the art of writing is discovering what you believe
As usual, a quick search for the word “land” turns up a disappointing number, in this case, 0.
Flip the question around and ask why China and Japan and various countries in Europe have built out their transit networks and compare their land use/ownership policies to those in the US. Private land ownership as a vestige of feudalism is one of the issues this country needs to address, not through expropriation but through recapturing the value through a ground rent/land value tax.
Land use decisions, reflected in zoning and tax/assessed values on land, drive inequality.
Rich Houston teems with greenery and public parks.
But unfair zoning laws mean its poorer communities of color bake in the hot sunEvery weekday at 6am, 68-year-old Ana Adelea-Lopez walks through her Houston neighborhood to the bus stop.On the way, she passes a series of apartment complexes, telephone poles and metal fences on a long stretch of sidewalk. For the entirety of her walk, there’s not a single tree in sight.
“You can’t even be on the street because of the heat,” said Adelea-Lopez who takes the bus to her seamstress job. “There aren’t a lot of trees. There are a lot of apartments. A lot of cement.”
And alongside housing policy, road and transportation policies that favor car owners are driving a new kind of segregation, where those who can afford to migrate to cheaper housing will take their unearned wealth to the suburbs, leaving behind neglected city cores to fall in value until they are redeveloped by those who reclaim them — gentrification is never far behind.
I haven’t yet found the context for this decision but I suspect this was put in place to ensure the single tax (ground rent/land value tax) was never given a chance. Mason Gaffney has written about how economics has treated the idea of land as a part of capital: a moment’s thought would disprove that, as land predates labor and capital, as the fruit of labor, comes even later than that.
Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. — Abraham Lincoln
Invest in a rental home for $100/share
Imagine if you could invest $100 in a home of your own, at a reasonable multiple of your annual salary. Time was, you could buy a home for about 10,000 working hours, or 5 times your annual salary. Not really possible anymore but by all means, go off about the sanctity of single family assets homes.
At a $15 minimum wage, that’s $30,000 a year, so there should be $300,000 homes — either freestanding or some kind of terrace/rowhouse or even a flat or apartment. Turns out even Seattle has houses that are valued at $300,000 but the land under them — something no one needs to buy — is worth more than the house.
“Arrived is entirely focused on single-family homes, which we are very bullish on during the next 10 years,” Chouza said. “As new home construction has not and will likely not keep up with the growing demand, we believe there are strong appreciation trends over the next decade.”
New home construction hasn’t kept up because land values encourage holding and discourage development: if the cost to hold an appreciating asset is 1% of its value, why would you develop it and pay tax on the development? And what do you bet the VCs and other investors in housing as an asset will fight any move to force land into productive use through ground rent or land tax? And they can count on local homeowners to go along, even as there is no evidence that development lowers existing property values and plenty that it raises values of nearby properties.
“While single family homes sometimes can go through short-term cycles, the asset class has proven to be incredibly resilient and has shown consistent upward movement for the past 100 years,” Chouza added.
“The asset class”…these are homes for families, not assets, but this is where late stage capitalism has brought us, to a place where everything is for rent, not for sale, where the media — music, books, movies — are a service, where you hope that Uber/Lyft can get you where you need to go.
The Transactional Age, where you can’t do anything without an exchange, but where your own value is undercut by the same entities who own what you need.
Councilwoman Mosqueda has argued for an end to the sale of city land
but I wonder if she knows how much this deal left on the table? It may been to the highest bidder but I don’t think it was the highest bid.
My reading of the RFP was that the eventual buyer offered a ground rent option that would have paid about $1 million per acre per year for the 3 acre parcel.
Maybe $3 million/year didn’t look like a good deal against $143 million but by those calculations, whoever negotiated that deal left more than $1 billion (with a b) on the table. True, it would have taken 99 years to collect it all but think of what kind of financial position that puts you in, to have a guaranteed revenue stream of more than $400 million per acre for one parcel. Imagine that across the full 500 acres set aside for downtown. That’s $4.25 million annualized, every acre, every year.
I’ve never been able to learn who negotiated this on behalf of the city but I wonder if they ever ran the offer through a future value analysis and if so, how they opted for the fee simple sale.
This is a useful corollary to the idea of land rents or other sovereign wealth funds. These tiny nations cooperate to manage their local fish stocks, creating a prosperity dividend for their people and maintaining the health of their fisheries.
The key to success, said Ludwig Kumoru, the outgoing chief executive of the PNA, was to jettison a system in which the PNA nations undercut each other in trying to sell fishing rights in their waters to foreign fleets – and replace it with another, called the Vessel-Day Scheme. That scheme sees them calculate how much tuna fishing is sustainable and then divides that amount up into fishing days for which fishing companies bid.
“We set the minimum price of a day at US$8,000 a day, up from $2,500 at the beginning, but demand was so high that we’ve been getting $12,000 to $14,000 a day,” Kumoru said.
“All our fish stocks are healthy,” said Transform Aqorau, a Solomon Islands lawyer who became the first chief executive of the PNA in 2010, and was largely responsible for introducing the scheme.
“And they are likely are likely to remain healthy if recent levels of exploitation continue,” confirmed John Hampton, chief scientist as the Secretariat of the Pacific Community, the region’s top fisheries scientist.
Like land, those increasingly valuable fish were not created by man: being owned by no one doesn’t mean anyone can take them for their own. Land, oil, the electromagnetic spectrum, as well as fish and wildlife of all kinds were not created by us or for our use: they should belong to all and their value recaptured for the benefit of all. These tiny island nations understand that better than the G7 leaders or any of the so-called developed nations.
This isn’t a new idea but I get the argument that it’s bad for tradesfolk.
