Category: land and how we use it

It is an experiment taking place across Silicon Valley, which often sets trends for other large employers. Facebook and Twitter cut pay for remote employees who moved to less expensive areas. However, Google’s pay calculator tool – which allows staff to see the effects of a move – suggests remote employees, especially long-distance commuters, could experience pay cuts without moving.

It continues to puzzle me how companies like Google, Facebook, etc., have yet to figure out that the higher wages and rents they have to pay tie back to this observation by Henry George:

Like a flash it came over me that there was the reason of advancing poverty with advancing wealth. With the growth of population, land grows in value, and the men who work it must pay more for the privilege.

The higher wages they have to pay, as well as the higher rents or costs to acquire buildings and land, all go to the pockets of speculators. The high value of land is driven by the work performed on and around it, not due to any investment by the rentier.

Now we see that companies will punish workers for the temerity to make the choices that their employers can’t or won’t: to move to a place with a lower cost of living, less graft for the rentiers.

In cities like NYC, San Francisco, or Seattle, the rents — for commercial real estate and home purchases/apartment rents — rise with wages, not based on the intrinsic value of the property. You have to be there where the action is and the rentier is there with her hand out. If cities or employers realized that there was a whole industry skimming off the cream, the value of the location that they had no hand in creating, they might be inclined to do something about it. But that revelation is long in coming, even now, more than 100 years after Progress & Poverty.

This piece in CNN Business lays out most of the game plan: buy up as much housing stock as you can with institutional funds, then rent it back to would-be homeowners, all to prop up the 20th C lifestyle that is going to kill millions over the next century.

For institutional investors starved of returns on government bonds, “Generation Rent,” the mostly millennial cohort born between 1981 and 1996, provides an opportunity for reliable long-term income. With an increase in the average age of renters comes rising demand for larger suburban houses suitable for families.
“Wealthier people are renting for longer and their demands are going up,” said Gemma Kendall, who advises investors in multi-family properties for Jones Lang LaSalle (JLL) in Europe, the Middle East and Africa.
That’s precipitated a rush by institutions to buy — and build — so-called “single-family houses,” displacing private landlords and making big investors a powerful new force in housing markets.

Housing is no longer shelter or a place to invest in your community through ownership: it’s just another asset you can’t afford. Berkshire Hathaway closed at $418,000 today: might as well buy a piece of that.

The coronavirus pandemic gave institutional investors all the proof they needed that single-family rentals could survive a severe economic downturn.
Real estate analytics firm Green Street estimates that single-family rental values in the United States are 15% above their pre-Covid level. Renting out single-family homes is expected to deliver annual returns for private investors in the next three years of 6.8%, compared with 6.1% for apartments, 6.3% for industrial properties and 6.4% for malls, Green Street said in a July report.

And imagine that: the 2008 crash that no one was held accountable for was the spark that lit this fire.

In the years following the 2008 housing crash, pension funds and traditional real estate investors mostly steered clear, leaving it to opportunistic hedge funds and private equity firms to mop up supply.
Now, big institutions can’t get enough of family homes. Earlier this year, funds managed by Invesco Real Estate, one of the world’s largest property investors, gave Mynd $5 billion to buy 20,000 homes in the United States in the next three years on behalf of pension funds.
Mynd is currently buying between 30 and 40 homes a month and wants to increase that to over 1,000, according to Brien.

All this does is tighten supply/reduce inventory and raise prices which makes this so maddening: I wonder why “people […] can’t afford to buy their own home?”

Dave Flitman, the CEO of Builders FirstSource, told CNN Business in July that construction on new single-family housing units was up 34% in the second quarter of 2021, compared to the same period in 2019 before the pandemic.
These developments are often in good school districts and offer a quality of life that might otherwise be inaccessible to people who can’t afford to buy their own home, Palacios said.

Maybe it’s because so many homes are being bought up, so many new subdivisions are being built as rentals, and it all comes down to land.

And this was adorable…

For renters accustomed to knowing their landlord by name, dealing with a corporation might take some adjusting to.
As institutions move into an industry overwhelmingly dominated by “mom-and-pop” landlords, analysts say they’re giving renters more choice, improving the quality of homes available and streamlining processes through technology.
“We would argue that [institutional money] is driving standards up in the rental market, which is a positive thing for households and the sector,” said Oliver Knight, head of residential development research at Knight Frank.

You would argue that but you would be wrong. Property managers don’t actually manage the property: they manage the investment, doing as little as they can, slow-walking repairs, so long as the occupancy rate stays high. The land is the asset, the building rents are just how it gets paid for. Sure, there may be some kindly old duffer who keeps his place up, some old doll who likes to put flowers in the entry way, but they are few and far between.

