the art of writing is discovering what you believe
“Everyone made the same bet on inexorably rising property prices, especially the developers, who levered to the hilt, overpaid for land at auctions, and scooped up as much real estate risk as they could take on,” [Michael Pettis, professor of finance at Peking University] said.
Because of course they did.
I know Mao didn’t actually kill the landlords but whatever happened to this? Why, in a country ruled by an actual communist party, is land ownership by anyone but the commons a thing?
Nothing I can add to this story…the writer has covered it all. But it’s always worth fossicking around in the property database to see how that parcel has progressed.
If there is a clearer illustration of how land increases in value with no effort on the part of the owner, I can’t imagine it — a 10 fold increase in value over 20 years for a parking lot.
It’s only 1/6 of an acre…if we apply the Mercer metric™ of $1M/acre per year, that’s about $160,000/year in ground rent/land value tax…as of 2021, that parcel only generates $38,190.82/year. If the parking racket doesn’t generate $160k/year, maybe it’s time to develop the land into something more remunerative — you know, the highest and best use. All I see now is someone making a 10x gain for nothing, while that land is wasted on car storage. That looks like a 12% annual return over 20 years: not bad for no effort or as the man said “Landlords grow rich in their sleep.”
What’s especially frustrating is that everyone in the real estate game, from developers to the local school district, understands the value of land, as an asset to hold onto or to develop under a ground lease — except the city of Seattle itself. It sells surplus land that investors add to their portfolios with no incentive to develop it. The city has even turned down lucrative lease offers, opting for a fee simple sale that represented a fraction (15%, in the case of the Mercer life sciences campus) of the offered revenue for that project. That left almost $1B on the table, a revenue stream that could have been used to borrow against (does no one in the city’s finance office know the future value function in Excel?): $1B over 99 years annualizes to $12 million per year. And that’s for one property, one development, one acre of the almost 500 Seattle has set aside as downtown/commercial real estate.
The authors are doing a lot of work for me, exploring ideas I have been thinking about but with much more skill…a couple of passages I found interesting:
[I]t was only at this point, in the mid to late eighteenth century, that European philosophers first came up with the idea of ranking human societies according to their means of subsistence, and therefore that hunter-gatherers should be treated as a distinct variety of human being. As we’ve also seen, this idea is very much still with us. But so is Rousseau’s argument that it was only the invention of agriculture that introduced genuine inequality, since it allowed for the emergence of landed property.
Rousseau had something to say about the first person to erect a fence and claim land as theirs but the authors explore this in much more depth, citing his quote that “people ran to their chains” instead of staying free of the system we see today. So much of the book so far has been about reading more deeply and getting the facts behind simplistic takes we have already heard.
Let’s first ask why even some experts apparently find it so difficult to shake off the idea of the carefree, idle forager band; and the twin assumption that civilization properly so called – towns, specialized craftspeople, specialists in esoteric knowledge – would be impossible without agriculture. Why would anyone continue to write history as if places like Poverty Point could never have existed? It can’t just be the whimsical result of airy academic terminologies (‘Archaic’, ‘Jömon’and so on). The real answer, we suggest, has more to do with the legacy of European colonial expansion; and in particular its impact on both indigenous and European systems of thought, especially with regard to the expression of rights of property in land. P 148
It seems that idea of land as shared commodity, owned by none but used by any, was so obvious no one knew it was a thing — not unlike how we see the ownership of land, as it underpins everything we rely on, include the unequality the authors are unpacking and what actually looks like autonomy — the power to own your own life, to say no, to avoid being dependent on anyone or having anyone dependent on you.
Central to all of this is the idea that the Americas are the birthplace of democracy but the europeans rejected it, saw it as a threat to their hierarchical society of churches and monarchs. It was already here — the idea of “governing” with the consent of the governed, representation, even the ability to opt out, to say no, as there was no government monopoly on force. There were times when discipline and hierarchy were needed but these were based on events/seasons or locations (a chief’s court, in one example). It was neither hereditary nor universal.
Not even 1/3 through and it’s simultaneously overturning old ideas and vindicating my own suspicions and doubts.
Some of these quotes hit pretty close to home…never read any of her stuff but I will have to fix that.
