However, I realized it was exactly the opposite. These people were taking their office spaces and desperately chopping them up and getting up to code so they could be leased as apartments.
Or... you know... just give homeless people housing?
[1]https://en.wikipedia.org/wiki/Unemployment_benefits_in_the_U...
On top of this, it only applies if you lose your job due to "lay-offs". I've been laid off four times in my life, all 3 times the companies claimed they were not lay-offs and fought my claim. 2 times I was denied.
The third time I received unemployment benefits for 5 months. I received $4,000 in benefits then my former employer won an appeal, and my claim was deemed "fraud". I had to pay $8,500 back ($4,000 + $4,500 in "fraud fees").
If you are fired for "cause", "screw you, have a nice day".
8 months ago 10% of my company's engineering department (screw you, cloud passage) was fired "for cause" and replaced with cheap Belarusian contractors. This time I didn't even bother for unemployment, I didn't want to risk having to pay it back + 100% fines. I also do not get covid stimulus, and have had to sell my 401k to keep from being homeless.
America has no social net whatsoever. I do not qualify for unemployment, food stamps, or anything else even though I have been working my ass off and paying taxes for 25 years.
The only thing really keeping us afloat is we fled the USA and move to my wife's town where she owns a home and there's a low cost of living. Luckily I was raised with the philosophy that if I cannot afford to buy a thing in cash, I cannot afford to buy that thing, so I have never had any debt.
But, this is one of my concerns too. I equate money with time and if, as a law-abiding citizen, I work diligently for a couple of decades and pay my taxes, when circumstances change – I should be assured some sort of a safety net. Otherwise, what is the point of wasting time working to pay taxes? Is this the hard reality that we cannot rely on governments taking care of us and need to come up with more individualistic backup plans in such circumstances? Does paying all of your taxes and being a model law-abiding citizen make you a sucker?
https://www.smh.com.au/opinion/how-to-fix-homelessness-give-...
Well yes, for many of the young working class - rent is eating up over 2/3rd of their paychecks.
We are being scammed by the Bourgeoisie with inherited wealth.
This explains our situation well imo:
-
"So where did our land system come from?
Weirdly enough, the land system that we have today has its origins in a problem specific to medieval kings, which is ‘how do I fund military campaigns and defence, without paying to keep a standing army?’
And it was William the Conqueror who perfected the answer. It was a piece of paper. And on that piece of paper was basically an agreement between the Crown and a noble, saying ‘if you provide men for military campaigns when I ask, in exchange I will grant you a monopoly over your own private fiefdom, where you can levy as high taxes as people can bear to pay’.
So effectively — rent is the original tax, paid via lords to the King.
In fact the word ‘feudal’ derives from the latin word feudalis — for ‘fee’. In other words, rent. So the whole system of government by which the Normans ruled over the Anglo Saxons was based on rent.
If you’re a King, there’s only really three groups of people you’re scared of: other kings, your family, and your nobles. So over time landowners managed to engineer a set of concessions, whereby increasingly taxes were levied directly on people and business, leaving them (the lords) as the owners of a monopoly right to extract privatised land tax.
So what you’re left with is a set of power relations in society: an enforced system of servitude and control. As the economist Henry George pointed out, it is essentially a diluted version of slavery.
“Ownership of land always gives ownership of people… Place one hundred people on an island from which there is no escape. Make one of them the absolute owner of the others — or the absolute owner of the soil. It will make no difference — either to owner or to the others — which one you choose. Either way, one individual will be the absolute master of the other ninety-nine.”
Fast forward a few hundred years, to post-civil-war America and that’s exactly what played out. The plantation owners could no longer own slaves, so what they said is ‘Ok, I’ll pay you, say, $2 dollars a day’ — but by the way, I own the land, and the rent is… $2 a day.’’. Which, incidentally, led to the invention of a clever invention called a ‘chattel house’ which was a kind of kit house that gave families of plantation workers the ability to relocate to try to escape exploitative landlords."
Fast forward again to today, and land is still the fundamental mechanism of racial inequity. To be blunt, all across the UK and the US, there are tenants with black and brown skin paying rent to landlords and mortgage lenders with white skin. Or commuting for hours. Or both.
