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The Uses and Abuses of Donuts

  1. Rape of the Lock(e)

It is thus, like a ship by its sails and wind, is the body by agents twain and diverse carried along.  –Lucretius

Looking Southward, blinking against the gelid light of noontide, half astride and half perpendicular to Locke Street, we angle our way to file between fatty packs of middle aged brawlers clustered on street corner launching pads waiting for a signal. She in her belly shirt and knit cloche hat, and I in a windbreaker and somewhat absurd silk scarf; we look unserious and I catch the flinty glares of a few very serious men. The air is charged with the promise of violence- “threat” would be a lying word- and it crackles with energy. The mood is like that before a schoolyard fight or a July 4th fireworks display that is running late to begin. The police file past in constant blue and yellow waves. All I want is breakfast: French toast and eggs Neptune with a pint of beer for the nerves. In the 1920s, the Communists and Fascist groups swelled and broke against one another in the streets of Berlin, Rome, and across Europe, vying for the trajectory of Western Civilization, since expired. In 2018, they are vying for a donut shop.

What mighty quarrels arise from trivial things. –Alexander Pope

This is a post about group dynamics and how they coalesce around in-groups and out-groups over the issue of gentrification.

The Uses and Abuses of DonutsThis is the attention grabbing lede: Twas a frigid night one month prior, Saturday, 3 March, that a brigade of twenty young people in black clothes and masks marched down this street of high end boutiques, lighting off fireworks and lobbing rocks through plate glass windows from behind a banner reading “We are the Ungovernables”. Especially hard hit was a gourmet donut shop called “Donut Monster” that shed all of its windows and became a symbol of the city’s resilience in the face of vandalism. Police eventually arrived in force and the group fled the scene, abandoning their black clothing and masks as they went. It’s perhaps telling that, while the horde made no statement of principles or even why they were marching, nearly everyone has assumed their target was “gentrification”.

I suggested, unhelpfully it seems, that the mob might have thought they were fighting an actual donut monster.

This is burying the lede: Three days later, Tuesday, 6 March, upwards of 200 people met at the Central Library in Hamilton to discuss the City’s Planning and Urban Development “Plan for Downtown Development”. The downtown core of Hamilton (where I live) has become a celebrated “hot spot” for condo building in recent years, so rezoning is to be expected. What was striking about the plan was the extent to which the city gave developers leeway to rebuild a large portion of downtown with condos of over thirty stories. Any bargaining power the city government could have used to shape development in a way that benefits residents was thereby surrendered before any negotiations could begin.

 By contrast, many cities in the United States have addressed the problems caused by gentrification by demanding concessions on the part of developers: You must build one low-income apartment for every ten luxury condos, etc. In Ontario, this sort of bargaining is done with what are called “Section 37 funds” given by developers and used to finance public art, affordable housing, parks and recreational facilities. However, the Hamilton plan has been called a “blank cheque” for developers.  To quote a local website:

The common thread is that this plan is great for developers and investors and not so great for average people. There are fears of displacement of the poor, elderly, and immigrant populations that currently live downtown. There are also concerns about shrinking green spaces, destruction of heritage builds, loss of the arts and culture scene, and more.

The March 6th meeting aimed to draft a positive, productive, workable response to the City’s plan, dubbing it “The People’s Plan for Development”. Artists, activists, business owners, social workers, musicians, and other concerned residents brainstormed in focus groups to come up with proposals that both accept the benefits of development and aim to shape the course that development unfolds. I took part in the Music Community focus group and found it a positive experience. Most of our concerns were subsequently addressed in the final plan, albeit in a somewhat toothless way.*

 

The local news media did not cover this meeting to any extent.

 

 

2. Lord of the Fryer

 

By contrast, the spree of vandalism was covered every day for two weeks in the local newspaper, The Hamilton Spectator, often with multiple articles. The city government held an emergency meeting to denounce the vandals as “terrorists”. The paper bizarrely demanded that a local coffee shop where “anarchists” probably held meetings five years ago prove that the owners weren’t involved in the vandalism The local anarchist collective The Tower, which held an “anarchist book fair” the same weekend was accused of being connected, vandalized repeatedly, broken into, ransacked, and saw its members assaulted by “alt-right” gangs and finally arrested for possible conspiracy in the Donut Shop Riots.

 

The Uses and Abuses of Donuts

Trudeaunuts

Local outrage radiated outwards to the police for not using force, the public school that allowed anarchists to hold a book fair, “Antifa”, “Marxists”, “welfare recipients” and a local heavy metal bar where the regulars also wear black. More positively, locals rallied around the shops with benefit concerts and organized days of shopping, also well-covered by the local media. Prime Minister and selfie model Justin Trudeau even came and had a donut from the shop.

 

One month later, my girlfriend and I came looking for breakfast, on the same morning that local anti-immigrant, white identity groups had organized a “Patriot March” for the street with hopes of confrontations with anti-fascist groups. In response, the police shut down the street with a full battalion of officers, including many from surrounding cities, so that there would be no clash as the alt-righters ate their pastries. A friend joked about pestering the shop owners: “No, do you have white powder donuts? White powder! I’m looking for white powder!”

As another friend, Simon Orpana, aptly summarized it, “the police temporarily turned my neighbourhood into a de facto gated community in order to protect private property and let some neo-nazis buy expensive donuts.”

3. The Fear

         Now, let’s talk about fear. It’s easy to understand why people are tense in this town. When I began paying a mortgage a little over a decade ago, our house went for around $170,000 and we were told we were “crazy” to move to this “dirty” blue-collar town. Now, the house, which my ex-wife occupies, would be valued around $500,000 in this “gritty” gentrifying city. Then, we were told it was cheaper to own a house than pay rent. Now, I am told a working class man like myself will never again afford a house in this town.

 

When I left my wife about five years ago, an apartment rented for $650/month. Now, the norm is over $1,000. We pay $1,150 for two bedrooms and have been told the market rate should be more like $1,400- by our landlord, naturally! So, we anticipate the new owners will try to evict us at some point. A two-bedroom apartment in a nearby building that was recently purchased by the “CLV property management group” now rents for an absurd $1,860 a month, and is notably smaller and tackier than ours. (That company, incidentally, is now experiencing a rent strike in two other buildings they recently purchased in town in order to do what are called “reno-victions” and nearly double the rent)*.

 

And it’s a heyday for evictions. Ontario law offers tenants some protections, along with one major loophole for landlords: a landlord can evict if he plans to move in himself or a family member. So, many will simply evict the tenant, do renovations, “change their mind about moving in”, and raise the rent to whatever they think the market will bear. Another popular strategy is to make cosmetic improvements and claim them as capital expenditures in order to raise the rent past the guideline legal rate of 1,5%. Finally, there’s old fashioned harassment. A friend’s hot water has been off for five months. Elevators in buildings are shut off indefinitely, laundry rooms remain locked- things that are basically illegal, but working people rarely fight against. One friend’s mother fears complaining about the black mold in her building in case the landlord decides to evict her and claim Aunt Tilly needs the room.

 

Understand that this is a predominantly working class city, for generations, and that many of the people who live here are on the margins already. Now, understand that the “demographic shift” happening is a concerted effort to push these people off the edge of the table and replace them with their social betters from Toronto. What is happening here is something the Guardian, among others, calls “second hand gentrification”: it’s not being driven by major growth in our local industries, but by an influx of people who can no longer afford to live in nearby Toronto moving here and making a “bedroom community”.

 

Couple this with the decades-old effort by employers to phase out luxuries like overtime pay, benefits, regular scheduling, and pensions… Well, you can see why, after a certain point, every other conversation you have with a local is about the fear that seems to seep into your bones. It starts to occupy all of your thoughts. It turns up in your dreams. It seduces you in some way. Finally, it feels like you’re boiling in fear all of the time.

 

There has been a steady drumbeat of hype in Hamilton about “growth” and “revitalization” for the last few years, about pumping new life into a moribund body. Even articulating these fears feels like an unburdening and an act of defiance because it’s so at odds with the “legitimate” view on the “revitalization” of Hamilton. In that Guardian article, a University of Toronto professor states: “As a direct result of Toronto’s gentrification, Hamilton too is gentrifying – and I think you’d be hard-pushed to find anyone who would see that as a bad thing.” It’s hard to imagine a better expression of hegemony: not only is the other opinion invalid; but nobody actually holds it.

4. Glazed New World*

Which brings us back to donuts. It is completely understandable why people would be outraged and upset by hooliganism and vandals. After all, they targeted local small businesses at a time in which many locals already feel threatened, and really they targeted exactly the wrong people, blaming small donut makers for the fairly concerted actions of landlords, property developers, property management firms, and investors.

But the intensity and duration of that outrage seemed disproportionate somehow. Reading locals calling to burn down these kids’ homes with them inside was a bit unnerving. It felt more like a neurotic symptom- Freud’s “return of the repressed”, an unleashing of pent-up anxieties. My friend Simon also noted, at one point, the similarities between the neo-Nazis and anarchists: they both fear that “outsiders” are coming in and pushing them out because it’s the only way they can articulate the reality that they are, in fact, being pushed out. We all are.

What has happened in cities over the past three decades parallels what I watched happen in Universities. Previously, these were places where people would go seeking possibilities and resources they couldn’t find at home: creative, social, sexual, intellectual, economic, or familial. Increasingly, though, those places have been made into the domain of a specific class and those resources have been filtered upwards and away from all other classes. The suburbanization of the cities that we call “gentrification” has really been about the class divide and has been justified by the same sort of vague bullshit about “market forces” that generally serves as an ideological justification for siphoning resources upwards. In fact, that is as good a definition as any for what gets called “neoliberalism”: vague bullshit about market forces being used as an ideological justification for siphoning common resources upwards. The end result, in the cases of universities and cities, is that places that were once democratic commons are increasingly becoming luxury items for those who can afford them.

And, unfortunately, all the donuts in the world won’t change that.

 

  • Postscript: Good news. The final draft of the Downtown Plan for Development was a marked improvement over the draft issued in October. Unfortunately, the new plan tries to make all sides happy by using language like “encouraging”- as in “encouraging” developers to build affordable housing and “encouraging” new condos to be greener in their building. It has, however, incensed local builders by bringing back in measures to trade height for Section 37 funds.
  • In fact, the very first line on the CLV homepage claims they are “one of the top choices for investors who are looking to minimize risk and maximize return on investment.” Purchasing existing buildings and greatly increasing the rents seems to be their business model, judging by conversations I’ve had with current residents in Hamilton and Burlington.
  • Okay I am sorry for some of the puns. I will note that I (almost) refrained from “Donut Quixote”.

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Rufus is an American curmudgeon in Canada. He has a PhD in History, sings in a garage rock band, and does a bunch of other stuff.

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192 thoughts on “The Uses and Abuses of Donuts

  1. as it happened, i ate white powder donuts yesterday

    also yesterday – spouse and self were conversing with the pianist for the choir we belong to – a couple weeks ago missus charley and this other lady were on the same plane to europe – my wife as part of a work trip, the pianist and her husband for a cruise up the rhine

    in the course of the conversation labor unrest was mentioned, and it emerged, unsurprisingly, that this american, like most americans, did not know that may 1 became international workers day because of events in chicago in in 1886

    see http://www.encyclopedia.chicagohistory.org/pages/571.html

    i see these events you discuss in hamilton as part of a centuries-long struggle between the owners and the workers – one that the owners are currently winning – so much so in the states that, as howard zinn wrote, almost everyone believes the two biggest lies about the system – that there is no class struggle, and that the u.s. always acts altruistically abroad

    may the creative forces of the universe stand beside us, and guide us, through the Night with the Light from Above – metaphorically speaking

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  2. You’ve got to protect your borders. When those people move in, they change the culture. People say “oh, it’s nice to have a mix of culture!” but they come in and demand that you start changing to accommodate them rather than them changing to assimilate into yours.

    It’s hard to imagine a better expression of hegemony: not only is the other opinion invalid; but nobody actually holds it.

    This is a fine trick, expertly pointed out. I will better know how to look for it in the future.

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  3. I’ve seen a version of this happen in the town where my parents live. Interestingly enough, there’s been relatively little protest, and that’s often been written off as “disgruntled conservative homeowners who don’t want things to change or get better”

    Even as several small local businesses were displaced (either their buildings, apparently owned by the city, were torn down for large new buildings, and in one case a CVS went in where several small businesses had been). Even as the city allowed for a large, fancy hotel that I predict will mostly stand empty to be built (with tax rebates and the like). Even as the town went from a “pay as you go” model that had worked well into a deficit-spending model.

    They’ve made the funky little college town I remember look kind of like a shiny clone of some rich soulless Chicago nouveau-burb.

    And yet, the people who commented that “this is not really what the residents want” were written off as sticks-in-the-mud stuck in the 1950s.

    I don’t know. Right now it seems the town is slightly in decline; a number of long-time restaurants and businesses NOT in the immediate downtown are closing their doors, I think home prices are down…I also think the developers have way over built on “college student” apartments; all the old rental houses around campus were bought up, torn down, and replaced by enormous apartment blocks that went up very fast and were probably built as cheaply as is legal. But in an era of declining enrollment – I wonder how many of those apartments are actually rented.

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    • We went through a period of being told that “art” would be the “new steel” for the local economy. But after six galleries closed in the last 12 months, that’s not convincing. Then we were told it would be a “music destination”, until three or four music venues closed. Then it was a “foodie destination” until the market got flooded, everyone had trouble finding kitchen help, and the restaurants started closing. The housing market is declining. So, I guess condos and apartments are the current big thing. The fact that so many of the people moving here don’t actually want to be here, but simply can’t afford Toronto rents, doesn’t make me think it’s a long term strategy.

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  4. The opponents of gentrification really haven’t laid down on what their alternative is though. As my brother would put it, they want cities to be frozen in amber. Their essential argument is that most or all true cities in North America should remain the refugees for outcasts of mainstream American and Canadian life. Middle class American and Canadians can visit but should essentially be born, raised, and die in the suburbs. They do have to be taxed heavily to support programs for the down and outs in the cities.