This is something I have realized also, though not expressed nearly as well: we don’t teach grammar anymore anyway, we simply correct usage.
Grammar is a piano I play by ear, since I seem to have been out of school the year the rules were mentioned. All I know about grammar is its infinite power. To shift the structure of a sentence alters the meaning of that sentence, as definitely and inflexibly as the position of a camera alters the meaning of the object photographed.
I don’t care so much about connected cars but rather than auction off spectrum, capturing the value through a rent — value that we create by using it in new ways — would be better.
The 3G network has to go away because the electromagnetic spectrum has a limited number of frequencies, and those frequencies are like real estate: you can’t really create new ones, and what’s there is very valuable.
Just look at this chart of how the RF spectrum was divided up in the United States around 2016:
And if we the people retained ownership, we might have more control over how it’s used. But mostly, I’m about the $ we should be collecting.
The value of an Amazon-leased building in Seattle increased 25% in three and a half years.
Not the building…the land under it.
King County on Wednesday posted an affidavit that shows Alexandria Real Estate Equities (NYSE: ARE) sold the 5th & Bell building in the Denny Triangle for $118.7 million to Hudson Pacific Properties (NYSE: HPP). Hudson said it bought a leasehold interest and that the remaining term on the ground lease is 50 years.
Read that back: “Hudson said it bought a leasehold interest and that the remaining term on the ground lease is 50 years.” We don’t know the terms of the ground lease but if it wasn’t going to make a profit, they would never have taken it. Those payments on the lease could be going to the city tax coffers but instead will go to the speculators who know a good thing when they see it — unlike our electeds and the local chamber of commerce.
Hudson Pacific said it funded the acquisition with a combination of proceeds from the company’s recently closed preferred stock offering and a $75 million draw on its revolving credit facility.
I wonder how much of their revolving credit facility is made up of payments against and income from other land investment…the sort of thing that a city could also be doing, to the benefit of the taxpayers.
The 25% rise in value indicates Amazon.com Inc. has renewed its lease for the six-story building with approximately 192,000 square feet. In a press release, Hudson Pacific Chairman and CEO Victor Coleman said that with the purchase, the company has “nearly doubled our portfolio of premier quality, long-term-anchored office tenants” in the Denny Triangle.
25% in 3 1/2 years is pretty good. That’s 7.1% annualized. The Mercer project only offered 2.5% and it still would have paid out quite a lot. Imagine any other investment with a 50 year term that pays that well.
Five of the most popular Idaho jobs can’t cover fair market rent, data analysis says
The most common jobs in Idaho do not pay a sufficient median wage to afford a fair-market-rent apartment, according to a data analysis by the Idaho Asset Building Network (IABN).
To afford a fair-market apartment, averaged across the whole state, the analysis says one has to make $17.36 per hour.
Further, rent has increased two times faster than wages over the past 30 years according to IABN.
Virginia Wilson in Boise has learned this the hard way. She has lived at Edgewater Apartments, just off West State Street, for three years and when she renews her lease next calendar year, her rent will increase by $500.
$500 more a month for what? To cover new or rising costs? Or to take advantage of Boise’s population surge?
Rents/land values (and by extension home prices) follow the money…as wages or investment dollars flow in, prices go up. Land is finite and if you want to own part of a finite commodity, be it gold or land, you have to pay the market rate.
The real question is, why is there a market rate in land anyway? The value of land as an investment is what drives up housing costs. There is no way to build affordable housing without affordable land, so as land rises in value as an investment, it becomes too expensive to develop for anything but luxe properties. If that value were recaptured through a ground rent/land value tax, it would lower the cost to acquire it for affordable development.
How the government helps we allow investors buy mobile home parks, raise rent and evict people
Money is tight for Mary Hunt. She often has to decide which bills to pay on time — heat, her car loan, the phone bill. But she’s been able to scrape by for more than 30 years, living in a mobile home park in Swartz Creek, Mich.
She owns her home outright. But she needs to pay monthly “lot rent” to the park for the little patch of land that it sits on. And the managers of the park, a couple named Stan and Nancy, used to live right here.