I imagine all of you have seen the speech made a couple of weeks ago by a young American writer called Kimberly Jones — if you haven’t, do — it’s absolutely the most eloquent piece of public speaking I’ve seen in a long time (https://www.youtube.com/watch?v=llci8MVh8J4). In it she uses this incredible image of getting white people to imagine what it feels like to play “four hundred rounds of Monopoly” with the game rigged against you, enforced by violence. There’s an interesting backstory here, that you may know, which is that the game of monopoly was first invented by a woman called Elizabeth Magie — and originally called ‘The Landlords Game’ and it was created so that… basically one day someone could make exactly the speech that Kimberly Jones just did.
So, broadly speaking — and I’m simplifying here — there were two positions in this power diagram. Tenant and landlord.
And over time that piece of paper became a tradable asset, as well as an inheritable one: so you can literally buy the right to extract taxes from people. And it’s amazing to me that we don’t find that more weird than we do — it’s right there hidden in plain sight in the language we use: landlord.
But such an extreme overclass/underclass diagram is politically hard to sustain. So, over time we saw the slow emergence of a middle position, which is for those who could get together just enough money to buy their own freedom from rent. Again, that’s why we have the word ‘Freehold’; it’s not free as in ‘no cost’ it’s free as in, ‘liberty’."
Source: https://medium.com/@AlastairParvin/a-new-land-contract-684c3...
+
"There are many kinds of monopoly, from utilities to pharmaceutical patents, but the greatest – the ‘mother of all monopolies’ as Churchill described it – is land. Land rents are a weird leftover of the medieval feudal system: a privatised location tax that is suffocating every Westernised economy today."
"It is worth remembering that there is no political argument —Left, Liberal or Right — that even attempts to justify economic rent-seeking on the basis of principle. You will not find one in any book. Adam Smith was against it, Karl Marx was against it, Keynes was against it, Friedman was against it. Even Ayn Rand was against it. Economic rent-seeking survives only in the dark, by obfuscation, distraction, corruption and perverse incentives. It endures only because it has not been part our political language for the last century, and in the tussle of everyday life, we are all susceptible to quietly putting our own short-term convenience ahead of our principles if we can get away with it (then justifying it to ourselves later)."
Source: https://medium.com/@AlastairParvin/progress-again-6f6213bdcd...
Landlordism is one of the oldest games. It is true that you do need quite a bit of capital in order to 'start'. This is the reason why many big corporations like Blackstone have gotten into the game. In the UK, landlordism is a common way to 'becoming a millionaire'.
After the '08 financial crash, the UK government even pledged to underwrite mortgages, making the game of starting a Monopoly-like property empire in the UK risk free for elites. Sheikh Khalifa is a big fan. [1]
> The only way it makes sense is if capital gains ratchets up the property prices significantly.
That's exactly what corporates do. It's the slow corporate fininancialization of the housing market [2].
"Between 2011 and 2017, some of the world’s largest private-equity groups and hedge funds, as well as other large investors, spent a combined $36 billion on more than 200,000 homes in ailing markets across the country. In one Atlanta zip code, they bought almost 90 percent of the 7,500 homes sold between January 2011 and June 2012; today, institutional investors own at least one in five single-family rentals in some parts of the metro area" [3]
+
"Scaling up portfolios consisting of thousands or tens of thousands of rental homes has made it possible for Wall Street firms to roll out financial instruments suited to “a rentership society”. Securitisation allows big investors to borrow against the value of the properties, to buy more properties and pay off old debt, and acts as a loan that tenants pay back with their rent checks.
Wall Street is no stranger to the housing business in America. But their involvement as landlords of single-family homes is new, and so are the financial instruments they have developed." [4]
[1] https://www.theguardian.com/uk-news/ng-interactive/2020/oct/...
[2] https://www.theguardian.com/artanddesign/2019/sep/10/push-fi...
[3] https://www.theatlantic.com/technology/archive/2019/02/singl...
[4] https://theconversation.com/wall-street-landlords-are-chasin...
