Category: land and how we use it

This is typical (from a recent newspaper endorsement to vote “no” on a large transit levy)…

“Imma vote on improvements I won’t use/won’t live to see while I bitch about property *values* getting to where I can’t afford the assessed tax on my house I bought for a fraction of that price.” I can’t comment at the newspaper, I’m not a subscriber, but this is a really common take. To be clear property taxes are not going up, though levies do increase the tax burden…property values are rising faster than people are comfortable paying their taxes on. These, of course, are the same people who sneer at young people living beyond their means.

There are a lot of Seattle homeowners who have stayed in their 2500+sq ft houses too long and now can’t part with them, because they can’t find any place local to move to (imagine that, a housing shortage) but can’t accept that they are making it worse for the next generation. Ideally, Seattle would have options for people to move into and keep their independence while still feeling connected to their neighborhood. But Seattle’s voters consistently vote against anything that will expand those options to local working people or even longtime residents.

And by “voting against” I mean voting for city council members whose policies protect the libertarian status quo, rather than the so-called “progressive” view so many people think of when they think of Seattle. Pro-tip: legal access to weed and support for LGBTQ rights are not enough to be progressive, not in the face of dual multi-year housing and homelessness “crises.” A multi-year crisis is not a crisis: it’s the new normal and people are fine with it. This is a libertarian city, where property rights are more important than human rights.

Many Seattlelites would rather see the same tent encampments on their drive to work than a new multi-use building anywhere near their single-family fortress. I used to wonder how people travelled to cities outside the USA and didn’t want to bring home the same benefits of density and reliable alternatives to driving…until I was in Paris and realized US tourists don’t use those. They stay in hotels and take cabs. I stayed in an 18th C flat and took the Métro everywhere because why wouldn’t you?

 

Perhaps this is for my own reference but anyone in Seattle’s budget office is welcome to borrow this at any time. 

Suppose you have an asset you want to rent or lease out. Let’s set the rate at 2.5%, the term at 99 years, the base payment at $1,000,000 per year, the present value at 0 (since we are looking for what we will make per unit of time, regardless of the speculative value of the asset), and we’ll leave the when-due field blank since it’s not needed for our purposes. I am using Apple’s Numbers application to do this but Excel and Google Sheets also offer the FV function. Let’s see what it produces. 

Using those values, a $1M/year payment that increments by 2.5% each year will yield $421,023,077.11 over the full 99 years. That means you will receive $4,252,758.35/year annualized (you’ll get just over $1M the first year but by the end of the lease you will have received more than $400 million). The final payment will $11,244,465.30 — on a $1,000,000 base. Not bad. 

If you want to see each year individually or check your work, you can simply enter the base value in a cell, multiply that by base and increment (1.025 in our case) in the next cell, then extend that for the full 99 rows. You can add a cell to sum it all at the bottom and also add on to divide it by 99 to get the annualized rate. 

 

 

When I worked at the UW many years ago, I often heard references to the “metropolitan tract,” the original land the UW occupied before it took over the site of Alaska Yukon Pacific expo site. It never sold that land, holding onto it under rental agreements since 1909. I just walked past it and got curious about it. 

According to the September 2007 Metropolitan Tract performance report presented to the UW Board of Regents, internal valuation of the downtown property was about $680 million.

That’s speculative or sale value, what some developer might be expected to offer for it (generally speaking, the assessed value is about a third of what land around here sells for). But that’s not the value we should be concerned about. Public institutions, be they school systems, cities, or universities, should never sell land. They are not in the business of making money and can never compete to buy land at market rates (which would be paid for out of public tax funds). 

Reading over the piece at the link, I see that it generated about $9 million/year for a 9 acre parcel in 2007. Contrast that with the Mercer Megablock proposal that would have yielded $12 million/year (annualized against a $1.3B lease over 99 years) and I’m wondering if the UW is getting its money’s worth here. 

If it adopted the same deal structure — and why not, as this parcel is right downtown, not in south lake union — it could be making a small increase to the base rate of $9M each year, say 2.5%. Over 99 years, the revenue alone — not the speculative value of the parcel — would be $3,789,207,694.03 or $38,274,825.19/year over a 99 year lease. And that backdates the lease to 2009. I have no idea what value it commands 17 years later. So without losing control of the land, the UW could spend or borrow against that $39 million annual revenue stream to fund whatever it needs, just as Seattle could use ground rents/leases to extract more value from land than simple property taxes will ever yield. 