There are, of course, plenty of private landlords who treat tenants badly or fail to meet expectations without fear of any public backlash. Unlike institutions, they have no corporate reputation to protect. Institutions are also “in it for the long term,” said Knight of Knight Frank. “It pays for them to be a good landlord and keep everything well maintained and working,” he added.

When all the rentals are in the hands of a few concentrated corporate landlords – when Main Street and your street are owned by Wall Street — what options will renters have? Rents rise to meet wages and no one will care about the landlord’s reputation when they need a place for their family. There will no pool of vacancies to choose from: supply will be tight and rents will stay high.

So what is to be done?

A split-rate land rent that values the highest and best use of the land, with higher rate on land than on the improvements, is the best option. But as a start, anytime a single family home’s tax bill goes to an address other than the address of the home, it’s considered a business and should be taxed accordingly. 20% of Seattle’s single family homes were rental last I looked. We have zoning laws that prevent businesses from opening up in the middle of a residential block: why do we permit Wall St to siphon off local wages by breaking up neighborhoods? Ideally, a well-tuned ground rent would put enough affordable housing into the market to hold shelter rents down.

Housing is all about land and land is a cartel, a group of owners whose interest is in keeping up the value/sale price of their property through managing supply — blocking development, opposing zoning changes, clinging to street parking and parking minimums, doing whatever they can to keep their unearned wealth. The value of location, of land, is created and increased by the activity around it. A vacant or underused parcel of land in a strong economy will gain in value with no effort on the owner’s part. That’s unearned wealth, and should be recaptured for the benefit of those who created it through a ground rent.

What if the privatization of public land, the expansion of the cartel of land owners, has helped bring about climate change by putting more and more land into the market, land that has high resource cost to make livable (think: Miami and the rest of SoFla, Houston, the desert SW)? If land had remained in public hands and rented out under a leasehold model, we could have increased density and allowed those areas to remain untouched.

In a poetic twist, it seems that many of the areas least conducive to life without massive support are the ones feeling the most effects of climate change — flooding and daily tide overflows in Miami, droughts and reduced water flows in the desert SW. All of those areas have transformed the land through development and added automotive transport, increasing greenhouse gases and exacerbating the heat island effect.

Food for thought, but it does feel like the planet is trying shake us off like a dog tries to rid itself of fleas.

Throughout the world, some of the most delightful urban spaces are also some of the smallest. It’s a counterintuitive observation that we ought to give more thought to.This is true of both private and public space. Think of the most charming, appealing backyards you’ve ever spent time in. Gardens. Patios. Courtyards. Alleyways or pedestrian streets.

The idea of this piece is about “delight per acre,” about high value experiences in small space, human-scaled and relatable.

But the part that jumps out at me is the private spaces that are walled off as private yards vs public spaces that are often far apart and too small for the number of people who could use them.

How many 6,000 square foot yards could be cut down to a quarter of that size — or even less per household in a multi-story development — with the balance going to public plazas, squares, wider sidewalks? The elevation of single family homes and car storage over a wider variety of housing for a wider variety of people is catching up to Seattle and other cities. We have all the land we will ever have and have ever had but we seem to have more people all the time.

Whenever a population converges around a certain location, the land, of which there is only a limited supply for each location, becomes more expensive to live on; people have to increasingly pay to live on land, and this in turn affects the entire economy.

This affects local businesses two-fold, in the rents they have to pay for their space and in the wages they pay to their workers. And the rentier/landlord charges as much as she can, taking their unearned increment every month, styling themselves as investors, rather than predatory speculators.

But with apologies to the staff at Mother Jones, land and what is built on it are inextricable. We can’t imagine housing without land, even though many people rent their housing and own neither their shelter or the land under it.

There is now not a single state or county in the US where a minimum wage worker on a 40-hour week can afford a two-bedroom home at the fair market rent, according to a report published by the National Low Income Housing Coalition this week. In 93 percent of US counties, such full-time minimum wage workers can’t afford a one-bedroom apartment, either.

CEO Diane Yentel [said] in an emailed statement[,] “Without a significant federal intervention, housing will continue to be out of reach for millions of renters.”

To crunch these numbers, the NLIHC relied on a common metric for housing affordability: a home is affordable if it requires workers to pay up to 30 percent of their monthly income in rent. Using this metric, NLIHC’s report found that workers would need to earn a little less than $52,000 per year—or $24.90 per hour—to afford a modest two-bedroom home, or at least $20.40 per hour to afford a one bedroom. The federal minimum wage is $7.25 per hour.

I prefer a different metric, one that gets people out of the landlord’s game. How many years (at 2,000 hours/year) will you need to work to own a place of your own? At $24.90/hour, you would earn $49,800/year. To buy an $800,000 home (the current median price in Seattle), you would need to put every penny for 16 years to buy that. And people argue that $15/hr is too much. Ideally, it would be about 10,000 hours but where are the $300,000 homes in Seattle or other cities?

