Monthly Archives: October 2014

Political campaigns combining big data, ground games

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Close elections mean both political parties are combining ground games and big data to try to eke out victories:

Workers like Ms. Wellington and Mr. Noble are, in the end, critical to any ground campaign, no matter how sophisticated data collection and targeting models are, said Sasha Issenberg, author of “The Victory Lab: The Secret Science of Winning Campaigns.”

“The great irony of the modern ground game is it’s this meeting of incredibly modern analytics and data married to very old-fashioned delivery devices,” he said. “It’s people knocking on doors; it’s people making phone calls out of phone banks; but the calculations that are determining which door and which phone are different.”…

The Democratic Senatorial Campaign Committee ramped up its commitment, creating the “Bannock Street project,” a multimillion dollar, data-driven effort to persuade, register and turn out voters.

“The easiest way to look at it is our strategy to winning is expanding the voting universe,” said Preston Elliott, Hagan’s campaign manager, in an interview in his Greensboro office. “It’s a little more machineish than just catching a wave and riding momentum.”

Republicans say they are catching up. In Raleigh, campaign workers and volunteers showed off a new smartphone app that helps canvassers target their door knocks. But Republican officials refused to reveal volunteer numbers, paid staff totals, field office locations or a tabulation of voter contacts. Nor would they allow reporters to recount the phone-bank pitch, “the secret sauce,” as they called it.

This is taking new information about voters – something political parties always want – and putting it into real-time (or close) models in order to produce more effective targeted efforts with limited time and efforts before elections.

Two other thoughts:

1. It would be interesting to then see how these new efforts fit with broad appeals politicians make to the public. Does this new kind of information and targeting mean that politicians will spend less time making big claims and instead focus on smaller segments of voters?

2. Americans aren’t always thrilled with the kind of information corporations or tech companies have about them. Are they happy with political parties having more information? Of course, people don’t have to give out this information but this information is going into the hands of political parties who don’t exactly have the highest ratings these days.

Argument: homeownership is not worth risky financial situations

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Megan McArdle argues that policies and leaders promoting homeownership for those with less resources are doing a disservice:

Because, I think, most of us still haven’t managed to shed the idea that buying a house is a good way to get some unearned bonus wealth. Too many people managed to do just that for too many years. We think of 2008 as an aberration, rather than reversion to the mean. And that’s a costly mental error.

The long, steep increase in American home prices from 1946 to 2008 was driven by a whole lot of trends that are hard to repeat: the invention of the 30-year, fixed-rate, self-amortizing mortgage, which allowed people to pay more for a house by lowering the monthly payments. The securitization revolution, which lowered mortgage risk by bundling the loans into large, diversified portfolios, thereby lowering rates. Rising inflation, which pushed up the price of houses. Falling inflation, which lowered interest rates and monthly payments still further and allowed people to pay even more for those houses. The credit-scoring revolution, which allowed banks to offer loans to more people, increasing demand for the existing housing stock. And in dense coastal areas, you also had the rise of NIMBY zoning laws, which made housing scarcer and therefore more expensive…

Which is not to say I am against buying homes. I am very much for buying a home — so much so that I went and bought one myself a few years ago. But buying a house is a good idea only if you meet the following conditions:

  1. You can afford a sizable down payment to cushion you from the effects of local economic downturns or you have a super-stable job, such as working for the government or your father-in-law, that makes you unlikely to ever miss any payments.
  2. You can afford the maintenance as well as the payments, insurance and property taxes.
  3. You have good disability and/or mortgage insurance to make sure that you do not miss any payments even if you break your back and can’t do your job anymore.
  4. You are pretty sure you do not want to leave your area or move to a larger, more expensive home anytime in the next five years.
  5. Your payment is a reasonable percentage of your take-home pay (I shoot for under 25 percent; anything over 35 percent is far too risky).
  6. You have a sizable emergency fund to deal with contingencies.
  7. You can afford other forms of savings, rather than counting on your house as a piggy bank for future needs. In general, if declining home prices would send you into a hysterical panic about your financial situation, you are buying too much house.

If you do not meet these conditions, then buying a house is gambling — not just on rising home prices, but also on the continued soundness of your roof, boiler and plumbing. If you wouldn’t borrow the money to go to Vegas, then don’t borrow it for a house, either.

It sounds like McArdle is concerned with two issues:

1. People have not learned the lesson of the housing crash: housing prices do not inevitably go up. They may go up – and generally have over time – but this is not a guarantee. If you don’t accept this premise, then you will treat real estate differently.

2. The general American desire for owning a home is not enough compared to economic realities. Americans generally like owning homes: they are part of the American Dream in symbolizing status, we assume homeowners are less transient and care more about their communities, and they allow for individual freedom. But, if people can’t properly afford them, McArdle says it is not worth stretching financial bounds to make it possible. Instead, we need sound principles like saving up your money over time to make a good down payment on a house.

