficial to my mental health for some reason, yet driving there does the opposite.
I think you can have a bit of column A, a bit of column B.
My home city is Mumbai (technically, the suburban city of Thane, north of Mumbai) one of the most dense large cities in the world.
Public transportation in Mumbai, in terms of frequency, capacity, reliability, and cost is already better than any American city (I'm counting NYC in that). It could definitely be better; for instance the city is served by standard gauge trains but the metro railway (whatever gauge a subway is) that goes underground is still under construction.
Despite all that, and despite the fact that the tallest building in the city is a mere 88 stories[1] the infrastructure is straining under the pressure every day. All the good jobs (government, tech, banking) are concentrated in just one or two parts of the city (South Mumbai and the Andheri-Bandra-Dadar triangle, maybe Powai; my geography might be a bit outdated because I haven't lived there for 8 years). And real estate in those places is astronomically expensive[2] (here's a non-luxury 3-bed apartment for USD 1.3m in South Mumbai). That means everyone whose isn't living with parents who bought decades ago in those places has 3-hour round trip commutes every day (I was one of those people).
Building taller wouldn't densify the city because rich people will likely buy that new housing and they have smaller families on average. Improving public transportation won't change laws of distance and traffic - like I said it's already quite good. It would be better for people in North Mumbai if there were more jobs closer to them so they wouldn't have to commute so far every day.
Suburban, car-driven, sprawl is not ideal for city growth, but neither is the concentration of jobs in one place.
And that type of investment creates higher QOL for the residents who live there, I don't think anyone would argue that as the case for sprawly suburbs.
You can easily develop trains and create a series of nodes linking the outer suburb region to denser urban cities.
This has been done around the world for nearly a century, it's literally a solved problem but there is a distinct set of politicians in the US that don't want to spend any money for the public goods and would rather give the money out as corporate welfare.
Shouldn't cities grow and fade though? If whatever attracted people is lost, it should shrink. The problem is it's really hard to shrink concrete. In Louisiana after Katrina, the main solution was bulldozers. Think of them as the macrophages of the urban immune system.
> The problem is it's really hard to shrink concrete.
A better summary in one line than most essays on the topic.
We've put together a system that's unstable in the face of even modest shrinkage - and in some cases a mere failure to grow. The result is that even non-crisis change, like people moving to take better jobs, creates crisis results in shrinking cities.
In the short term, promoting growth is probably an inescapable part of the solution. But if we keep up the pattern of debt-financing expansion by planning for growth, we're never going to do better than deferring the crisis.
Long term, we need to build financially-stable cities and work out actual strategies for managed decline. 'Shrinking' and 'failing' are equivalent today, but that pattern needs to be broken if we're going to get out of crisis mode.
For that matter it's hard to grow concrete above a certain rate both for physical and political reasons. It's one of the problems causing the housing crunch in certain cities. Yes, in each case, there are specific issues. But, generally, when everyone and their dog suddenly wants to move into certain areas of certain cities that were actually declining in population not all that long ago, you're going to have issues.
Yes, especially when a place has nothing intrinsically going for it, and is a sort of "nowhere" that people settle for, in order to be close (but ironically, not especially close) to an actual place, that they want to be in but can't afford. Unfortunately, the invention of the automobile didn't make geography irrelevant; some spots are just better than others. And far-flung exurbs that are solely bedroom communities for other places seem especially unsustainable/doomed. Another good oil-price spike, and they're once again cut off to a surprising degree, from any real, useful human economic activity.
Survival of a place depends on finding & exploiting whatever it is that the location has uniquely. If society collapsed, Hemet could convert itself back to agriculture using some of your bulldozers. Though fuel might be hard to come by in that case. Plus, the people currently moving in in droves might be inclined away from that kind of hard work and more toward forming a roving band of predatory nomads based on ruthlessness, that raids other places. Mad Max!
Single homes ought to be owned, and multi-tenant apartment buildings ought to be rented.
Why? One case you are observing in the article. Renters of home don't care about keeping up their house. Spending any kind of money on it is just not their priority. The only one who can keep up the house is owner, but as you can see in this case they'll just choose to pocket the rent.
But there's a different angle. Imagine an apartment building where every apartment is owned. Some of them by elderly, some of them by poor. Now the common areas and house territory would deteriorate, because apartment owners don't have incentive to spend on either one. You could try to roll these charges into their utilities bill, but they will fight tooth and nail. Poor will say "we don't have money for this", elderly will say "we don't care and also don't have money", the rest will say "we're not paying for the aforementioned if they're not".
This is becoming a problem in countries where owned apartments are a thing. The city has to pay from its pocket for the upkeep of territories around such apartment blocks.
Naturally when apartments are rented out, landlord is interested in its state because they have to maintain steady number of new tenants to replace people moving out. Bad upkeep = no more tenants = lost money.
In the UK, it's normal for apartment buildings where people buy the apartments to have what's called ground rent. This is an additional charge that is specifically for the upkeep of the buildings shared areas and grounds. I don't know if perhaps that's missing in other places, but it seems to work ok here.
In the US, owner-occupied flats are called condominiums. And ground rent exists as "condo fees".
In my area, condo fees are often high enough to make buying a condo a strange proposition - you really must want to live in a multi-unit building because mortgage+fees > mortgage for a detached dwelling.
Some places have the worst of both worlds in the form of HOA dues. You pay yearly for the upkeep of common areas that are so far away from your front door that you never even see them unless you make a special effort.