    This argument and vision for urban life is nuts. You can’t exclude people from the cities, especially if they have money. The wealthy are just going to do regular gentrification, pricing out the poor and lower middle class by offering to pay high rent or buying title from landlords. The city of refuge for the down and outs led to a lot of social and economic problems. To get a good tax base you need people capable of paying taxes.

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    • I think this is all true but there needs to be a middle way. Culture can’t be frozen and wealthier people can’t be fenced out. It doesn’t follow though that all the poor people need to be dispersed further away from the services they rely on and where their already precarious living situations are made costlier.

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      • The middle way is to build a lot of housing so the wealthy people go there rather than price out the lower middle class or poor. Oakland covers around 55 square miles in land but has only around 400,000 people living in it. There could be hundreds of thousands of more people living in Oakland and the population density would still be comfortably low. You can fit nearly all of Alameda County’s 1.7 million people in the Berekely-Oakland-Alameda area and not be at that high a population density.

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        • Yes, but population density isnt the only issue. This is where those vague market forces come into play. If you haven’t carved out some controls you’re going to have skyrocketing prices. Obviously this can be overdone, and impacted communities need to be reasonable in their requirements. Still I don’t think its fair to allow scorched Earth displacement or city halls to totally sell out their constituents.

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          • This is why I point at global trade as the culprit rather than local developers.
            What is happening isn’t particular to Ontario, or Los Angeles, or San Francisco.

            Wages- overall- are stagnating and rents- overall- are not.
            The reason is that the prosperity of global trade agreements is distributed in wildly uneven amounts to uneven groups.

            In 1955 one guy might work at a factory making toilets, and live next door to a guy who unclogs toilets.

            In 2018 the first guy is working as a retail clerk making barely above minimum wage and the second guy is still able to rent a middle class apartment.

            It isn’t the landlord, or the donut shop owner who did this.

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            • But talking about wages when on the subject of housing is gibberish. If we could wave a magic wand and increase wages across the board by 10% the result would be a 10% increase in rents with no other change in the particulars.

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              • We aren’t talking about wages declining “across the board”.
                As we can see from evidence, some people have no trouble at all paying city rents.
                Some people have felt no ill effects whatsoever from the change in global manufacturing.
                It is these people who are keeping the rents sustainable.

                It is those other people, whose wages have declined, who can’t afford city rents who are feeling the pain.

                We could simply ask them to move away from the city to find housing compatible with their incomes.
                Except their incomes are derived from the jobs that are located in the city.

                This is the entire problem, that our economy is diverging, with some people floating upwards and the rest falling downwards.

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          • I have said this before but I live in a building that is nearly 80 years old. Normally this would be affordable apartments but I am a well paid professional in one. The housing stock in the Bay Area is so dire that modest housing is going for 500k to 800k over asking with all cash and no contingency offers. There are lots of well paid people who can’t compete.

            The Palo Alto NIMBYs say “move to Livermore” and the Livermore NIMBYs say go the fuck away. Livermore is 46 miles from SF and has 90k residents. I was there in March and saw the alter kakers be really angry at building housing and they had signs for “build parking, not housing.”

            I think the arguments against building are aesthetic. Everyone is saying”Eww yucky and boring yuppies. Ewww.” Everyone is digging their own grave and getting causation ass backwards.

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            • I’m totally in favor of building and didn’t intend to imply I’m not. I live in a close-in DC suburb slated for development and moved there in part because of that. I just would prefer to find a solution for the people living here who won’t be able to afford the area in a few years that isn’t good luck elsewhere/FYIGM.

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              • But this is where I get so frustrated because it is like people refuse to get causation right because it messes with their narrative. If you build enough or right, no one will get pushed out because there is enough housing to meet demand. If you do it wrong, landlords will kick out and sell to professionals with more money.

                The problem is that no one likes these facts because they are boring and don’t allow for heroic narrative of outsider misfit mosh pit punk rocker v. Bourgeois yuppie. If SF built right, I wouldn’t be in an 80 year old building. But they won’t build right because”ewww development and developers and ewww yuppies.”

                Facts are stubborn things but essays like this prove humans are more stubborn.

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    • Really? You’re responding to a post in which I talked about the hundreds of thoughtful people in this city who are brainstorming workable alternatives to gentrification-as-we-know-it that would allow for growth, for wealthy people to move into their luxury condos or homes and live here, and for working class people to thrive and find new opportunities in a growing economy. They have absolutely laid down their alternatives and perhaps the key takeaway from this post should be that the media just isn’t interested in covering the wonks when window-smashers provoke a knee-jerk emotional response and boost newspaper sales. But I can tell you that the political class is definitely listening because I’m in touch with them and that regular gentrification is no longer a viable alternative when we can and should do growth better.

      As for the people who want to “exclude people from the cities”, I have met maybe three teenage anarchists who think that, and dozens of thoughtful people who welcome the wealthy, but simply want a place for the working middle class to live and thrive as well. By contrast, I met a realtor yesterday who told me flat out that their goal is to “change the demographics of this whole area and get these people out of here”- referencing the working poor who were passing us on the sidewalk on a Sunday morning. That’s not a long-term strategy for social stability or growth for that matter.

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      • Yes really.

        You’re responding to a post in which I talked about the hundreds of thoughtful people in this city who are brainstorming workable alternatives to gentrification-as-we-know-it that would allow for growth…

        By trade, I work in the real estate business with 20 years of real estate, banking, finance, capital markets and most recently investment management experience. I’ve also at points throughout my career been exposed to these issues through various assignments (including representing a family that sold 2,200 rent stabilized units in Queens in a single portfolio transactions). Given my own position representing a public real estate company and seeking investment opportunities that maximize the value of the shareholders my firm represents, while you and I may have overlapping sympathies, I’m not sure anything you wrote does anything than express your well-founded concerns.

        Allow me to play the bad guy here…it seems it’s a role sorely lacking around here anyway and I’m damn good at it.

        Workable alternatives? I have a sinking feeling that what I think works and why I think it works isn’t going to be close to what you think works and why. It doesn’t really matter because as cold as it sounds, you don’t care about my interests and I don’t care about yours.

        I don’t play in this space every day but I’ve seen this game played out over and over and over again. If I was in the game, I’d be three steps ahead of you working every angle I possibly can while you’re still working out your “workable alternatives”. There’s nothing you’d be able to do that I wouldn’t see coming. Yeah, you’ll have sympathetic politicians but I won’t? You talk about lofty ideals and how you think other people should spend their money. I put my money where my mouth is and talk about the numerous economic benefits that generate into increased spending, increased tax revenues, improved quality of life, etc. etc. etc. at the same time I address the concerns about the poor, homeless, displacement of residents etc.

        Do you think your opponents don’t know how to play the win-win card while at the same time turning that against you to show YOU as the enemy of progress? They will, and their more experienced so this…

        and perhaps the key takeaway from this post should be that the media just isn’t interested in covering the wonks

        The key takeaway is that the media doesn’t enjoy watching the underdogs getting their asses kicked.

        But I can tell you that the political class is definitely listening

        Oh they are, but you aren’t the only ones they’re listening to.

        By contrast, I met a realtor yesterday who told me flat out that their goal is to “change the demographics of this whole area and get these people out of here”

        Any realtor that doesn’t say that isn’t a good realtor. It’s not like they make any money keeping you where they are.

        To your OP:

        The suburbanization of the cities that we call “gentrification” has really been about the class divide and has been justified by the same sort of vague bullshit about “market forces” that generally serves as an ideological justification for siphoning resources upwards.

        Vague bullshit? What?

        People that are being displaced from Area A because rents are too high are moving into lower rent areas, and given the number of people that could be moving into these areas given the supply and the willingness to pay a rent amount over what’s considered market WILL push market rents up. You’ve explained this and quantified this so I don’t understand why we’re talking about vague market bullshit.

        If a pool of potential tenants is willing to pay $1,400 a month in a market that was even $600 a month a year ago and when units turnover and the landlord fully leases the building at $1,400, it’s market – comparable transactions. On the investment management side and constantly evaluating investment opportunities, I’m EXTREMELY sensitive to this for obvious reasons.

        In fact, the very first line on the CLV homepage claims they are “one of the top choices for investors who are looking to minimize risk and maximize return on investment.”

        Story time…

        Have you ever read into the story behind the failed acquisition of Stuyvesant Town and Peter Cooper Village? Back in 2006/2007 during the height of the boom, Tishman Speyer acquired the assets with the intention of rolling out the rent stabilized units and shifting to either market rate units or maybe even condo sales (I don’t remember).

        I was working at one of the major investment banks at the time and we competed to advise the seller on the disposition (MetLife) so I saw how those numbers had to play out in order to justify the $5.3 billion price that was paid. It was crazy, if not unworkable and Tishman Speyer ended up breaking all sorts of laws trying to do it. I think the tide turned against Tishman quickly and it ended up dishing out a few fatal blows.

        Eventually, the deal tanked, and everyone else that had equity in the deal lost it.

        Great story for the average person, right?

        Maybe. Maybe not. Two investors lost $600 million collectively. Both were U.S.-based public pension funds – California Public Employees Retirement System and California State Teachers Retirement System. Those aren’t the kind of holes you want to leave in your pension funds when your workers depend on them.

        We can hate on capital all we want but we’re dealing with blurry lines here.

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  5. At least you’ve got some sort of protection from Section 37 which seems to me to be the kind of political compromise necessary to do these projects in at least a semi-ethical way. I think trying to totally thwart development efforts is a losing prospect. The people with money will always win. Maybe its easy for me to say but I think the best avenue is to try to negotiate a defeat the community can live with, namely one that doesn’t result in mass expulsion by rising costs.

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    • And that is the real future of growth. A big takeaway from this post should be that the city planning committee really didn’t see the need to trigger Section 37 requirements until our local academics and activists and community organizers and artists spoke up and made it clear that they needed to. Those are the people that have been bringing real change instead of smashing windows. But, like I’ve said, the wonks tend to get left out of media coverage because they don’t get people fired up and tuned into their local news.

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  6. Excellent essay.
    This echoes a similar essay a few months back about anii-gentrification here in East Los Angeles, where similarly, the anti-gentrification groups present a threatening face to outsiders, even those who appear harmless like yuppy coffee shops.

    I like your point about “vague bullshit about market forces being used as an ideological justification for siphoning common resources upwards.”

    There is this false choice about how there is no possible alternative to the constructed edifice of global tax and trade laws, that there is no possible alternative to the system of property claims and rights.

    So people who are frightened and angry desperately search for villains and settle on a donut shop, even though the real decision makers sit in boardrooms thousands of miles away in New York or China.

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    • I like your point about “vague bullshit about market forces being used as an ideological justification for siphoning common resources upwards.”

      There’s nothing to like about it. It shows a willingness to approach the issue solely through the lens of a political ideology that’s disconnected from what’s actually happening in the real world.

      You’re welcome to disagree with me, but by all means, let’s avoid the high-level talk in the OP and take this to the level where I operate best – the details.

      I appreciate the good intention but it’s no surprise the media isn’t covering this. It’s the kind of preservationism, NIMBY-ism and central-planning-wannabee-ism that is woefully outclassed and outgunned by the opposition. It’s more of a political agenda than anything that I would put forth as a cogent business plan.

      Check out Page 45 of 45:

      Should “market forces” remake Hamilton or should the people of re-make Hamilton?

      “Wonks” produced this drivel?

      There is this false choice about how there is no possible alternative to the constructed edifice of global tax and trade laws, that there is no possible alternative to the system of property claims and rights.

      The best way you can back up your claim is to map out that possible alternative and demonstrate its political viability. Otherwise, you can speak the language of radical change, tell everyone is wrong without doing much else.

      Judging from what I’m seeing on this issue, there’s a team that could sorely use your help.

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      • “Market Forces” is itself, the high level ideological drivel we should be avoiding.

        Markets aren’t naturally occurring phenomenon like weather. The are created and shaped by collective forces like laws and regulations and social norms and attitudes.

        They aren’t infinitely plastic of course, they have ranges in which they exist.

        But in this instance, the rental market in Ontario or Los Angeles is shaped in part by international trade agreements that determine whether or not a manufacturing plant closes or not.

        As I’ve said before, these trade agreements are negotiated, and can contain a lot of provisions different than what they do, and could have a far different outcome than they do.

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        • The other thing that was, until very recently, driving up the cost of real estate in Toronto and thus here was wealthy investors from places like Dubai and China buying up condos in Toronto as a short term investment with a presumably high return. The government recently added a tax on that which has slowed it down slightly, but it’s still an issue.

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        • “Market Forces” is itself, the high level ideological drivel we should be avoiding.

          I agree 100%. Can you please point to anything I’ve said here or elsewhere that suggests that I’m speaking about market forces at some high level ideological drivel? If anyone is guilty of ideological blah blah blah, it’s you sadly:

          Markets aren’t naturally occurring phenomenon like weather. The are created and shaped by collective forces like laws and regulations and social norms and attitudes.

          They aren’t infinitely plastic of course, they have ranges in which they exist.

          Yes, I agree with your sentiment but how does this statement in of itself even begin to answer the question I posed to you. I’m asking you to map out alternatives and all you’re saying is that alternatives can be mapped out. Well, what are they?

          As hard as I’m being on for different reasons, I think the direction is taking isn’t fundamentally wrong. I would NEVER accuse him of wanting to keep Hamilton poor (that kind of slur is just shitty and low-class), and there are legitimate concerns about the displacement of residents, many of which may not afford a nearby alternative. Put the fate of those residents in the hands of an abstract market and you have a disaster on your hands. I’m aware of this.

          But in this instance, the rental market in Ontario or Los Angeles is shaped in part by international trade agreements that determine whether or not a manufacturing plant closes or not.

          “In part” as in not a primary, secondary or even tertiary concern. Supply/demand, land costs, cost to build, the regulatory environment, zoning, local demographics and other drivers take precedent. I look at rental markets every day and I can assure you I’m not thinking of international trade agreements.

          As I’ve said before, these trade agreements are negotiated, and can contain a lot of provisions different than what they do, and could have a far different outcome than they do.

          And as I just alluded to above, discussing trade agreements doesn’t get us one step closer to you answering the question in the way that I posed it – which means I need you to step away from the abstract ideology and start getting into the kinds of weeds I play in day and day out as a real-world markets guy.

