Month: November 2021

This is where owning land — and being assessed taxes that don’t make sense — comes back to bite us.

To cover the property taxes, he might rent the land to another farmer or take part in the federal Conservation Reserve Program, which rents farmland for environmental restoration.

This family could have rented this land on a 99 year lease and worked it as if it was their own all this time. By the same thinking, tax the land in the towns and cities for its highest and best use, since that’s where the money will be spent anyway.

The CRP takes land out of production:

[F]armers enrolled in the program agree to remove environmentally sensitive land from agricultural production and plant species that will improve environmental health and quality. Contracts for land enrolled in CRP are from 10 to15 years in length. The long-term goal of the program is to re-establish valuable land cover to help improve water quality, prevent soil erosion, and reduce loss of wildlife habitat.

but I don’t see any reason why all farmland isn’t assessed rents instead of taxes, to keep farmers on the land, with land treated as a productive asset rather that a speculative asset on some hedge fund’s books.

It’s Never Too Late to Pick Up Your Life and Move to Italy
Holly Herrmann vowed to move to Italy when she was 20. Her dream came true 38 years later.

Sounds like a lovely story until you get to this bit…

In 2016, the couple picked up their lives in Seattle. Unsure of what their future would hold, they first rented their four-bedroom home, then later sold it along with their two cars and possessions too large to take with them.

They owned a four-bedroom home in one of the hottest property markets in the US, where they may well have quadrupled the value (assuming they bought in the 80s and sold in 2016) during their tenure. With savings, retirement plans, the cars and other possessions, they might have had 7 figures to bankroll their move. This is essentially a lottery windfall…hardly a risky move. The only risk is knowing they could never buy back in if it didn’t work out. But the bottomline is they could have made that move on nothing more than the accumulated wealth of their property, wealth created by their neighbors and everyone else who lives in Seattle.

And they probably think of themselves as middle-class, nothing exceptional.

“[Daniel] Boone’s early, temporary excursions into the “Land of Tomorrow” [Kentucky] gave him a sense of the beauty and unknown dangers he could expect… The trips also led to property claims on the land by the travelers, in turn prompting a demand for surveyors to record those claims. One such team of surveyors put their lives on the line to parcel off two thousand acres below the Elk River for George Washington, then a representative to the Virginia legislature, and in two other spots recorded seven thousand acres for another legislator, Patrick Henry, who was ready to carve out a large piece of property in a place unknown to him. Washington and Henry, like other influential politicos, believed they could get rich from pushing into the territory.
“Years earlier, the British had forbidden private purchase of lands from American Indians such as the one Henderson engineered, having cited ‘the great dissatisfaction of the said Indians’ involved in such transactions.” [ — emphasis added] — excerpt from Chapter 1 of The Taking of Jemima Boone: Colonial Settlers, Tribal Nations, and the Kidnap that Shaped America, by Matthew Pearl (HarperCollins, 2021).

“said Indians” didn’t think anyone could own land…how could anyone own something they never made? Next thing, someone might think they could own people…

A couple of quotes…

“We knew it was coming,” said Francisco Nuñez, who for nearly two decades lived at the Cactus Rose Mobile Home Park until it was sold to a developer to make way for amenity-rich apartments that now fetch more than double what he once paid in rent.

“This has become the tale of two Austins,” said Susana Almanza, a longtime activist. “The rich keep building in our neighborhoods and the poor keep getting displaced. It doesn’t end.”

It’s worth reading in full…plus the pictures tell a story

Two professors/researchers wrote a piece headed thusly:
Why building more homes won’t solve the affordable housing problem
The problem isn’t the supply of housing; it’s that millions of people lack the income to afford what’s on the market.

So I sent them a response…

I just read this —
https://www.inquirer.com/real-estate/housing/affordable-housing-supply-new-construction-20211127.html — and had hoped for more analysis of the problem. To argue that affordable housing won’t fix anything because people can’t afford it seems tautological. Why can’t they afford it?

What I was hoping for was an explanation of why affordable housing is impossible to build, why wages and the cost of housing are so divergent. Even that would not do more than admire the problem: the real issue is not housing but land, the scarcity-driven cost to acquire land to develop in dynamic economies (the pressure cookers of the west coast, for example). A developer who buys an expensive parcel to develop will be limited by zoning (height limits, parking minimums, etc) that will make affordable unit too expensive for those who need a place to live near their work. They will make great investments, though, as happens all too often. Vancouver discovered this, and other cities are seeing it as well.

Some cities in Pennsylvania have a history of split-rate taxation, where land and improvements are taxed at rates to maximize the use of idle land, but that idea seems to have fallen out of favor. Land is not a productive asset: it has been transmuted into a speculative asset, through scarcity and the increasing financialization of the economy. When automakers make more revenue from loans that on the cars themselves — and it would be bad form to wonder why the prices being financed are so high — there is something amiss. Likewise, land that sits idle as parking lots or brownfields in cities with high rents and rising homeless populations is a sign of a deep problem. This article didn’t do much to address it.

The simplest example I can come up is to look at the population in 1970 and 2020 — 50 years apart — and note that the population increased by right around 50% — 220M to 330M — over that span. The land available for development didn’t increase by anything like that so what had to happen to the price? Seattle, where I live, is 85 square miles and has increased in population by about 25% in the past 20 years with a steep rise in rents and housing prices, exacerbated by the fact that many of the newcomers are high-wage workers and rents always follow rising wages. The lack of density is a big piece of the problem, as much of the city is zoned for single family homes, 20% of which are rentals.

