Suburbs That Haven't Recovered from the Recession
theatlantic.com
theatlantic.com
1) Absentee landlords are terrible. I can't say I know what the solution is, but perhaps simply lowering the price of the houses until the (low income) workers could afford to buy and therefore take stake in the community is preferable?
2) Unfortunately the sprawling layout of Hemet in particular is unconducive for creating the kinds of businesses that could at least mark the beginning of a more dense mixed use area. In this case there will have to be pain to raze some of the houses at the very least to help things go in that direction.
3) Broken window effect seems to be in full force with the absentee landlords only throwing fuel to the fire. Ideally the city would help some of these residents sue these landlords to resolve some of these issues, which would help slow the downward spiral of non-maintenance by the residents.
I think a major windfall could be had with better regulations and rights renters could have protecting them from abusive landlords.
The rental regulations in my city are laughable and I have to deal with it almost every time we look at a potential property when I "assess" how much care has been put into its structure, mechanical, appliances, etc. That's even assuming the previous owner permitted the property for such use.
I know of a retired magistrate judge that acquired over 30 residential properties via tax-delinquency sales.
These properties, not in the best condition, were used as Section 8 HUD housing, with no improvements made.
Tactics included keeping the utilities in the landlord's name to be able to shut-off water, electric, or gas at a moment's notice.
Many of the tenants were former defendants with the magistrate court that the judge oversaw.
Additionally, barter was used in lieu of security deposits and partial rent payments - the tenant could fix-up the property.
However, the tenants lacked any ability to properly repair anything, and the repairs caused further damage to the properties.
The wife of the landlord, insisted he divest himself of these properties before his death, so she would not have to continue to deal with this.
However, he did die, she inherited the properties, and is too old to have the energy to deal with this.
As you said, "too old or bothered to do it themselves".
Some of these properties now sit unoccupied, but cannot pass inspection because of the substandard repairs, and further disintegrate.
I know of one particular property that was not winterized (unoccupied), and I am certain the pipes have frozen and cracked.
At this point, the property should be razed (roof issues, structural issues, mildew, pests), but that costs money too.
I briefly rented a small single family home from an 85 yo woman (managed by her son who lived a few towns away). We quickly found out there was black mold everywhere from a bad leak in the garage and a small one in the kitchen, and that she smoked her whole life in the place. She had no interest in keeping it up, she just "wanted to rent it out." Her son had no interest in dealing with it either as he readily admitted to us. I don't think he had seen the place in a long, long time considering the state of the damage.
We ended up recouping our costs and moving after a few days. She bought it for $150k 20 years ago, pays $600/year in property taxes so there's no incentive for her to give it up (prop 13). It's valued at $500k and was renting for $2500/mo.
Our new place is owned by chinese investors, and also has issues which they aren't interested in fixing. They haven't responded to a single email (I think they are in their early 20s, live in china, and i'm not entirely sure they speak english), we also tried to go thru the property manager who said he won't fix stuff since the landlords are unresponsive. We gave both of them 30 days notice that we need about $500 worth of things fixed. We never heard back, so we did the repairs and just deducted it from the rent, as you're legally allowed to do... come to thing of it, I could propbably not pay rent and squat the place and I'm sure they couldn't give less of a shit.
That means if she bought the property 20 years ago for $150K, the property tax in year one was 1% of 150K, or $1500.
Under Prop 13 property taxes go up 2% ever year (compounded). So after 20 years that property tax would be up to roughly $2400.
And when this sort of thing gets truly out of control, you end up with Detroit syndrome. A city with a tax base so small it can't even afford to tear down unlivable properties - and consequently can't encourage reconstruction that might expand the tax base.
Hell, Detroit got to the point where serial arson was one of the major ways of cleaning up abandoned properties. I think people underestimate the degree to which this sort of disuse is not just a missed opportunity but an active harm.
So, in the same area I mentioned in my previous post, there have been several arson incidents.
