Altering mortgages to account for climate change threats

A new Federal Reserve report considers how the consequences of climate change might affect mortgages:

The housing market doesn’t yet factor in the risk of climate change, which is already affecting many areas of the U.S., including flood-prone coastal communities, agricultural regions and parts of the country vulnerable to wildfires. In California, for instance, 50,000 homeowners can’t get property or casualty insurance because of the increased risk to their homes.

Yet for now, no mortgage lender, portfolio manager or buyer of mortgages takes into account climate-induced floods, except to determine if a house sits in a 100-year floodplain at the time the mortgage is issued, said Michael Berman, a former official with the U.S. Department of Housing and Urban Development and former chairman of the Mortgage Bankers Association.

Once lenders and housing investors do start pricing in such risks, “There may be a threat to the availability of the 30-year mortgage in various vulnerable and highly exposed areas,” Berman wrote in a recent San Francisco Fed report. He predicts lenders could “blue-line” entire regions where flood risks are high — a reference to redlining, the practice of refusing mortgages to minorities…

Said Cleetus: “My biggest fear, honestly, is that the markets will get out ahead of our policies, and we see a situation where property values do start to decline, and small communities that rely on a lot of property tax revenue won’t be able to deal with it.”

It will be interesting to see who (1) pursues this as a competitive advantage and (2) how federal policy plays into this. In a quest to get ahead of the rest of the market, could someone come up with a unique mortgage for areas with more climate change risk? Discussions about whether federal money should be used in places prone to natural disasters has been going for decades (see Hurricane Sandy or discussions about resilient cities).

Much of the article focuses on how the lack of mortgages in certain areas would lead to decreased property values and then a downward spirals as communities would not be able to generate as much tax revenue. This could also work the other way: imagine communities where only the really wealthy can live because they do not need traditional mortgages. They could come in and gobble up real estate with lowered values. Either way, the result could be increased inequality in affected areas.

Open office arrangements may not work for getting work done

An evaluation of the implosion of The We Company highlights the importance of physical space for accomplishing tasks in the workplace:

Much will be written in the coming weeks about how WeWork failed investors and employees. But I want to spotlight another constituency. WeWork’s fundamental business idea — to cram as many people as possible into swank, high-dollar office space, and then shower them with snacks and foosball-type perks so they overlook the distraction-carnival of their desks — fails office workers, too.

The model fails you even if you don’t work at a WeWork, because WeWork’s underlying idea has been an inspiration for a range of workplaces, possibly even your own. As urban rents crept up and the economy reached full employment over the last decade, American offices got more and more stuffed. On average, workers now get about 194 square feet of office space per person, down about 8 percent since 2009, according to a report by the real estate firm Cushman & Wakefield. WeWork has been accelerating the trend. At its newest offices, the company can more than double the density of most other offices, giving each worker less than 50 square feet of space

But after chatting with colleagues, I realized it’s not just me, and not just the Times: Modern offices aren’t designed for deep work…

The scourge of open offices is not a new subject for ranting. Open offices were sold to workers as a boon to collaboration — liberated from barriers, stuffed in like sardines, people would chat more and, supposedly, come up with lots of brilliant new ideas. Yet study after study has shown open offices to foster seclusion more than innovation; in order to combat noise, the loss of privacy and the sense of being watched, people in an open office put on headphones, talk less, and feel terrible.

This moment might just a tipping point in the evolution of office space. Cubed suggests office layouts do change over time. What seems to be next is a mixing of older models and the open model: different spaces that range from very private (think soundproof booths or offices away from activity, sound, and eyes) to very open (think couches and play areas for activity). How exactly the imperative to save money or be efficient remains to be seen.

Hinted at in this opinion piece is another interesting idea: could truly private spaces only be available to certain classes of workers or certain people? The office has long been symbol of more power and/or responsibility. Imagine a workforce or a public where the majority of people operate in common spaces that are semi-private, with privacy usually obtained though the actions of individuals (headphones, focus on screens, etc.). In contrast, those with power and resources have access to distraction-free spaces.

Another big issue could be this: how much work these days is truly distraction-free and are we moving toward less deep work? Again, this might different by field or role. But, the rise of smartphones and the Internet means people are highly distractable from work, even in very private settings. American adults on average are consuming 11 hours of media a day, some of this which must happen at work for many.