Both are valid concerns. Generally, Americans like seeing homes as an investment as well as an essential part of a successful life. Telling them otherwise may not be popular for politicians…

Want more affordable housing? Build more pre-fab homes and trailer parks

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Affordable housing can be cheaply provided by building more manufactured homes:

“The manufactured home is probably the most cost-effective way to provide quality affordable housing,” said Donna M. Blaze, the CEO of the Affordable Housing Alliance, which helped provide manufactured homes for Sandy refugees. “Most of our new units are light years ahead of the apartments for rent in today’s market.”

The average sales price for a manufactured home in 2013 was $64,000, according to the Census Bureau, while the average sales price for a single-family home was $324,000. The single-family site-built home includes the land, though, while owners of manufactured homes often have to still grapple with landlords and leasing issues. But the structure itself is nevertheless significantly cheaper: New manufactured homes cost around $43 per square foot; site-built homes cost $93 per square foot…

There are currently about 18 million Americans living in manufactured homes, and the houses make up the largest stock of unsubsidized housing in the country, according to the Manufactured Housing Institute. That is becoming more important as government budgets shrink and Americans prioritize other policy areas over public spending on subsidized housing…

But there are actually fewer of these homes being built than there were two decades ago. While manufactured home builders shipped more than 200,000 units a year through the 1980s and 1990s, last year there was demand for a fraction of that amount, just 60,000, according to the Manufactured Housing Institute.

From one end of the housing market – luxury in NYC – to another. I can only imagine the response in some communities if this is the kind of affordable housing proposed. It is already difficult for many middle- or upper-class communities to promote affordable housing without also having to combat the (unreasonable) stigma of manufactured housing. So even while these homes might be quite cheap, where exactly can they be put?

 

Luxury building boom continues in New York City

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The housing market may still be somewhat sluggish throughout the country but the luxury market continues to grow in NYC:

New York City developers will spend 60 percent more on new homes this year, while adding only 22 percent more units, a sign of the market’s tilt toward luxury condominiums, the New York Building Congress said.

Spending on new housing will reach $10.9 billion, the most in records dating to 1995 and $4.1 billion more than last year’s total, the trade group said in a report released today. The number of homes that money will build is 22,500, up from 18,400 in 2013.

A record wave of ultra-luxury condo projects planned or under construction in Manhattan accounts for the “wide disparity” between costs and unit production, said Frank Sciame, chairman of the New York Building Foundation, the trade group’s philanthropic arm…

Even as construction spending increases, the number of homes produced still falls far short of the 30,000-plus built annually from 2005 to 2008, the building congress said. In 2008, the city gained 33,200 units at a cost of $5.9 billion.

This echoes the larger housing market in the United States: while the market for cheaper or more affordable homes is slow, the luxury market still has plenty of builders and buyers. And we are talking about New York City, one of the places to be for the wealthy and influential.

The article also hints that New York Mayor Bill de Blasio promised lots of affordable housing in the next ten years. Having more luxury condos doesn’t necessarily preclude also building cheaper units but the statistics above suggest overall building is down. What big-city mayor could truly turn down or fight luxury projects? Cities desperately need such money even as they need to find ways to help promote housing for more average residents.

What will the closed CPS properties become?

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When the Chicago Public Schools closed nearly 50 elementary schools (part of the story of the series Chicagoland), they noted it would be difficult to sell many of these properties. Well, the first one just sold:

The Chicago Board of Education on Wednesday unanimously approved the sale of the former Peabody Elementary school site and building to the Svigos Asset Management company for $3.5 million.

The site at 1444 W. Augusta Blvd. was one of only three closed schools that reached a bid stage for a potential sale.

The other two — the former Marconi Elementary in West Garfield Park and Wadsworth Elementary in Woodlawn — will receive new bid solicitations from the school district. CPS said both the closed schools “failed to generate qualifying bids.”

The board also unanimously approved the sale of the district’s soon-to-be-vacated headquarters at 125 S. Clark St. to Blue Star Properties for $28 million.

This is a minimalistic explanation that leaves out some very important information. Like:

1. Were these fair prices for the properties? The suggestion that other properties haven’t sold does hint that CPS is asking a decent amount.

2. How are these properties going to be used? Perhaps it doesn’t matter once they generated some revenue and are now off the hands of CPS.

It still sounds like this could be a drawn-out process.

Driverless buses could improve mass transit

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Discussion of driverless buses in Britain highlights the efficiency they could offer, leading to improved service:

Claire Perry, the Transport Minister, said that operating buses without drivers could help companies provide “better and more frequent” services, particularly in rural areas.

She also revealed that work is already under way to identify any problematic “regulatory issues” which could prevent the vehicles being rolled out on roads across Britain.