All that remains is the shell of the structure, and the property owner cannot be contacted (some other state/country), the municipality cannot pay for the removal and dumping of the debris, and the EPA considers the property an unauthorized dump/landfill.
Particularly in areas with basements, the basements collect the debris and all the rain and snow, and become, as you say, an "active harm".
The arson seems to have been done to get rid of squatters, drug dealers, and places children might try to go play. So it's lowering the community impact of the building, but doing nothing (or less than nothing) to make actual cleanup or development there possible.
Since then he's tried to withhold the full security deposit, largely for issues that existed when I moved in that he'd (verbally) promised to fix (but refused to commit to over email). I submitted it to small claims around the same time one of my roommates from that house put him down as a (required) reference for a new place, and he called her directly to blackmail her, claiming he would give her a negative reference unless she submitted in writing that she believed all the issues he cited in keeping our deposit were justified.
I don't even understand how some people live with themselves. Oh well, court date approaching.
It seems like neglect by absentee landlords is a big part if the problem, so the money could also be used to increase enforcement against neglected properties.
here's a source: https://niskanencenter.org/blog/time-repeal-home-mortgage-in...
https://www.theatlantic.com/business/archive/2017/05/shame-m...
You mean making them equal to people who can't afford to buy?
For example, one could argue that by removing the incentives to lend to buyers with sub-prime credit, Obama actually hurt the ability for the lower and lower-middle class to buy a home.
But primarily, I don’t think the tax bill, a few weeks old at this point, and in effect for less than 10 days, has had its effects studied adequately enough to conclude that it is the largest problem with developing home ownership since GWB.
Not my claim, though -- rather my claim is that it is the latest signal of the intent to stop promoting home ownership, which was also signaled by Obama's murmuring about ending the 30-year mortgage and failure to prevent foreclosures despite avenues to do so.
I think this paper was really compelling and it's a big part of the thinking I'm working out here: http://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=242...
I’m not a member of either party.
https://en.wikipedia.org/wiki/Home-ownership_in_the_United_S...
Yes, perhaps you could dream up a better means of delivering these benefits, and certainly home ownership was not equally or equitably distributed among Americans, but I feel like those objections are more compelling in a vacuum than in the reality we actually inhabit.
Whenever rents are less expensive than mortgages, then it's better to rent or buy. This case is true throughout much of the Bay Area right now.
And it's not clear that it's a net societal good in other countries. In Berlin, a lot of people are lifetime renters. In Japan, housing is a depreciating asset that becomes worthless after 20-30 years. When you buy a house it's generally for the land and the house is generally demolished by the new owners.
Not so fast. It seems a little silly to say the equity in the home is worthless, even if the house depreciates somewhat (although for the time period described and even in the present the trend for most home owners is appreciation that is better than inflation). After all, you not only get the option to sell the home -- you also have the ability to seek HELOCs, reverse mortgages, etc. Those options are not available to renters.
Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
There are a few things I'd like to address. First, for a mortgage, most of your money for the first few years goes straight to interest. You're not building equity, and it's only the amount of money you're paying in interest is tax deductible. The amount of equity you're accumulating with mortgage payments in the beginning is laughable.
Second, you're also paying for maintenance and property taxes, two things that the renter does not care about. When the water heater breaks, if you're the renter you call your landlord and take a shower at the gym, and the next day things are magically better and you don't have to worry about dry rot and stuff. If you're the owner, you're on the hook.
Third, the thing about HELOCs and reverse equity, generally you can only borrow on the equity already in the house. You could easily save that money, especially since with closing costs, agent fees, and the 20% down payment means that if you didn't buy the house, you have options not available to the buyer. Especially as a renter, you can up and move for a new job whenever you want. Would you rather have money sunk in a house and a home equity loan or liquid money in the financial markets?
> Or, to put it another way, if renting's such a better deal, why does anyone become a landlord?
In most housing markets, rents are above mortgages.