Ah yes, a most trustworthy source. A book written by many authors and used by monarchs to subdue their populations.
I am not saying this post is factually/historically correct.
It all seems very similar to me. I'm sure at the start they also thought they were turning defunct office space into desirable apartments too.
> Smith is one of hundreds of residents placed at Terminus House in Harlow by councils in and around London, often many miles from everything and everybody they once knew.
I'm not familiar with the specifics of UK subsidized housing, but it sure sounds like the residents were placed in this building by government.
Councils used to be the biggest house builders in the UK.
Then the neoliberals decided that was silly and the free-market could sort it. So they banned councils from building houses in the 80s. House builds plummeted from 300k per year to 30k per year. Plus they forced the council to get rid of their affordable housing by letting people buy their council house from the council.
So now, when poor people who are guaranteed a house need one, the council have to buy a slot from the free market (and obviously need to go for cheap).
Now the UK has a housing crisis.
Yay, free market.
Basically, the opposite of what you think. The council didn't 'choose' to put people there, they were forced to by the market and disasterous neo-liberal policies.
Whether or not the free market has caused the use of private companies to provide project style social housing on the fringes of cities (short answer: of course it has) is somewhat irrelevant compared with converting city-centre commercial property into private accommodation.
>> sounds like the residents were placed in this building by government
> council didn't 'choose' to put people there
Again, your response isn't to the point being made really - no-ones really arguing against your point. Just because they didn't have any real alternative doesn't invalidate the point that they did it.
In contrast if the policy is "Government pays the rent on the cheapest houses on the market, for homeless people" or "government has a fixed budget and must house as many homeless people as possible" then the legal minimum standard is crucial, because that's what you'll likely be giving to homeless people.
For councils to build houses and build them to a reasonable standard would, as you say, be another option.
Can anyone buy some land and build whatever they want on it, like massive apartment buildings? If the answer is no, how can you claim there is a free market? I think the problem is clearly on the heavy regulations, licensing and zoning that keep companies from building.
They probably can, but The Market™ may give better ROI to (e.g.) condominiums so who'd want to do it?
With apartments you have to do things like put up with tenants and such, and who wants to do that? With condos you sell the units, create a condo corporation, and then walk away with your money once it's constructed and never think about it again.
Why build rental units for poor people when you can sell to oligarchs who want an asset to park their money in?
As with everything else in a capilistic economy: because there is profit to be made.
Same as we have very expensive top-of-the-line smartphones and very cheap but functional ones, a truly free market housing economy would provide cheap housing for the poor. The reason why we don't see that happening is because of all the regulations that increase the cost of building, making such companies inviable.
Poor people would benefit the most from truly free markets, if we care about them we should be asking for less government intervention, not more.
As someone who lives in Toronto, Canada where there's a lot of condo construction, and little-to-no purpose-built rental construction, the "capitalist economy" has decided that rentals are generally not worth it.
At least when it comes to builders: plenty of people are buying condos and renting them out instead of living in them, but apartment blocks seem to be not worth the effort.
You are right to complain about this issue, but don't blame free markets, because they are not free: government intervention prevent the necessary competition for the market to work and fulfill demand.
Which are exactly the same for condo or apartment.
The reasons are economic AFAICT:
> For a long time, the economics of constructing a rental made little sense compared to a condo. Condo builders get a significant portion of their financing directly from future unit owners, who give hefty deposits to secure their spot and therefore assume some of the risk. Rental landlords, on the other hand, need to front the majority of the equity, assuming all the risk themselves. When a condo building is complete and all the units have been sold and paid for, the developers quickly reap the returns on their investment and move on. For a rental building, the returns take many, many years longer.
* https://nationalpost.com/life/homes/is-this-rare-new-rental-...
Toronto has had vacancy rates <2% for decades, so it's not like rental demand wasn't there. In fact prices peaked just before the pandemic and are now falling because the Airbnb folks are switching to long-term rentals. The price of condos is dropping as well since plenty of people are just selling their Airbnb units and flooding the market to certain extent.