Speaking at the Driverless Vehicles Conference at Thatcham on Wednesday, Mrs Perry said she could “see a future where driverless buses provide better and more frequent services”.

“A major component of rural transport is the cost of the driver – and so a truly driverless bus could transform rural public transport in the future,” she said.

Driverless cars offer safety and commuting convenience but this is a twist: mass transit could be more frequent and cheaper without drivers. It would be interesting to know how much cheaper this could be. Would this mean a 20% increase in bus service for the same price or is it something even more drastic? If so, perhaps this could make buses a lot more attractive, particularly in rural or suburban areas where riders may not necessarily want to ride with a lot of other people and want service that doesn’t inconvenience them much.

Continued mansionization debates in Los Angeles

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The Los Angeles Times reports that controversy over mansionization in Los Angeles continues as the city struggles to develop guidelines that will please residents:

Los Angeles leaders say they want to tighten restrictions on mansionization, but citywide fixes are expected to take at least 18 months to allow for repeated hearings and environmental review, according to city officials…

Local politicians and planning officials say that L.A.’s rules against mansionization — meant to prevent bloated houses from being built on modest lots — have fallen short. The restrictions, put in place six years ago, curb the size of new and renovated homes based on lot size. But the rules also include “bonuses” of 20% or 30% more space than otherwise allowed…

In the meantime, city planners have suggested temporary rules to curb demolitions and give residents “breathing room” in neighborhoods that have mobilized against mansionization, including Sunset Square, Studio City and North Beverly Grove.

The Los Angeles chapter of the Building Industry Assn. is worried about those moves, saying that the temporary restrictions could “result in a flurry of lawsuits.” Homeowners have not been given enough warning about the restrictions, which “will immediately remove property owner rights,” the group’s chief executive, Tim Piasky, said.

Planning officials say the temporary restrictions would immediately address the problem in mansionization hot spots: desirable areas with older, smaller homes targeted for teardowns…

“It creates a situation of haves and have-nots,” said Traci Considine, whose Faircrest Heights neighborhood has been recommended to get temporary curbs on home demolitions. “If you do a few Band-Aids for a few select neighborhoods, the target is just bigger on the backs of the neighborhoods that aren’t protected.

Los Angeles is a big city so having city-wide regulations could be quite difficult. Austin passed a noted anti-McMansion ordinance but the city has 885,000 people in 272 square miles while LA has 3.88 million residents in 503 square miles. In addition to size differences, real estate in California is huge: the housing market is still quite pricey so limiting the ability of property owners to cash out is a bigger restriction than in the cheaper Austin market.

I would guess that the long-term solution is different guidelines for different neighborhoods in accordance with what residents desire. Yes, this might push the mansionizers to different neighborhoods. But, this is how communities often tackle this problem.

Different areas to address to help millennials purchase homes

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Survey data suggests Millennials want to buy homes but have a hard time finding the resources. Here is a quick look at different hurdles:

So why aren’t all young would-be homebuyers just taking advantage of the low down-payment options offered by these plans to get into the market before prices rise further? Not everyone has access to the programs that can shrink a down payment, and even for those who do, such help may not be enough. “Typically the down payment is the biggest hurdle for a homebuyer” says Ken Fears, director of regional economics and housing finance at the National Association of Realtors. “Programs that have a lower down payment are going to provide a bigger boost for the consumer.” Some programs, like Fannie Mae’s Community Home Buyer’s, require a 5 percent down payment, a sum that still makes saving a difficult proposition for many young people, particularly those in areas with quickly climbing home prices, such as San Francisco and San Diego. States like North Carolina and New Hampshire, have particularly well-regarded programs that allow for down payments of about 3 percent. Some private lenders also offer assistance to new homebuyers, but fees and additional factors, such as debt-to-income ratios, can prove more restrictive.

But programs aimed at reducing down payments for first-time homebuyers can feel like a double-edged sword. In competitive areas, where homes are scarce and multiple bids are common, an affordably low down payment can be limiting. “You’re not very competitive. If you’re going into a house with multiple offers and they see 3 percent down versus 10 or 20 percent down, they’re not going to go with your offer,” says Anne Simpson, a 27-year-old teacher and prospective homebuyer in Washington D.C…

Tight inventory is also a major hurdle for first time buyers. “In a majority of large metro areas nationwide, the inventory of lower-priced homes for sale is much lower than inventory of mid and high-priced homes for sale,” says Humphries. That can make for a stressful and competitive shopping experience where prospective buyers feel like there’s a race to save up for their down payment before rates go up and favorite neighborhoods sell out…

And for more Millennials, issues of poor or nonexistent credit and lack of consistent wages push dreams of homeownership just out of reach. High student-debt payments combined with escalating rent leaves little extra income for savings and even those with steady jobs have learned that significant raises are hard to come by. According to Humphries, there’s no quick fix. Instead, patience, education, and advocacy programs for newer buyers will be the key to boosting first time home purchases among younger buyers, progress that could take another three to five years.