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      • Sure, you and I are obviously going to disagree on this topic since we’re coming at it from different perspectives. That doesn’t bother me. As you said you “work in the real estate business with 20 years of real estate, banking, finance, capital markets and most recently investment management experience.” And I’ve been to grad school for history and lived in a community for 15 years where people in my income bracket have been targeted for “displacement” by newly arrived developers. That you know more about real estate investment and development would seem obvious. I would assume I know more about Franco-Ottoman relations in the 19th century.

        But the weird thing is I know people who work in pretty much exactly the same field as you do and we’re able to sit down over beers and talk about these issues even though we generally disagree and my concerns about what happens in the community in which I live don’t really constitute a cogent business plan in their opinion either. Incidentally, most of them have recommended not to invest in this city at this point because the bubble is making it too expensive and look at Detroit for better investment opportunities.

        As for the People’s Plan for Downtown, yes, people who work in other fields and have been trying to learn about these issues over the last five months don’t know as much as real estate developers and their lawyers. Duly noted. Note however that they’re responding to a feeding frenzy of developers and real estate agents from other parts of the country and the US coming in and explicitly saying they’re going to change the demographics of this city by pricing out the working poor, the elderly, artists and musicians, etc. etc. in order to bring in “young professionals” who are desperate for housing. You can’t say that that isn’t an ideological argument as well. Nor can you say that people’s response to that is purely based on their airy ideologies over real world concerns, such as, for instance, not wanting to be evicted.

        You know, there is a way that developers could respond to fears about gentrification beyond saying they’re better trained and lawyered up so they’re going to win out over the concerns of the community in which they’re investing. But they haven’t done that here either. Mostly it’s been this sort of heavy handed frustration that the city isn’t sufficiently appreciative of what they’re doing.

        As for the “market”, when people talk about how the market has driven up the cost of housing and education over the last two decades far beyond the rate of inflation, they speak as if the “market” showing that more people like Coke than Pepsi is a similar mechanism as the “market” deciding that more people prefer to have shelter than not have shelter, or an education that they’ve been told they need in order to survive in the new economy versus falling behind. This says to me that it’s not a particularly useful heuristic.

        But, again, I’m not trained in economics, so I don’t understand why living here is both desirable and something that is being sold in many cases by explicit appeals to fear similar to those I heard in academia. Nor do I understand what exactly the long-term economic strategy is for this city since they only area of growth is in real estate construction that might well calm down once the surrounding green belt is opened up for development. If developers or politicians were to explain all of this to us novices, citizens might well calm down and shut-up.

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        • I have a BA in Economics and rest assured, there’s nothing about what I do for a living than anyone with a brain can’t figure out. You and I are different here not because of some intellectual gap but only because I’ve been at this long enough to know things I’m making you aware of in my cranky old-ass way…nothing more.

          Incidentally, most of them have recommended not to invest in this city at this point because the bubble is making it too expensive and look at Detroit for better investment opportunities.

          As I’m neither a residential developer nor an investor in Canadian real estate markets, I can’t comment on whether or not these people are correct at a micro level but at a macro level, I’d agree…although I’d love to know if these people are actually investing in Detroit (I’m not but I’m looking at properties in the stronger suburban markets).

          Low interest rates combined with increased leverage has had an upward push on pricing, and as someone that works for a REIT with a pretty inflexible capital structure, it’s a challenging environment for me to find opportunities that make sense that I can acquire within those parameters. As much as I’d love to sit on the sidelines and wait for pricing to move in a way where I can acquire certain kinds of assets, I have cash I need to deploy so it’s a double-edged sword.

          That does throw a wrench into redevelopment, especially large scale residential redevelopment where the balance between an adequate supply meeting demand and over-supply may be more fragile than I understand it. I’m also happy to concede the disastrous consequences of oversupply, especially of the kind we saw in 2008 when the financial crisis and the bursting of the subprime bubble left hundreds of thousands of units if not more vacant with all sorts of other consequences.

          My thinking on that is that none of these developers are going to come into anything like this at any kind of scale and throw their money at it. Assuming a $20 million cost, maybe the developer has 10% of that into it. It’s not a small amount of money but the brunt of the risk will be borne by lenders and lenders, especially commercial lenders, pay very close attention to this. If these things blow up, aside from the harm done to the communities, lenders are holding the bag.

          As for the People’s Plan for Downtown, yes, people who work in other fields and have been trying to learn about these issues over the last five months don’t know as much as real estate developers and their lawyers.

          You don’t need to, only how to work the system the right way to help yourself on a tilted playing field.

          You can’t say that that isn’t an ideological argument as well.

          Maybe you and I have different definition of what an ideological argument is. If I made those statements, I wouldn’t be making it in the service of any political theory or economic ideology. I’d see dollar signs and lots of them. I’m motivated by profits and the potential for promoted returns on my equity. That’s it.

          Nor can you say that people’s response to that is purely based on their airy ideologies over real world concerns, such as, for instance, not wanting to be evicted.

          To clarify some of my earlier comments – I’m not suggesting that your concerns aren’t real. Of course being evicted is a real concern. Of course having a neighborhood turned upside down with the current residents being on the outside looking in is a real concern. I’m not insensitive to those concerns, and one reason why I’d probably never get into that specific side of the business is because I don’t want to be the one doing that to people. I have a cold perspective of the world but that doesn’t mean I don’t sympathize with you. However, what am I supposed to make of the response. I mean holy crap there’s a disclaimer at the beginning of one of these things saying something about development not being satanic only to find statements, points, arguments, etc. that I could read that leans towards the contrary.

          I understand there are several groups that wanted to provide feedback and be heard. That’s fair although the more groups that get involved in something the higher risk of a less cohesive message. Personally, as sympathetic as I’ll be towards people fighting for the rights of residents not to be displaced, when I start to see that gravitating towards arts, culture, music and the overall community, you’ve lost me. Pick the best horse you have and run with it.

          But they haven’t done that here either.

          Their perception will be that they’re getting the value they need doing what they’re doing and if you don’t bring any additional value, then your opinion of the best way is simply that.

          Mostly it’s been this sort of heavy handed frustration that the city isn’t sufficiently appreciative of what they’re doing.

          You don’t see the value in that kind of posturing? Not that you need to agree with it or find it valuable, but do you not see where certain people (cough: politicians) respond to that? Feels like negotiation to me.

          As for the “market”, when people talk about how the market has driven up the cost of housing and education over the last two decades far beyond the rate of inflation,

          When I talk about the market, I look at all of the comparable apartment buildings in your immediate vicinity and reach out to realtors to get the lease rates of recently executed transactions and track that against any market data that’s been tracked historically.

          If I look at the buildings in your vicinity and see actual leases being signed by actual people at say $1,000 a month when I can look back two years to see leases at $750 a month, that says something about the market because I’m looking at actual transactions. If I see vacancy rates drop to historically low levels and get enough anecdotal evidence from realtors and landlords about inquiries about available units, reduced downtime on vacant units, population growth, increasing median household income and other data points which may indicate a current housing shortage, rising market rents and other data points that support the feasibility for high rise residential development, then that’s what the market is telling me and it damn well be telling you that as well because that’s the kind of reality you’re not looking at (assuming it exists).

          All I’m hearing from you is that the “market” doesn’t help you because it fails to address the bad things that happen in these situations. Sorry, but you can’t just wish that away.

          If developers or politicians were to explain all of this to us novices, citizens might well calm down and shut-up.

          Put me in a room full of novices and by the end of the conversation, they’ll be more pissed off about it than you are so no I don’t expect anyone to shut up. I’ll probably end up getting a Richard Spencer-style sucker punch or something. Who knows these days.

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        • As for the People’s Plan for Downtown, yes, people who work in other fields and have been trying to learn about these issues over the last five months don’t know as much as real estate developers and their lawyers. Duly noted. Note however that they’re responding to a feeding frenzy of developers and real estate agents from other parts of the country and the US coming in and explicitly saying they’re going to change the demographics of this city by pricing out the working poor, the elderly, artists and musicians, etc. etc. in order to bring in “young professionals” who are desperate for housing. You can’t say that that isn’t an ideological argument as well. Nor can you say that people’s response to that is purely based on their airy ideologies over real world concerns, such as, for instance, not wanting to be evicted.

          It’s a predictable pattern. The priviledged view effort by the less priviledged to improve their situation as needlessly “political,” whereas the political systems that buttress the lives of the priviledged are the “natural order.”

          This reminds me of the lesbian teacher who got fired in Texas. Her crime: she mentioned in class her upcoming wedding. That was, in the eyes of this fine Texas community, “pushing a lesbian agenda” — whereas one presumes that a str8 person mentioning their fiance is somehow not pushing a “str8 agenda.”

          Blah.

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    • What am I supposed to do? Honest question. I am well paid but not a tech millionaire. Anti-Gentrifers see me as a yucky yuppie and NIMBYs see me as a threat. Where am I supposed to go? Am I supposed to quit my job and attempt to get one elsewhere?

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      • Here’s a suggestion: Why not talk to those people in your community and see if you have any common cause for making it a good place for everyone to live? I’m amazed at how often people in tech or media will move to this city and not have anything to do with the community because they just assume we’re all window-smashers who hate them or “dirty poor people” as I heard one group of newcomers describe us in the coffee shop yesterday. It’s amazing to me how few renters feel they might have common interests with other renters.

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        • The answer for a lot of people is “Go home. You aren’t wanted here.” But a lot of people who grew up in the Bay Area are also suffering for a lack of housing. Their parents bought houses for relatively low amounts around 40 years ago and are now sitting on goldmines. Their kids can’t afford it either. The parents seem fine sacrificing their kids to higher housing values.

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          • Well look I’m not in San Francisco. I’m sure old hippies and their offspring have different values than old steelworkers and their offspring. Here It’s a lot easier to make friends than people think. I had about 30 once I got the nerve up to go to the corner bar more than once.

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            • I have long found that blue-collar, military, and other working class people are the most willing to accept me and try to make friends with me out of anybody, as you say, just based on repeat proximity (and some willingness to laugh at being teased rather than jump immediately to being offended).

              And if it works for the bald obviously queer person with glasses and a tattoo reading a book in the corner ….

              It’s the middle-class joints where you can show up every week at the same time for years, see the same other regular patrons for years, and only the waitstaff will ever act like they know you.

              (The only exception to the latter I’ve found is a climbing bar, and that’s because the gym’s prices for members are low enough that they’re about 1/2 enlisted or ex-enlisted. So I’m not sure they count.)

              I realize intellectually that the middle class customers are being polite in their own culturally appropriate way and/or I don’t really know middle-class rituals so I’m doing something wrong, but coming from my own cultural background, it’s hard not to presume something more like vaguely hostile indifference.

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      • @north
        Oh I very much am in favor of building more housing.

        My point is that this isn’t a localized problem, particular to any one city or region.

        Like most often happens when the peasants are oppressed and angry, they lash out at targets that are visible and convenient, not necessarily the ones doing the oppression.

        Stagnating wages and inequality are the result of conscious political choices not inevitable acts of nature.
        I just read this article about a decision to make it easier to offshore manufacturing.

        Tucked into the legislation are tariff waivers like the one Leviton requested, which exempt hundreds of finished consumer products—from microwaves to pillows to fishing rods—that used to be made in America.

        So the people who used to work for decent wages will now be poorer, while those who escape being offshored (for example the corporate managers) will continue to fuel higher rents.

        The villain here isn’t the yuppy barista, it is Congress.

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        • So the people who used to work for decent wages will now be poorer, while those who escape being offshored (for example the corporate managers) will continue to fuel higher rents.

          The trade policies of North Korea will not make us richer. Free trade being good and tariffs being bad is well understood in economic circles.

          This is counter intuitive and it’s easy to point to people being “victimized” by trade, but the Theory that free trade is good is to economics what the Theory of gravity is to Physics, well understood, well researched, etc.

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          • As the article makes clear, there is no such thing as “free trade”.

            There are only sets of laws and regulations that govern how trade is to be handled, how contracts are to be adjudicated, how property rights and disputes are to be dealt with and how much fees, taxes, and subsidy will be allowed.

            There are a million ways to alter our agreements and still call it ” free trade”. Leviton didn’t need to get a waiver, and the agreement could exempted a million other items, or not, and had very different outcomes, all while being “free trade”.

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            • As the article makes clear, there is no such thing as “free trade”.

              Sure, there’s only “free-er” trade and “less free” trade.

              However you seem to be pointing to the protectionist exceptions and arguing that they should be the rule, that everyone’s job should be preserved, etc. That is very much on the “less free” end of the spectrum.

              The “different outcomes” you’re arguing for would cost the economy more money and jobs than it’d save.

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              • How do the trade agreements make trade “free-er” when they just set the terms between nations which all have some degree of subsidy and investment?
                In the article, does a waiver make trade more or less free? Do anti dumping laws which restrict price drops make trade more or less free?

                Trade agreements are not about reducing the rules nations trade by, but increasing them so as to bring more certainty and protection to the market. In other words, markets are facilitated by becoming less free.

                The China/ US trade was more free when there were no rules at all and anyone could buy and sell whatever they wanted with whoever they wanted.

                “Free Trade” is just one of those emotive words that means whatever someone wants it to mean.

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        • I don’t think SF has had much manufacturing for a while. The fight here is between people who remembered or want to remember seeing the Dead or the Dead Kennedys; and Techies/Yuppies.

          In other words, it is a clash of aesthetics or cultural tribes.

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        • But I don’t think we can lay the blame on this at the feet of free trade, globalization or its enablers in congress.
          Let’s posit for a moment that all of economics is wrong and somehow a magical anti-free trade policy actually does preserve “decent paying” manufacturing jobs.
          That doesn’t solve your housing problem in Hamilton or anywhere else. If anything it exacerbates the problem. More people have more money but are chasing the same housing supply. That just means the rents go up faster. If you enact rent control or similar such fig leaf schemes then that just means the landlords get increasingly desperate to avoid renting to lower income tenants and now no one can find even modest rent housing.