Adding a large number of high wage workers without building housing for the varied incomes needed to support them — someone has to make the coffee and clean those luxe high rise apartments and drive the Ubers — skews the housing market. It’s too easy to argue that developers are greedy: they need to make sure the development pencils out. If greed is an issue, it stems from the speculator/investors who make money while working people sleep, as the quote runs. A tax on land or a split-rate tax that recoups that speculative wealth and drives more dense development would be good policy. Looking at the time needed in years to afford a home would also be useful. It was right around 10 years in the 60s through 70s — 10 years of wages would equate to a home price, so a 30 year mortgage would be a good risk. Now? A minimum wage worker would be at almost 27:1 and no one is underwriting a 81 year mortgage to someone in that position.

And if employers understood that land speculation was hitting their wage bill (driving up wages as rents go up) and office rents, they might support something like a land tax/ground rent. But Neo-classical economics either ignores land or assumes it to be capital. So we suffer at the hands of speculators, from Main Street to Wall Street (see: BlackRock et al).

I call Seattle a city for cars, not people: I wonder what percentage of the city budget that $7 million represents or what percentage it is as a shortfall?

In total, the latest revenue forecasts predict a $15 million decrease in general fund revenue, driven largely by lower-than-expected payroll tax and parking ticket revenue—both consequences of the slow return to in-person work. A shortage of parking enforcement officers, forcing the city to suspend the collections of parking fines, also explains the parking ticket revenue decline. Parking revenue shortfalls totaled more than $7 million.

As noted previously, downtown Seattle commands an annual rental value of about $1 million/acre. At 500 acres, per the city’s own land use plan, this $7 million shouldn’t be a big deal. But here we are, enslaved to cars and what they need — roads and parking — vs what people need — housing and productive spaces.

Interesting…

The Crown has made payments to 23 First Nations of the Robinson-Huron Treaty territory since 1850, in exchange for a territory roughly the size of France.

In 1874, the payment was increased to C$4 per person per year. It has not changed since then.

On Friday, Ontario’s court of appeal ruled unanimously that the meagre payments were a violation of the spirit of the treaty: to share the wealth generated from the territory.

4 loonies per person per year since 1874? I hope the First Nations south of the 49th parallel are keeping an eye on this.

At least we’re open about it: home-buying is no longer a simple matter of a buyer making an offer on a listed property. Low inventory and high demand have transformed the housing market into an auction and these sharps are hoping to make bank. A pinch of Zillow and Redfin, a soupçon of eBay…

Doorsey, an online real estate platform founded by a group of Spokane entrepreneurs, launched this week and secured $4.1 million in a seed funding round.

Founded by Jordan Allen, Nick McLain and Matt Melville, Doorsey is an online bidding platform they say takes the guesswork out of buying a home by providing real estate agents with real-time home prices and upfront sales terms and disclosures.

“Today’s home-buying offer process is rife with frustrations for all parties,” Allen said in a statement. “Buyers and their agents want to know whether their offer can win. Sellers and their agents want to know they’re getting the best offers. And agents want to close more deals in less time.

“Doorsey solves this by allowing sellers to define upfront what it takes to win, so that buyers can compete on a level playing field and sellers can find the right buyers.”

Translation: prices go up in a sellers market and we are selling a service to sellers, not buyers. Anyone who doesn’t sell through us might not get the best price — so long as our slice doesn’t have them making less, we’re golden. Selberg’s Law in operation…”anyone who says they are trying to reduce the friction in some transaction is actually trying to become the friction.”

Imagine building a transportation network that links homes and businesses and then giving away the land closest to it

Every debate about housing or development in Seattle will eventually come down to one question — “but where am I supposed to park?!” It’s as predictable as Godwin’s Law. The disastrous soon to-be former Mayor of Seattle could have created some car-free areas — the pandemic helped show the value of public streets for the use of all of the public — but declined. The incoming Mayor seems unlikely to do anything along those lines…the election was clearly revanchist, pushback against the small gains made by progressivism.

Street parking and surface lots — unimproved parcels on valuable sites with pay boxes to remit rents out of town — should be among the first things to go but this city has to transform itself from a city built for cars to one built for people. The removal of the “ugly as a mud fence” Viaduct was a start. Could a lid over the livid scar that is I-5 through downtown be next?

The debate over the free parking in West Seattle, on lots owned by a local business group, could be instructive. The value of the lots — the property tax — has risen past where it makes sense to hold on to it so they were considering selling to a local housing non-profit. The reaction was predictable: people actually said out loud that if the local hardware store was going to make them pay for street parking, they would take their business to the suburban big box store. Like the Bradley effect, one never knows if people will do what they say they will do, but the public display of car/parking dependency is real. It will take decades to undo what car-dependent land use planning has done. The combination of low density — because land was cheap — and distance — because gas was cheap and roads/parking were “free” — has created a tangled knot that will have to unpicked carefully. But the sooner we start, the better. Getting rid of street parking, reclaiming parking lots on high-value land will both remove distance by filling in housing and businesses and make them more accessible, ie more valuable to those who live there.

Some will see the prices of the new infill development as proof that this won’t work, that density doesn’t lower prices. But that’s premature. Of course, prices will go up in the short term, as people move to these new more desirable areas. The obvious lesson seems to be that we need more of them, not less.