Saturday, October 5, 2019

Housing Can’t Be Both Affordable and a Good Investment

Housing Can’t Be Both Affordable and a Good Investment

The two pillars of American housing policy are fundamentally at odds.

Promoting homeownership as an investment strategy is a risky proposition. No financial advisor would recommend going into debt in order to put such a massive part of your savings in any other single financial instrument—and one that, as we learned just a few years ago, carries a great deal of risk.
Even worse, that risk isn’t random: It falls most heavily on low-income, black, and Hispanic buyers, who are given worse mortgage terms, and whose neighborhoods are systematically more likely to see low or even falling home values, with devastating effects on the racial wealth gap.
But let’s put all that aside for a moment. What if housing were a low-risk, can’t-miss bet for growing your personal wealth? What would that world look like?
Well, in order for your home to offer you a real profit, its price would need to increase faster than the rate of inflation. Let’s pick something decent, but not too extreme—say, annual increases of 2.5 percent, taking inflation into account. So if you bought a home for $200,000 and sold it ten years later, you’d be looking at a healthy profit of just over $56,000.
Sound good? Well, what if I told you that such a city existed? What if I told you it was in a beautiful natural setting, with hills and views of the ocean? And a booming economy? And lots of organic produce?
An aerial view of downtown San Francisco.
(Stephen Lam/Reuters)
Maybe you’ve guessed by now: The wonderland of ever-increasing housing prices is San Francisco. When researcher Eric Fischer went back to construct a database of rental prices there, he found that rents had been growing by about 2.5 percent, net of inflation, for about 60 years. And this Zillow data suggests that San Francisco owner-occupied home prices have been growing by just over 2.5 percent since 1980 as well.
Like I said, over ten years, that gives you a profit of just over 25 percent. But compound interest is an amazing thing, and the longer this consistent wealth-building goes on, the more out of hand housing prices get. In 1980, Zillow’s home price index for San Francisco home prices was about $310,000 (in 2015 dollars). By 2015, after 35 years of averaging 2.5 percent growth, home prices were over $750,000.
Now, if all you cared about were wealth building, this would be fantastic news. The system works! (Although actually even this rosy scenario is missing some wrinkles: San Francisco real estate prices did suffer enormously, if briefly, during the late-2000s crash, and if you bought in the mid-2000s and had to sell in, say, 2010, you would have taken a massive loss.)
But this sort of wealth building is predicated on a never-ending stream of new people who are willing and able to pay current home owners increasingly absurd amounts of money for their homes. It is, in other words, a massive up-front transfer of wealth from younger people to older people, on the implicit promise that when those young people become old, there will be new young people willing to give them even more money. And of course, as prices rise, the only young people able to buy into this Ponzi scheme are quite well-to-do themselves. And because we’re not talking about stocks, but homes, “buying into this Ponzi scheme” means “able to live in San Francisco.”

In other words, possibly the only thing worse than a world in which homeownership doesn’t work as a wealth-building tool is a world in which it does work as a wealth-building tool.
This also means that the two stated pillars of American housing policy—homeownership as wealth-building and housing affordability—are fundamentally at odds. Mostly, American housing policy resolves this contradiction by quietly deciding that it really doesn’t care that much about affordability after all. While funds for low-income subsidized housing languish, much larger pots of money are set aside for promoting homeownership through subsidies like the mortgage interest deduction and capital gains exemption, most of which goes to upper-middle- or upper-class households.
But even markets with large amounts of affordable housing demonstrate the contradiction. Since at least the second half of the 20th century, the vast majority of actually affordable housing has been created via “filtering”: that is, the falling relative prices of market-rate housing as it ages, or its neighborhood loses social status, often as a result of racial changes. Low-income affordability, where it does exist, is predicated on large portions of the housing market acting as terrible investments.
And to the extent that low-income people do find a subsidized, price-fixed housing unit to live in, that means that they won’t be building any wealth, even as their richer, market-housing-dwelling neighbors do, increasing wealth inequality.
Even the community land trust, which seems to be a way of squaring the wealth-building/affordability circle, ultimately fails. Community land trusts typically provide subsidized or reduced price ownership opportunities to initial buyers, and assure longer term affordability by limiting the resale price of the home. In other words, CLT-financed homes remain affordable only because they restrict how much wealth building the initial owners are allowed to capture. The result is that CLT-financed homes only attract those who couldn’t otherwise purchase a home—which means that the lower-income people in CLTs will be building wealth more slowly than higher-income people in market-rate housing, a fundamentally inequality-increasing situation.

We say we want housing to be cheap and we want home ownership to be a great financial investment. Until we realize that these two objectives are mutually exclusive, we’ll continue to be frustrated by failed and oftentimes counterproductive housing policies.
This article originally appeared on CityObservatory.