          Who’re the villains in this story? Probably a subclass of liberals (and some conservatives) who own a lot of single family houses in close in exurbs to Hamilton’s downtown core. Definitely the liberals (and some conservatives) who own the single family neighborhoods close in around Toronto. They own their houses and they say “No”. No to more traffic. No to more people. No to obstructions to their view. No to higher skylines. No to newer, poorer, more ethnically diverse neighbors. No to change. No. No. No. They say all the nice things. Environment this.. Gentrification that… Neighborhood character theother… And they’re playing poor people and renters for fools.
          I’m sure Rufus doesn’t care very strongly about the aesthetic preferences of well off (but not rich) local landowners- he certainly is indifferent to the financial interests of landlords who’re probably from a similar financial class. But in hating on developers and density advocates that’s who he’s helping out.

          I mean the solutions are a pretty short list:
          -Strong Rent control: Keeps the current tenants in some of their apartments but blights the neighborhoods and eventually the landlords start burning the buildings down for the insurance money (and no one ever ever builds or creates a non-luxury housing unit in those neighborhoods ever again absent a government subsidy).
          -Weak-Complex Rent Control: Keeps the tenants in their apartments for a couple years until they get shuffled out and eventually have to move out of the city because landlords will avoid renting to people who’ll be protected under those rent control rules.
          -Massive building of affordable housing by the Government: Unpopular with the NIMBIES because it’s crazy expensive and is everything they hate. Unpopular with everyone else except the poor because it’s crazy expensive and costs a fortune. Maybe in Europe but it simply ain’t done in North America for those reasons.
          -Massive building of housing in general by private interests: NIMBIES hate it because it’s against their interests. Rich people get houses built for them first, then everyone else moves into the houses the upper income peeps bail out of. Derogatorily called trickle down housing. Prices eventually go down as the supply goes up but it’s long term and unsatisfying. Obviously my favored solution since it’s actually a solution as opposed to a palliative patch. I am pretty okay with affordable housing requirements. Build a hundred luxury units if you also build twenty affordable ones? Seems decent and if it gets the building permits issued probably worth the economic distortion.

          I mean that’s about it as far as options go. That’s the spectrum.

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          • Since I believe that automation is combining with global trade to drive down wages, I agree that there is no silver bullet.

            Which includes building more which we all seem to think is a good idea.

            Building more will help, but only to a point.

            Unlike cell phones, construction technology is not going to make land and concrete and steel significantly cheaper that they are today, which means absent wage growth the pool of people who can afford rents will be enlarged only, slightly no matter how many we build.

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            • And if we were talking about markets where the population density was even a two digit fraction of, say, urban NY or Tokyo then I’d be on board with your point. But we’re talking about markets where 99% of the housing is single family housing lots. Increasing housing units and density should be the liberals first go to solution, not their last.

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          • Rufus wants more housing though – he’s talked about that in previous essays and in his comments on this post.. He just doesn’t want what’s happening there to be happening in the way it is happening, with the outright animus (and in many cases viciousness toward poor people and the working class) that is coming bundled up with it.

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            • Oh yeah, I’m all for building more towers, houses, etc. Which is what’s happening believe me! (Well, not a lot of new houses) I’m sure there are some people who don’t like seeing small old buildings torn down and replaced with 30 story condos, but really everyone I know sees it as an inevitability of so many people being priced out of Toronto and coming here. And, yes, we’re very welcoming of newcomers, so long as they’re polite to us.

              So the logic on the part of builders seems to be that, if young people can’t afford to pay $2000 a month for an apartment in Toronto, they can pay $1800 for one here and take the train there to work- and thus spend three hours a day commuting and spend a few hundred dollars for the privilege. I’m skeptical. I think most of them would rather own a house, but simply can’t afford to.

              But even the “cheap” apartments- in quality especially- are going for around $1,4000 a month now and the people behind these higher rents are pretty openly making the case that the future of this city is “revitalization” via “demographic shift” as one property management company put it to “younger, better educated, professionals”. From an economic standpoint, this all makes perfect sense- they have more money.

              But, the reality is a whole lot of working class people, pensioners, and the precarious poor will be “displaced” first. And there’s fairly open classism being used to justify that- their culture is inferior, they’re dirty, they’re drunks, they never really “did anything” with this city anyway, we’re finally bringing in real culture, etc. If you’re uncomfortable with this crap, you’re accused of wanting to “keep Hamilton poor”. The idea seems to be that there’s only one type of growth and this is it!

              For the record, I would absolutely love to see Hamilton improve by a mixture of attracting people here and empowering the people who live here already to improve their situation by things like small business loans, job training, social mixers, affordable housing units, etc. Which is absolutely doable! What’s happening is we’re just pushing them out. I don’t think that will make a vibrant culture or economy in the long run.

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              • But even the “cheap” apartments- in quality especially- are going for around $1,4000 a month now and the people behind these higher rents

                You mean the tenants moving in from out of town willing to pay these rents?

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            • Rufus wants more housing though – he’s talked about that in previous essays and in his comments on this post

              Have you read any of the documentation coming out of the “People’s Plan”? Here’s one of them.

              Sure, I suppose you can say he wants more housing and be technically correct, but the devils in these details suggest that he’s not at all serious about putting something together meaningful.

              It’s a f–k you message to private capital, developers and the current landlords. Big surprise there given the animus thrown his way, but since a solution requires compromise and he seems less than capable of it, I don’t share your view on his views.

              He wants to keep the existing supply, keep the existing residents and keep the existing culture and make little to no changes to the infrastructure except to make it bigger. Magically, the non-for-profits are going to make this happen?

              Anyway, since he’s insisting this can work despite having ZERO real world large scale examples of this happening anywhere at anytime, I’ll just defer to his expertise.

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              • What do you mean “he”? I’m not the author of the People’s Plan. I was in the musicians subgroup. If anything, I’m the author of the idea that music clubs be given clear guidelines for times they can have shows without getting shut down for noise violations.

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                • It seems like you’re responding to a comment about what I believe with a paper I didn’t write and don’t agree with at least half of, so it makes it hard to know what you mean, for example by:

                  He wants to keep the existing supply,

                  I do? Hamilton has a lot of vacant lots and parking lots and abandoned buildings, a great many of which are currently being converted into condo towers. So, the existing supply is already being greatly increased, which seems ideal because the population is growing.

                  keep the existing residents
                  Well, yes, I don’t want the existing residents to be forced out of the city, since I’m one of them. I don’t really see why mass displacement would be ideal for the city either, although I’ve heard more than a few people claim it will be.

                  and keep the existing culture
                  This is somewhat irrelevant to my opinion. My continued argument (this being the third article I’ve written here on this topic) has been that making gentrification a conflict over cultural tastes- cheap donuts versus gourmet donuts- misses the point entirely. I could care less if we had all sorts of cultural choices and I can afford an apartment. Besides, as someone who grew up in the US, the cultural differences between Hamiltonians and Torontonians are like night and five minutes later same night.

                  and make little to no changes to the infrastructure except to make it bigger.
                  Not sure what this refers to. For instance, Hamilton is about to spend one billion dollars on light rail transit, something that seems like an understandable necessity given how commutes and traffic are going to be increasing. Similarly, the “GO Train” was extended to downtown, which I had no problem with. I supported and have used the bikeshare technology the city introduced. And I am perhaps the only person in Ontario (seriously) who accepts that hydro rates have gone up so dramatically at least partly because the old electricity system desperately needed to be updated. And I can’t really think of a specific building project I’ve been opposed to, as of yet.

                  Magically, the non-for-profits are going to make this happen?
                  No, I doubt it. I don’t think the for-profits are going to build affordable rental units either. If anything, I think the city will have to do so, which seems to be their current intention, if what I’ve heard back from my local Councillor is accurate. The city is planning to increase the supply of affordable housing units, possibly using those Section 37 funds, as I understand. This seems like a compromise, as I understand those.

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  7. The place I come from, a rural resort, has changed a lot since my youth. This is my basis of comparison. Maybe it isn’t fair at all.

    But I own a condominium that sits on land my great-grandfather homesteaded in 1872. We had tons of picnics on that land, and walked over to the beach afterwards. On the 4th of July, we shot fireworks over the water. The house my great-grandfather built was eventually moved elsewhere (it still stands in a preservation-focused park) after being restored and turned into a summer home by my aunt.

    I had a reunion there, at a park, with a bunch of cousins a couple years ago. One of my cousins said to me, “They didn’t ask our permission to change everything, did they?”

    So that’s where I start when I engage with this stuff.

    The thing is, I could still live there if I wanted, because I managed to land on the good side of the inequality divide. I sort of think has the right of it, that this story is as much about inequality as anything. Because the world is always changing, and always will be.

    I don’t know that I put much store in the idea of devoting a few units per building to low-income housing. Aren’t those units just going to end up being rented by some well-to-do’s kid or nephew or cousin?

    I mean, we need lots more housing, and we need jobs that pay more. I continue to feel that in the long term, we should be trying to move so many of our “information age” jobs away from the really expensive places to live. There’s no need for that. I know people doing exactly that.

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  8. As many here know I work in the apartment building industry in LA.
    One of our projects just opened, where we gentrified a property near Skid Row.
    Rents go for about $2,500 for a one bedroom and are marketed to young singles or new couples..

    I was talking to one of the new tenants, to find out who these people were who can pay these rents. According to the leasing agent, most are in either the entertainment industry or tech sector.

    I was thinking of this with my scenario yesterday of the Roman model where the Knowledge Elite and Creative Class enjoy high wages and status, while the lesser orders of labor, the craft workers, compete on a level just barely above the Robot/ Slave class.

    The modern day Virgil of the patrician class exits his apartment each day and walks past the immigrant slave laborers hosing down the street and parking his car, then waits while a craftworker in a construction vest stops traffic for a moment on his way to the Hollywood office where he writes literature to entertain the masses.

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  9. I’m going to second what said and this “What was striking about the plan was the extent to which the city gave developers leeway to rebuild a large portion of downtown with condos of over thirty stories. Any bargaining power the city government could have used to shape development in a way that benefits residents was thereby surrendered before any negotiations could begin.”

    Your “elected officials” already sold you down the river. You just vote for them, you don’t fund their re-election. You’re barely necessary (votes that is) and the deck is stacked against you.

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    • I knew that part of the post was going to be confusing. The plan we had in March when these groups were meeting was the one that city planners made public in October as a sort of penultimate draft. The response from the public was quite a bit louder than expected and as a direct result the final draft actually does trade height for Section 37 funds. The region’s association of builders came out against that draft and basically got shot down- I think largely because they called for another rewrite about an hour before the final draft was to be voted on. But, as a result, most of the developers at the City Hall meeting on the final plan that I attended (and who I sat next to) were very pissed off. I don’t think it was an overwhelming victory for the neighborhood associations that were pushing for a very strong plan either, but if the deck was stacked completely in the favor of developers, they were not aware or appreciative of the fact.

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  10. In fact, that is as good a definition as any for what gets called “neoliberalism”: vague bullshit about market forces being used as an ideological justification for siphoning common resources upwards. The end result, in the cases of universities and cities, is that places that were once democratic commons are increasingly becoming luxury items for those who can afford them.

    Typically an increase in prices is it’s own solution. If that’s not happening, then my first question is always “is there a gov policy which is fueling this?”

    I know very little of that local situation, but complex negotiations with the gov for the “privilege” of creating housing suggests there is.

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  11. More data:

    While the forces of globalization battered America’s middle class, they largely benefited the country’s emerging urban professional elite—managers, consultants, lawyers, and investment bankers enriched by booming international investment and by the cheapening of imports. And as the corporations and their bosses gained political clout, the interests of the middle class faded.

    So the managerial class earns First World wages and can easily pay First World rents, while the working class sees their wages stagnating or shrinking, and is unable to pay those same rents.
    And moreover, witholding their participation in renting doesn’t force prices lower, because there is a steady stream of outside wealth to keep rents high.

    Again- this is a political problem caused by political choices.

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    • this is a political problem caused by political choices.

      Blaming international laws of trade seems like a way to avoid just increasing the local supply of housing.

      This hits the radar as a local issue, created by local political choices which are artificially keeping the supply of housing low. Ergo a shortage. Ergo people are priced out.

      Probably it’s nicely worded, “keeping the neighborhood’s charm” or some other flowery phrase which prevents high rise apartment buildings from going up but whatever.

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      • Its just math.
        Assume massive building boom of whatever volume you like.
        The cost of construction isn’t going to drop, if anything it will increase due to shortages, but ignore that if you like.
        Here in LA, new units rent for between $2.50 to $3.75 /ft. in the city core.

        What income level is needed to afford an apartment?

        How many people earn that? Is that number growing or shrinking?

        Are things different elsewhere?

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        • A 2×4 is going to be the same cost whether you build a building where apartments rent for $2000/month, $1000/month, or $500/month.

          Same for most of the building materials, for that matter. Once you get to the plumbing fixtures and some of the kitchen amenities, prices start to change… but, for the most part, the rest of the apartment uses the same materials whether or not you’re making it for classy people or schlubby ones.

          But if you were going to be charging rent… wouldn’t you pretty much have to pick the $2000/month apartments to be landlording over instead of the $500/month ones?

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        • Assume massive building boom of whatever volume you like. The cost of construction isn’t going to drop, if anything it will increase due to shortages, but ignore that if you like.

          Under these assumptions I’ll assume a 100x increase in housing, which drops the price down to the marginal cost to run a building (if not much lower).

          All homeless issues not created by insanity disappear because there’s many empty units for every person in the city.

          Or maybe you want to use different assumptions.

          Here in LA, new units rent for between $2.50 to $3.75 /ft. in the city core.

          Here you’ve switched from talking about increasing the supply to talking about the current cost at which current market works, but that includes a massive mismatch between supply and demand.

          This makes everything else you said after this point irrelevant since if we increase the supply the price will drop.

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            • Unless you’re being sarcastic, I’m not getting the logic here.

              As the supply goes up, the price goes down. Your assumptions and limits on how far I can increase the supply are such that I can increase the supply to infinity, which should drop the price to zero.

              So no matter what the current cost to rent is, the future cost in this thought experiment is zero.

              Although this is a degen example, the general logic is correct, i.e. if we dramatically increase the supply, the price will go down.

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        • “The cost of construction isn’t going to drop, if anything it will increase due to shortages, but ignore that if you like.”