Oh yeah, I know all about those! I live in Reston, VA, one of the early planned communities. I live in small townhome development, with it's own "cluster" dues (paid quarterly), then I have the Reston Association fees (paid annually), special district real estate taxes, and county real estate taxes. Quadruple whammy of taxes/fees! And four levels of incompetence to deal with!
Maintaining your detached building isn't free, and condos are typically a feature of denser, closer-in land where a similar quality detached house would cost considerably more.
The local high-rise has condo fees in the range of $1000/month on a $800,000 unit. Even adjusting for amenities, it would be hard to get to $1000/month on a detached.
With a household income in excess of $250k to afford that $800k condo, the labor you’d spend mowing the lawn, gardening, coordinating repairs, etc. could easily be worth that much.
Obviously there will be (a) pressure from flat owners to keep ground rent down, and (b) inefficiency in how ground rent is spent, compared to how building owner would spend it. The dynamics for both things are exactly as described.
This is slowly evolving story, at some point most apartment are no longer used by original buyers but by their children or grandchildren.
The only one who can keep up the house is owner, but as you can see in this case they'll just choose to pocket the rent.
I don't think it's just a profit thing. If you're a small time landlord, it's probably incredibly expensive to retain a gardener/landscaper for such a tiny job. On the other hand, unless you live down the street it's awfully difficult to mow the grass every week, shovel the sidewalk after snow, water the plants, and so forth.
A small time landlord has no economies of scale for professional services, but doesn't make enough money to quit their day job either. (which would give them time to do all this themselves)
I think renting homes can be just fine, but there needs to be savage, almost draconian punishments for not acting as a good landlord. Do 3 strikes: On the 3rd strike for not fixing things up, you straight up lose the property to the tenant.
Condos exist and charge HOA fees to maintain the structure and common spaces. The fee is a condition of moving in; if you don’t want to pay it, you don’t buy that condo.
How would you introduce such fees if they never existed and now people are already owning that property, being used for certain monthly utilities bill?
I don't think condo's exist without HOA fees, otherwise the whole building would just collapse. That's kinda how former Soviet apartment buildings function and they look like meth houses in the public areas
I'm referring to this case exactly. They don't always collapse, but they're not a pretty sight and their residents can't be bothered. As far as they go, somebody else should probably make it look nice, without touching their wallet.
Pity that pre-Soviet buildings are also affected.
Thing is, from game theory perspective, it's a totally expected outcome.
Residents elect an HOA or coop board, which can vote to levy fees according to its bylaws. Not uncommon to get stuck with increased/extra fees when the building decides to do major work.
Haven't recovered... What if it is should have not been?
Many things were built and new subdivisions were creates with the notion the economy was ready for it.
It clearly was all built on lies and bad practice.
That is why I question not that it is recovering but maybe it should have not been.
I think the real solution is to leave these areas that clearly can't be supported by the local economy.
And sorry to say. Yeah it's going to suck for a lot of people. But that is life. Not everything is going to be perfect. Holding on to a dying dream is only going to make it worse.
(I am not cold hearted. I have just experience life enough to not let a sob story make me make irrational decisions).
I could see it going either way. I actually have become more likely to use transit since ride-hailing is so much easier—if I'm ever stranded anywhere (lack of good bus route, after hours, etc.), I just have to open the Lyft app.
Furthermore, when car ownership is no longer considered a necessity (as it is today in most of the US), the economics will change. Right now, my personal vehicle is a sunk cost, so I view car trips as costing close to zero—unlike the up-front, immediate transactions inherent to taking the bus or Lyft. Once I no longer own that vehicle (I'm not planning to replace it), all of my options will be on more equal footing, since they'll all be priced per-trip. Even self-driving vehicles will not be able to compete with mass transit when they're both priced similarly.
Self driving cars will eventually be much, much less expensive to own and operate than cards of today. That's assuming there isn't a massive per-mile tax imposed.
I would also guess public transportation will evolve as well. I could see small and medium sized cities getting rid of buses, fixed schedules, and fixed routes and instead deploy a fleet of van-sized vehicles to pick up people on demand. I could see this as being something that gets outsourced to Uber and Lyft. Maybe it will be less expensive and better to just subsidize rides from private companies.
Mechanically, self driving cars are not going to be cheaper to build or maintain, and they will need just as much fuel if not significantly more to go park somewhere distant. You also need 2 parking spaces @ 100+$/month (one at home, one at the office) and pay to park other places. Insurance might get slightly cheaper, but I don't see the economics changing much and the added electronics are not going to be free.
You're assuming that the ownership model stays the same. Many people (myself included) are predicting that the convenience and low cost of autonomous ride-hailing services will make car ownership a frivolity, much like owning an additional non-daily-driver is today.
Of course. But it does translate into cheaper transportation options. Many people may opt out of car ownership once ride hailing reaches a certain level of affordability.
Electronics will do what they always do - get cheaper and better.
The cars (eventually) will not be like current cars. If they don't crash, they don't need as many safety features. They can be made much lighter and from cheaper materials. When the car is way lighter, it can use a smaller, simpler drivetrain. They will likely be electric. Maintenance on electric cars is far less than gasoline or diesel vehicles. Your robot car will likely be serviced by another robot.
Don't think of a Lexus with an instrument package bolted to the roof, think about adding a few hundred dollars of sensors and actuators on a fancy golf cart. I wouldn't be surprised if self driving cars are eventually available for less than $10,000. I think the low cost of the vehicles combined with the low cost of operating them will result in an explosion of ownership, not a reduction. I think when the cost of the vehicle drops and the cost of a trip drops, more vehicles will be sold and more trips will be made.