Friday, October 4, 2019

How Large Corporations Took Over Single-Family Homes

The percentage of single-family homes that are rented rather than owner-occupied has been growing since the recession. Fred Greaves/Reuters

How Large Corporations Took Over Single-Family Homes

The Great Housing Reset has led to more than one-third of single-family homes being rentals, with a significant share controlled by large corporations.

When most people think of housing, they separate it into two types: single-family suburban homes that people own, and apartments, largely in cities and urban centers, that people rent. Until recently, the popular image was more or less correct. Most single-family houses provided homes for the families that owned them.

But more than 12 million single-family homes are currently being rented in the United States. Those homes, valued at more than $2.3 trillion, make up 35 percent of all rental housing around the country. In the past, the great majority of single-family homes that were rented out were done so by their owners or small real-estate companies. But today, a large and growing share of single-family rental homes are owned and managed by large corporations, real-estate firms, and financial institutions. The percentage of owner-occupiers of single-family homes is at its lowest level since the 1960s.More than $220 billion in housing wealth has been transferred from Americans who once owned, or would have owned, homes to large corporations.

Those are the big takeaways of a recent study by Andrea Eisfeldt of UCLA’s Anderson School of Management and industry expert Andrew Demers, published as a working paper by the National Bureau of Economic Research (NBER).

This is yet another of the economy-shifting consequences of the financial crisis of 2008. The crisis took a huge bite out of housing prices, and rising unemployment put large numbers of homeowners underwater in their mortgages. A good many fell victim to foreclosures, and plummeting housing values meant that they often had to sell their homes for a fraction of their value.

Into the breach stepped large corporations, real-estate investors, and financial institutions that saw a huge investment opportunity in these bargain-basement-priced single-family homes. According to a 2018 report in Curbed, a handful of large companies like Invitation Homes, American Homes 4 Rent, Progress Residential, Main Street Renewal, and Tricon American Homes own approximately 200,000 single-family rental homes and that number is growing. The Curbed story cites research finding that these homes tend to be concentrated in areas that were hit hard by the housing crisis; that many of their renters are low- and moderate-income families with children (including many minority families); and that these large companies frequently charge higher rents and are more likely to evict tenants.

These homes are not just properties that are rented out to house families; they have been transformed into a new class of financial asset and investment vehicle. According to the NBER study, the homes have been capitalized into single-family rental bonds, which has grown into a $15 billion-plus market. Three Real Estate Investment Trusts (REITs) backed by single-family rental assets have had IPOs with a market capitalization of more than $18 billion.

It’s a disturbing twist to the phenomenon I’ve dubbed the Great Reset. A large and growing component of the shift, or reset, from homeownership to rental housing is made up of single-family homes that were once owned but are now rented. The NBER study estimates that the 4 percent decline in America’s homeownership rate, from 67 percent before the crash in 2007 to 63 percent in 2014, means that roughly 1.5 million American households have shifted from owners to renters.

This represents more than $220 billion in housing value—a huge transfer of wealth from Americans who once owned, or would have owned, these homes, to large corporations.

As the NBER study shows, these large-scale investors in single-family homes have essentially made money two ways: by collecting rents, and also by gaining from the appreciation in the value of these homes. To get a sense of this, the study tracks both rental yields and housing-price appreciation for the 30 leading cities using a combination of data from American Housing Survey, from the U.S. Census Bureau, and CoreLogic’s House Price Index data.

The numbers add up fast. When it comes to rent, gross rental yields (that is, before expenses) averaged 7.4 percent, while net yields averaged 4.5 percent a year. Housing prices appreciated by 4.3 percent over this time. The chart below shows how the 30 cities stack up over this period.

A basic pattern jumps right off this graph. On the one hand, in cities with lower overall housing prices, the rate of housing-price appreciation is lower, but rental yields are higher. On the other hand, in more expensive cities, yields are lower but appreciation is higher.

In fact, rent yields in the lowest-priced quintile of cities were about double those in the highest-priced quintile—an average of 6.1 percent versus 2.9 percent between 1986 and 2014. “[R]ental yields tend to be highest in the lowest price tier cities, and monotonically decline with price tier,” is how the study puts it. And it adds that “high quality houses should, all else equal, have both higher rents and higher purchase prices. Empirically, however, rental yields are substantially higher in lower price tier cities.”

On the flip side, housing in more expensive cities has seen greater appreciation. Between 1986 and 2014, housing-price appreciation averaged 5.3 percent in the most expensive cities, versus 3.2 percent is the least expensive cities. The large corporate owners of single-family rentals make more money off rents in poorer cities, and more money off appreciation in expensive cities.