As the article notes, even with higher renting costs, it is not easy to buy a home. While this article provides just a brief overview, it seems like there is an opportunity for private lenders to really help or develop this market. Imagine college graduates with some student loan debt that want to own, have decent jobs, and yet don’t have the credit or big down payment yet. Isn’t there a way to craft something based on their education (tied to lower unemployment rates, higher earnings down the road)?

Decrease the number of new McMansions to increase local food security

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One farmer and activist suggests reaching local food security means stopping the construction of McMansions:

Salatin — a successful American farmer, former reporter and author of nine books on the food revolution — is able to produce far more food per acre than industrial-scale farms using techniques that make raising beef, chicken, eggs and even pigs palatable to the neighbours…

Putting fallow land around monster homes that are proliferating in the Agricultural Land Reserve back into production will be key to building local food security in B.C.“We call those McMansions,” he said. “It is a problem because that is agriculturally abandoned land. We can’t begin to feed ourselves with a local-centric system if we lock up land in royal manor models.”

Even urban dwellers need to consider how far their food has to travel and whether it will come at all if there are shortages, he suggested. The integrated approach he takes to food production on the farm can be applied at any scale, Salatin said.

There are a lot of things that people, even in well-established communities, can do themselves to become more food secure, said Salatin, giving examples such as keeping honeybees on rooftops, installing food-producing solariums in our homes, capturing rainwater for food production, container gardening and reclaiming some of the billions of potentially productive acres sequestered under lawns in North America.

It is rare to find a critique of McMansions that explicitly addresses food. Such homes are often criticized for being wasteful, using too much land and resources as well as providing more space than people need.

Yet, I suspect it is not quite as simple as suggesting new McMansions automatically mean less agricultural space. McMansions aren’t the only use of land. This argument seems to use McMansions as a shorthand for sprawl. The sprawl often associated with McMansion neighborhoods consumes green land and pushes farming and agriculture further and further away.

Would a middle ground be consistently using McMansion land for growing things and raising animals? I have yet to see a request from McMansion homeowners to allow chickens or livestock – though such lots could accommodate such activities. It probably comes down to property values…

 

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Chinese homebuyers flood LA suburb with big homes

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Bloomberg examines an influx of large-home purchases by Chinese buyers in Arcadia, California:

A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.

The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions. The deals happen fast and are rarely listed publicly. Often, the first indication that a megahouse is coming next door is when the lawn turns brown. That means the neighbor has stopped watering and green construction netting is about to go up.

This flood of money, arriving from China despite strict currency controls, has helped the city build a $20 million high school performing arts center and the local Mercedes dealership expand. “Thank God for them coming over here,” says Peggy Fong Chen, a broker in Arcadia for many years. “They saved our recession.” The new residents are from China’s rising millionaire class—entrepreneurs who’ve made fortunes building railroads in Tibet, converting bioenergy in Beijing, and developing real estate in Chongqing. One co-owner of a $6.5 million house is a 19-year-old college student, the daughter of the chief executive of a company the state controls.

Arcadia is a concentrated version of what’s happening across the U.S. The Hurun Report, a magazine in Shanghai about China’s wealthy elite, estimates that almost two-thirds of the country’s millionaires have already emigrated or plan to do so. They’re scooping up homes from Seattle to New York, buying luxury goods on Fifth Avenue, and paying full freight to send their kids to U.S. colleges. Chinese nationals hold roughly $660 billion in personal wealth offshore, according to Boston Consulting Group, and the National Association of Realtors says $22 billion of that was spent in the past year acquiring U.S. homes. Arcadia has become a hotbed of the buying binge in the past several years, and long-standing residents are torn—giddy at the rising property values but worried about how they’re transforming their town. And they’re increasingly nervous about what would happen to the local economy if the deluge of Chinese cash were to end.

Interesting look at how this affects one particular community. It seems to bring together several issues that might trouble the average American suburbanite:

1. An influx of immigrants. This is happening across the suburbs as many new immigrants move directly to the suburbs. At the same time, there are a number of ethnoburbs in the LA region so this is not unknown.

2. An influx of immigrants from China. The United States has an interesting current relationship with China and Americans didn’t treat Chinese immigrants well in early California. A large group of wealthy foreigners from a country with a huge economy and shadowy government might make some nervous.

3. This big money means older homes are being torn down and replaced with big houses. A large number of teardowns in an established community tends to attract attention as the homes can change the character of neighborhoods as well as raise prices (though this is also presented positively in this story as long-time residents can cash out).

All together, this rapid change will be worth watching.