A self driving golf cart is not a self driving car. Until we outlaw humans from driving anything self driving cars will need all their current safety tech. That might happen in 100+ years, but it may also never happen because hitting something due to mechanical / software failure is always going to be possible.
PS: Adding a camera may get cheaper over time, that does not mean it's ever cheaper than not having one in the first place.
Mechanical and software failures will always be possible. However, we already accept a really high rate of death and injury when both could be eliminated. I don't think that will change with self-driving cars.
Adding a camera is cheaper when it results in being able to eliminate hundreds of pounds of metal and airbags. We don't make bus riders wear a seatbelt because it just doesn't solve a huge problem. When the injury rate of car passengers gets to a similar level, we probably don't need seatbelts there either.
We have zero production self driving cars today or in the next 3 years and will not be on 90% of new cars for at least a decade after they show up. Hyundai for example is targeting 2030 for urban driving as an option.
Cars last for ~25 years in normal use (average car in US is 11.5 years old and accidents take many out before reaching their lifespan). So, at a minimum we are talking 50 years before essentially every car is even capable of being self driven. Laws are unlikely to change before self driving goes from a novelty to assumed behavior call it another 25 years at a minimum. Now, add a few more years for phasing in the law, and then a few more for statistics to validate reducing safty equipment.
So, 100+ seems fairly optimistic as that's the happy path assuming zero major issues show up.
> Even self-driving vehicles will not be able to compete with mass transit when they're both priced similarly.
I think there's likely to end up being a third option: Public transport with self-driving cars for last mile at each end. That way you have the convenience of door-to-door, combined with the efficiency of mass transit for the bulk of traffic.
There are also other advantages, like it expands the effective catchment area of stations, making them more viable even at lower densities. And the cars themselves can be much smaller and more efficient as well, since they don't need the range, and they don't need to be as comfortable if people are only sitting in them for ~5mins.
I did not mean to imply I don't like the suburbs. I was implying that too many we're built to quickly with the expectation that the economy was going to be different or that it could sustain these new build outs.
Maybe self driving cars will help. But I see that being a thing for those who can already afford to live in the city. These people are going to likely prefer new stock over run down hoods.
That's one side of the coin, but on the other hand I can also envision self-driving cars enabling more urban density. Presumably self-driving cars don't really need to be parked on-site at the destination and could instead drop off their rider at the destination and park in some centralized parking garage. The car could even make money for its owner by being an automated uber driver while the owner is working or shopping or whatever. American cities give up a lot of space to parking lots, it'd be great to be able to reclaim some of it
I heard an estimate that something like 25% of traffic in some areas at a given time are just people driving around looking for a parking spot. That's just nuts!
It really remains to be seen what self driving cars would do to traffic.
sadly I want to think you're wrong but in reality every last remote place will be destroyed by them. Why live in walnut creek when you could commute from yosemite?
It sounds like a lot of the people living there aren't holding on to a dying dream but are stuck. It isn't the residents fault that what happened did.
Frankly you sure come off as cold hearted. You are talking about a problem affecting many people as nothing more than a mistake that we should just let die basically.
> You are talking about a problem affecting many people as nothing more than a mistake that we should just let die basically.
But what if parent's premise is correct?
What if these areas cannot support a local economy that justified the rapid build-out?
What if these areas will never be able to support that?
Sometimes the truth is hard. That doesn't make the truth-bearer "cold-hearted". Indeed, sticking our heads in the sand seems even worse, from a moral perspective.
Funny, I read his comment through a critical Economic lens and find myself in agreement. Capitalism is cold hearted (to use your wording)...there is no accounting for ethics in Supply and Demand models.
This fact is an underlying foundation for many regulatory bodies. For example the EPA establishes and enforces environmental rules in the best interest of society as a whole rather than allow companies to pollute ad nauseam which would be in their individual bottom line's best interest. This type of regulation is meant to correct factors outside of market actors which lead to an equilibrium that is sub-optimal for society.
You might say he sounds cold hearted, but that is unfairly judging an individual ethically for the speculation of an economic reality which has no ethicality.
To be fair, he stated that he isn't cold hearted in his original post. That is why I said what I did. The article wasn't some economics view into this topic, it was a look at the people. You shouldn't be looking at people struggling as an economics problem. You should be looking at it from a humanitarian standpoint.
You can talk about the economic issues all you want, but it comes down to the residents are the ones getting hurt. The people that took advantage of the situation in developing where they did are not getting hurt.
"This dynamic changes the housing markets of these cities, too, with big cities getting more expensive as more high-wage workers migrate there, and low-wage workers leaving cities to seek more affordable housing in the far-away suburbs they can afford. Now that the dust of the recession has cleared, it is evident that the geography of poverty has changed in America."
There was just an article posted here a couple of weeks ago about a woman who was pushed out of LA and moved to Hemet while continuing to commute to LA for work. IIRC the woman was in her 50s and still renting in Hemet despite the lower housing costs. There are no jobs in cities like Hemet but you'd expect that a significant enough number of LA expats moving there would revitalize the local economy some what, just from the higher earnings of super commuters.
I think most people who would traditionally move to further flung neighborhoods to buy are those who are just getting started with families. However, most people aren't willing to commute that far in painful traffic.
