Inequality and Housing Mini-Update
1. Gothamist reports on how tax breaks and dollars help build luxury condos instead of affordable housing.
2. Hamilton Nolan wonders if California is going to start having slum cities. I normally don’t like Hamilton Nolan pieces but this is a rather solid view of the problems facing the California housing market and the possible solutions.
3. Brookings find that inequality in cities is more and more stark. The least unequal cities tend to be somewhat smaller population wise but they also tend to be mono(ish)-economies that have really good or really bad economies. Raleigh, North Carolina has a population of slightly under 450,000 people according to wikipedia and the biggest employers are either public/government entities, hospitals banks. Albuquerque is equal in the “we are all really poor” kind of way.
Colorado Springs seems to be a college town and a military town with a dash of tourism thrown in. The top 4 employers in Colorado Springs are all associated with the Air Force.
The dangers of mono or close to mono economies is that they can and do dry up. Maybe not tomorrow but eventually. The paradox though is that when they are thriving everyone seems to do okay. San Francisco, New York, Los Angeles, and other major cities are more diverse in their economies but this also seems to create huge income inequality.
The question then becomes is it better to live in an area with a diverse but unequal economy or an economy where everyone is going to crash at the same time if industry leaves town?
I think you failed to mention one significant exception to the mono or diverse economy-the proximity to Wash DC and the federal gov’t. There are so many federal workers, or those that derive their livelihood from Fedgov largess in the area, that I see little likelihood that housing costs in the MD and VA counties surrounding DC will ever decline, baring something cataclysmic. The costs may drop, like they did during the last crash, but, crater, like they did in Fla and AZ, I doubt.Report
Short of a Brasilia-like move of the capital, which seems… unlikely.Report
2. The article underwhelmed. Shanty-towns like those that exist in Brazil and other places never really existed in the United States because property rights were always strong enough to prevent it. We did have lots of sub-standard housing for the poor but the land was always properly owned. Real slums require some very informal property arrangements. Building codes are also strong enough to prevent too sub-standard housing.Report
Yeah it was nonsense on stilts.Report
Well they don’t tend to exist any more – having been razed to make way for horrible housing projects that have themselves mostly been razed after it became clear they were worse than the shantytowns they replaced.
But for example I found this http://en.wikipedia.org/wiki/Category:Former_shantytowns_and_slums_in_Atlanta
Most of the shantytowns as near as I can tell were either relatively short-lived Hoovervilles, or established in the 19th Century.Report
#1 is nausea inducing. Trading subsidies that’re being used to build more upper end units for greater rent control? Can’t both sides lose?Report
Seemingly not. My guess is that you would just see more luxury condos and people buying them for investments and the working and middle classes screwed even further.
Wonks for all their good ideas are not very good at convincing politicians and the electorate to go along.
Notice how it is seemingly impossible to prevent sweetheart stadium deals from happening.Report
In terms of realpolitic you may be correct. Politicians just can’t say “tough, leave if you must” to sports teams.
In terms of outcomes I think you’re mistaken. I dare say NY’s footprint could build more luxury condos than the market of money stashing elites could absorb. It’s not like they’re wedged against a mountain.Report
@north
I think they could but it hasn’t happened yet. I am also cynical/doubtful that the apartments would get filled if NYC builds too much. I am cynical and suspect banks and developers will just hold on for a buyer. They might drop prices but not too much. They certainly won’t rent them out at reasonable rents.
I present this as evidence:
http://www.nytimes.com/2011/05/23/business/economy/23glut.html?_r=0Report
Saul if the banks tried to hold them that’d still depress prices and it’d suck lower tier home buyers upwards which’d depress prices on lower tier homes all the way down to the lower rungs of affordability.
I can also tell you from first hand experience that banks have zero incentive to hold real estate in New York. Banks will lend on property in NYC even if it’s on fire- and that’s because they’re almost zero risk. You can always resell them for what the loans on them are worth or more.
It is enormously more expensive than you probably realize to sit on an empty home. Rest assured banks do not like doing it at all. It would cost a howling fortune to do such a thing in New York City.Report
They may hold on for the short run in hopes that demand picks up, but no business sinks a bunch of money into capital assets that don’t produce income or appreciate and then just sits on them forever. Every year that goes by, you’re losing whatever the depreciation of the asset is and whatever opportunities you could have invested in if you had the cash instead of the fallow property. “Investors hold on to empty property with no potential buyers” is just not a stable long run situation unless there’s some outside incentive (neat accounting tricks, tax breaks, etc.) for them to do it.Report
TF: don’t forget that banks sitting on property must pay HOA dues, upkeep, taxes, and any assessments that are levvied by HOA’s. In New York City that is an ENORMOUS potential sum of money. In cold climes you also have to pay utilities.Report
Not sure how much #1 is an inequality story as much as it is a “real estate developers capture Albany/City Hall story.” Unless, of course, folks have just decided that every economic/political economy story from now on is to be filed under Income InequalityTM.Report
@j-r
This is one of the problems with discussing inequality. There are any number of things that can cause inequality, some of which are a problem and some of which are not.Report
More importantly for me, I don’t care about inequality per se. I care about the objective well being of the poor. If you show me that inequality has a negative impact on the poor and middle class, I’ll care. Otherwise, it’s all signalling.Report
Some good old fashioned rock throwing at any residents brought in by a new economic boom will fix that right up.Report
@troublesome-frog
That was tried, it didn’t last long, and it seemingly didn’t work.
When have pitchforks ever worked in the United States? They just seem to be a kind of wet dream for a certain segment of the left like the Republican right has wet dreams about reviving the McCarthy hearings and recriminalizing sodomy.Report
I don’t know about pitchforks…Report
Violence to ensure that ballots were counted: That’s exactly the opposite of 2000.Report
@mike-schilling
Are you talking about Florida?Report
The Brooks Brothers riot, which was a violent attack on the electoral process. Good thing for them they weren’t selling loosies — that has consequences.Report
Ah, got it, and the point you are making.Report
[2] Back when they were building BART, there was concern expressed that cheap mass transit would lead to a situation where San Francisco was a super-expensive place that was mostly businesses plus a few super-rich people, and everyone lived down the BART line on the peninsula or the East Bay.
And, um, that’s what’s happening right now anyway.Report
Other than there being a BART line down the peninsula.Report