I'm sure there are investment reasons, especially if you already have a lot of money and want to diversify. Plus if you're truly wealthy, you would diversify into some real estate, commercial and residential in different housing markets, and pay for property managers. Putting all your eggs in one basket is generally not the winning play. Would you put all your money in Amazon for 30 years? Then why would you invest heavily in land in one particular market with the great majority of your capital for 30 years?
Generally the advice I see is if you intend to stay in the same place at least five years it makes sense to at least consider buying.
You can certainly sell the stock and rent a house. Also, stocks don't have maintenance fees and ownership taxes, only taxes when you sell. Housing has both those fees and is highly illiquid, you have to pony up a couple of hundred thousand up front, and the transaction fees are not inconsiderable.
I'm not sure what your point is. My assertion is that rent and housing prices should be tightly correlated, with rent higher than housing prices because of the maintenance, HOA (if applicable) and property taxes. When rent is lower than an average mortgage of the same type of property, definitely rent. For example, if rent for a two bedroom condo was 500 dollars a month and it was selling for 600k, would you still decide to buy?
However, it's possible to have an HOA that just doesn't give a shit and does no enforcing.
It's already illegal to not do certain maintenance on your house (blight, etc.) especially if you have tenants living there. (tenant protection laws)
So enforcement is the key.
Almost every new/private development (as opposed to houses built along public roads or something) has one. That's how the resources to build up the common area are marshaled.
I think of the definition of "gated community" as a little squishy so I wasn't sure of absolutes. Now that I think about it more though, the "gate" part pretty much necessitates private roads as public roads would be open to the public. Kinda feel silly, "public" is in the name.
The HOA bill keeps increasing until it could be tens of thousands of dollars. When the landlord eventually sells the property the HOA is then able to get payment from the new buyer before the former owner receives the funds.
Since legal action is so expensive, this is almost always how the HOA eventually gets their money. Of course if the bill goes over 30k, then it might be worth their time to go through litigation to get their money.
And with that investment comes a more attractive property which commands a higher rent. And that means the housing becomes less affordable for the low-income renters.
There's no escaping the economics of it no matter how hard you govern it.
When you spruce up a house, that attracts different renters. The other renters will take up housing otherwise they wouldn't have bothered with, and it goes on down the ladder.
The argument that market rate housing causes lack of affordable housing is just not true. Look at San Francisco. They have strict zoning laws, laws against construction of market rate housing, and rent control laws. Is it a paradise for low-income renters?
So your solution is keep the place a dump to keep housing costs low?
If you want to get people in better housing, the real solutions require changing and influencing the people, not the housing.
A better summary in one line than most essays on the topic.
We've put together a system that's unstable in the face of even modest shrinkage - and in some cases a mere failure to grow. The result is that even non-crisis change, like people moving to take better jobs, creates crisis results in shrinking cities.
In the short term, promoting growth is probably an inescapable part of the solution. But if we keep up the pattern of debt-financing expansion by planning for growth, we're never going to do better than deferring the crisis.
Long term, we need to build financially-stable cities and work out actual strategies for managed decline. 'Shrinking' and 'failing' are equivalent today, but that pattern needs to be broken if we're going to get out of crisis mode.
Survival of a place depends on finding & exploiting whatever it is that the location has uniquely. If society collapsed, Hemet could convert itself back to agriculture using some of your bulldozers. Though fuel might be hard to come by in that case. Plus, the people currently moving in in droves might be inclined away from that kind of hard work and more toward forming a roving band of predatory nomads based on ruthlessness, that raids other places. Mad Max!
It was pretty much exactly how the article described it. I looked at about five or six lower priced large houses (5-6 bedrooms, 4-5 bathrooms, in the 4-5k ft range) and all were the same. They were all totally run down. Gutters falling off, carpets destroyed, holes in walls, kitchens in total disrepair. All kinds of stuff were left behind like there was a fire and the owners just fled.