Anecdotally, my wife and I are more willing to relocate to Austin or Denver than to NJ or Westchester (this is from NYC). I imagine many other young, moderate income, residents of high population cities feel the same.
For that to happen, those people would have to be spending money in Hemet, and not just at the grocery store or the gas station. They'd have to be dining out in restaurants in Hemet (local ones, preferably, not just fast food chains), going to bars in Hemet, buying things in little shops in Hemet, etc. As it stands, a lot of these people are probably still commuting to LA, not just for work, but for their leisure as well.
People who want to live in the cities are moving to the cities, and so house prices in those suburbs are dropping and people who can't afford houses in the city are moving to places where they can afford houses. Both of those seem like good things. Of course if you look only at the suburb then it looks like a decline.
A country that has built enough housing for its population should have empty houses, should have houses that are not worth keeping up slowly falling into disrepair, available on the cheap to anyone who decides they do want them. Build more houses where people want to live - the cities. Let them rot where people don't.
It seems like there's a market opportunity to create a property management company that operates on a Wal-Mart or McDonalds scale. Franchises all over the country, consistent architectural design for apartments, consistent management and maintenance. I'm surprised something like this doesn't exist already.
That's an interesting thought. The only reason I can think of that such a thing might not exist is that each state and city might have a unique set of regulations and licensing, which would make it difficult to operate nationally.
Equity Residential, Avalon Communities, Essex Property Trust, etc. They are cold profit-maximizes at lease renewal, but very good at maintenance and very easy to move into. Make an appointment, see the place, sign the papers, get the keys. No “wait and see which one of the 50 applicants I pick,” low security deposit ($500-$1000 vs $8000+ for a mom and pop), helpful onsite staff.
Correct me if I'm wrong but isn't this basically what REITs do minus the franchising? (Walmart doesn't franchise either)
There's also large privately own property management/real estate companies, I lived in a complex owned by one for 4 years. They own and operate properties in 25 states.
REITs don't necessarily run the building management or development sides of the business. Normally these functions are bid out to developers and property management companies.
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[ 4.1 ms ] story [ 198 ms ] threadhttps://www.bloomberg.com/view/articles/2017-08-25/millennia...
When you're looking for housing, your choices are basically to move into something that exists, or living in a van by the rive. You don't get to put a construction crew to work to build your dream home.
So when millenials move into the burbs, that's not an indication that they want to. Suburban housing exists in enough quantity. Urban housing does not.
If you want to you absolutely can, without being "the very rich." It just takes more work, and the availability of vacant land. Yes, I understand vacant land doesn't exist in NYC or the Bay Area but for most of the country it's trivial to buy a half acre (or larger) lot with water and sewer hookups already, and get a construction loan for the building of a house.
Yes it's more logistics and you need to management the mortgage for the land and the construction loan(s) separately but if you're not in a very concentrated urban area it's doable for anyone in the middle class or above who actually wants to do it.
Not really. Having just gone through this process myself in the midwest, we found it impossible to find land within a reasonable commute to the city that was not already owned by a major developer. The handful of plots a year that we came across were basically the undesirable ones that you'd have to be desperate to build on, or that required a private road to be constructed for access.
We got lucky and a town close to the city parceled off an old park. But it took years of looking to stumble upon this. We were honestly beginning to look into the cost of demoing an existing house.
ADDED: This is consistent with data showing the supposed urbanization trend mostly being about a certain demographic (mostly college-educated millennials) moving into the cores of a relatively small number of popular cities.
What the article is really about is how when 3/4 of the houses in my community went up for foreclosure they were all purchased by real estate investors. In my neighborhood these investors were almost 100% Chinese. The person I bought my house from owns 7 houses on my street, and he has never even visited the United States. He is not a great land lord obviously, and the renters who live in these houses don't keep them up and the area is very different than it was before 2008.
I think the neighborhood will recover eventually, but people don't realize it will take decades before the owner occupancy rates return to what they were. The investors aren't bad people, but they profited from a bad situation so much that even their investments aren't exactly what they thought they were anymore. The investors thought they were investing in super safe bonds of the "American Dream TM", and now they own a majority of the shares in "New Suburban Ghetto Inc".
What they didn't realize is that real estate isn't like another stock you can own anonymously. It's value depends a lot on who owns it. The market can absorb some amount of real estate investors without changing much, but the consequences of crossing a certain threshold will completely change what the investment is.
1) Absentee landlords are terrible. I can't say I know what the solution is, but perhaps simply lowering the price of the houses until the (low income) workers could afford to buy and therefore take stake in the community is preferable?
2) Unfortunately the sprawling layout of Hemet in particular is unconducive for creating the kinds of businesses that could at least mark the beginning of a more dense mixed use area. In this case there will have to be pain to raze some of the houses at the very least to help things go in that direction.
3) Broken window effect seems to be in full force with the absentee landlords only throwing fuel to the fire. Ideally the city would help some of these residents sue these landlords to resolve some of these issues, which would help slow the downward spiral of non-maintenance by the residents.
I think a major windfall could be had with better regulations and rights renters could have protecting them from abusive landlords.
The rental regulations in my city are laughable and I have to deal with it almost every time we look at a potential property when I "assess" how much care has been put into its structure, mechanical, appliances, etc. That's even assuming the previous owner permitted the property for such use.
I know of a retired magistrate judge that acquired over 30 residential properties via tax-delinquency sales.
These properties, not in the best condition, were used as Section 8 HUD housing, with no improvements made.