Finding the second cities in tickets sales for NFL teams

Vivid Seats looked at ticket sales for NFL teams by location and found the place with the second-most ticket sales could vary:

Naperville represents the No. 2 most popular market for the fan base of a certain team from a certain town, known as Da Bears, according to ticket sales from Vivid Seats

It should come as no surprise that outside Green Bay, Milwaukee has the biggest fan base of Packers fans…

According to Vivid Seats, the second city with the highest overall percentage of ticket orders for its team was Colorado Springs, Colorado…

The Patriots’ fan base spans across New England, and Vivid Seats reports Quincy, Massachusetts, is the team’s second city. Providence, Rhode Island, isn’t far behind, and Nashua, New Hampshire, and Saco, Maine, are other hotbeds of Patriots fans…

For the Oakland Raiders, its No. 2 city is Sacramento, California, and Erie, Pennsylvania, comes in second to Pittsburgh for the Steelers.

A quick hypothesis: the distribution of ticket sales by NFL team is largely a function of the population of communities and distance from the home city of the team or the city where the team’s stadium is located.

These factors could be mediated by other influences. The relative wealth of communities could matter as NFL tickets are not cheap. The distance from the stadium may not be the best measure compared to access or time needed to get to the venue. Furthermore, the analysis suggests some fan bases draw from secondary cities in a region, like Providence for the Patriots or Sacramento for the Raiders.

With these factors at play, would the distribution of NFL ticket buyers largely reflect inequality across metropolitan regions or do ticket sales cut across racial, ethnic, and class divides?

Black homeownership down to nearly 41% – and housing values down

The two largest minority groups in the United States are headed in different directions regarding homeownership:

While Hispanic homeownership rate is on the rise, the black homeownership rate has fallen 8.6 percentage points since its peak in 2004, hitting its lowest level on record in the first quarter of this year, according to census data.

This divergence marks the first time in more than two decades that Hispanics and blacks, the two largest racial or ethnic minorities in the U.S., are no longer following the same path when it comes to owning homes.

Analysts say black communities have struggled to recover financially since the housing crisis, which has kept homeownership out of reach. A decades long legacy of housing segregation has also made many would-be black buyers wary of returning to the market after losing their homes…

Homes in neighborhoods with a high concentration of white borrowers on average have seen their homes appreciate 3% from 2006 through 2017, according to the study. However, homes in neighborhoods with a concentration of black borrowers on average are worth 6% less than they were in 2006. High-income black borrowers have concentrated in neighborhoods where homes have lost 2% of their value, compared with white borrowers, who have concentrated in neighborhoods where homes have appreciated 5%.

According to the first quarter homeownership rates reported by the Census Bureau: whites have a rate of 73.2%, Hispanics are at 47.4%, and blacks are at 41.1%. These are off from peaks of 76.0% for whites in 2006, 50.1% for Hispanics, and 48.6% for blacks in 2006.

This is a contributor to inequality that gets relatively little attention. If homeownership rates are low for a particular group, not only does that mean a different present experience (renting versus owning), it has significant long-term consequences for building wealth. When whole neighborhoods have relatively low homeownership rates plus the properties there do not appreciate much, the effects can last decades.

Where are the 2020 presidential candidates in discussing homeownership as an issue Americans care about?

Housing as the ultimate marker of poorly functioning (free) markets

Alexis Madrigal considers generational access to housing and the high real estate prices in some markets:

There are obviously many reasons that coastal housing markets have gone so bonkers. But it is an ironic twist that residential property, which once served as the bedrock for American capitalism, has become the most obvious sign for young people that something is deeply wrong with the markets.

What exactly has gone “deeply wrong” with these housing markets? Madrigal lays out a number of factors. But, I wonder if we could extend the analysis a bit further from “housing markets” to “economic markets” more broadly. Here is what two opposing sides might say:

One side: these housing markets with high prices have never truly been free. For decades, federal policy has privileged single-family homes. Local policies have made particular choices, often toward protecting property values and limiting density. Open up these markets to true competition. If affordable housing is needed, limit regulations and let all the money of potential buyers drive new development.

The other side: housing markets have not been regulated enough. The federal and local policies have tended to privilege certain actors – like the white middle-class and connected developers – over the needs of many working-class and poor residents as well as non-white residents. Policies aimed at providing more housing for all need more teeth and the ability to compel protected wealthier residents to accept development near their own homes.

As a sociologist who has studied this for over a decade, I tend to side with the latter argument: (1) markets are rarely ever completely and free and (2) the scales have been tipped toward whiter and wealthier residents for a long time. Perhaps the true lesson of these high-priced housing markets is that calls for regulation and oversight only go so far when property values and who neighbors are is truly at stake.