My realtor also pointed out a few of the houses where the workmanship of the house was way below where it should be. The houses were built quickly for the boom. Corners were cut and it was clear even after five years, the houses would need a ton of work.
One other thing the article didn't touch on was the huge availability of retail and commercial space. There's a bunch of suburbs around where I live where businesses went under during the recession and nothing has filled those buildings yet. Retail is the same thing. There are businesses that either moved out or closed shops and those spaces remain empty, almost ten years after the recession.
2000 square feet is plenty of upkeep if you aren't paying someone to do it.
I ended up with a 2500 sq ft mid century modern that was in rock solid condition that I got for a steal. I haven't had to do anything substantial in the last five years. Some things will be due in the next three years (windows and HVAC) but otherwise, it's been easy to maintain.
Drive around from downtown to way out here, though, and you'll see an extremely high vacancy rate for retail. And it's clear that it's been that way for some years.
Given that residential has a shortage and commercial is booming, I don't know if retail is ever coming back, ever.
Great opportunity to renovate and get everything done the way you want it? Dilapidated properties should cost much less, so you can use those savings to renovate. Updated floorplan, drywall, electrical, plumping, windows, floors. Everything designed exactly how you'd want things.
- Open floor plan- efficient use of space. Tons of storage.
- Enough electrical outlets where you need them.
- Cat6 ethernet ran to every room.
- Proper insulation and quality windows for energy efficiency.
I guess if you don't want to wait 2-3 months for a renovation, then you'd want to avoid these properties. But after watching enough Property Brothers it's something I think would be great.
There's also large privately own property management/real estate companies, I lived in a complex owned by one for 4 years. They own and operate properties in 25 states.
A country that has built enough housing for its population should have empty houses, should have houses that are not worth keeping up slowly falling into disrepair, available on the cheap to anyone who decides they do want them. Build more houses where people want to live - the cities. Let them rot where people don't.
There was just an article posted here a couple of weeks ago about a woman who was pushed out of LA and moved to Hemet while continuing to commute to LA for work. IIRC the woman was in her 50s and still renting in Hemet despite the lower housing costs. There are no jobs in cities like Hemet but you'd expect that a significant enough number of LA expats moving there would revitalize the local economy some what, just from the higher earnings of super commuters.
Anecdotally, my wife and I are more willing to relocate to Austin or Denver than to NJ or Westchester (this is from NYC). I imagine many other young, moderate income, residents of high population cities feel the same.
Didn't find the HN discussion (gave up rather easily) but this is the LA Times article:
http://www.latimes.com/local/california/la-me-lopez-commute-...
We made that particular mistake already. You don't need to repeat it.
I grew up in a Suburb in Colorado where the only buildings for miles were other houses. It was impossible to walk to the grocery store or any other amenity. It's extremely isolating, and a hostile and depressing living experience in my experience
Now I live in a small town and boy do I love it! Since it's a small town there's not really any huge roads and very little traffic. The streets beyond the major thru fares are quiet and the neighbors are friendly. If I'm bored and feeling restless I can walk to the park (half mile, maybe), the local watering hole (2 blocks), the coffee shop (1 block), or even the convenience store (about a quarter mile). I mean, just getting up and taking a short walk to the convenience store seems to be really beneficial to my mental health for some reason, yet driving there does the opposite.
My home city is Mumbai (technically, the suburban city of Thane, north of Mumbai) one of the most dense large cities in the world.
Public transportation in Mumbai, in terms of frequency, capacity, reliability, and cost is already better than any American city (I'm counting NYC in that). It could definitely be better; for instance the city is served by standard gauge trains but the metro railway (whatever gauge a subway is) that goes underground is still under construction.
Despite all that, and despite the fact that the tallest building in the city is a mere 88 stories[1] the infrastructure is straining under the pressure every day. All the good jobs (government, tech, banking) are concentrated in just one or two parts of the city (South Mumbai and the Andheri-Bandra-Dadar triangle, maybe Powai; my geography might be a bit outdated because I haven't lived there for 8 years). And real estate in those places is astronomically expensive[2] (here's a non-luxury 3-bed apartment for USD 1.3m in South Mumbai). That means everyone whose isn't living with parents who bought decades ago in those places has 3-hour round trip commutes every day (I was one of those people).