Tactics included keeping the utilities in the landlord's name to be able to shut-off water, electric, or gas at a moment's notice.
Many of the tenants were former defendants with the magistrate court that the judge oversaw.
Additionally, barter was used in lieu of security deposits and partial rent payments - the tenant could fix-up the property.
However, the tenants lacked any ability to properly repair anything, and the repairs caused further damage to the properties.
The wife of the landlord, insisted he divest himself of these properties before his death, so she would not have to continue to deal with this.
However, he did die, she inherited the properties, and is too old to have the energy to deal with this.
As you said, "too old or bothered to do it themselves".
Some of these properties now sit unoccupied, but cannot pass inspection because of the substandard repairs, and further disintegrate.
I know of one particular property that was not winterized (unoccupied), and I am certain the pipes have frozen and cracked.
At this point, the property should be razed (roof issues, structural issues, mildew, pests), but that costs money too.
I briefly rented a small single family home from an 85 yo woman (managed by her son who lived a few towns away). We quickly found out there was black mold everywhere from a bad leak in the garage and a small one in the kitchen, and that she smoked her whole life in the place. She had no interest in keeping it up, she just "wanted to rent it out." Her son had no interest in dealing with it either as he readily admitted to us. I don't think he had seen the place in a long, long time considering the state of the damage.
We ended up recouping our costs and moving after a few days. She bought it for $150k 20 years ago, pays $600/year in property taxes so there's no incentive for her to give it up (prop 13). It's valued at $500k and was renting for $2500/mo.
Our new place is owned by chinese investors, and also has issues which they aren't interested in fixing. They haven't responded to a single email (I think they are in their early 20s, live in china, and i'm not entirely sure they speak english), we also tried to go thru the property manager who said he won't fix stuff since the landlords are unresponsive. We gave both of them 30 days notice that we need about $500 worth of things fixed. We never heard back, so we did the repairs and just deducted it from the rent, as you're legally allowed to do... come to thing of it, I could propbably not pay rent and squat the place and I'm sure they couldn't give less of a shit.
That means if she bought the property 20 years ago for $150K, the property tax in year one was 1% of 150K, or $1500.
Under Prop 13 property taxes go up 2% ever year (compounded). So after 20 years that property tax would be up to roughly $2400.
And when this sort of thing gets truly out of control, you end up with Detroit syndrome. A city with a tax base so small it can't even afford to tear down unlivable properties - and consequently can't encourage reconstruction that might expand the tax base.
Hell, Detroit got to the point where serial arson was one of the major ways of cleaning up abandoned properties. I think people underestimate the degree to which this sort of disuse is not just a missed opportunity but an active harm.
So, in the same area I mentioned in my previous post, there have been several arson incidents.
All that remains is the shell of the structure, and the property owner cannot be contacted (some other state/country), the municipality cannot pay for the removal and dumping of the debris, and the EPA considers the property an unauthorized dump/landfill.
Particularly in areas with basements, the basements collect the debris and all the rain and snow, and become, as you say, an "active harm".
The arson seems to have been done to get rid of squatters, drug dealers, and places children might try to go play. So it's lowering the community impact of the building, but doing nothing (or less than nothing) to make actual cleanup or development there possible.
Since then he's tried to withhold the full security deposit, largely for issues that existed when I moved in that he'd (verbally) promised to fix (but refused to commit to over email). I submitted it to small claims around the same time one of my roommates from that house put him down as a (required) reference for a new place, and he called her directly to blackmail her, claiming he would give her a negative reference unless she submitted in writing that she believed all the issues he cited in keeping our deposit were justified.
I don't even understand how some people live with themselves. Oh well, court date approaching.
It seems like neglect by absentee landlords is a big part if the problem, so the money could also be used to increase enforcement against neglected properties.
here's a source: https://niskanencenter.org/blog/time-repeal-home-mortgage-in...
https://www.theatlantic.com/business/archive/2017/05/shame-m...
You mean making them equal to people who can't afford to buy?
For example, one could argue that by removing the incentives to lend to buyers with sub-prime credit, Obama actually hurt the ability for the lower and lower-middle class to buy a home.
But primarily, I don’t think the tax bill, a few weeks old at this point, and in effect for less than 10 days, has had its effects studied adequately enough to conclude that it is the largest problem with developing home ownership since GWB.
Not my claim, though -- rather my claim is that it is the latest signal of the intent to stop promoting home ownership, which was also signaled by Obama's murmuring about ending the 30-year mortgage and failure to prevent foreclosures despite avenues to do so.
I think this paper was really compelling and it's a big part of the thinking I'm working out here: http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=242...
I’m not a member of either party.
https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
Yes, perhaps you could dream up a better means of delivering these benefits, and certainly home ownership was not equally or equitably distributed among Americans, but I feel like those objections are more compelling in a vacuum than in the reality we actually inhabit.
Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now.
And it's not clear that it's a net societal good in other countries. In Berlin, a lot of people are lifetime renters. In Japan, housing is a depreciating asset that becomes worthless after 20-30 years. When you buy a house it's generally for the land and the house is generally demolished by the new owners.
Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). After all, you not only get the option to sell the home -- you also have the ability to seek HELOCs, reverse mortgages, etc. Those options are not available to renters.
Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
There are a few things I'd like to address. First, for a mortgage, most of your money for the first few years goes straight to interest. You're not building equity, and it's only the amount of money you're paying in interest is tax deductible. The amount of equity you're accumulating with mortgage payments in the beginning is laughable.