A good number of rental buildings are actually being constructed in partnership with insurance and pension funds, as they need long term cash flows and baby boomers aren't getting any younger.
The building looks and was named straight out of judge dredd.
All my SF life I’ve tried to stay in the real residential neighborhoods, the ones tourists don’t know exist. Would be nice to change it up without being rent gouged.
Before anyone has a hissy, while a good sounding idea it can raise costs for remaining units and price other people completely out of the market again and greatly delay a project as each group wants its pound of flesh. So the very same reason there is a lack of housing will rear its ugly head in this case as well
The resi tower has concrete separations between floors and if you are lucky, between flats on the same floor. Office buildings don’t have any real separation between floors as you are supposed to walk on accessible fake floors and have fake ceilings too.
The sound insulation between flats on a converted office building must be nil.
There's still a fire danger, of course, with any kind of cooking, but at least there shouldn't be open flames all over the place.
So couldn’t you isolate the noise with false ceilings and walls that are constructed to minimise transmissions?
The key is the installation and design of the system, though. Miss one vent, electrical cutout, or gap (or even using the wrong length of screws) makes all that material useless.
source: I tried very hard to soundproof between floors. Sound passage is non-existent but footfalls are plainly heard.
Sheetrock (gypsum) can solve this problem if you use enough of it. But that can get expensive.
A lot of the older buildings in SF just have 2x4 walls separating the apartments, with fiberglass insulation. It's not very good at insulating sound either.
If the office conversions are done properly they will be better at sound insulation than much of the existing housing stock in SF.
The real question is, why bother renting in SF when any of the surrounding cities are cheaper? Most of the reasons to live in SF (restaurants, nightlife, cultural events) are shut down indefinitely, and commute distance isn't relevant if you are working from home. Renters can get a lot more for their money in the East Bay or the Peninsula.
Because the pandemic-related shutdowns are temporary (though of course there will be lasting effects), and rents are 30% off their highs, with many landlords throwing free months and other incentives at people to get them to rent.
Sure, if you need/want to save some money over the span of the next 8-12 months, moving out might be a good idea, but if you want to live in the city, you're going to move back eventually, and moving itself isn't free. I think that's a thing that people seem to be missing: posts like yours seem to suggest that the only or main reason people live in SF is because their jobs are there and they want a short commute. That's... just not the case for many, many people.
I think there are valid arguments for leaving, valid arguments for staying, and valid arguments for moving in. But it depends on each person's individual situation and wants and needs.
Outside of some makeshift co-living shelter-like concept it does not seem that convertible.
The coming economic response to the pandemic has the potential to be like that, basically 10x the 2009 "great recession" and a lot of second and third order effects.
Hard to predict what to do and it's nice to hear the Fed doing their research. The TARP program in 2009 was pretty creative and managed a pretty big thwack without nearly as much pain as their could have been.
Are you sure you aren’t basing that analogy on the movie Speed 2?
Where it ends is anyone's guess, and the worst part will be the second and third order effects it won't be super easy to predict. Things like pension/401K/Superannuation funds with high Commercial real estate exposure leading to reduced retirement income, state pension funds that suffer as big US cities see revenue plummet after the population moves, European cities with vastly worse economies - the UK with London hurts there the most - and the cyclical effect of Italian demand reducing French production, reducing French demand reducing Italian production, ad nauseam.
This will be a multi-speed problem, with some countries, cities, counties, suburbs & streets affected far more than others.
If it wasn't so tragic it would be a truly fascinating thing to watch unfold.
An interesting second (or even third) order effect of the 2008-2009 financial meltdown was the collapse of many German state banks (Landesbanks I think they're called) which had invested massively in US-based CDCs and the like. I don't think many people would have predicted that happening in 2005-2006.
https://www.bloomberg.com/news/articles/2020-09-01/fed-s-mor...
Though I'd dispute that the Fed cares particularly about their valuation. The Fed's dual mandates are inflation and unemployment, not balance sheet returns.
Probably the worst consequence from a failed commercial real estate market will be the collapse of the economy that services and depends on these spaces. Restaurants, trasport, maintenance workers and so on will inevitably fail. This will lead to loan defaults, bankruptcies and eventually this trickles down to every citizen in the community if not the country.