Building taller wouldn't densify the city because rich people will likely buy that new housing and they have smaller families on average. Improving public transportation won't change laws of distance and traffic - like I said it's already quite good. It would be better for people in North Mumbai if there were more jobs closer to them so they wouldn't have to commute so far every day.
Suburban, car-driven, sprawl is not ideal for city growth, but neither is the concentration of jobs in one place.
1. https://en.wikipedia.org/wiki/List_of_tallest_buildings_in_M...
2. https://www.99acres.com/3-bhk-bedroom-apartment-flat-for-sal...
This has been done around the world for nearly a century, it's literally a solved problem but there is a distinct set of politicians in the US that don't want to spend any money for the public goods and would rather give the money out as corporate welfare.
Many things were built and new subdivisions were creates with the notion the economy was ready for it.
It clearly was all built on lies and bad practice.
That is why I question not that it is recovering but maybe it should have not been.
I think the real solution is to leave these areas that clearly can't be supported by the local economy.
And sorry to say. Yeah it's going to suck for a lot of people. But that is life. Not everything is going to be perfect. Holding on to a dying dream is only going to make it worse.
(I am not cold hearted. I have just experience life enough to not let a sob story make me make irrational decisions).
I, for one, plan on moving further out of the city as soon as my car can drive itself. The dream isn't dying. It hasn't even started yet.
Furthermore, when car ownership is no longer considered a necessity (as it is today in most of the US), the economics will change. Right now, my personal vehicle is a sunk cost, so I view car trips as costing close to zero—unlike the up-front, immediate transactions inherent to taking the bus or Lyft. Once I no longer own that vehicle (I'm not planning to replace it), all of my options will be on more equal footing, since they'll all be priced per-trip. Even self-driving vehicles will not be able to compete with mass transit when they're both priced similarly.
I would also guess public transportation will evolve as well. I could see small and medium sized cities getting rid of buses, fixed schedules, and fixed routes and instead deploy a fleet of van-sized vehicles to pick up people on demand. I could see this as being something that gets outsourced to Uber and Lyft. Maybe it will be less expensive and better to just subsidize rides from private companies.
The cars (eventually) will not be like current cars. If they don't crash, they don't need as many safety features. They can be made much lighter and from cheaper materials. When the car is way lighter, it can use a smaller, simpler drivetrain. They will likely be electric. Maintenance on electric cars is far less than gasoline or diesel vehicles. Your robot car will likely be serviced by another robot.
Don't think of a Lexus with an instrument package bolted to the roof, think about adding a few hundred dollars of sensors and actuators on a fancy golf cart. I wouldn't be surprised if self driving cars are eventually available for less than $10,000. I think the low cost of the vehicles combined with the low cost of operating them will result in an explosion of ownership, not a reduction. I think when the cost of the vehicle drops and the cost of a trip drops, more vehicles will be sold and more trips will be made.
PS: Adding a camera may get cheaper over time, that does not mean it's ever cheaper than not having one in the first place.
Mechanical and software failures will always be possible. However, we already accept a really high rate of death and injury when both could be eliminated. I don't think that will change with self-driving cars.
Adding a camera is cheaper when it results in being able to eliminate hundreds of pounds of metal and airbags. We don't make bus riders wear a seatbelt because it just doesn't solve a huge problem. When the injury rate of car passengers gets to a similar level, we probably don't need seatbelts there either.
Cars last for ~25 years in normal use (average car in US is 11.5 years old and accidents take many out before reaching their lifespan). So, at a minimum we are talking 50 years before essentially every car is even capable of being self driven. Laws are unlikely to change before self driving goes from a novelty to assumed behavior call it another 25 years at a minimum. Now, add a few more years for phasing in the law, and then a few more for statistics to validate reducing safty equipment.