Second, you're also paying for maintenance and property taxes, two things that the renter does not care about. When the water heater breaks, if you're the renter you call your landlord and take a shower at the gym, and the next day things are magically better and you don't have to worry about dry rot and stuff. If you're the owner, you're on the hook.
Third, the thing about HELOCs and reverse equity, generally you can only borrow on the equity already in the house. You could easily save that money, especially since with closing costs, agent fees, and the 20% down payment means that if you didn't buy the house, you have options not available to the buyer. Especially as a renter, you can up and move for a new job whenever you want. Would you rather have money sunk in a house and a home equity loan or liquid money in the financial markets?
> Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
In most housing markets, rents are above mortgages.
I'm sure there are investment reasons, especially if you already have a lot of money and want to diversify. Plus if you're truly wealthy, you would diversify into some real estate, commercial and residential in different housing markets, and pay for property managers. Putting all your eggs in one basket is generally not the winning play. Would you put all your money in Amazon for 30 years? Then why would you invest heavily in land in one particular market with the great majority of your capital for 30 years?
Generally the advice I see is if you intend to stay in the same place at least five years it makes sense to at least consider buying.
You can certainly sell the stock and rent a house. Also, stocks don't have maintenance fees and ownership taxes, only taxes when you sell. Housing has both those fees and is highly illiquid, you have to pony up a couple of hundred thousand up front, and the transaction fees are not inconsiderable.
I'm not sure what your point is. My assertion is that rent and housing prices should be tightly correlated, with rent higher than housing prices because of the maintenance, HOA (if applicable) and property taxes. When rent is lower than an average mortgage of the same type of property, definitely rent. For example, if rent for a two bedroom condo was 500 dollars a month and it was selling for 600k, would you still decide to buy?
However, it's possible to have an HOA that just doesn't give a shit and does no enforcing.
It's already illegal to not do certain maintenance on your house (blight, etc.) especially if you have tenants living there. (tenant protection laws)
So enforcement is the key.
Almost every new/private development (as opposed to houses built along public roads or something) has one. That's how the resources to build up the common area are marshaled.
I think of the definition of "gated community" as a little squishy so I wasn't sure of absolutes. Now that I think about it more though, the "gate" part pretty much necessitates private roads as public roads would be open to the public. Kinda feel silly, "public" is in the name.
The HOA bill keeps increasing until it could be tens of thousands of dollars. When the landlord eventually sells the property the HOA is then able to get payment from the new buyer before the former owner receives the funds.
Since legal action is so expensive, this is almost always how the HOA eventually gets their money. Of course if the bill goes over 30k, then it might be worth their time to go through litigation to get their money.
And with that investment comes a more attractive property which commands a higher rent. And that means the housing becomes less affordable for the low-income renters.
There's no escaping the economics of it no matter how hard you govern it.
When you spruce up a house, that attracts different renters. The other renters will take up housing otherwise they wouldn't have bothered with, and it goes on down the ladder.
The argument that market rate housing causes lack of affordable housing is just not true. Look at San Francisco. They have strict zoning laws, laws against construction of market rate housing, and rent control laws. Is it a paradise for low-income renters?
So your solution is keep the place a dump to keep housing costs low?
If you want to get people in better housing, the real solutions require changing and influencing the people, not the housing.
It was pretty much exactly how the article described it. I looked at about five or six lower priced large houses (5-6 bedrooms, 4-5 bathrooms, in the 4-5k ft range) and all were the same. They were all totally run down. Gutters falling off, carpets destroyed, holes in walls, kitchens in total disrepair. All kinds of stuff were left behind like there was a fire and the owners just fled.
My realtor also pointed out a few of the houses where the workmanship of the house was way below where it should be. The houses were built quickly for the boom. Corners were cut and it was clear even after five years, the houses would need a ton of work.
One other thing the article didn't touch on was the huge availability of retail and commercial space. There's a bunch of suburbs around where I live where businesses went under during the recession and nothing has filled those buildings yet. Retail is the same thing. There are businesses that either moved out or closed shops and those spaces remain empty, almost ten years after the recession.
2000 square feet is plenty of upkeep if you aren't paying someone to do it.
I ended up with a 2500 sq ft mid century modern that was in rock solid condition that I got for a steal. I haven't had to do anything substantial in the last five years. Some things will be due in the next three years (windows and HVAC) but otherwise, it's been easy to maintain.
Drive around from downtown to way out here, though, and you'll see an extremely high vacancy rate for retail. And it's clear that it's been that way for some years.
Given that residential has a shortage and commercial is booming, I don't know if retail is ever coming back, ever.
Great opportunity to renovate and get everything done the way you want it? Dilapidated properties should cost much less, so you can use those savings to renovate. Updated floorplan, drywall, electrical, plumping, windows, floors. Everything designed exactly how you'd want things.
- Open floor plan- efficient use of space. Tons of storage.
- Enough electrical outlets where you need them.
- Cat6 ethernet ran to every room.
- Proper insulation and quality windows for energy efficiency.
I guess if you don't want to wait 2-3 months for a renovation, then you'd want to avoid these properties. But after watching enough Property Brothers it's something I think would be great.
We made that particular mistake already. You don't need to repeat it.