          So technology has no effect? The cost of plumping a unit, time and materials, is the same for black iron and copper, as it is for PEX?

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          • No, it does have an effect and construction costs can reduce….but only slightly, a few percentage points at most, leading to a very small dip in rents.

            The gap between wages and rents is much wider than any small dip in costs can cover.

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            • That gap exists because more people want to live there than there is housing at this time. Change either side of that equation and you will see rents and values drop.

              One can simply look to many other cities and town across this country to see places where that no longer is the case. Such as Detroit, the location of approx. 70,000 abandoned homes, and other parts of the Midwest. The demand this has created in some areas, such as Downtown LA, has caused the price of land to skyrocket, and taking along with it the cost of materials and labor.

              Which brings me back to my original point, the added costs of housing that occur when you have artificial inflation of those goods and services or inflation of the land cost. Adding gov’t rent seeking adds cost, both directly in dollars or in time. Some of these costs are also in using outdated methods of construction due to code (not sure how fast code gets updated in your area) construction delays due to waiting on inspectors (an area that is nominally a good thing but gets turned into another instance of rent-seeking) or additional taxes on supplies.

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                  • The rents for new apartments in high demand areas are only slightly higher than for equivalent new apartments in low demand areas.

                    Again , rents are driven by land cost and hard cost.
                    Lower demand will reduce land but only slowly and slightly since they have other options than building apartments.

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                    • A bit more fleshing out: What this post and our discussions are revolving around is the affordability threshold.
                      That is, what is the desired income level to afford a basic apartment, that we want as a matter of public policy?

                      The basic rule of thumb is that housing should be no more than 30% of gross income.
                      So working backward, right now rents for a 1 bedroom apartment in downtown LA are around $2500.
                      So 2500/.3= $8333 per month, = about $100K per year of household income to rent an apartment.

                      Is this acceptable, from a public policy standpoint?
                      “Acceptable” here means “Will the voters tolerate it, or vote for someone who promises to change it?
                      Or, “riot and smash the windows of pricey donut shops”?

                      Suppose we wanted to set a different level, what would it be?
                      $80K? $60K?

                      Even this lower bound of $60K/ year for a household means a young couple earning $30K each would just barely afford to rent an apartment.

                      And there are a lot of young couples like this!
                      Keep in mind, these young people are earning nearly double the minimum wage that retail clerks, restaurant workers and service employees earn.

                      So could developers do this, build apartments to satisfy this $60K couple?
                      Short answer, no.

                      This would mean constructing apartments so as to cut rents to 60% of their current level.
                      There just isn’t any feasible way to get this scale of cost reductions.
                      Waiver of codes, shortening approval times, tax cuts…those just nibble around the edges and chip a few percentage points off, but nowhere close to what we are talking about.
                      60% would barely cover the cost of the bricks and mortar, even if developers took no profit and the land were free.

                      And this isn’t particular to LA, or SF, or Ontario.

                      This is why I keep coming back to wages.

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                      • So could developers do this, build apartments to satisfy this $60K couple? Short answer, no.

                        This would mean constructing apartments so as to cut rents to 60% of their current level.

                        How price elastic is this? I.e. how much would the current supply have to increase in order to have this happen?

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                        • Not very.

                          It happens occasionally that developers overbuild and find themselves with vacant units. Their ability to cut prices is limited since these are highly leveraged, and after the developer gives away his profit (maybe 10%) he is down to operating costs and debt service.
                          After that, the best move is to walk away and let the bank deal with it.

                          Again, we are talking marginal moves here, 5%, 10%. There just isn’t much money on the table to give away.

                          The reason for this is that the various actors in this are coming from radically different places.

                          The land, materials, construction labor and capital are all priced in First World levels, targeted at renters who earn First World incomes starting at about $100K.

                          What we have is a growing pool of households whose labor is competitively priced at Third World levels.
                          These young people could totally afford an apartment in Guatemala or Vietnam, but the commute is a bit much.

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                          • More data points:
                            This map shows the extent of the Southern California apartment boom. Will all the construction help lower your rent?

                            “This is the biggest number we’ve seen in a long time,” said Mark Obrinsky, chief economist for the National Multifamily Housing Council. “Demand ran ahead of supply, and supply is starting to play catch-up.”

                            So, after seven years of galloping rents and low vacancies, are tenants finally going to get a break? Is there an apartment glut that will trigger a round of rent cuts?

                            In a word, experts say, no.

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                            • So, after seven years of galloping rents and low vacancies, are tenants finally going to get a break? Is there an apartment glut that will trigger a round of rent cuts? In a word, experts say, no.

                              7 Years? Let’s just do a review of all this… and the lazy man’s way is to look up someone else’s work (especially when there have been well funded expert studies).

                              https://en.wikipedia.org/wiki/San_Francisco_housing_shortage

                              Since the 1960s, San Francisco and the surrounding Bay Area have enacted strict zoning regulations. Among other restrictions, San Francisco does not allow buildings over 40 feet tall in most of the city, and has passed laws making it easier for neighbors to block developments.

                              Partly as a result of these codes, from 2007 to 2014, the Bay Area issued building permits for only half the number of needed houses, based on the area’s population growth.[7]

                              At the same time, there has been rapid economic growth of the high tech industry in San Francisco and nearby Silicon Valley, which has created hundreds of thousands of new jobs.

                              The resultant high demand for housing, combined with the lack of supply, (caused by severe restrictions on the building of new housing units[8]) have caused dramatic increases in rents and extremely high housing prices.[9][10][11]

                              For example, from 2012 to 2017, the San Francisco metropolitan area added 400,000 new jobs, but only 60,000 new housing units.[12]

                              Later on that link talks about other self inflicted problems like rent control. In the face of all this the Mayor’s solution of building 30k more houses by 2020 (after he leaves office perhaps?) seems like it won’t fix things. Even your “boom” of 73k more houses also won’t fix things. You need to build 340k more houses just to return things back to 2012, and yes, the problem absolutely is the fault of local politics.

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                              • Of those 400,000 new jobs, how many paid enough to rent new apartment units, i.e. over $100K?

                                Here’s a summary of recent wage growth;
                                Of the occupations listed under “Fastest Pay Growth”, most aren’t above that affordability line.
                                So very few of these people, even the high tech workers like “Web Designer” earn enough to rent one of the new apartments we want to build.

                                ETA:
                                “Wages are up for several healthcare jobs, including pharmacy technician (up 3.4 percent to $30,688), registered nurses (up 2.0 percent to $66,450) and certified nurses assistant (up 2.0 percent to $28,678). There are more than 878,000 open jobs in the healthcare industry on Glassdoor. Highly paid pharmacists (up 0.4 percent to $127,506) and physical therapists (up 0.7 percent to $74,903) are experiencing a weaker labor market today and are not seeing a significant increase in pay.”

                                Jesus…even a nurse or physical therapist can’t afford an apartment and this is listed among the good news part.

                                We just aren’t seeing enough wage growth to support all the new housing we need.

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                                • We just aren’t seeing enough wage growth to support all the new housing we need.

                                  You’re using current rental prices. One assumes if we dumped 320k units on the market the rental price would drop back to 2012.

                                  If we had a time travel machine and could retroactively build what the market wanted to build in the last 30 years without rent control and harsh zoning, then the market would be what it was like 30 years ago, i.e. roughly 80% higher than the rest of the United States.

                                  And this brings us back to what I was trying to say earlier. Your handwave assumption, i.e. “Assume massive building boom of whatever volume you like.” has the underlying assumption that supply of housing doesn’t affect the price of housing.

                                  In reality the supply+demand of housing determine the rental price. Drastically increase the supply (and that “boom” of 70k units is NOT a “drastic increase”) and the price will go down.

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                                    • Where is this cost coming from? You say it’s not land, or legal burden, or time sink, by labor and materials? Labor I can kinda see, but why are materials so far in excess of other parts of the country?

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                                      • Materials aren’t in excess so far as I know.

                                        What I am saying is that the vast majority of rent is composed of the hard cost of construction. This is true for just about every city and has always been the case.

                                        No one is proposing any way to reduce this, so the proposed solution to high rents which seems to be “create a huge glut” means, literally, that “someone has to suffer a huge loss”.

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                                    • How would they make money renting apartments for less than it costs to build them?

                                      1) None of the root causes listed in that summation (with it’s multiple links to professional evaluations) mentioned cost of building new buildings.

                                      2) The rest of the United States, with rents one third(ish) of San Fran, find it profitable to build new rental buildings.

                                      3) If memory serves, the numbers you’ve put down just point to the current rental costs and suggest (correctly) that most people can’t pay them, ergo builders aren’t willing to make buildings which rent for less. The later does not follow from the former.

                                      4) Also if memory serves, the economics of building rental apartments is that you’re not supposed to get all of your costs back in a single year, so everyone always rents apartments for less than what it costs to build them. Long after a builder has made back his money, an apartment building is still generating housing.

                                      5) Various evaluations and studies claim the local anti-growth ordinances are the vast bulk of the problem.

                                      To expand my statement that 70K units isn’t a massive expansion; 400k divided by 5 is 80k. 72k new units (I assume in a year) should be your normal level of growth and may not even be enough to keep the problem from getting any worse. That it’s considered a “boom” is just a reflection of how hard it’s been to build new units with the state of your laws. San Fran should have been doing this every year starting ten or twenty years ago.

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                                        • You need to show some math here.

                                          That wiki page has more than a dozen links backing up their conclusions. Some are professional investigations into this issue.

                                          But since you’re claiming it’s simply too expensive to build in San Fran, let’s Google “cost of construction in san francisco per square foot”. From that we learn it’s only slightly less than New York (this is not a good thing), and then they go into the “why” of it… and we hear the familiar story.

                                          https://www.bizjournals.com/sanfrancisco/news/2018/01/24/sf-construction-costs-2nd-highest-housing-crisis.html

                                          San Francisco has the world’s second-highest construction costs because of complex, burdensome approvals, a severe labor shortage and easy paths for opponents to delay projects, according to a new report.

                                          The city’s average construction costs of $330 per square foot was second only to New York, according to a study last year by Turner and Townsend, a construction consultant. Apartments cost around $425,000 per unit to build, exacerbating the region’s housing crisis by requiring high rents or massive public subsidies to make construction feasible.

                                          UC Berkeley’s Terner Center for Housing Innovation surveyed developers, contractors, architects and nonprofits building market-rate and affordable residential projects on why costs are so high. Respondents said that city agencies have a complex and unwieldy permitting process, noting “additional hoops and requirements seem to pop up at various stages in the process.” They also pointed out that building inspections that aren’t standardized and lack of coordination between departments adds time to the process.

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                                            • Given this paragraph:

                                              San Francisco has the world’s second-highest construction costs because of complex, burdensome approvals, a severe labor shortage and easy paths for opponents to delay projects, according to a new report.

                                              I’ma gonna go with “lower”.

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                                            • Were it not for these burdens, the cost would be…?

                                              I checked and your labor costs run about 50% higher than national average, labor is roughly half the project. Your housing costs are 3.5x national average.

                                              My WAG here is your imposed political costs are something like a true double, i.e. half of the building costs. That tracks well with San Fran housing costs being “only” +80% back in the good old days. Those days were hardly free of constraints and also had strong NIMBYs but didn’t have them overtly in charge, so this is the difference between that level of regulation and what you’ve got now, not the diff between no regulation and what you’ve got.

                                              At the moment you’ve got a serious glut of people seeking housing so you need is a decade or three of serious building, two or three times your current “boom”. That “boom” only deals with this year’s growth, it doesn’t even start to deal with the backlog.

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                                                • So it’s not that the wages of renters are too low, but the wages of the construction workers are too high?

                                                  No, I mentioned them to point out they’re not responsible.

                                                  50% higher than average for 50% of the costs means without other problems housing would be 25% higher than average, not three and a half times average.

                                                  So extra labor costs are 10% of the problem (+25% of +250%).

                                                  This is important because labor costs are the only issue in those reports that isn’t artificially created by the gov. This way of measuring things put the gov responsible for 90% of the problem.

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                      • We had a conversation going about your views on property rights, markets, etc. and I asked a question that you still haven’t answered and we’re shifting gears here?

                        Ok then…

                        That is, what is the desired income level to afford a basic apartment, that we want as a matter of public policy?

                        We can focus on the desired income level to afford a basic apartment or use public policy to require developers looking to build market rate units to set aside a certain percentage of those units for those at lower incomes to mitigate the displacement issues. It’s the path of least resistance.

                        So could developers do this, build apartments to satisfy this $60K couple? Short answer, no.

                        Short answer – public policy should be such where you don’t put the developer in a position to consider this as a question but rather make it a requirement. I’m very supportive of requiring affordable housing units in redevelopments, especially when the market rents can displace residents.

                        Is it not the slightest bit ironic that you’re ignoring the use of government policy to address housing and me, allegedly libertarian (although I’d rather reclaim the liberal label given how badly it’s been bastardized by the left), am looking at the more obvious path to explore.

                        What a fished up world this place has become.

                        We can waste our time discussing wages later if you want, but for now, you need to convince me why you couldn’t craft public policy to address affordable housing issues.

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                        • Me, saying we shouldn’t craft public policy to address affordable housing?
                          Heck, that would get me kicked out of the Soros Socialist Club pronto.

                          The City of LA actually did force my company to include a few “inclusionary units” on one of our projects, and we will probably still make money on it.

                          There are plenty of tools that cities and states can use to increase the stock of affordable housing and I generally support them.

                          But they are small and the problem is vast.

                          The number of people who can’t afford to rent isn’t some small marginal segment; It is a large and growing part of the population.

                          Notice above, where that article notes how a nurse makes less than the $100K threshold needed to afford a one bedroom apartment.
                          A nurse! A highly skilled medical practitioner can’t afford a simple one bedroom apartment in downtown.

                          This is problem, a very big problem in our economy. Our economy isn’t producing enough jobs at sufficient wage levels.

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                          • we shouldn’t craft public policy to address affordable housing?

                            A lack of affordable housing is typically a supply issue created by so called “public policy” which in practice is run by NIMBYs. Claiming we’re going to fix this by some method other than “build baby build” is just talk designed to keep everyone happy, but if the NIMBYs are happy then supply issues aren’t going to be fixed.