For a historical view of this type of collapse, look into any resource based boom to bust city or town. The sad part is those that can leave, get out long before the SHTF and it's only the middle class to poor left holding the bag. Then when the Fed steps up with a bailout the parasitic rich start showing up again to ride the recovery, lining their pockets once again.
Real estate --- residential, commercial, and industrial --- is among the largest asset classes in the financial system, and it acts as collateral and backing of loans and other financial instruments. Those in turn affect banks and their own ability to generate loans, themselves much of the total money supply.
When market value of these assets falls dramatically, it has ramifications across the financial system. The 2007--2008 global financial crisis was the result of a prior crash in real estate valuations. Japan's Lost Decade (1991--2001) was the result of its own real estate-inflated asset bubble collapse. (https://en.wikipedia.org/wiki/Lost_Decade_(Japan)). Money available for business investment (already constraind) will further contract.
Additionally, for many people, lacking a defined benefit pension, real estate is a major component of household asset portfolios.
Whilst real estate asset inflation is highly problematic, and is not a contributor to economic growth, sudden collapse is tremendously disruptive. And very much a concern of the Fed.
Of course, special interest intervention may be another factor in decisionmaking, though there's ample reason for interest without any such.
By definition, solvency and liquidity at the country level depend on major asset classes maintaining some amount of value.
That baseline changes based on regulations of what can or cannot be used as collateral for different measures, what ratios institutions have to maintain, etc, but there is a floor of some sort at which point the financial system implodes and the economy collapses.
Given their powers and mandate, preventing economic collapse is of the utmost importance.
Beginning with the 2008 GFC, this was expanded to buying "distressed assets" (https://blogs.wsj.com/economics/2008/11/10/fed-takes-step-in...). This was, and remains, controversial (as noted in the WSJ link), and poorly understood (I'm still not certain I grasp it well, let alone fully, myself).
My understanding is that the Fed's goal isn't profit, but of buying money into, or selling assets, and hence money out of existence. The Fed's asset-buying targets are better thought of as liquidity-injection targets (where liquidity is money created by the Fed to be injected into the economy). The Fed stabilises asset prices as a buyer of last resort, incidentally to its primary goal of both ensuring sufficient money in the economy and in creating greater ceertainty in asset values which allows banks to function.
The Fed can always buy assets or lend money, as it has the sole power (save the US Treasury) to create money without restriction. And in practice, it makes profit on these transactions (which is contributed to the US Treasury).
The distortionary effects on risk and incentives ... remains fuzzy to me.
This is largely my own conceptualisation, it seems generally to agree with other explanations, and smells strongly of MMT.
I may be badly mistaken, however.
A new 57-story office tower opened just last week: https://www.chicagoarchitecture.org/2020/10/18/a-new-skyscra...
Dozens of new residential towers have been announced, and at least a dozen are under construction, including one that's almost finished at 101 stories tall.
https://www.chicagoarchitecture.org/2020/10/05/sit-back-brea...
Surely this didnt start or finish as a result of the last 6 months?
Residential real estate may be okay in the cities receiving this exodus in the South, Midwest, Texas, Idaho, etc. but as for HCOL cities I’m just not sure. There may be enough demand to at least cushion it.
Commercial will definitely be a bloodbath of epic proportions, especially in formerly hot markets.
Edit: too early for good stats but here are some cities that seem to be receiving HCOL expats as determined by the highly scientific process of observing anecdotes:
Phoenix, Santa Fe, Boise, Denver, Dallas, San Antonio, Austin, Atlanta, Cincinnati, Pittsburgh, Chicago... I’m sure that list is not exhaustive. Those are just some I have seen.
Those vary in terms of how not-HCOL they are but all of them are much less expensive than California, NYC, or the Seattle area. Much better places to live if you don’t have to live somewhere with $500k to $1.5m “starter homes” and other absurdities. Now that we are discovering that we can actually use this Internet thing, good riddance to that madness.
As for tech hubs, they are now only economically rational if you are high up at a large FAANG or similar company that is able and willing to pay huge salaries.