I grew up in a Suburb in Colorado where the only buildings for miles were other houses. It was impossible to walk to the grocery store or any other amenity. It's extremely isolating, and a hostile and depressing living experience in my experience
Now I live in a small town and boy do I love it! Since it's a small town there's not really any huge roads and very little traffic. The streets beyond the major thru fares are quiet and the neighbors are friendly. If I'm bored and feeling restless I can walk to the park (half mile, maybe), the local watering hole (2 blocks), the coffee shop (1 block), or even the convenience store (about a quarter mile). I mean, just getting up and taking a short walk to the convenience store seems to be really beneficial to my mental health for some reason, yet driving there does the opposite.
My home city is Mumbai (technically, the suburban city of Thane, north of Mumbai) one of the most dense large cities in the world.
Public transportation in Mumbai, in terms of frequency, capacity, reliability, and cost is already better than any American city (I'm counting NYC in that). It could definitely be better; for instance the city is served by standard gauge trains but the metro railway (whatever gauge a subway is) that goes underground is still under construction.
Despite all that, and despite the fact that the tallest building in the city is a mere 88 stories[1] the infrastructure is straining under the pressure every day. All the good jobs (government, tech, banking) are concentrated in just one or two parts of the city (South Mumbai and the Andheri-Bandra-Dadar triangle, maybe Powai; my geography might be a bit outdated because I haven't lived there for 8 years). And real estate in those places is astronomically expensive[2] (here's a non-luxury 3-bed apartment for USD 1.3m in South Mumbai). That means everyone whose isn't living with parents who bought decades ago in those places has 3-hour round trip commutes every day (I was one of those people).
Building taller wouldn't densify the city because rich people will likely buy that new housing and they have smaller families on average. Improving public transportation won't change laws of distance and traffic - like I said it's already quite good. It would be better for people in North Mumbai if there were more jobs closer to them so they wouldn't have to commute so far every day.
Suburban, car-driven, sprawl is not ideal for city growth, but neither is the concentration of jobs in one place.
1. https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_M...
2. https://www.99acres.com/3-bhk-bedroom-apartment-flat-for-sal...
This has been done around the world for nearly a century, it's literally a solved problem but there is a distinct set of politicians in the US that don't want to spend any money for the public goods and would rather give the money out as corporate welfare.
A better summary in one line than most essays on the topic.
We've put together a system that's unstable in the face of even modest shrinkage - and in some cases a mere failure to grow. The result is that even non-crisis change, like people moving to take better jobs, creates crisis results in shrinking cities.
In the short term, promoting growth is probably an inescapable part of the solution. But if we keep up the pattern of debt-financing expansion by planning for growth, we're never going to do better than deferring the crisis.
Long term, we need to build financially-stable cities and work out actual strategies for managed decline. 'Shrinking' and 'failing' are equivalent today, but that pattern needs to be broken if we're going to get out of crisis mode.
Survival of a place depends on finding & exploiting whatever it is that the location has uniquely. If society collapsed, Hemet could convert itself back to agriculture using some of your bulldozers. Though fuel might be hard to come by in that case. Plus, the people currently moving in in droves might be inclined away from that kind of hard work and more toward forming a roving band of predatory nomads based on ruthlessness, that raids other places. Mad Max!
Single homes ought to be owned, and multi-tenant apartment buildings ought to be rented.
Why? One case you are observing in the article. Renters of home don't care about keeping up their house. Spending any kind of money on it is just not their priority. The only one who can keep up the house is owner, but as you can see in this case they'll just choose to pocket the rent.
But there's a different angle. Imagine an apartment building where every apartment is owned. Some of them by elderly, some of them by poor. Now the common areas and house territory would deteriorate, because apartment owners don't have incentive to spend on either one. You could try to roll these charges into their utilities bill, but they will fight tooth and nail. Poor will say "we don't have money for this", elderly will say "we don't care and also don't have money", the rest will say "we're not paying for the aforementioned if they're not".
This is becoming a problem in countries where owned apartments are a thing. The city has to pay from its pocket for the upkeep of territories around such apartment blocks.
Naturally when apartments are rented out, landlord is interested in its state because they have to maintain steady number of new tenants to replace people moving out. Bad upkeep = no more tenants = lost money.
In my area, condo fees are often high enough to make buying a condo a strange proposition - you really must want to live in a multi-unit building because mortgage+fees > mortgage for a detached dwelling.
Typically the condo board is in charge of contracting a management company who they give the fees to in order to keep up the place.
Said condo board is typically made up of retirees with the time to do it and they're less sophisticated than the management company.
Over time, the fees go up while the management company skates by doing a little less each year.
This is slowly evolving story, at some point most apartment are no longer used by original buyers but by their children or grandchildren.
I don't think it's just a profit thing. If you're a small time landlord, it's probably incredibly expensive to retain a gardener/landscaper for such a tiny job. On the other hand, unless you live down the street it's awfully difficult to mow the grass every week, shovel the sidewalk after snow, water the plants, and so forth.
A small time landlord has no economies of scale for professional services, but doesn't make enough money to quit their day job either. (which would give them time to do all this themselves)
Pity that pre-Soviet buildings are also affected.
Thing is, from game theory perspective, it's a totally expected outcome.
Many things were built and new subdivisions were creates with the notion the economy was ready for it.
It clearly was all built on lies and bad practice.
That is why I question not that it is recovering but maybe it should have not been.
I think the real solution is to leave these areas that clearly can't be supported by the local economy.
And sorry to say. Yeah it's going to suck for a lot of people. But that is life. Not everything is going to be perfect. Holding on to a dying dream is only going to make it worse.
