The nuisance of Apple’s new HQ vs. it can help double your property values

This article details the complaints of neighbors of the new Apple headquarters facility in Sunnyvale yet ends with this tidbit about property values:

Some worry that the neighborhood of mostly single-story homes built in the 1950s and ’60s is living on borrowed time as long-time residents sell their homes to newcomers.

Housing values in the neighborhood have doubled since 2011, according to Art Maryon of Intero Real Estate Services. And in the first six months of 2017, 24 houses in Birdland sold on average at $1,690,350, according to Maryon.

The increase in property values mirrors what has happened in the rest of Sunnyvale, and across the Bay Area, but Birdland’s proximity to Apple Park makes it even more desirable.

“Many say we should just be happy that Apple is raising our property values,” said Birdland resident Debby MacDonald. “This doesn’t do me much good unless I plan to sell. And I am not sure what we have had to put up with and will continue to put up with is worth the money.”

This presents suburban residents with quite the dilemma: will NIMBYism or raised property values win out? Both are goals for the average suburbanite. They resist significant changes to the character of their community as this can disturb their quality of life through altered scenery, increased traffic, and a change in neighborhood activities. Ultimately, the changes may lower property values. Yet, this massive headquarters may change their neighborhood and significantly raise property values since it houses many employees and is home to one of the most desirable brands in the world.

Someone needs to make sure to follow up on this in a few years or ten years and find out how many residents are left. And even if they cash out – some because they want to and others because they have to (increased housing values can also lead to other increased costs) – those who leave might feel a real sense of loss.

Claim: “Local politics is always…about housing”

In a detailed overview of the policy debates over housing between YIMBY and the Democratic Socialist of America groups in San Francisco, Henry Grabar leads with an interesting argument:

Local politics is always, in one way or another, about housing. In San Francisco, a deep blue city whose fault lines long ago ceased to resemble America’s, that politics is a vitriolic civic scrimmage, where people who agree about almost every national issue make sworn enemies over zoning, demolition, and development. It’s like a circular firing squad at a co-op meeting.

This seems similar to Sonia Hirt’s contention that zoning in America is all about protecting the single-family home.

Ultimately, do local politics always come down to housing? In many ways, housing is the bedrock of a community: it is where residents experience home, it provides numerous signals about the status of the residents and the community (through property values, architecture, the quality of life associated with the dwellings), and it generates property tax revenue (more important in some places than others). If the housing is bad shape or there are major issues, it is a major concern for residents and, by extension, their elected (and unelected) officials.

Perhaps we could even get more specific about which aspects of housing drives local politics. Which issue is most important may differ based on the (1) class status of the community and (2) its stage of development. How about property values? Or decisions about large-scale developments (particularly if they present some differences from already-existing housing)?

When a suburb dismantles a plane in a homeowner’s driveway

You don’t see too many airplanes parked on the typical suburban street but this incident in New York may serve as a warning to those interested in just that:

A 70-year-old Long Island man who allegedly ignored 17 summonses calling for him to remove a plane parked in his driveway threatened to use a crossbow on town officials who dismantled it.

Crews spent most of the day Thursday disassembling the single-engine Cessna parked outside Harold Guretzky’s home in Oceanside, ending a 1½-year saga that pitted Guretzky against his neighbors and the town…

Town officials said housing the aircraft in Guretzky’s driveway violates building safety codes…

Last year, Guretzky likened it to parking a boat in a driveway and has said he didn’t have money to house the plane in a hangar. Some neighbors, however, said there’s no comparison.

What a production that included local officials giving a press conference in front of the plane in the driveway of street of raised ranch homes. The main reason given for removing the plane was safety but no one said exactly why it was a safety hazard. The owner compares it to a boat and the safety issues there could be similar: large gas tanks just sitting there. Presumably, he is not going to try to take off on the suburban street (though wide streets of many recent suburbs would help avoid clipping mailboxes).

My guess is that this is more of an eyesore/property values issue. For similar reasons, communities may not allow RVs or work trucks to be in driveways. Is a plane that is rarely used really more of a safety hazard than a large truck? However, it does look unusual (particularly with the wings spread out) and probably draws the ire of some neighbors who are worried about potential homebuyers or outsiders getting the wrong idea about the block.