                            Pointing fingers at the lack of “sufficient wage” jobs, is simply a distraction from dealing with the actual supply issue.

                            You’ve created a market where only the top 30% (*) or so of incomes can have housing. This can’t be a “level of income” issue because if that nurse were making twice as much money and could purchase a home, then some one else would be out of the street. You can NOT have 100% of the population in the top 30%.

                            (*) I’m assuming two incomes and this is a WAG.

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                        • Part of the problem is that in the USA we have determined that a family house should be bigger than X -where X is much bigger than in most of Europe, Latin America, or Asia- and, further, that children cannot/should not grow up in apartments -which is disproved by me and most of my school and university friends being raised in relatively small apartments.

                          I live in a 1940s neighborhood where the original family houses where 800 sq.ft. You can raise a family in 800 sq.ft. We just no longer want to.

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        • The cost of construction isn’t going to drop, if anything it will increase due to shortages, but ignore that if you like.

          As light rail has made downtown Denver much more accessible to the inner ring suburbs, there’s a considerable amount of transit-oriented development happening (in my suburb, even before the trains are running). Much of the advertising is for upscale apartments, condos, and townhouses with easy access* for 25%-30% less than living right on the edges of downtown. Some of that is, of course, charging what the market will bear and the edges of downtown are hot right now. Some of that is lower land costs. I have been wondering how much of it is lower service costs: lower property taxes, lower water and sewer hookups and fees, lower trash collection fees, lower insurance rates. Talking to friends in Denver, the cost of “operating” my house would be at least a couple hundred dollars per month more in Denver than it is where I am, and probably more than that. Apartment buildings are not houses, but it seems like there would be corresponding price differences.

          * Once the trains are running, I’ll have easier access to downtown than some of the outlying parts of Denver proper.

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      • But you can’t JUST build housing. You also need to build the infrastructure to support that housing. Schools, sewer and water lines, parking, transit options, etc. Not undoable, but harder than just building housing.

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        • In my town, there is currently a debate about adding high-density housing. There are strong NIMBY arguments… talk of losing the town’s “charm” or Facebook posts with pictures of (perfectly lovely) town centers with apartment buildings saying, “DO YOU WANT OUR TOWN TO LOOK LIKE THIS?!”

          Then there is talk about an already existing parking crunch. Okay, not invalid. But that is partly due to opposition to a downtown garage and laws against overnight street parking. But some people don’t like the garage because CHARM.

          Then there is talk about school crowding. Which, to me, seems like a valid concern. Now, I’d want to look at the numbers but if you are adding a sizable bump to the population, some segment of that is going to be children and those children are going to need seats in schools and if the schools are at or near capacity, you’ll eventually run into problems. I suppose you can build another school or make an addition but I can only imagine how complicated a process that is. Not impossible. But complicated.

          So I have no opposition to the high density housing plans but I do hope they’re coupled with some plan for addressing any crowding issues in the schools that may arise. The town has to do that… you can’t leave that to the developers as, ultimately, it isn’t their problem.

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          • I do hope they’re coupled with some plan for addressing any crowding issues in the schools that may arise.

            Lots of cities have needed to handle growth and more children over the years. This sort of thing normally comes hand in hand with an increased tax base so it’s a good problem to have.

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            • Well, another one of the grumbles I hear is that the increased tax base these units will provide will not offset the increases to the school budget. I don’t know if this is true or not but it is an argument being proffered.

              It does seem like it’d be more likely to hold water if the increases to the school budget take the form of, “We need to add a new wing to all 7 buildings.”

              Then again, it is unclear to me how developments of the size I’m seeing proposed could possibly have that sort of effect.

              So… who knows.

              Generally speaking, I favor adding more housing. My point is that more housing needs to be coupled with more of the pieces required to meet the needs of the inhabitants of those houses.

              I’m not very sympathetic to the “charm” argument.

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              • the increased tax base these units will provide will not offset the increases to the school budget.

                Depends on assumptions. Every unit will have three children. The increase in taxes will be limited to that unit’s taxes.

                So those people won’t have any other economic impacts, they’ll always shop/eat out of town, none of them will create a job, etc, etc.

                And this assumes there’s any math here at all. It’s more likely it’s an emotional argument; “those children will learn next to yours”.

                Then again, it is unclear to me how developments of the size I’m seeing proposed could possibly have that sort of effect.

                Your back of the envelope assumptions are probably saner.

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                • I’m curious about the schools too. When I first moved here 13 years ago or so, there was a noticeable generation gap- people moved out after high school (or before) and, if they returned, they were in their late 40s or older. Now, we’re attracting people in their early 20s, which is fantastic. But, we’ve already turned a number of schools into condo blocks, so we need more schools. Or those young people are planning to rent and not particularly inclined to have kids. I hate to say it, but there seems to be a class aspect to having kids as well. The working class people that stayed already had their kids by my age and I’m not sure the young professionals are having any. But, if they are, they’re going to need schools.

                  Perhaps a bigger issue is nobody seems to be building new grocery stores. It’s just condos as far the eye can see.

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                  • Yea… development can’t JUST be housing. And maybe increased demand for related services will spur that development, but publicly supplied services function differently. So what then? (I know one answer is that we offer private options for those services but that isn’t always realistic.)

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  12. If you enjoy schadenfreude (and who doesn’t?), then you’ll enjoy this article talking about how gluts are showing up in the luxury housing market.

    (I suppose that the depressing thing is that these apartments won’t be middle-class housing for another 10-15 years.)

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    • I’m not surprised. There have been a bunch of ‘luxury condos’ coming up in my area. Rumor has it the really pricey ones have been getting tougher and tougher to sell. The market distortions are becoming too obvious.

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  13. I’ll just note that there’s a disconnect between saying you want more housing and then demanding there be height limits (or a price to pay for exceeding them) and a carefully-constructed-by-committee master plan controlling the development.

    You can’t maximize on multiple variables simultaneously, so you have to accept the tradeoffs. And that can be OK, except in this case the root problem as I interpret Rufus’s essay is affordability, and the ultimate cause of unaffordability is supply not meeting demand. So Rufus’s ultimate goal (assuming I’ve read him correctly) of affordability is undermined by his subsidiary goals of having development be carefully planned and controlled.

    This relates to the “vague talk of market forces.” Newcomer offering Landlord more in rent than Local is not vague. It’s an on-the-ground reality. The vague part is why Newcomer is in effect bidding on the same property as Local with a willingness to offer more, and the answer to that is insufficient supply.

    But insufficient supply is not a fundamental market problem. Markets solve supply problems, for the simple fact they suppliers are greedy and when prices rise they all want their share. The supply constraint in this issue is the regulation that Rufus favors. So the vagueness in this particular market’s forces is the consequence of his own preferences, which makes them an awkward point for him to critique.

    As Chip Daniels said above, “Markets aren’t naturally occurring phenomenon like weather. The are created and shaped by collective forces like laws and regulations and social norms and attitudes.” That includes regulations like section 37 and the conflicted attitudes of folks like Rufus. And the primary effect of those two things is to counteract their preferences for affordability.

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    • Yeah, sure, I contain multitudes. What I want is for them to build affordable housing along with the luxury condos. They will not do that unless forced to. Full stop. If the mechanism for that is to require them to pay for the construction of affordable units in exchange for height, so be it. There’s absolutely no reason to believe that letting them build as much as they want without trade offs or regulations will lead to them suddenly wanting to corner the market in affordable housing instead of luxury condos or even in addition to luxury condos. Nor is there any reason to believe that Section 37 funding is going to slow down the building of luxury condos. As far as conflicted attitudes, holding two opposing opinions is not something I worry about.

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      • What I want is for them to build affordable housing along with the luxury condos. They will not do that unless forced to. Full stop.

        This is a true statement, but it’s important to understand the ways that it is true and the ways that it needs more fleshing out. Developers build luxury units, in part, because the cost it takes to overcome regulatory hurdles make it somewhat of a financial necessity to build luxury units. This is partly a function of market forces, but its also a function of communities doing everything they can to attract the right kind of people and keep out the wrong kind.

        Pitching this a a battle of neoliberal market forces vs. humane community planning is almost everywhere a false narrative. In reality, that community planning is almost never that humane and the market forces are the result of trying to keep up appearances. We have collectively decided to subsidize a certain lifestyle that we really cannot afford and no one wants to take the write down.

        These trends will continue – despite the fact that from the individual perspective almost no one is better off – because, from a system point of view, no one has enough individual incentive to do things differently.

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        • But I don’t see where the “regulatory hurdles” alone caused this problem.

          What we had was very little building for a long time because nobody wanted to move here, frankly, and if they did, they could afford to buy a house.

          Then, we became a destination for people who were priced out of Toronto. So, that’s going to drive building. But, for the last few years, the assumption was that developers were going to be given pretty much free reign to build in the downtown core. There was a public outcry and the final draft of the city development plan, as of last month, reflects that to some extent. But, they’re not greatly constrained and, in the boom time of the last few years, we’ve had three things happen:
          1. A ton of luxury condos are being built,
          2. A group of property management companies bought all of the more affordable apartment towers and nearly doubled the rent on any unit they could get the residents out of,
          3. Landlords renting out of divided houses have greatly increased their rents, although perhaps not quite as much.
          So, like I said, five years ago, you could get an apartment for $700 and now it’s about $1,200-1,500 and rising. I get where the influx of higher income people has driven the demand for luxury condos, because it’s the next best thing to a house, but I don’t see where regulations have forced people to unwillingly double their rents everywhere else.

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  14. Those vague market forces provide affordable housing if supply is unconstrained enough to meet demand. No affordable housing may get built, but existing housing tends to shift down market when enough luxury housing gets built.

    When we focus on the dislocations when there is a change in demand we are looking at the short run, which is not a full picture of the market. In the longer run the market tends to overbear that disruption.

    But by limiting housing construction through regulation and centralized planning we actually maintain that disrupted state for longer. In the case of New York and San Francisco it’s been maintained for multiple decades, while people demand the affordable housing they are inadvertently preventing.

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    • Welcome back!

      I’m generally pro-development. Or, perhaps, anti-anti-development.

      I talk above about other factors that may more justifiably limit growth. If a developer buys a parcel of land that currently houses 10 families and wants to build a high rise that can house 500 families… who is then responsible for ensuring the sewer system or schools or roads can accommodate 490 more families worth of waste water or children or cars?

      I recognize such arguments are often just thinly veiled NIMBYism. But, is there a point at which they hold enough water to limit development?

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      • Kazzy,

        I don’t have a problem with requiring developers to cover the cost of those things. That cost will be passed on to their residents, who should pay for their marginal effect on infrastructure.

        It’s advantageous to ensuring smart growth, too, because clustering people reduces the per-residential unit infrastructure cost. Some cities are in dire straights because as they’ve grown they’ve encouraged density that’s too low to support the infrastructure costs. Some literally cannot fund basic maintenance now through any reasonable property tax rate because their residential unit to infrastructure unit ratio is too low.

        Requiring developers to cover those costs, instead of implicitly subsidizing them, encourages denser development, which is economically more sustainable.

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  15. Pingback: Retroactive: This Week in Ordinary Times - Ordinary Times

    Ignored

  16. I have to say, I’m finding the argument that what’s driving this is the widening gap between income levels much more convincing than that it’s simple supply and demand and the government needs to let developers flood the market, which they would supposedly do otherwise. I’m oversimplifying, of course, but my market forces crack was about this tendency people have when these topics come up to oversimplify greatly.

    I don’t think it’s one factor, of course, but if I’m a developer it just makes sense that I’d rather spend my time and money building $2 mil condos than $700/month apartments. In other words, I’m also more convinced by the argument that a workable fix to this is to require a certain percentage of affordable units in developments that are majority high income OR for city governments to include a tax and build affordable units themselves.

    I mean, yes, people might lose the taste for expensive condos at some point, which could lower the high end- I’m skeptical there too- but it’s somewhat irrelevant for the low end. At the low end, it’s not like Cheetos or soda pop- the majority of people are not going to make a rational choice to forego housing, so up to a certain level, you don’t have a choice what you’re going to pay for shelter. Yes, some cities will end up like New York, where more people are moving out than moving in and, according to the Wall Street Journal, there are “thousands” of New Yorkers who work jobs and live in homeless shelters, but that’s the extreme high end and this housing crisis is a problem in most large cities, It’s also a lot to expect people to give up their careers because rents have doubled where they work.

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    • if I’m a developer it just makes sense that I’d rather spend my time and money building $2 mil condos than $700/month apartments.

      Sure, absolutely. If we’re only going to build enough housing for 15% of the market (60k houses and 400k jobs created), then the builders are absolutely going to focus on the richest 15%.

      However forcing the builders to make some of that 15% “affordable” is just pretending to address the problem.

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      • Okay, to be fair, at present, builders are building for the top 40%, which is better than the top 15%. They still have no incentive to start building for the bottom 40% when the top 40% will pay at least twice as much. (I suppose my girlfriend and I are in the middle that has some wiggle room). They’re not pushing to get in on that bottom 40% market, so cities will have to build a lot more affordable units, which doesn’t seem fair either.

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        • They still have no incentive to start building for the bottom 40% when the top 40% will pay at least twice as much.

          If the level of gov micro-management and regulation is such that it costs just as much to build for the top 40% as the bottom 40%, then sure. Note my costs calculation conversation with Chip suggests this is exactly the case, i.e. the bulk of the costs are gov inflicted.

          You also have the whole “backlog” effect which is currently plaguing you. Having only built for the upper 15% for years, there’s a lot of people in the 5% right below that who are willing to bid high for that “top 40%” you’re “currently” building for.

          Big picture is you need “build baby build” for a decade or three before you get a sane market, and all of the “negotiations” and “regulation” and “deals” you’re inflicting on the developers is telling them their services aren’t wanted.

          In an ideal world the developers would be making crazy outsized profits off of your current situation, which would attract lots of other developers and so forth. It was suggested on this thread that just isn’t happening, and if so that’s a HUGE problem. In a functioning market, crazy prices are their own solution.

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          • One thing that is important to think about when it comes to affordable housing is this:

            Is the government demanding that affordable housing be built to some standard which removes it from the realm of affordable?