But we know that home prices are not the real metric: it’s land. In cities with huge lots (6,000 sq feet) and a slavish worship of single family homes on those big lots, you are setting a cap on the population that can buy in, turning the rest into renters or forcing them to live outside the city and commute in. Why you would want to pump local wages outside city limits to enrich neighboring communities is a question to ask your local city council. This is especially important when you consider than many of workers forced to live outside the city where they work are city or state workers: why could you take wages funded by local taxes and send them to be spent in other cities?

And the answer to the question above — “where are the $300,000 homes in Seattle or other cities?” — is that they are all over those cities. The tax records for King County — where Seattle is — make clear that where the assessments on housing have risen slowly over the years, the assessed value of land has sometimes exceeded the value of what is built on it. What makes housing unaffordable is the land under it. We have all the land we have ever had and will ever have but we can make far better use of it, to make a better life for everyone and generate more revenue for those cities.

Would you pay £63 for a chicken? The artist who built a street to show house price madness

Beginning with the very origins of money, [the show] moves from financial deregulation to the bonfire of mortgage-backed securities, to the gushing petrol pump of quantitative easing, and relentless house price inflation – noting that it would now cost £63 to buy a chicken if groceries had increased at the same rate as homes. With Fishbone’s smooth American accent providing a slow, measured monologue, calmly explaining the intricacies of the global banking system over the top of his Powerpoint slides, it’s as if The Big Short has been remade as a soothing meditation video.

[…]

The film is certainly an entertaining 15 minutes. It charts how “money became postmodern” after Nixon removed the US dollar from the gold standard in 1971, giving central banks a free licence to print cash. “Money has always been a fictional thing,” Fishbone says, and all systems of valuation are “just social contracts based on mutual agreement and backed by some kind of institutional violence”.

The fiction doesn’t matter if we agree with it but that’s not his argument. The problem with the “mutual agreement” he mentions is that’s not universal…the property owners agree on how to value what they have but not with an eye to telling the have nots who make their property worth owning.

KETCHUM, Idaho—Ethan McKee-Bakos has had no trouble finding work since he moved to this upscale mountain town last February, earning $60,000 a year from two jobs. But Mr. McKee-Bakos spent nearly six weeks living out of his SUV in the nearby Sawtooth National Forest, unable to afford rent for a condo.

$60,000 a year…that equates to $30/hour, double the $15 wage target people are fighting for. And it’s not enough.

“If you live in Ketchum, there’s no shortage of work. There’s just a shortage of where you can live,” said Mr. McKee-Bakos, who works as a supply manager at a local hospital and a bouncer at a bar. “This is the first time I’ve experienced any type of homelessness.”

Like many towns in the West with economies built around tourism, Ketchum is facing a cascading housing crisis caused by a rush of new residents during the Covid-19 pandemic, growing demand for workers during the economic boom that has followed, and a shortage of affordable homes that was years in the making.

Just another town where the land values are so high — the revenue rentiers can extract from them so lucrative — that working people, the ones who make the town go, are left out in the tiresome game of musical chairs that is the private property market. A desirable location and the recreational benefits that go with it, some historical ties (Hemingway is associated with the town) — none of which was created by the people who hold the land — and all the value gets siphoned out by rentiers and landlords.

If businesses are so determined to get people to commute back into their offices, maybe they should find away to make it less painful.

I have never seen any news coverage that compares the cost of fare enforcement on the local bus/rail networks with the revenue captured through fares. And we know that farebox recovery only covers a fraction of the cost of each ride. So why not eliminate the fare and the cost to enforce payment? How much does the fare collection network cost, in expensive terminals, fare enforcement officers, and the associated back office expenses, expanding and upgrading a system we might not even need?

What if the land along those busy corridors was taxed on its productive value with that revenue dedicated to the costs of transporting workers and consumers along those rights of way?

Dan Price — locally grown, internationally known — has some thoughts on the relationship between work and where one does it.

But the key takeaway for me was this, about the possibility of earning Seattle wages outside Seattle, of being able to take your job to where you had more buying power.

“But wait, isn’t that what suburbs are for? And you hate suburbs…”

If you don’t have to commute back into the city, it’s not a suburb. If you work for Microsoft but are based in London, does that make London a suburb of Redmond? I think not. So if people are able to work from Renton or Bremerton and make the same wages, why not do that? And if Seattle wants to keep those people, it will have to do something to make that happen…lowering housing costs, improving commutes, etc. But I think a survey would find that a lot of people live in Seattle because that’s where the jobs are. Service jobs, any kind of in-person/presence-based work – healthcare, education, grooming/personal care, food service — are also tied to location.

I wish even one member of city council understood this, that there is not affordable housing without affordable land and that the cost of land or high value extracted by speculators is making Seattle a rich people’s playground, not a city for everyone.