Startups, bootstrappers, and labors of love are not going to happen there unless they are lavishly funded or only comprised of straight out of college folks willing to live on couches.
Every. Single. Time. Valuations too high. Debt too high. Equity too low.
I am pretty cynical because I have read a bit too much history and seen this so many times working in investment management but...so what? Some rich people lose a ton of money...okay? Capitalism has losers. You lose.
Also, in the last crisis, a ton of people (particularly Blackstone) made a ton of money buying huge deals at the very top of the market. None of this excess came out of the market. Lots of people who borrowed tons of money were just able to take their paper to the Fed, and keep playing.
Working remote was still a niche idea at the beginning of 2020, now it's ubiquitous. That has never happened before.
Have some markets seen ~15% vacancies before? Yes, corporate real estate is very cyclical, no-one builds for years, and then the market adds 40-50% in a few years. But when it gets to 30-40% then you are probably looking for examples outside the US...and SF will be the worst-hit market, others should be less.
But...the world will move on, write down the value of property, assign losses, pay off remaining creditors, the world moves on...I don't think anyone could say a fault of the last ten years has been that shareholders/creditors were forced to swallow too many losses. The strength of a capitalist economy is that losses can be assigned quickly, and everyone moves on...in theory.
My concern is more about the ripple effects. Many low-skilled workers rely on service work, and servicing corporate real estate is a real industry (janitorial services, managerial duties, parking lot attendants, plumbers, even construction). They are already having a pretty hard time of it, and if this industry vanishes, "moving on" may mean going out on the streets. San Francisco, Los Angeles, New York, and San Diego have enough homeless already.
And, if it doesn't, in the absence of work they always have the option of moving somewhere with a more attractive income to cost of living ratio.
Much harder for a company to up and move than an individual or a family.
I wouldn't be surprised to see established companies expand on cheap real estate and start offering closed offices to employees.
As much as I like closed offices, I think that companies that want to save money still won't offer them. The cost of closed offices isn't just more square footage; they also incur construction costs that open office space don't: walls, doors, their own heating/cooling/ventilation ducts, their own lighting and electrical wiring, etc. And an office layout with closed offices is more expensive to modify.
Doesn’t this require the pandemic to be gone? I hope it is, but that’s one hell of a condition.
To compensate for lack of socialization in the office, I notice that companies like Gitlab organise corporate gatherings were all employees can meet in person. Open Source projects teams meet at (the fringe of) Fosdem and probably at their yearly conference a second time.
1) size Non-linear diseconomies of scale mean that all other things held equal smaller companies are more likely to be able to pull it off than larger companies
2) first mover / selection I’d guess that there’s a relatively small fraction of employees that can be competitively productive in an indefinite WFH scenario. Companies that were always remote first and got there before everyone else were able to pick off these outliers. Companies trying to convert to it have the luck of the draw and further as the market saturates everyone will have a harder time chasing after these few.
But if we're talking about office buildings, and the reason for the collapse is because people don't need/want offices at all (not because those offices are moving elsewhere), then I think it'll have a much smaller effect on the residential markets.
What I think has a higher chance of hurting residential markets would be hiring moving away from HCoL areas because companies believe that most workers can be remote (and workers in LCoL areas are cheaper comp-wise). That hiring movement already seems to be happening, though SF home prices haven't changed much. There might just be a delayed response to that, though.
Do leases tend to get renewed in Q2?
Subleases are a different story, of course.
There are also a fair amount of 1-year direct commercial leases, depending on the area.
I would expect that a sliding window of leases would be expiring all the time, and that the bloodbath would be slightly more gradually occurring right now.
Better to run it into the ground — this stuff will get bailed out to protect the banks.
I thought the general expectation, or at least the hope, is that that's about when things start to go back to normal.
I looked at various online domains a few years back, and STL Fed publishes far more articles than the rest of the Federal Reserve branches. ~106k STL vs. 6--8k for others. federalreserve.gov publishes about 1/2 what stlouisfed.org does.
https://old.reddit.com/r/dredmorbius/comments/3hp41w/trackin...