One solution is for Guretzky to find a suburban airplane subdivision. They do exist: see the example of Aero Estates in NapervilleAero Estates in Naperville.

Claim that McMansions have proportionally lost resale value

A recent study by Trulia suggests McMansions don’t hold their value:

The premium that buyers can expect to pay for a McMansion in Fort Lauderdale, Fla., declined by 84 percent from 2012 to 2016, according to data compiled by Trulia. In Las Vegas, the premium dropped by 46 percent and in Phoenix, by 42 percent.

Real estate agents don’t usually tag their listings #McMansion, so to compile the data, Trulia created a proxy, measuring the price appreciation of homes built from 2001 and 2007 that have 3,000 to 5,000 square feet. While there’s no single size designation, and plenty of McMansions were built outside that time window, those specifications capture homes built at the height of the trend.

McMansions cost more to build than your average starter ranch home does, and they will sell for more. But the return on investment has dropped like a stone. The additional cash that buyers should be willing to part with to get a McMansion fell in 85 of the 100 largest U.S. metropolitan areas. For example, four years ago a typical McMansion in Fort Lauderdale was valued at $477,000, a 274 percent premium over all other homes in the area. This year, those McMansions are worth about $611,000, or 190 percent more than the rest the homes on the market.

The few areas in which McMansions are gaining value faster than more tasteful housing stock are located primarily in the Midwest and the eastern New York suburbs that make up Long Island. The McMansion premium in Long Island has increased by 10 percent over the last four years.

Read the Trulia report here.

Interesting claim. After the housing bubble burst, some commentators suggested that Americans should go back to not viewing homes as goods with significant returns on investment. Instead, homes should be viewed as having some appreciation but this happens relatively slowly. This article would seem to suggest that return on investment is a key factor in buying a home. How often does this factor into the decisions of buyers versus other concerns (such as having more space or locating in the right neighborhoods)? And just how much of a premium should homeowners expect – 190% more than the rest of the market is not enough?

This analysis also appears to illustrate both the advantages and pitfalls of big data. On one hand, sites like Trulia and Zillow can look at the purchase and sale of all across the country. Patterns can be found and certain causal factors – such as housing market – ca be examined. Yet, they are still limited by the parameters in their data collection which, in this case, severely restricts their definition of McMansions to a certain size home built over a particular time period. As others might attest, big homes aren’t necessarily McMansions unless they have bad architecture or are teardowns. This sort of analysis would be very difficult to do without big data but it is self-evident that such analyses are always worthwhile.

Why would we want to promote more HOAs with a tax break?

A new proposal in Congress would allow members of a HOA to deduct their association fees from their federal taxes:

Upward of 67 million people live in these communities — ranging from sprawling master-planned subdivisions down to individual condominium or cooperative developments. As of 2014, they contained nearly 27 million housing units. Their homeowners associations often provide the functional equivalents of municipal and county services, and residents nationwide pay roughly $70 billion a year in regular assessments to fund road paving and maintenance, snow removal, trash collection, storm water management, maintenance of recreational and park facilities, and much more.

The same residents also pay local property taxes to municipal, county or state governments. But unlike other homeowners, only their local property tax levies are deductible on federal tax filings. Their community association assessments that pay for government-type services are not.

Now a bipartisan group of congressional representatives thinks that’s inequitable and needs to be corrected. Under a new bill known as the HOME Act (H.R. 4696), millions of people who live in communities run by associations would get the right to deduct up to $5,000 a year of assessments on federal tax filings, with some important limitations…

The bill’s primary author is Rep. Anna G. Eshoo, D-Calif. Co-sponsors include Reps. Mike Thompson, D-Calif., and Barbara Comstock, R-Va.. Though the bill has little chance of moving through the House or Senate during this election year, it sends a message to the legislative committees now working on possible tax code changes for next year: Congress needs to acknowledge the role the country’s community associations play in providing municipal-type services. The way to do it is to allow deductions on a capped amount of the money residents are required to pay to support community services.