She is not homeless but landless…she owns her home but the land is a market-rate commodity, in the hands of investors, not the community or a trust controlled by the people who live on it. But she may be homeless soon, losing both her home as a place to live and the value of it as an investment. The value of the land is more than the value of anything built or kept on it.
But there’s something else at play here, too — when mobile home park investors like Havenpark put the squeeze on residents like Hunt, they’re getting help from an unlikely source: federally backed companies with a core mission of helping to make homeownership affordable.
“When private investors come to buy parks, [they] raise the rent, sometimes 20, sometimes 50, sometimes 70%” says economist George McCarthy, president of the nonprofit Lincoln Institute of Land Policy.
And, he says — what’s really troubling to him — is that the government is basically turbocharging this trend.
That’s right: we are enabling this system. From subsidized home ownership and tax deductible mortgage interest to this ripoff, we allow land to be controlled and sold at ever-higher prices to those who can afford it and are willing to turn it into an investment.
Several industry insiders tell NPR that this is the way it works: When a company raises the rents and fees in a park, that increases the cash flow and makes the park more valuable on paper. So the company can then borrow more money against the property.
This is essentially the argument I have been making, that the rental value of land is cash flow that can be borrowed against by a city to fund needed development or services with taxing income or commercial activity through sales taxes. Recall the Mercer Megablock project, with the $1+ Billion dollars in ground rent offered that Seattle’s city council rejected, settling for $150 million. Now that $1B wouldn’t be paid upfront, but over time, 99 years to be exact. But that could be annualized to about $12 million a year…for one property, about $4 million per acre. Consider that many of our wealthiest neighbors don’t need to qualify for a mortgage using income from labor but by using their wealth in stock or land as a collateral. Why can’t a city do the same?
Sometimes the headlines write themselves…👆🏼
According to the latest numbers from the Texas Real Estate Research Center at Texas A&M University, the average price per acre in the Austin-Waco-Hill Country market reached $5,290 in the third quarter, up 30% year over year. Almost 60% more acreage changed hands last quarter than in Q3 2020.
Rising land prices mean higher overhead for new housing, a significant factor in rising home prices in the Austin area. In October, the median house in the metro cost $455,000, according to the Austin Board of Realtors. At the same time, the need for new housing was extreme, as the area had only one month of inventory. This is a far cry from a healthy market’s inventory of six months. — emphasis added
There is no affordable housing without affordable land. Those high land prices reward speculators and investors, as the headline makes clear. There is no way housing developers can build their way out of a hole that deep. The solution to this was understood 150 years ago and further back. But those who still stand to make money from the scarcity of land and are willing to pocket the unearned increment, the dividends of other peoples’ investment, will resist that solution.
What is being appraised? The house as a home or as an asset to be used to accumulate value through scarcity/boost the value of others nearby?
That year, it appraised at over $1.4 million but a year later, they said it was appraised at just $995,000.
When the appraisal came in lower than they expected, the couple knew something was wrong.
[…]
The couple decided to ask a White friend of theirs to pretend to be Tenisha to see if they would get a higher appraisal. With their friend, Jan, pretending to be the homeowner, the couple removed all photos of them and their family.
[…]
After doing this and with Jan’s help the new appraisal came in—nearly $1.5 million dollars, more than the appraisal roughly a month before.
So they lost about 1/3 of the value based on how the appraiser thought someone would feel about buying a home from a black family — who could afford a 7 figure home in Marin county. Nothing to do with the home or location…
They’re now suing the appraiser, who is White, claiming she used unsuitable, racially biased comparable home sales or “comps” in determining their home’s worth—giving it a low market value.
It doesn’t say how far away the “comps” were but if they factored in the race of the owner, they may not have been near the property in question. So the imputed location, a/k/a proximity, was the real factor, preserving the “neighborhood values” of the other properties. They appraised it as a black-owned home, not as a home, full stop.
It must be understood that the value here is in the land, even though the appraisal fluctuated by half a million dollars. The location in Marin is the value and the appraisal reflects the scarcity of that finite asset. If land was valued for its highest and best use — commercial or residential — it wouldn’t be a speculative asset and none of this chicanery and wealth extraction would be an issue.