“At 1,738 square feet of livable space, the custom, single-family home will feature three bedrooms, two full bathrooms, and overlook Clark Park, a center of activity with its community garden, ballfield, playground and recreation center. Approximately 70-80% of the home will be 3D printed, including all the internal and external walls; the remainder will be built using traditional construction methods. The home will be solar ready once construction is completed; Habitat Central Arizona is also pursuing LEED® Platinum certification and IBHS FORTIFIED Home™ designation.”
The good news is, they needn’t worry as these “solutions” need land to be useful: if land was affordable in Tempe or anywhere else, houses would be built as needed. This might lower the cost by removing the need for labor — and the limitations that creates are called out in the article — but don’t laborers need jobs and houses too?
Now, if someone was making these to be stacked in a multilevel arrangement, like the Habitat project at Expo 67 or the various “apodment” or capsule hotels we see, it would make more sense. And that would be a more interesting design challenge: how to make a living unit that would be installed into a larger cluster, where services (sanitary, power, ingress/egress) all meet up, would be something to see.
But if the answer is always single family homes on their own lot — a private park at the expense of a more useful public space — we are asking the wrong question.
This is really the end-game of late-stage capitalism, to force everyone into a subscription model for media (Spotify, Apple Music, Netflix, Amazon Kindle), transportation (Lyft, Uber, Gig), and shelter (courtesy of Wall St and the deep-pocketed investors who can buy up a whole subdivision before a family can buy one of the homes). Rents in everything, ownership of nothing, which means today’s working stiffs will never be able to stop working, lest they miss a payment on all the things their parents used to own outright — their music and movies, books, cars, homes.
This 57,120 sq ft parcel (1.3 acre) parcel was cleared in 2005, from the history below:
Since then it has been a hole in the ground, not even paying property taxes until it was sold about 12 years after it was surplused. But look at how the valuation of the land has jumped in the last two decades.
Imagine if the city had decided — like Seattle Schools does with its surplused land — to hold onto it and let it be developed under a ground rent/leasehold arrangement. It could have been $1M/acre, as was offered for the Mercer bioscience site. At that rate with a 2% annual increase, an acre would generate $305 million over the term of the lease, about $3 million per year (annualized).
How long will it take to match that at the $60,000 that vacant lot generates in revenue? A mere 5,000 years. And it might still be a vacant lot then.
If the same developer was offered the leasehold of that parcel for $1.3M per year rather than having to finance $60 million, imagine how much more incentive they would have to break ground and build something. That becomes an expensive asset to hold at $1.3M vs $60,000/year.
Whether or not the city would tax the improvements at a lower rate is another discussion but the almost $400 million over 99 years seems like a better deal than $5.6 million over the same term from the current tax assessment.
But the real magic here is that whatever gets developed there will increase the supply of apartments, retail space, etc, which will either slow the increase in local rents or even lower them if enough land is turned from speculative asset to productive land through ground rents.
As a side note, consider how much we have heard about raising local wages to match the rising cost of living and how much more effective it would have been to tackle housing costs through ground rents and never need to raise local wages. Higher wages that give you no more buying power are of no value. This is the real cause of the inflation we see: the scarcity and rising cost of land as shelter/commercial is what forces up prices and that money flows to wherever the owners live, rather than staying in the local economy.
NB: if you want to know where these numbers come from, you can use the Future Value of an asset in Google Sheets, Microsoft Excel, Apple Numbers, etc.
The syntax varies by application/maker (of course) but here is how Sheets does it: I’ve left the row numbers in and you can work out the columns —
You can verify your results with a 99 row column and repeated addition. It can be eye-opening to see how much money has been left on the table by people who I have to assume have never run a future value function against a ground rent.
The title says it all. There is no affordable housing without affordable land. All the talk we hear about possible solutions — new construction processes, new zoning regulations, an end to parking minimums, new materials — is meaningless without land. To argue otherwise is to ignore reality.
Every thinktank or activist or housing advocate or architect/designer who talks about solving the housing crisis without mentioning land is wasting their time and yours. As with the “war on [some people, mostly black and brown who are arrested for the use and sale of some] drugs” if you deal with demand, the supply will take care of itself. If we can make land available to developers at a price that allows them to build to the density we need, we’ll find that we have a lot of land to work with.
What this looks like is assessing land with tax that reflects the highest and best use…if we want a parcel to house some number of people and support jobs through retail or other activity, we need to tax it so that the owner has to find a way to pay that tax. They can hold it as idle land if they can afford it, but the higher tax burden will make it hard to sell. Better to develop it and put it to work.
If we take what we learned from the Mercer Megablock project, that an acre of land can pay $1M/acre every year, we can work out a value for other idle or underused parcels anywhere in the city. And other cities may well have their own benchmark valuations to work from…developers are probably offering to pay ground rents in other overheated cities as well. If you think about it, it’s a vote of confidence in that city, that the developer thinks there will be enough economic activity to justify the commitment to pay rent for 99 years.
The high cost to acquire land is why we see so many plain boxy buildings: it’s not an aesthetic choice so much as a reflection of how much the land costs and how little is left to spend on design. If the land costs millions of dollars upfront, that’s money you can’t spend on the actual design and construction. Given the option of $150 million upfront or $3 million a year, which one frees up more money for design and construction? Even if you pay more over time, through an annual rent, that is paid by the purchase or rental of apartments or commercial rents from businesses, just as landlords do now. The difference is that the land was cheaper to acquire and it became imperative that the land be developed.
So when you hear think tank operatives or local activists talking about their plans for more housing, wait to see if they mention the need for land, and if you get the chance, ask them about it. If they can’t tell you where they plan to put their 3D printed, recycled, organic, cruelty-free, artisanal housing project, they are wasting your time. There is no affordable housing without affordable land.