So, 100+ seems fairly optimistic as that's the happy path assuming zero major issues show up.
I think there's likely to end up being a third option: Public transport with self-driving cars for last mile at each end. That way you have the convenience of door-to-door, combined with the efficiency of mass transit for the bulk of traffic.
There are also other advantages, like it expands the effective catchment area of stations, making them more viable even at lower densities. And the cars themselves can be much smaller and more efficient as well, since they don't need the range, and they don't need to be as comfortable if people are only sitting in them for ~5mins.
And maybe a fourth one: self-driving road based mass-transit (autonomous buses basically).
Maybe self driving cars will help. But I see that being a thing for those who can already afford to live in the city. These people are going to likely prefer new stock over run down hoods.
It really remains to be seen what self driving cars would do to traffic.
The more I hear about self driving cars the more I wish the US government would take investment into public transportation seriously.
Frankly you sure come off as cold hearted. You are talking about a problem affecting many people as nothing more than a mistake that we should just let die basically.
But what if parent's premise is correct?
What if these areas cannot support a local economy that justified the rapid build-out?
What if these areas will never be able to support that?
Sometimes the truth is hard. That doesn't make the truth-bearer "cold-hearted". Indeed, sticking our heads in the sand seems even worse, from a moral perspective.
This fact is an underlying foundation for many regulatory bodies. For example the EPA establishes and enforces environmental rules in the best interest of society as a whole rather than allow companies to pollute ad nauseam which would be in their individual bottom line's best interest. This type of regulation is meant to correct factors outside of market actors which lead to an equilibrium that is sub-optimal for society.
You might say he sounds cold hearted, but that is unfairly judging an individual ethically for the speculation of an economic reality which has no ethicality.
You can talk about the economic issues all you want, but it comes down to the residents are the ones getting hurt. The people that took advantage of the situation in developing where they did are not getting hurt.
Single homes ought to be owned, and multi-tenant apartment buildings ought to be rented.
Why? One case you are observing in the article. Renters of home don't care about keeping up their house. Spending any kind of money on it is just not their priority. The only one who can keep up the house is owner, but as you can see in this case they'll just choose to pocket the rent.
But there's a different angle. Imagine an apartment building where every apartment is owned. Some of them by elderly, some of them by poor. Now the common areas and house territory would deteriorate, because apartment owners don't have incentive to spend on either one. You could try to roll these charges into their utilities bill, but they will fight tooth and nail. Poor will say "we don't have money for this", elderly will say "we don't care and also don't have money", the rest will say "we're not paying for the aforementioned if they're not".
This is becoming a problem in countries where owned apartments are a thing. The city has to pay from its pocket for the upkeep of territories around such apartment blocks.
Naturally when apartments are rented out, landlord is interested in its state because they have to maintain steady number of new tenants to replace people moving out. Bad upkeep = no more tenants = lost money.
In my area, condo fees are often high enough to make buying a condo a strange proposition - you really must want to live in a multi-unit building because mortgage+fees > mortgage for a detached dwelling.
Typically the condo board is in charge of contracting a management company who they give the fees to in order to keep up the place.
Said condo board is typically made up of retirees with the time to do it and they're less sophisticated than the management company.
Over time, the fees go up while the management company skates by doing a little less each year.
This is slowly evolving story, at some point most apartment are no longer used by original buyers but by their children or grandchildren.
I don't think it's just a profit thing. If you're a small time landlord, it's probably incredibly expensive to retain a gardener/landscaper for such a tiny job. On the other hand, unless you live down the street it's awfully difficult to mow the grass every week, shovel the sidewalk after snow, water the plants, and so forth.
A small time landlord has no economies of scale for professional services, but doesn't make enough money to quit their day job either. (which would give them time to do all this themselves)
Pity that pre-Soviet buildings are also affected.
Thing is, from game theory perspective, it's a totally expected outcome.