The late 2000s “global economic meltdown” and values of McMansions

One columnist connects the economic crisis of the late 2000s and McMansion values:

Perhaps you thought the last decade’s global economic meltdown, which crushed stock prices and McMansion values, would most hurt the wealthy. Nope. The gap between rich and poor in the U.S. expanded in the aftermath of the Great Recession. The (sarcastic) good news: America’s wealth gap expanded less than Bulgaria’s between 2010 and 2017.

Three quick thoughts:

  1. McMansions are often cited as a symptom of the problems that led to the economic crisis and housing bubble of the late 2000s. The spirit of consumption in the United States with lenders providing more and more risky loans (and not recognizing the problematic loans and then selling and buying them as if they were good investments) plus decisions by consumers to purchase more and acquire debt all contributed to the larger issues. If you needed one symbol of excessive consumption from the early 2000s, commentators often go for the McMansion or the SUV.
  2. While the McMansion became an important symbol, housing prices almost across the board declined precipitously. Not just McMansions were affected. And since most American single-family homes are not McMansions, it seems a bit odd to single them out here. Many Americans who would not or could not purchase McMansions felt the effect of declining property values.
  3. Housing construction declined during and stayed depressed for a number of years after the economic crisis. Even during this down time, builders continued to construct McMansions. And once the economy started to pick up, more McMansions appeared. While the economic trends certainly affect how many McMansions go up, the style of home has some staying power. Even if such homes helped contribute to the economic crisis, some Americans still want to build and buy them. The value of such homes may not be the only reason people build and buy them.

Promote smaller, cheaper housing by calling it “missing middle housing”

Even if the median size of new American homes is smaller in recent years, this does not mean it is easy to construct smaller new homes in communities:

To propel the movement, he recommends using the term “missing middle housing,” rather than terms such as “upzoning,” “density” and “multifamily,” which he says have a negative connotation.

“I can’t imagine a single neighborhood in the country where people will get excited about the term ‘density,’ ” Parolek said. “Even things like ‘multifamily’ can be a scary term that’s past its life span.”

His larger recommendation is for cities to change their zoning ordinances. Parolek advocates for form-based zoning, which allows more flexibility for what can be built on a property…

“Zoning in and of itself is a system that encourages single-family home construction in cities,” Parolek said. “Most cities don’t have effective zoning for missing middle housing, so the easy thing to do is to build a single-family house. There’s no neighborhood pushback and less risk. There’s a reason it’s being done, but it’s not responding to what the market wants.”

Very few neighbors or communities would be excited to live next to or approve cheaper housing. The assumption is that more expensive housing is good: it will bring in more tax dollars, typically has fewer residents (so lower local costs), and connotes a higher status. In contrast, it is thought cheaper housing brings down surrounding property values and the kind of people who live in cheaper housing are not as desirable as higher income residents.

Would communities react better to “missing middle housing”? Perhaps. Many places talk about the need to have housing where hard working professionals with a stake in the community, like teachers and firefighters, can reside in the place where they work. Or, it is desirable to provide denser housing for young professionals and retirees to keep them in the community. Yet, as Parolek notes, the goal is still to move people toward a single-family home (with some flexibility for townhouses and condos) in the long run. Changing zoning is not easy because many people purchase a home and then work hard for years to protect the value of that home. Cheaper housing may be more acceptable if located away from existing larger and more expensive housing, if it is allowed in the community at all.

Missing from even this suggestion about “missing middle housing” is an acknowledgement of the necessity of housing for lower-class and poorer residents. True affordable housing needs to go beyond the middle-class and provide housing for those working in the retail and service industries. But, I don’t think most communities and America as a whole wants to talk about this kind of housing.

Overcoming resistance to solar arrays in the Chicago suburbs

Cutting through municipal red tape could help encourage solar development in the Chicago suburbs but it can also take some work to find suitable sites:

Solar power projects have faced logistical challenges and opposition from residents. Proposed installations in Plato Township in northwestern Kane County and in Yorkville were recently met with concern about their proximity to neighbors…

In Oak Park, where large trees, a concentrated population and many historic homes pose challenges for solar projects, officials plans to subscribe part of its municipal electric aggregation program to small, “community solar” installations elsewhere in northern Illinois likely to be built under a new state program, said Mindy Agnew, the village’s sustainability coordinator. There is not expected to be any change in rates in the aggregation program because of the switch, she said…

It could begin with educating residents, she said. The city could look at land for solar installations that is unlikely to be developed or used for other purposes, such as a site with contaminated soil, she said. The city is already considering approval for a developer to build a solar project on a former landfill.