There are 500 acres set aside as “Downtown Seattle” in the city’s land use plan. Imagine if a majority of them — we could never hope for all — were under a ground lease model that reflected the true value of the land, as created by the economic activity if the city itself. No one would be able to buy any of that land because no one would be willing to part with it, if they weighed the revenue stream against the fee simple sale price. Imagine what it would to the value/price of land still in the speculative market. 

Would you sell an asset for $680 million that was paying you $40 million a year for the foreseeable future? I’d ask what city would be foolish enough to do that but I am sitting in the heart of one that sold a $1.2B ground lease that would have paid $12M/year — for the equivalent of 13 years of the lease, leaving 86 years of income — more than $1 billion — on the table.

What’s interesting to me is that both Seattle Public Schools and the UW are smarter about land value than the city itself. Both institutions hold onto land, rather than sell it, meaning the taxpayer is not on the hook to replace land sold to reap a windfall. The city, on the other hand, doesn’t take the long view or manage its assets as well. I suppose that makes sense, as it is the only one that can tax directly. 

“When houses are a million dollar plus and an older couple will likely outbid us anyway, we’re gonna relinquish any lingering delusions about homeownership.”

This kind of talk might make holiday get togethers a little tense. Today’s young adults (and some older ones) don’t have a lot to look forward to.

Meanwhile, with a looming recession, multiple ongoing wars, and climate change at a catastrophic tipping point, others voiced doubt over whether the future is even worth investing in.

It’s as if someone in the family already spent the rent and food money on their expensive travel, the very thing young adults are put on blast for.

Seattle’s worst city council member never ceases to disappoint. This is the same person who described the removal of homeless people from an abandoned home as “humane relocation.” That’s the kind of phrasing used to describe the rehoming of a food-habituated bear or nuisance family of raccoons. Or perhaps how indigenous peoples were sent to industrial schools or reservations…you’d think someone who puts their indigenous heritage front and center would be more aware. But then you wouldn’t be thinking of the same person. So what is she up to this week?

She seems to think this local business that is open one night a week and sits on 8800 square feet of prime developable land is worthy of our praise. A roadhouse smaller than most houses in the area, open one night a week…how much tax revenue that that generate for the city, that we should be so grateful? What acts play there that we should appreciate its status as Seattle’s last roadhouse?

The fact of the matter is it sits on 1/5 of an acre of land on Lake City Way, a busy arterial/stroad/busway, where housing or mixed-used development would be welcome. As you can see, the tavern is a teardown, valued at $1000, the lowest value you’ll see. And the land is valued at $1.1 million, up from $71,000 at the end of last century and  $528,000 10 years ago.

 

And this valuable contribution to District 5 remits $5,690.58 in property taxes every 6 months. About 1% of the assessed value over the course of a year. Seems like a great deal for someone. Not Seattle or anyone who lives there though I will give the owner full marks for using the business address for his tax mailings. Not Bellevue or Glendale, CA…

District 5 has Lake City Way, Aurora Ave, Northgate, and Holman Road/15th Ave NW, all inhospitable stroads/car sewers, as well as half a dozen strip clubs. Not that I care about how people make a living but one of them a block away from where I live, on half an acre of land, has an adjacent parcel  zoned for multi-family development. To no one’s surprise, it remains undeveloped. In the same block is a disused car wash, closed for about 2 years now and taking on a new life as a graffiti canvas.

Just up the block is an installation of a couple hundred eco-blocks, placed there after some local vigilantes attacked an RV/homeless encampment. I didn’t see that attempt at “humane relocation” mentioned in her newsletter.

Further up the street we have a disused car lot, an idled truck sales office, and entirely too much low density development for such high value land. Further south, more disused land and low-density development on a high volume roadway. But at a 1% tax — no pressure to increase density or redevelop that land — everything is fine, as far as our councilor is concerned. I asked. She thinks it’s great.

Hayekian property rights outweigh human/civil rights, it seems, in this progressive city. Certainly in District 5.

Business is booming at the Roadrunner Grab’n’Go deli outside Joshua Tree national park. Demand for sandwiches, mezze boxes and local vegan cheese has remained high through the summer, even as temperatures soar in a desert landscape that now attracts more than three million visitors each year.

But the shop’s co-owner, Merilee Kuchon, has a problem. Her employees, many of whom grew up here, are struggling to afford to stay. Over the past year, she’s lost at least a dozen staff, driven out by local rental prices that have soared during the pandemic. Now, she’s worried about hiring enough employees to keep the shop going when even more tourists return in the fall.

Gentrification is technically correct…

but this isn’t just a haphazard evolution of some bohemian district becoming cool. It’s more calculated than that…some of the land in the area was bought in the event someone else — like this sandwich shop owner or some backcountry outfitters — put in the work to make the location valuable.