In a twist that is both ironic and disturbing, the Great Reset turns out to be more than just a simple shift from owners of single-family homes to renters of urban apartments. It has been bound up with the broader financialization of housing—the transformation of housing from shelter into yet another investment vehicle.

Just as high-priced condos in expensive cities have become a new kind of asset for large companies and wealthy foreigners, so too have larger and larger numbers of single-family homes been turned into investment vehicles for large corporations. For a growing number of families, the American Dream of owning their own home and the wealth and financial security that comes from it have given way to renting a place to live from a mega-corporation.
About the Author

Richard Florida

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He is a university professor in the University of Toronto’s School of Cities and Rotman School of Management, and a distinguished fellow at New York University’s Schack Institute of Real Estate and visiting fellow at Florida International University.

Should Marinwood CSD build a Modular Garage like this and save $$$?

Similar modular buildings are available for commercial uses.   Much time and money can be saved with modular construction. The above garage is approximately 640 square feet or the same as the 640 square foot garage that McIniss Park uses for their Staff building pictured below on the right. The McInnis office on the left is another 600 square feet.

Staff building in McInnis Park for six employees. It is 1/3 of the size of the Marinwood Maintenance Compound. Their park is THIRTY TWO times the size of Marinwood Park.

Thursday, October 3, 2019

The White Elephant is Coming to Marinwood Park

The story poles should be installed shortly and finally, you can see that the Friends of Marinwood Park have been telling you the truth.  We had to fight for your right to see the story poles.  Marinwood CSD has wanted to keep them hidden from public view citing "safety concerns"  You will see that building blocks the fire road and walking path-vehicles will be forced to drive over the horseshoe pit and our park will effectively be cut in two.

The proposed Maintenance Facility is TWICE the size of neighboring homes. It was designed by former Marinwood CSD politician, Bill Hansell who has been paid nearly $50,000 BEFORE the plans have been approved.  In February 2018, Marinwood CSD general manager, Eric Dreikosen claimed that Hansells fees would be $13,800 FOR THE ENTIRE PROJECT.  The public has been lied to and an illegal conflict of interest has been hidden from the public.

Marinwood Parks and Recreation discusses banning Outsiders.

Tuesday, October 1, 2019

Marinwood Parks and Rec discusses Wildfire Tax/JPA

You Fire up the Weed. A song about a dysfunctional relationship.

FIRE UP THE WEED I’m embarrassed to say this relationship works Because we never talk Except for make me some eggs, bacon and toast And aren’t you gonna wear socks? To be honest and true what I like about you Is that you’re always high You don’t care if we never get out of the house And neither do I This must be the way we want it This must be what we need I’ll make the martinis And you fire up the weed I have so much guilt attached to how we began And that’s what silences me You were with someone else; I snatched you up for myself Like the last piece of meat Not that you didn’t jump at the chance Old dog that you are But I opened the door, patted the seat And said get in the car This must be the way we want it This must be what we need I’ll make the martinis And you fire up the weed I think that talking things through is overrated I’d rather be blue and medicated It took a few years and buckets of tears For me to understand Why your ex never once even complained When I took her man She was patiently waiting for a sucker like me To come onto the scene I did her a favor and she’ll be forever Grateful to me This must be the way we want it This must be what we need I’ll make the martinis And you fire up the weed We’ll keep each other out of circulation Doing mankind a very good deed (c) 2009 Tracy Newman BMI, Kabeauty Music Upright Bass: Dave Francis Acoustic guitars: Pat McGrath Pedal steel: Robbie Turner BGVS: Bryon Holley

50 People Show Us Their States' Accents

Sunday, September 29, 2019


A BEETLE once begged the Eagle to spare a Hare which had run to her for protection. But the Eagle pounced upon her prey, the sweep of her great wings tumbling the Beetle a dozen feet away. Furious at the disrespect shown her, the Beetle flew, to the Eagle's nest and rolled out the eggs. Not one did she spare. The Eagle's grief and anger knew no bounds, but who had done the cruel deed she did not know.

Next year the Eagle built her nest far up on a mountain crag; but the Beetle found it and again destroyed the eggs. In despair the Eagle now implored great Jupiter to let her place her eggs in his lap. There none would dare harm them. But the Beetle buzzed about Jupiter's head, and made him rise to drive her away; and the eggs rolled from his lap.



Now the Beetle told the reason for her action, and Jupiter had to acknowledge the justice of her cause. And they say that ever after, while the Eagle's eggs lie in the nest in spring, the Beetle still sleeps in the ground. For so Jupiter commanded.

Even the weakest may find means to avenge a wrong.

Marinwood CSD official video for 9/10/19 meeting