Leader who does not like “Mayor 1 percent” label joins Wall Street investment firm

Former Chicago Mayor Rahm Emanuel does not like one of the names applied to him during his mayoral tenure:

Dellimore also pressed Emanuel on the “Mayor 1 percent” tag that has dogged him for years, a nickname critics use to tie him to wealthy supporters and downtown development they say he favors at the expense of struggling outlying neighborhoods.

Emanuel first responded by taking a swipe at wealthy Blackhawks and United Center owner Rocky Wirtz, who has publicly ripped Emanuel for raising entertainment taxes at big venues such as the United Center: “Go ask Rocky Wirtz what he thinks about being part of the 1 percent.”

When Dellimore said the criticism comes from poor and working-class neighborhoods that feel like they’ve been left behind while the Loop and adjoining neighborhoods have boomed under Emanuel, the mayor changed tacks. He defended investments downtown.

“You name me one world-class city in the world with a decaying central business district,” Emanuel said. “Name one. They don’t exist. I’m proud that we have a thriving, successful central business district that gives us the revenue to also fund from 14 to 33,000 kids in summer jobs.”

Few local governments would argue that downtown development is a bad thing. After all, growth is good and stagnation or decline is terrible.

Yet, if a leader wanted to counter an image of working for the wealthy or the better-off neighborhoods in a city, would joining a Wall Street investment firm be a good next move?

Former Chicago Mayor Rahm Emanuel is joining the Wall Street investment firm Centerview Partners LLC, whose leaders include long-time friends and campaign donors…

“Rahm’s leadership and vast experience providing strategic advice, coupled with a track record of successful planning and execution, will bring tremendous value to our firm and our clients,” Effron said. “Establishing a presence in Chicago is a logical next step for Centerview as we continue to grow, and it positions us to better serve existing and new clients throughout the Midwest.”…

Emanuel on Wednesday rejected any notion that his work as mayor affected the hiring…

Emanuel previously spent more than two years as a Chicago investment banker at Wasserstein Perella & Co., from 1999 to 2002, a job he took after serving as a top aide to President Bill Clinton.

So perhaps this is little surprise given Emanuel’s track record as mayor and roles prior to becoming mayor. Or, maybe he thinks providing commentary for The Atlantic and ABC News will help balance out or help people forget about the Wall Street work.

Predatory contracts took $3-4 billion from blacks in Chicago

A recent study looked at the financial cost of contract buying for two decades for black homeowners in Chicago:

Black families in Chicago lost between $3 billion and $4 billion in wealth because of predatory housing contracts during the 1950s and 1960s, according to a new report released Thursday.

The Samuel DuBois Cook Center on Social Equity at Duke University and the Nathalie P. Voorhees Center at the University of Illinois-Chicago sought to calculate the amount of money extracted from black homeowners on the city’s South and West sides from home contract sales. The report is titled “The Plunder of Black Wealth in Chicago: New Findings on the Lasting Toll of Predatory Housing Contracts.”

Contract buying worked like this: A buyer put down a large down payment for a home and made monthly installments at high interest rates. But the buyer never gained ownership until the contract was paid in full and all conditions were met. Meanwhile, the contract seller held the deed and could evict the buyer. Contract buyers also accumulated no equity in their homes. No laws or regulations protected them.

Home contract sales were a ruthlessly exploitive means of extracting capital from African Americans with no better alternatives in their pursuit of homeownership, the report said. Contract loans were rampant all over the West Side — in East Garfield Park, West Garfield Park and North Lawndale — but also in Englewood on the South Side.

The key here is that wealth generated through homeownership is the sort of asset that gets passed down over time and helps build intergenerational wealth. Many Americans today rely on this same logic: owning a home is a significant investment to draw on later in life. That wealth then enables other possibilities, such as education or moving or acquiring other goods. This long-term wealth goes far beyond the benefits a homeownership has while living in that home; the wealth enables possibilities for future generations.

As one study puts it:

If public policy successfully eliminated racial disparities in homeownership rates, so that Blacks and Latinos were as likely as white households to own their homes, median Black wealth would grow $32,113 and the wealth gap between Black and white households would shrink 31 percent. Median Latino wealth would grow $29,213 and the wealth gap with white households would shrink 28 percent.

Earlier public policy decisions and social practices can have long-term consequences, even decades later.