I don’t buy the “inevitability of gentrification” unless we want to accept the inevitability of being hit by a bus if we cross against the lights. It’s avoidable, not inevitable. Better land use policy, managed by land use taxes and hard boundaries, would prevent both the destruction of beautiful places like this and the evisceration of working people’s lives by speculators. It’s not inevitable, unless we accept it to be so. I don’t.

Reading DeLong’s “Slouching toward Utopia,” I realize I am firmly on Team Polanyi and now understand why I have never bought into Team Hayek. Property rights don’t trump human/civil rights or the Maslovian requirements for a good life. The pendulum has some way to swing before we get there, though.

Walking the picket line today, some of my colleagues were simultaneously griping about their property taxes and rejoicing that they would be able to retire with a nice cushion when the time comes (a reasonable house in the $300-500k range 1-15 years go now commands a high 6 or even 7 figure valuation).

I wonder how many of them understand that the valuation they are seeing is not from their loving cared for home or the carefully curated plantings they have invested in but the land itself, the coordinates they own exclusive rights to. I further wonder how they would handle it if their property taxes/property value dropped. Again, the value is in the land: their house is the same house today as it was yesterday or last year. But the value today is much higher than it was a year or five years or ten years ago. And none of that has to do with any expense or effort on their part.

I doubt there are any plans to upzone or increase the density of any land near them, like the commercial land along the arterials that is often occupied by single story strip malls or single family homes. But if there were and they were promised a lower tax bill that didn’t require a lower valuation, I wonder if they would accept it? What if commercial property, either multifamily residential or pure commercial was taxed at a different rate to force more dense development and what if the resulting increase in tax revenue meant that residential property — non-remunerative property — could now be taxed at a lower rate, less than the 1% that every property owner pays now?

Right now, we have the perverse incentive of families investing in their shelter as their retirement fund, paying higher and higher taxes on it, in the hopes of a payback. A low risk bet, to be sure: they’ll get their money but what are they forgoing on both a higher purchase price/higher mortgage payments and the rising taxes that are both driven by the finite nature of land, the artificial scarcity of limiting development, enforcing parking minimums, keeping building heights down, etc.?

The perverse incentive of paying too much for artificially scarce land to pay into a retirement fund while keeping housing prices out of reach seems like something we should address. Conflating housing and land as housing is part of the problem, mostly due to the single family home as the only option for buyers, especially if they have a family. But taxing commercial land at the same rate as residential land is also part of it. Why should we tax land used purely as residential land at the same rate as the land under a store or restaurant? Are commercial and personal auto registrations taxed at the same rate? Is electricity sold to homeowners at the same rate as businesses?

If a parcel of commercial land commands $1 million per acre per year, as we have seen offered, what is that land worth? At 1% that’s $100 million. But the assessment didn’t reflect that. The developer said it was worth that much to rent, and buyers set the price in every market, as sellers eventually discover.

I think this is backwards…

On Aug. 1, a new pilot program launched in North Tahoe that pays homeowners up to $24,000 to rent long-term to locals.

The goal is to “unlock” homes that are sitting vacant in Lake Tahoe and alleviate some of the mounting pressure on local workers who are in need of places to live that they can afford on their wages.

So you are going to pay homeowners a bonus, on top of the unearned wealth they already enjoy, to rent to people whose wages are too low to allow them to pay market rate rent?

In North Lake Tahoe, 65% of single-family homes are second homes and short-term rentals, according to a 2021 Mountain Housing Council study. Many of those houses sit empty for the vast majority of the year. Meanwhile, at any given time, about 200 to 300 households who work in the Tahoe region are searching for housing,

Rather than reward rentiers for tying up valuable land and housing, the rents on which will not be spent in Lake Tahoe, why not tax them for the value of their land, the value that all the local people who can’t afford to live there created? Those property owners didn’t create that wealth. They may never have even have set foot in town or might have inherited that property. Meanwhile, the local economy is built on the backs of people who can’t actually enjoy the place where they live.

Inflation, as in a weakening dollar? Or hyper-inflated land values?

The original Kidd Valley restaurant, which opened in 1976, will be permanently closing, according to a Facebook post from Kidd Valley.

Located on Northeast 55th Street near Ravenna Park and originally opened in 1976, the 800-square-foot restaurant needed to be remodeled to bring it up to code for the Americans with Disabilities Act.

According to Kidd Valley, because of inflation, it became too expensive to remodel or build a new store.