It will be fascinating to see what sort of formula is used to calculate these deductions as the fees paid to associations do not cover all sorts of municipal services used outside of the association.

At the same time, won’t this promote more HOAs, or at least make them more attractive? And do we really want more? They certainly are popular but they continue a trend that is not necessarily good for society: privatizing municipal goods and helping neighbors guarantee their property values. For the first, instead of paying a municipal government, a new layer of private government is enabled to take care of certain services. Americans tend not to like more and more layers of fees and government. However, this might be outweighed by the second factor: the HOAs help keep the neighbors in line without owners directly having to interact with other neighbors. Instead of possibly having to live next to the neighbor who paints their house purple and starts a garden in the front yard, the HOA polices this. In other words, this tax break might help more and more Americans work out civic life through private associations that they see as a necessary evil.

Given all of the HOAs, is there any analysis that shows they pay off financially in the long run either for the property owners or the municipalities?

Hiding the remains of the dead Chicago Spire

With the plans for a 150-story Chicago building postponed or dead, the massive hole in the ground is going to be harder to see:

It was supposed to be a strutting 150-story lakefront symbol of the city’s virility — but eight years after construction of the Chicago Spire skyscraper ground to a halt, the gaping hole where it was to have stood has instead become an enduring reminder of the Great Recession.

So owner Related Midwest is now hiding the unsightly circular hole that would have formed the foundation of the world’s second-tallest building behind a pile of dirt.

Workers last week started moving dirt to form a landscaped berm that will block the view of the 110-foot diameter hole from a row of 10 Streeterville row homes on the 400 block of East Water Street…

The screen, which won’t be tall enough to block the view of the hole from nearby high-rise buildings, is simply “the neighborly thing to do,” Anderson said on Tuesday, declining to comment on Related Midwest’s long-term plans for the land.

There could be a variety of reasons for blocking views of this large hole:

  1. The city requires such changes.
  2. People have complained about this, either because it is a safety issue or it harms property values.
  3. The company has some plans or changes they don’t want to broadcast.
  4. The empty hole in the ground is a negative symbol that reflects poorly on the property and Chicago.

We tend to like stories of large skyscrapers that succeed against all obstacles. They fit with narratives of endless urban growth, humans producing technological marvels, reaching for the heavens, and serve as symbols of power and wealth. Recently, I had my class watch part of Episode 8 (“The Center of the World”) of the PBS documentary New York which details the decades long effort to build the World Trade Centers which were not needed but came to be important markers. Yet, there are certainly stories of significant building projects that failed or never got off the ground. These are rarely told or there is little physical evidence that something went wrong. A large hole in the ground present for years suggests something didn’t work out and few corporations, planners, or urban officials would want to be reminded of this.

Man ups ante in zoning battle by allowing the KKK to use his property

There are many ways to wage war with your neighbors but one Georgia man has a unique technique:

Bill Torpy of the Atlanta Journal-Constitution visited the Six Hills subdivision in tony Milton, Georgia, to get to the bottom of things. “For a decade,” Torpy writes, “the owners of a mostly land-locked 24-acre parcel in Six Hills have tried to develop the property and have gotten increasingly frustrated in getting turned down.” The latest owner is one Douglas Hay, whose own development proposal was rejected by the city of Milton and who has responded by (reportedly) letting pigs run free on the land, hiring a loud truck to annoy a neighbor, and now renting space to the Loyal White Knights of the KKK.

“We go out there, it’s open for our members to camp out, to target practice, to have our meetings because we’re a religious organization,” a KKK rep said.

Hay bought the land for $900,000 and now says his “feud” with the neighborhood/city will end if he can sell it for $2 million. Just a reasonable regular businessman, this Douglas Hay.

This goes beyond buying a nearby property to avoid a teardown or going to court. Presumably, the tactic is intended to threaten the property values of neighbors who will then cave to the plans for the property. Bring in one of the most reviled groups and see how the neighbors like that! The community of Milton is well-off: the median household income is nearly $111,000. Then, the question becomes how long the neighbors can wait Hay out. Or, perhaps they can mount a counteroffensive including demonstrations and negative publicity for the landowner? It sounds like the various actors can draw on a number of resources to win this zoning battle.