            Note I’m not talking about safety and building codes, but rather living area and amenities requirements. Even if all the red tape is removed, such requirements can still price a building out of the affordable range.

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            • Let’s talk in real world numbers.
              Land: 10 million
              Soft cost, i.e., govt fees, finance fees, design fees: 10 million
              Hard cost: 40 million
              Rent: 2500 for 1 bed;
              Required income: 100k/ household

              These are real, rounded numbers for a 150 unit project in downtown LA.

              The numbers vary but the proportions dont, by much.

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              • The numbers vary but the proportions dont, by much.

                Numbers which bury the cost of regulations/mis-management into “Hard” or “Soft” or whatever are just hiding from the question of “why” are these numbers that costly? Since we’ve changed locations from San Fran to LA (and I assume, California in general), let’s look at new links and see what they say.

                https://en.wikipedia.org/wiki/California_housing_shortage

                The good news is this link has new sources of problems which give us a broader view on what’s going on. However the bad news is all the new sources come down to “the government”, even things like “higher construction costs”.

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                • What you are engaging in here, is the conservative version of that magical thinking of Come The Revolution.

                  Wherein Come The Revolution, everything will be different and better except everything we like will still be there functioning exactly as it did before.

                  You assert that the Regulatory Burden inflates everything by double, without bothering to explain how this could be so. The Wiki article doesn’t do much to advance this case.

                  And then go on to assert that Come the Revolution, when the Regulatory Burden is lifted, everything will fall to astonishingly cheap levels.
                  Again, without any explanation of how.

                  Like for instance, what is this Regulatory Burden? It’s nuisance codes of course, but isn’t it also the cost of police, fire departments, sewers, electricity, and so on which helps add to the cost of everything?

                  When the Regulatory Burden is lifted, will these things still be here to service all these new buildings?

                  Right now your argument is kind of on the level of “Lets cut the Dept of WastenFraud!”

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                  • You are running a motte and bailey here. Fire, police, etc. aren’t typically rolled into the cost of a building, those are sourced elsewhere. Other infrastructure connections are a normal part of the process, so if those costs are excessive, I’d have to wonder why.

                    Regulatory burden is pretty well defined. You don’t get to play with the definition.

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                    • I’m asking for the definition!

                      The assertion being made is that Regulatory Burden is crippling, somehow doubling the cost of building.

                      But actual fees paid are trifling, on the order of 5% of the cost.

                      So where is this doubling coming from?

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                      • Here is the definition I’ve seen.

                        1) Safety and Engineering Regs: The requirements necessary to make sure your building doesn’t fall down or burn like dry tinder, and that it can be evacuated in a timely manner, etc. Basically the requirements that any ethical architect and engineer will insist upon and that exist to prevent shady developers from trying to trade safety for savings.

                        2) Requirements that satisfy outside interests, but are not actually related to #1: This is often the result of rent seeking or capture. Things like plumbers demanding that supply lines be run to flushless urinals. Anything that directly affects the cost of construction and satisfies the wants of an outside party. Can be one the books as code, or could be the result of #3.

                        3) Political and Legal Costs: This is where I think places like LA & SF really feel it. These are the normal costs of satisfying regulatory requirements (pulling permits, etc.), as well as paying people to handle the political lobbying and legal challenges that exist when large construction projects are proposed. The political lobbying is dealing with every elected official and bureaucrat who desires to exercise their power to get something they want out of the project. And the legal challenges are, of course, every lawsuit filed by outside interests in order to halt, delay, or force a concession out of the project. These costs will get rolled into the total P&L, and will be a factor in deciding how much rent to charge.

                        Now ideally, if a developer wanted to raise an affordable housing project, the political bodies would streamline the process, and keep the political costs to a minimum*, but in CA, IIRC, they can’t do squat to reduce legal challenges from outside parties, which means the NIMBYs have the means to potentially raise the cost of any project above what could be considered affordable.

                        *Not sure how much power elected officials in any given city have over the bureaucracy, so even if the political types promise not to put their hand out, they might not be able to prevent other parts of the government from doing so.

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                        • Yes this is the definition I have seen.

                          1. These are real costs, with real benefits. Any assertion of savings, like having one stair instead of two, should also calculate in the added cost of increased deaths.

                          2. This is a real thing, but I haven’t seen much documentation of how much this affects costs and what the benefits would be.
                          The Building Code, by the way, is literally written by a consortium of outside interests like fire chiefs, real estate developers, accessibility advocates and engineers. Sometimes those silly-sounding requirements have a valid engineering justification, other times are thinly veiled rentseeking. But developers have as much power to block them as the advocates do to implement them.

                          3. This is the “soft cost” I mentioned above, and rarely amounts to more than a couple percentage points.
                          In fact, if you build “by right”, that is, without asking for permission to vary from the code, it is next to impossible for anyone to legally stop you.
                          Most of these time consuming expensive legal battles are over projects that are asking for all sorts of freebies like reduced parking or added stories or something.

                          See this is what I mean by Come The Revolution.
                          Eliminating safety codes, blocking neighbors ability to stop a project, or outside interests from contributing to the code would amount to a radical re-organization of how our society operates.

                          Any proposal needs to conjure up a persuasive vision of what the world would look like without safety regulations, planning boards or legal standing.

                          And its not like we don’t have plenty of empirical evidence to study!

                          The pre-20th century America was just such a world, and in fact, all the things listed above were responses to things like the Chicago Fire, Triangle Shirtwaist fire and various collapses, floods and disasters.

                          The American cities were famous for helter-skelter development where waste and debris was just dumped in a convenient river or vacant lot, where your neighbors objections to your soot and toxic chemicals was ignored by officials if the bribe was right.

                          For a bunch of guys who talk about Chesterton’s Fence, conservatives seem awfully willing to engage in radical social re-engineering.

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                          • Can we compare two projects, one built by right, and one not, and see what the cost winds up as? Building parking costs money. If the city wants to make affordable housing more attractive to develop, perhaps they should revisit the parking requirements. What other ‘by right’ requirements significantly add costs such that a developer would want to ask for a variance? Are these things the code could be revised so that affordable housing can be more profitable?

                            Sometimes it isn’t about reducing regs, so much as making them smarter.

                            I mean, ultimately, if developers are not even attempting to build affordable housing, it’s either because there is just so much more money to be made building luxury, or the costs and headaches associated with building affordable are not worth it. Assuming that the cost of land, materials, and labor are not significantly excessive.

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                            • Oh absolutely!
                              For myself, as an urban resident without a car, I would be happy to see auto parking requirements deleted entirely.

                              However, there are a lot of stakeholders who vehemently disagree, and will vote accordingly.

                              I would be happy to see density increased fivefold. But again, other stakeholders disagree.

                              I’m not arguing that nothing-can-be-done. But buildings and cities are intensively collective projects with many stakeholders who have a legitimate interest in the outcome.

                              My main point here is that while yes, we can create cost reductions, they enlarge the pool of affordability only by tiny marginal amounts.

                              Right now we are moving towards a Prince and Pauper distribution of wealth, and the Princes have chosen to make the city their own.
                              The Paupers have no claim to the land, and without capital, so are given no choice but to pack up and move themselves to somewhere else.

                              So long as we accept a world of Princes and Paupers, our cities will shape themselves to reflect that.

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                              • Right now we are moving towards a Prince and Pauper distribution of wealth, and the Princes have chosen to make the city their own.

                                That’s too pat an explanation, especially when you just got done telling me about the various stakeholders who refuse to bend to help reduce the cost of developing affordable housing.

                                I was reading this morning that something like only 8% of the land area in the city of Seattle is zoned for multifamily housing. Almost 50% is single family homes (the rest is commercial/industrial/etc.). That 50% is exercising the hell out of a NIMBY veto on any rezoning efforts and against any new developments on the 8% nearby. These are not princes, nor are they paupers.

                                I’m willing to bet the people who refuse to reduce the parking requirements aren’t car dealers, they are people who don’t want their access to on street parking impacted.

                                The people who lobby against increased density aren’t tycoons, they are people who don’t want a view impacted, or just simply don’t want the area to be even more crowded.

                                The princes and paupers narrative is neat and tidy, but the reality is that it’s people who are assholes, and the politicians are just unwilling to stand against those people.

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                                • OK, but once again, what happens when all the barriers like parking requirements and zoning restrictions are lifted?

                                  That is, imagine it becomes much easier to build. How much lower will the cost/ affordability level be?
                                  5%? 10%?

                                  That would represent real progress, something to be applauded.
                                  But even then, instead of needing a household income of 100K to rent in LA, you would need “only” an income of 90K.

                                  It wasn’t the 90K earners who were smashing the windows of the donut shop.

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                                  • We have some operating assumptions here:

                                    When land is expensive, density is required to keep housing costs low.

                                    Building dense housing costs a lot of money, way more than the land itself costs.

                                    There seems to be a catch-22 here that you can’t build your way out of this. Your $60M, 150 unit is just the way it is.

                                    But…

                                    Does that building include parking? If so, how many sq ft is dedicated to parking? What is the area of a 1 bed unit? Is this a required area, or just what the developer thinks will let them get $2500/mo? Area is king here, so how many more units could be built if there was no parking, or if the units could be smaller? What is the limit of affordability here? $1000/mo, $800? If you could get an extra 100 units in the place, what would be the 1 bed rent?

                                    Take @j_a ‘s comment elsewhere to heart, that Americans are just too damn comfortable with the idea that they HAVE to have a large area to live in. I don’t buy that. I’ve seen some very nifty ways to make a small space function as a much larger one (Hong Kong and Japan are innovating the hell out of small spaces).

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                                    • Yep, we are looking at just this scenario at this very moment.
                                      We are looking at an old building constructed in the 1910s, without parking.
                                      We are doing a highest and best use analysis to see if it pencils out better as apartments, office, or some combination.

                                      The apartment market is strong enough to where you can offer apartments without parking, and just tell the residents to rent a space nearby.
                                      The office market though, is still weak enough to where you have to offer parking. So some strategies are to offer a free shuttle service to a nearby parking structure with pre-leased spaces.

                                      The point being, removing the parking requirement could result in much cheaper buildings, since parking can be on the order of 25% of cost.

                                      But beware!
                                      Apartments without parking command significantly less rent, for the obvious reason that the monthly parking fee is effectively given away to another property owner.
                                      And if the market softens, you might find yourself with an empty building.

                                      Here is a real building, which is deliberately underparked:

                                      Angels Landing 88 Story Building with 465 parking spaces

                                      Here is the tl;dr takeaway:

                                      The project will have 465 parking spaces, developer Ricardo Pagan of Claridge Properties told an audience last week at an event for Bisnow. Those spaces will serve approximately 650 apartments and condos, 500 hotel units across two hotels, an elementary school, and shops.

                                      The parking plan rocked the room Tuesday night: “The audience of 250 or so commercial real estate professionals gasped upon hearing Pagan’s bold underparking plans,” Bisnow reports.

                                      The article goes on to say that per zoning guidelines the project actually meets minimum requirements, but the market usually demands much more.
                                      So this is a risky move by the developers.

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                                      • Honestly, if cities are serious about reducing automobile traffic and improving public transit usage by the residential public, risky moves like that are essential. As long as buildings feel required to include parking garages, the cost of apartments is going to remain high.

                                        Also, are things like this common in LA?

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                          • Any proposal needs to conjure up a persuasive vision of what the world would look like without safety regulations, planning boards or legal standing… The pre-20th century America was just such a world, and in fact, all the things listed above were responses to things like the Chicago Fire, Triangle Shirtwaist fire and various collapses, floods and disasters.

                            So clearly getting rid of any regulation at all instantly gets rid of all them and brings back The Jungle? That seems like a false choice.

                            Perhaps you could just reduce the growth-hostility of your system to say, Texas, or any other State that has rent levels you like?

                            conservatives seem awfully willing to engage in radical social re-engineering.

                            At the moment the people engaged in “radical social re-engineering” are the people creating these “no poor allowed” housing regulations; Not in name of course but in effect, in name it’s for their good.

                            And last I checked California hardly counted as “conservative”.

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                  • You assert that the Regulatory Burden inflates everything by double, without bothering to explain how this could be so. The Wiki article doesn’t do much to advance this case.

                    Those wiki articles are summations of (multiple) research(es) so it’s a lot more than “my assertion”.

                    The most recent link suggests there’s a fair amount of “you must do this which is more expensive than you need”, but as far as I can tell the big pain point is Time. Even costs we normally consider to be fixed (say, cost of the land) will telescope with time because of bank loans. The process is designed to take as long as possible and to let NIMBYs throw sand in the gears at every step. Time is a huge deal with these sorts of things, the workforce is hourly, the bank’s interest is paid monthly, and so forth.

                    However the regulatory burden gets multiple bits at the apple.

                    A developer need an expensive “environmental impact” study before he can start and whatever he builds has to be a min size (so tiny low-cost projects aren’t viable), he’s not allowed to build above a certain number of stories (so he can’t do large projects), his materials (etc) all have to be environmentally moral (i.e. expensive), his workforce must be union, and the local anti-growth groups have lots of opportunities to try to shut him down so all of his costs telescope because of Time… and all of these things are taken to extremes compared to other states.

                    Note the local powers-that-be insisting he build “affordable” housing for the “privilege” of building anything at all is just another way to lower his profit and thus lowering the total amount of housing that gets built. If building is a privilege only given out rarely and made as expensive as possible then it will be rare and only available to the rich.

                    I like Oscar Gordon’s link (which I’ll repost below) because it has math and was clearly written by someone a lot closer to the problem than me, however while it’s a great summation of how regulatory burden kills micro dwellings, it’s only a view of one type of regulatory burden. But this one bite of the regulatory apple reduces affordable housing 20%, admittedly that’s situational.

                    http://www.sightline.org/2017/03/20/how-seattle-killed-micro-housing-again/

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                • .

                  “However the bad news is all the new sources come down to “the government”, even things like “higher construction costs”.