Riley also envisions solar arrays on rooftops. She sees installations on the roofs of the old buildings that largely make up the city’s downtown, such as one array that a private company installed on the roof of their building, which once housed the city library. And as companies such as Amazon build warehouses in the city, she sees the large, flat roofs as ideal for solar installations.

Even an idea that many people find favorable in the abstract might not be so desirable if proposed for construction near residences. I would guess many suburbanites would desire solar arrays to be mostly out of their view. This means locations away from residences – industrial parks, outside of the metropolitan area, etc. –  or hidden from view – such as on the flat tops of buildings – could work.

This leads to a broader question: is it necessarily the case that having visible solar panels decreases property values? Could they instead add value to properties if installed in tasteful ways (and providing for a greener structure)? Or, perhaps a critical mass of residents or owners has to acquire solar panels in a relatively short period of time to turn the tide of local opinion. Suburban single-family home residents can have knee-jerk reactions against anything near their homes due to what it may do to their property values. But, not all changes are necessarily a threat to the financial status of homes.

Do political signs in yards lower property values?

Homeowner’s associations often have restrictions about signs and displays owners can have on their property. The supposed goal of all of this is to protect property values. Without such community organizations, someone might do something odd to their property (ranging from painting their door an unusual color to having stuff in the yard to hanging) that would affect selling prices nearby.

Two questions:

  1. Do political signs and displays actually lower property values?
  2. Even if they do drive down property values, isn’t political expression worth it?

Regarding the first question, outside of legal opinions, I cannot quickly find scholarship with empirical evidence about this. I could see how such an argument could be made: certain political opinions or just the clutter of political signs or displays could detract from the particular aesthetic of a block or neighborhood. As realtors often suggest that the interiors of homes should be relatively depersonalized and uncluttered so that any prospective buyer could imagine themselves there, perhaps the same applies for the exterior. If political signs do indeed have a negative effect, I imagine it would be quite small. (Could signs have a positive effect? Perhaps it could indicate the political leanings of a neighborhood that some would find worth knowing. Or, it might suggest a level of political engagement that some could find attractive.)

But, even if political signs have a negative effect, how much are they worth regulating given that Americans typically like to have the right to political expression? Should HOAs have special regulations about signs or displays that go beyond what a municipality might have about size or noise or crowding? (See a recent example involving a large “Impeach Trump” sign in Elgin, Illinois that the owner reduced in size after the city said it violated their codes.) HOAs often go beyond municipal regulations to make sure that property owners are protected against possible threats to their property values.  Why not allow a little more politics in HOA developments rather than clamp down on matters that could be handled by someone else? (There is already a sorting process that goes on for homeowners at the municipal level before they even consider entering an HOA.)

Another argument to make in favor of more freedom for political signage in HOAs is thinking about the common good – theoretically what politics is about – rather than individual property owners. If more speech is better so that all sides have a chance to participate, why would we then allow HOAs to limit some political expressions just so owners can benefit?

Ultimately, homeowners voluntarily enter such communities; they do not have to purchase one of the millions of housing units governed by an HOA. At the same time, many Americans seem willing to enter HOAs to protect their property until they run into regulations they do not like. If higher property values are the ultimate goal of suburban life, perhaps these HOA dispute stories will simply continue because people cannot afford to not utilize them. On the other hand, if HOAs do not serve the common political good, perhaps they should be avoided.

 

Township argument: don’t disband us because we only take a little of your money

Continuing with local governments making interesting appeals to suburbanites, I received a newsletter from our township earlier this week. Illinois and DuPage County have had discussions about limiting taxing bodies and dissolving townships because of the state’s large number of taxing bodies. In response, the township put this graphic on the first page of the newsletter:

TownshipGraphic

While other parts of the newsletter described what the township does and how residents benefit, this graphic makes one argument: the township does not really ask for much so leave us alone.

In relative terms, this is a good argument: townships ask for the least amount of money. Even the Forest Preserve, a rather large one, asks for more money. On the other hand, given property values in the township, even 1.69% can add up to some decent money over the years. Plus, how does the money for townships compare to what residents get from the other taxing bodies?

On the whole, the quick appeal to property taxes hints at how suburbanites think: they do not want to pay more in taxes and want to be able to see how the money is being spent. I’m guessing relatively few DuPage County residents could detail what the townships do (compared to other taxing bodies) or connect the township activities to their property values.

Rallying cry: support higher property taxes for schools to have higher property values

I saw a yard sign that made this argument about a proposed tax rate increase for a nearby school district: voting yes to the increase means you are protecting your property values.