(I am not cold hearted. I have just experience life enough to not let a sob story make me make irrational decisions).
I, for one, plan on moving further out of the city as soon as my car can drive itself. The dream isn't dying. It hasn't even started yet.
Furthermore, when car ownership is no longer considered a necessity (as it is today in most of the US), the economics will change. Right now, my personal vehicle is a sunk cost, so I view car trips as costing close to zero—unlike the up-front, immediate transactions inherent to taking the bus or Lyft. Once I no longer own that vehicle (I'm not planning to replace it), all of my options will be on more equal footing, since they'll all be priced per-trip. Even self-driving vehicles will not be able to compete with mass transit when they're both priced similarly.
I would also guess public transportation will evolve as well. I could see small and medium sized cities getting rid of buses, fixed schedules, and fixed routes and instead deploy a fleet of van-sized vehicles to pick up people on demand. I could see this as being something that gets outsourced to Uber and Lyft. Maybe it will be less expensive and better to just subsidize rides from private companies.
The cars (eventually) will not be like current cars. If they don't crash, they don't need as many safety features. They can be made much lighter and from cheaper materials. When the car is way lighter, it can use a smaller, simpler drivetrain. They will likely be electric. Maintenance on electric cars is far less than gasoline or diesel vehicles. Your robot car will likely be serviced by another robot.
Don't think of a Lexus with an instrument package bolted to the roof, think about adding a few hundred dollars of sensors and actuators on a fancy golf cart. I wouldn't be surprised if self driving cars are eventually available for less than $10,000. I think the low cost of the vehicles combined with the low cost of operating them will result in an explosion of ownership, not a reduction. I think when the cost of the vehicle drops and the cost of a trip drops, more vehicles will be sold and more trips will be made.
PS: Adding a camera may get cheaper over time, that does not mean it's ever cheaper than not having one in the first place.
Mechanical and software failures will always be possible. However, we already accept a really high rate of death and injury when both could be eliminated. I don't think that will change with self-driving cars.
Adding a camera is cheaper when it results in being able to eliminate hundreds of pounds of metal and airbags. We don't make bus riders wear a seatbelt because it just doesn't solve a huge problem. When the injury rate of car passengers gets to a similar level, we probably don't need seatbelts there either.
Cars last for ~25 years in normal use (average car in US is 11.5 years old and accidents take many out before reaching their lifespan). So, at a minimum we are talking 50 years before essentially every car is even capable of being self driven. Laws are unlikely to change before self driving goes from a novelty to assumed behavior call it another 25 years at a minimum. Now, add a few more years for phasing in the law, and then a few more for statistics to validate reducing safty equipment.
So, 100+ seems fairly optimistic as that's the happy path assuming zero major issues show up.
I think there's likely to end up being a third option: Public transport with self-driving cars for last mile at each end. That way you have the convenience of door-to-door, combined with the efficiency of mass transit for the bulk of traffic.
There are also other advantages, like it expands the effective catchment area of stations, making them more viable even at lower densities. And the cars themselves can be much smaller and more efficient as well, since they don't need the range, and they don't need to be as comfortable if people are only sitting in them for ~5mins.
And maybe a fourth one: self-driving road based mass-transit (autonomous buses basically).
Maybe self driving cars will help. But I see that being a thing for those who can already afford to live in the city. These people are going to likely prefer new stock over run down hoods.
It really remains to be seen what self driving cars would do to traffic.
The more I hear about self driving cars the more I wish the US government would take investment into public transportation seriously.
Frankly you sure come off as cold hearted. You are talking about a problem affecting many people as nothing more than a mistake that we should just let die basically.
But what if parent's premise is correct?
What if these areas cannot support a local economy that justified the rapid build-out?
What if these areas will never be able to support that?
Sometimes the truth is hard. That doesn't make the truth-bearer "cold-hearted". Indeed, sticking our heads in the sand seems even worse, from a moral perspective.
This fact is an underlying foundation for many regulatory bodies. For example the EPA establishes and enforces environmental rules in the best interest of society as a whole rather than allow companies to pollute ad nauseam which would be in their individual bottom line's best interest. This type of regulation is meant to correct factors outside of market actors which lead to an equilibrium that is sub-optimal for society.
You might say he sounds cold hearted, but that is unfairly judging an individual ethically for the speculation of an economic reality which has no ethicality.
You can talk about the economic issues all you want, but it comes down to the residents are the ones getting hurt. The people that took advantage of the situation in developing where they did are not getting hurt.
There was just an article posted here a couple of weeks ago about a woman who was pushed out of LA and moved to Hemet while continuing to commute to LA for work. IIRC the woman was in her 50s and still renting in Hemet despite the lower housing costs. There are no jobs in cities like Hemet but you'd expect that a significant enough number of LA expats moving there would revitalize the local economy some what, just from the higher earnings of super commuters.
Anecdotally, my wife and I are more willing to relocate to Austin or Denver than to NJ or Westchester (this is from NYC). I imagine many other young, moderate income, residents of high population cities feel the same.
Didn't find the HN discussion (gave up rather easily) but this is the LA Times article:
http://www.latimes.com/local/california/la-me-lopez-commute-...
A country that has built enough housing for its population should have empty houses, should have houses that are not worth keeping up slowly falling into disrepair, available on the cheap to anyone who decides they do want them. Build more houses where people want to live - the cities. Let them rot where people don't.
There's also large privately own property management/real estate companies, I lived in a complex owned by one for 4 years. They own and operate properties in 25 states.