Hmm, I wonder…what’s the value of the land under that burger joint?

Well, now. The burger joint itself has been a $1,000 teardown since the year I moved to Seattle. But look at the value of the land since then…

About 1/10 of an acre valued at one and a half million dollars. Why is it worth so much? And why did it rise so quickly?

• It’s right near the University of Washington, within blocks of a very densely populated student quarter
• It’s on an arterial with frequent bus service
• It’s also near a very successful shopping destination

All this as Seattle’s population increased from around 600,000 to 750,000…about 25% more people with a steep rise in land values/prices.

Which of those items did the owners of Kidd Valley build? At best you could argue their taxes helped fund the transit service. But the rest of it? All built by the community around it. Sure, they own the value of the business, the loyalty to the brand, the reasons why people go there. But the land value? Not so much. A vacant lot would command a high price at that location.

In a way, they are right: if they were to tear down and rebuild that 1960 building, it would be assessed at far more than the $1000 it’s valued at now. So they would be paying that onerous 1% or so on the $1.5 million in land with perhaps another $1 million on the new building. Maybe that doesn’t pencil out for a fast food restaurant, no matter how good the location is. And that’s fine. Let the land be repurposed. We’re not talking about cutting down the redwoods here: this is land that has already been developed multiple times.

So they are sitting on land valued at $15 million per acre. One could extrapolate that value along that corridor for a few blocks in either direction: how would one assess a land value tax there? Probably more than $13,364.34 per year, I think (and paid to an address outside Seattle, so Seattle doesn’t even get the paltry tax anyway).

If you turned the property tax into a ground rent/and value tax — maybe raise it by a factor of ten as the value of the location increases — the decision to move on would have happened 10 or 15 years ago, freeing up that land to find it’s highest and best use. Perhaps as a multistory mixed-use building with a Kidd Valley at the street level and 3 stories of residential above it. Look just down the street and see the dense development across from the University Village mall. Assess the value of the land at it’s most remunerative use, manage the improvements at a lower rate with zoning and land use guidelines to let developers maximize that value, and stand back.

Went out to the KEXP 50th birthday party at Seattle Center yesterday and enjoyed it, lots of good music and a chill crowd on a hot (for Seattle) day. But I asked myself why I don’t do more of that sort of thing… 1/

Well, for a start, getting there is a collection of poor options. I could ride a bike if I wanted to spend the better part of 8-10 miles on either a state highway masquerading as a local road or various other local streets, all in bicycle gutters. 2/

I could take public transport (the option I chose) which took about an hour each way to go 7 miles.
Or I could drive 8 miles and pay to park and deal with all the attendant hassles of that. 3/

Seattle Center has been referred to as Seattle’s living room or collective gathering space. But why is getting to it such an afterthought? Link Light Rail has plans to connect to it but the flow of city life Link is built for has bypassed the so-called Center. 4/

And credit where it’s due: there were a *lot* of bikes at the event…100s of them. But where did they come from? Ballard, Capitol Hill, SLU…I doubt many came from N of the Ship Canal where a lot of the annexed car-dependent suburbs are. 5/

But a quick look at Search Results for “ghost bike” – Seattle Bike Blog
will show you a couple of good reasons why it’s not safe to ride a bike in Seattle, no matter your age or experience level. I don’t want to be a ghost bike by the side of the road. 6/

So it’s a mix of factors…Seattle’s inability to integrate the annexed suburbs into any transportation network because it tore out that network before the annexation. Seattle like many cities had streetcar suburbs and a viable intercity rail line from Everett to Tacoma…7/

(Guess what Link Light Rail’s N/S plan is going to replicate, at considerable expense — the old Interurban rail line) 8/

And its inability to imagine what NotJustBikes refers to as “viable alternatives to driving.” I took someone to the airport on a Thursday at 5:30 AM: by the time I returned at 6, traffic was crawling to stopped in places. Link would have taken over an hour, if it was running 9/

How many of those people could be served by transit if development and transit were designed together? If you have the same daily patterns of rush hour to all day stop and go traffic, you have proven the need for alternatives. Why aren’t they available? 10/

If you have one or more “traffic reporters” calling out the usual slowdowns and backups every day, what are you doing? And the irony of Seattle as some nature-loving stronghold while local salmon stocks are being wiped out by tire dust running into streams…11/

…and the livid weeping scar that is I-5 emitting clouds of greenhouse gases 7 days a week isn’t lost on me. Why would anyone *want* to ride a bike alongside that? We shit the bed on a daily basis then just remake it and do it all again tomorrow. A better world is possible. 12/F

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