This is a circular argument fit for the suburbs. Property values are partly dependent on the perceived status of a community. Generally, higher status suburbs have better performing schools. Thus, paying more in taxes means the property values are likely to increase. For the average suburbanite, this means they should expect a bigger payoff in the end when they sell their home. In other words, vote to hand over some money starting now to guarantee a bigger amount of money later.

There are other reasons a school district and its supporters could give in order to support a tax increase. Provide a better education for the children of the district. Support the important work of teachers. Invest in the community’s future.

But, given the difficulty of asking many suburbanites for higher property taxes, perhaps these abstract notions do not work. Many districts work hard to develop support for a referendum way before it comes to a vote. In this case:

The Board’s vote comes after months of community-engagement work. In January 2018, CCSD 89 Superintendent Dr. Emily K. Tammaru convened a Superintendent’s Finance Committee to examine the district’s financial status and priorities. The committee looked at the nearly $3 million in cuts the district has made since 2009, and examined how rising enrollment and increasing costs have affected the district’s budget.

The members of the Finance Committee eventually recommended two options to the Board of Education:

  • Option A: Increase revenues in order to maintain comprehensive, high-quality educational programming. Increasing revenues would allow the district to avoid cuts to programs that directly impact students.
  • Option B: Reduce programs and increase fees. The district would need to make about $1.2 million in cuts during the 2019-20 school year. These cuts could include reductions of: gifted services, band and orchestra, social work services, library staff, and full-day kindergarten. The cuts could also result in larger class sizes. The cuts could be more significant in subsequent years.

The district then hosted three community meetings to share financial data and gather feedback. Community members who attended those meetings said they valued fiscal responsibility, but did not want cuts that would affect programming and potentially property values.

At the community meetings, 84.7 percent of the people in attendance said they supported increasing the tax rate rather than cutting programs to balance the budget. When the district conducted phone surveys this summer of all residents (parents and non parents), 56.9 percent of residents said they would support a 40-cent referendum.

Even with this supposed support (note the drop-off in support in those who attended the meetings versus those who answered the phone survey; plus, who answered their phone?), the bottom line appeal here is money. Some parts of the district will pay more than others – the referendum page uses a $300,000 value as a baseline while Glen Ellyn has a median housing value of just over $400,000 and Lombard has a median value of $240,000 – but the money will come eventually. Pay us now so you can gain later.

If suburbanites value property values above all, perhaps this is the only way to build support for local tax increases.

Controlling private property, as viewed through Nextdoor

Based on Nextdoor, one writer sums up what bothers Americans about their local surroundings:

Steve Wymer, Nextdoor’s vice president of policy, told me that the same topics arise again and again, modulated by region and neighborhood type. Service requests and recommendations constitute 30 percent of chatter, and discussions of real estate make up another 20 percent. About 10 percent of Nextdoor conversations relate to crime and safety, Wymer said. (Suspicious persons come up a lot, often amounting to sightings of people of color in predominantly white areas. Nextdoor has attempted to discourage posts that use appearance as a proxy for criminality by prompting users to add more detail and blocking some posts that mention race.) Public agencies such as police and emergency-management departments also post updates to their constituencies. Noise complaints are another popular subject, according to Wymer—fireworks seem to raise particular ire—as are classifieds, missing pets, and gardening tips.

Judging by the conversations on Nextdoor, it would seem that Americans are concerned first about the safety and security of their property, family, and pets, and then with their property’s, family’s, and pets’ upkeep and improvement. Though the platform breeds its share of conflict, it is notable—in contrast to other social networks—for the commonality it reveals, even in these times of unprecedented political division. No one, Democrat or Republican, wants a neighborhood strewed with dog poop.

I wonder how much this online behavior is driven by two fundamental factors underlying American neighborhoods:

  1. Residents want to be able to control their own property.
  2. They also want to control some of their immediate surroundings, often in the name of property values or the character of the neighborhood.

These values can often come into conflict when one resident’s actions with their own property clashes with the desires of another property owner. Property rights are very important in the United States but property values often rely on neighbors and the surrounding community.

In the long run, it would be interesting to know whether Nextdoor provides a better platform for resolving neighborhood conflicts compared to face-to-face conversations or mediated conversations through other actors (such as calling the police or contacting local government about a concern). For example, many suburbanites are averse to open conflict and moving the conversation online might diffuse some of the tension. At the same time, an online platform could reinforce issues if things are said there that wouldn’t be said face-to-face or conversations take significantly more time.