                  If only the government will reduce the regulatory burden -like, I don’t know, fire retardant siding- poor people, too, could have a place to live in high cost areas like, you know, London’s Royal Borough of Kensington and Chelsea

                  Yay, we did it!! We did away with pesky regulations!

                  https://en.m.wikipedia.org/wiki/Grenfell_Tower_fire

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                  • It is always possible to point to any regulation and claim people will die if we get rid of it. That’s a wonderful rallying phrase, it’s right up there with “it’s for the children” or “god wants it”.

                    The problem with that line of reasoning is life is never risk free and we’re not letting people decide for themselves how much risk they’re willing to absorb. No one wants to have their apartment burn down, but housing prices so high only the upper 15% can afford to buy a house probably isn’t the optimal place to maximize society’s good.

                    In addition, these wonderful regulations in California have not only raised prices but they’ve also created fire traps and burning houses.

                    https://en.wikipedia.org/wiki/October_2017_Northern_California_wildfires

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                    • The problem with that line of reasoning is life is never risk free and we’re not letting people decide for themselves how much risk they’re willing to absorb.

                      The problem is that no one asked the residents if they wanted non fire resistant siding. It was a decision made *for them* by people who would never accept that in their own houses.

                      Loosening up regulations almost always socializes the risks and the loses, but rarely distributes the gains.

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                        • I fully agree that every regulation ought to be assessed individually.

                          My point is that regulations are one of the best ways to address the tragedy of the commons. I’m open to any other suggestions, but I’m not impressed with the libertarian solution of having LLCs respond to liabilities like 50-plus dead people only up to the limit of their (very limited) asset base (*)

                          (*) That’s what the first and second L in LLC stands for: Limited Liability.

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                          • This libertarian is fine with using regulation to deal with ‘tragedy of the commons’ issues. What I have a problem with is using regulation to deal with ‘this makes my feels sad’ kind of issues; i.e. big, splashy media circus events that are vanishingly rare or very limited in scope and which have no obvious remedy. What ‘s video is getting at.

                            If it’s a real ToC thing, we should be able to determine a probability of occurrence and a degree of impact, along with some kind of reasonable remedy or preparation. And IMHO, if such a target of regulation has very small probability and/or degree of impact, we should leave it alone unless the remedy/preparation is also very easy/cheap (relative to the probability and impact).

                            But we use such criteria and thresholds inconsistently. Regulations are often driven by circus events, or worse, by people with desires more driven by matters of taste, who use circus events to push their tastes under the guise of safety.

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                            • If it’s a real ToC thing, we should be able to determine a probability of occurrence and a degree of impact, along with some kind of reasonable remedy or preparation. And IMHO, if such a target of regulation has very small probability and/or degree of impact, we should leave it alone unless the remedy/preparation is also very easy/cheap (relative to the probability and impact).

                              Even if the probability of occurrence is low (and the Grenfell Tower’s fire probability is not “that” low), what’s the degree of impact of dying in a fire, I mean, for the dead person?

                              I know that I cannot realistically make the probability of dying in a fire go down to zero (I have run a risk program for utilities), but i’m deeply concerned that the risk is being borne by people different than those that collect the savings. So you want to skimp on the siding, then, by all means, do so, but then carry a general liability policy that will pay a couple of millions per fatality. And, failure to do so, victims are allowed to pierce all corporate veils all the way up to the final beneficiaries of the savings.

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                              • Well, we are dealing with policy, so we can’t look at the individual concern, but the aggregate.

                                A house burns down, the impact is small (one family). A residential tower burns down, the impact could be significant (multiple families). Obviously the residential tower has to be tighter than the single family house.

                                Speaking of Grenfell, I didn’t know this, but that building had no sprinkler system, and it seems the residents themselves decided against installing one.

                                As for your last paragraph – sounds good to me.

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                              • So you want to skimp on the siding, then, by all means, do so, but then carry a general liability policy that will pay a couple of millions per fatality. And, failure to do so, victims are allowed to pierce all corporate veils all the way up to the final beneficiaries of the savings.

                                If you want to ban a practice you should just ban a practice.

                                Imposing unclear political risks to the tune of $2 Mill per renter which can’t be reduced or avoided means this economic activity, i.e. funding the building of housing, doesn’t happen.

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                                • You need to make up your mind. Upthread you argued that people should be free to chose to take higher risks. Now you are concerned about people being made liable for the damages the risk they took caused.

                                  Because the Grenfell Tower administrators took the risk of OTHER PEOPLE dying so THEY could save money.

                                  OTHER PEOPLE

                                  THEY

                                  it’s not the same.

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                                  • @j_a
                                    We’ve been talking about how to expand housing availability, let’s do the opposite for a moment.

                                    How would you reduce the supply of housing?

                                    One way is to raise the minimum “acceptable” standard so it’s uneconomic (but ‘it’s for their good’ of course). You need one armed guard for each room, you need bullet proof glass for windows, you need a fancy garden (if it’s good enough for Trump then it’s good enough for everyone).

                                    Another way is to increase the risk for anyone daring to try to build. Screw with liabilities and auto-magically “pierce corporate veils”, or just make the landlord liable for anything his renters do by stating “he should have known”.

                                    Either or both of those would be really effective at reducing the level of housing, that’s what makes them bad ideas.

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                            • we should be able to determine a probability of occurrence and a degree of impact, along with some kind of reasonable remedy or preparation.

                              We should, but we never do because the costs and benefits accrue to different people.

                              As the old joke goes, how much is a human life worth?

                              Depends, is it yours or mine?

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                      • It was a decision made *for them* by people who would never accept that in their own houses.

                        So if I’m on the board it’s ok for me to insist everyone have a house my size with a backyard large enough that deer create problems?

                        Loosening up regulations is almost always socializes the risks and the loses, but rarely distributes the gains.

                        The current situation is regulations are so tight that housing isn’t available for 60 to 85 percent of the population. Surely that’s unethical on the face of it.

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              • Let’s talk in real world numbers.

                1. Can you provide the capital stack for that? You’ve just described the uses of the costs. I assume you can provide the information on the sources (equity, debt, mezz, etc.)

                2. I assume that these are market rate units. Are any of these units designated as affordable housing units and if so, what are the required rents for those?

                3. What’s the assumed pro-forma NOI and what is that as a % of total cost? My guess is that it’s under 7%.

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                • The original assertion was that lifting of the regulatory burden would cause the costs to drop by half and thereby allow paupers to rent alongside princes in urban cities.

                  My assertion is that the costs don’t have a lot of room to fall, and only real wage increases relative to costs can enlarge the affordability pool.

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                  • My assertion is that the costs don’t have a lot of room to fall,

                    I agree 100%

                    and only real wage increases relative to costs can enlarge the affordability pool.

                    I disagree 1,000,000,000,000,000,000,000,000%

                    Funny you chide for, as you put it “magical thinking” when no one here does it better than you do. You two may as well be twins.

                    Now, I asked you three questions about your real world numbers. Please address my questions or I’ll just assume you’re making all of this up. “Magical thinking” and all.

                    I refuse to play Fantasyland with you.

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                    • I’m not grasping what you are asking for.

                      1. The sources of financing are pretty varied, and I’m not privy to how other developers get their cash; Its not like they advertise that info. The ones I am familiar with have a mix of cash and debt.

                      2. All of ours are market rate.

                      3. A developer will more likely discuss the size of his penis with more honesty than his actual NOI. They all make a killing on the market, even on the deals they lost to foreclosure.
                      However, we can safely assume the returns are within the range of other uses of capital, or else there would be a stampede of cash into the real estate market which we aren’t currently seeing.

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        • What seems to be an unspoken assumption in most of the comments is that in some ideal world, the income inequality gap would, somehow, not be reflected in a housing inequality gap.

          What the rioters and developers have both grasped if only intuitively, is that our First World/Third World incomes are producing the same effect in all of society from the house we live in, to what school we attend, to what stores we shop in.

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          • What seems to be an unspoken assumption in most of the comments is that in some ideal world, the income inequality gap would, somehow, not be reflected in a housing inequality gap.

            What does “housing inequality gap” mean in this context?

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  17. This discussion about rents and regulations and construction costs is fascinating, but the real world application of all of this is I am actually looking for a new place for me and my partner in Hamilton right now, where they’re basically building new condos and renting old apartment towers and units in houses, so I’ve gotten to see a lot of what’s going on here. My question is really what drives up the price of existing apartments, which haven’t seen new regulations or generally doing a great deal of new work- the renos most of them seem to have done are fairly inexpensive, having done them myself in a few places for others, or at least they’re not $400 more dollars a month in rent expensive. So, why does an apartment go from $1000 to $1400 per month in two years? Especially the ones with no new work.

    At any rate, I had a long conversation this morning with a landlord who is renting at $1,000 a month for a beautiful place (we got our application in) and his explanation, actually more of a rant, was “people are just getting really greedy in this town”. Which, you know, duh. Kids are now moving here after university with higher incomes, where they used to go straight to Toronto, and so they can get more money from them for rent.

    He had reasons that he didn’t think that’s a good business model aside from his opinion that it’s “greedy”, but I still don’t see any way that the trend will reverse. It’s cheaper to keep an old apartment in decent shape and replace $1,000 a month tenants with $1,400 a month tenants. Or higher- there are plenty of $1,800 a month apartments now that were previously $1,000 a month. I mean, sure, we’ve established in the thread that, if we all knew more about economics, we’d all be libertarians. But, if Hamiltonians are supposed to wait for the market to be flooded for rents to go down across the city, it seems like we’ll be waiting a long, long time because nobody’s building new $1,000 a month apartments and, really, why would they?

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    • An economist would probably tell you what you already know.

      There is a pool of people whose labor is sufficiently valued in the marketplace that they can sustain the rental market in that area along with fancy donuts and designer coffee.

      The other pool of people, whose labor is not as valuable, must pack up and move elsewhere. But they should take comfort in the knowledge that people in China are wealthier than ever before.

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    • If the city really wants affordable units, what is the city doing to make it attractive to landlords to keep units affordable?

      I’m renting out my house for a year while we move to AZ temporarily. We are asking for a rent that is $400 more than our mortgage payment. Am I being greedy, or just trying to keep my costs balanced? Maybe your ‘greedy’ landlords are being greedy, or maybe they are finally able to charge a rent that will allow them to afford much needed repairs and upgrades to the building.

      Or it could be more of a social signal. I’ve rented out houses before (this is not my first turn as a landlord), and the quality of renter you get at, say, $1600/mo is quite different from the person who can afford $2800/mo. It’s not a guarantee, but I’m a lot less worried that the lady (who will be renting my house this year) will track road tar all over the carpeting and leave the washing machine full of concrete chips.

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      • Just to note- I’m quoting a landlord who called them “greedy”. To me, their character isn’t really important- they might be charging more because their mother needs a heart transplant. What the guy said is he’s been doing it for a long time in this city and he charges the mortgage payment plus enough to make repairs and upgrades- he was actually replacing the flooring when we there- and, you know, make a small profit too, but he was of the opinion that, if they’re now charging $400 more a month than a year or two ago, it’s because they think they can get it. And I’ve lived here 13 years, so I’ve seen what the usual rent increases were and how much more they shot up after we became a “hot” destination. None of which really surprises me.

        As far as quality of renters goes, he said he’s always had good luck, but he also picks based on a number of background checks, including the usual job letter, pay stubs, references, credit check, and just a gut feeling. I’m 42, have a decent income, very good credit, and a good history of renting and paying my mortgage when I was married. So, anyway, we chatted for a good while- it actually started with him asking what sort of rents we’re seeing around the city and then offering a rant about why that is- so I hope that bodes well for getting the place.

        It does go the other way too- because it was $1,000, I was pretty wary going in, but checked out everything I could think of in the place and it’s in good shape.

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        • Fair enough.

          Of all the tenants I’ve had, only one was an issue, and they did at least manage to get the tar out of the carpeting. I think I will, however, be forever scarred by the renters I had to live next door. The section 8 renters who rang every single white trash stereotype bell you can and who I had to work with the landlord and the city to get them evicted (& their section 8 benefits revoked). The ones who inspired me to sleep with a gun next to the bed for 9 months because they were dealing drugs and fencing stolen goods out of the place.

          I KNOW such tenants are so very rare, but once you have to deal with the nightmare such people cause (and I was just the neighbor, not the landlord!)…

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          • Not to make you even more traumatized, but there was a dude like that across from us. I actually had to report his dog because it kept getting out and biting people (self included, on the thigh, good thing I had my sturdiest jeans on that day and have dealt with aggressive dogs before) and it was aggressive-mean, humans-are-evil level mean, not just fear-aggressive, so god only knows how he was treating it. He was harboring wanted criminals for weeks on end, and all kinds of fabulous stuff, aside from the drug-dealing and fencing.

            Anyway, this dude paid *cash in advance for a year* on a fairly expensive property… think he was deliberately looking to be in a safe/boring neighborhood near a dangerous one, based on where I heard he moved when he got out of jail (same pattern, diff edge of the neighborhood). So you can imagine how hard he was to evict. I think he only ended up getting evicted once he was actually back in jail and convicted for some stuff.

            Point being, I’m not sure how much money-filtering actually helps. (And it’s pretty hard to find a way to phrase a contract such that people aren’t *allowed* to pay cash in advance for a year… I think? So his landlord claimed anyway.)

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            • I am so sorry you had to live next to that, I wouldn’t wish that on any… OK, I can think of a few people I would wish such neighbors on, but certainly not you.

              Money filtering works to an extent. A years rent in advance is, to me, a red flag. I wouldn’t call it a deal breaker, but I’d be looking hard at things like employment, credit, etc.

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          • I was going to say that I’ve been lucky with fellow tenants, but then I remembered the Scientologists and the screaming alcoholic that I wrote about recently.

            We did look at an apartment recently where the landlord started by telling us that he won’t rent any longer to people on welfare, which neither of us are. After we saw the place, it was easy to see why he was upset, because the last renters had utterly trashed it. I got the feeling the issue wasn’t so much welfare as crack.

            In answer to your first question, I honestly go back and forth on whether the city really does want affordable units. Obviously, they say it’s a major concern, but if the “demographic shift” taking place is towards residents in a higher tax bracket, it’s arguable that the city hasn’t got much incentive to address it, aside from the obvious issue that the homeless population is growing. This is where pressure from civic groups likely does make a difference.

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