To get richer, get the right job and then “buy a home in a neighborhood with a lot of zoning restrictions”

David Brooks looks at which professions provide a higher likelihood of getting into the 1% and then how to get even richer once you are there:

Photo by Vincent Gerbouin on Pexels.com

Once you’ve made some money, there’s one more way to get richer. Buy a home in a neighborhood with a lot of zoning restrictions. For example, 84 percent of the land in Charlotte, N.C., and 94 percent of the land in San Jose, Calif., is zoned for detached single- family homes. These restrictions keep the supply of housing low and jack up the value of homes for people wealthy enough to already own one.

My main message is that if you want to get rich, don’t invent a new and useful product, start a company and try to sell it. That seems risky. Put the effort into entering a clubby line of work in which legislators and professional associations are working to make you rich. It’s easier!

While the majority of the argument is about particular professions, I think the connection between jobs and exclusive homes is this: in both cases, the structures are set up to enrich those that can participate. Just as regulations and structures may privilege particular careers, zoning in the United States is often meant to protect single-family homes. If a homeowner can purchase a residence with particular features and in a specific setting, the zoning helps ensure that the property will be worth more in the future. The homeowner is responsible for some upkeep and updating – and may even go so far as to pursue a teardown – but the protections for the property are almost enough in themselves to let the investment grow in worth just be sitting there.

Connected to this, the zoning for single-family homes restricts the number of residences in that immediate area. More density does not necessarily mean lower property values; numerous urban centers – such as Chicago and New York – are home to new tall buildings whose units are only available to the super-wealthy. At the same time, proximity to amenities and particular neighborhoods are desirable and fewer residences there can help drive up the value of existing properties.

To some degree, many Americans are hoping for this to work for them. Go to college and get a good degree from a good school to gain the right skills, qualifications, and access to social networks. This leads to a better job with higher pay. Then, purchase a home in a reputable community where prices will continue to rise. Wait a few decades and let the pay, home investment, and other benefits accrue. This may not lead to being rich but it reduces anxiety about later decades in life.

Of course, the system could be set up in other ways. Do Americans want homes to be investment vehicles? Should there be such differences in pay and compensation across fields or job positions? Is zoning about the good of the community as a whole or about particular land owners? Combating existing patterns is no easy task, particularly in times when any discussion of inequality can quickly get heated.

The “world’s most expensive home” – $340 million! – about to go on sale

Architectural Digest displays and summarizes the features of what is a very expensive property in Los Angeles:

After nearly a decade of design and development work, what is being billed as “the world’s most expensive home” is finally ready for its close-up. Set on a five-acre parcel in the posh Los Angeles enclave of Bel Air—and aptly named The One—the 105,000-square-foot property’s interiors have remained a closely guarded secret. Until now. AD has been an exclusive look at what’s inside this record-setting property—and the design and aesthetic minds that made it happen.

Surrounded on three sides by a moat and a 400-foot-long jogging track, the estate appears to float above the city. Completed over eight years—and requiring 600 works to build—the home was designed by architect Paul McClean, who was enlisted by owner and developer Nile Niami to help it live up to its reported $340 million price tag…

Beyond the eye-catching design are the home’s equally jaw-dropping stats. There are 42 bathrooms, 21 bedrooms, a 5,500-square-foot master suite, a 30-car garage gallery with two car-display turntables, a four-lane bowling alley, a spa level, a 30-seat movie theater, a “philanthropy wing (with a capacity of 200) for charity galas with floating pods overlooking Los Angeles, a 10,000-square-foot sky deck, and five swimming pools…

Due to recently approved city ordinances, a house of this magnitude will never again be built in Los Angeles, which means The One will truly remain one of a kind. “This project has been such a long and educational journey for us all,” McClean notes. “It was approached with excitement and was thrilling to create, but I don’t think any of us realized just how much effort and time it would take to complete the project.”

What a house – and at a particular time. With concerns about mansionization in Los Angeles plus COVID-19 and its effects exacerbating inequality in capital and housing and shedding light on how much space people have, here is an incredibly large and expensive home. Given the limited pool of actors with the resources to purchase this home, these larger patterns might not matter much.

Down the road, because of its size and price alone does this become a local or international landmark? Or, because it is a single-family home in an exclusive location, will this house rarely be seen? Some of this might depend on who the owner is. The next step in the news coverage is to figure out who purchases the home and what they do with it and then the legacy of the property will come later.

It would be interesting to compare this home to previous properties that claimed to be the most expensive or the largest. I recall an effort in Florida to construct a 75,000 foot home; a documentary about the home detailed some of the process and issues that arose.

“NYC isn’t dead”…for the wealthiest

A look at the ten most expensive properties sold in the United States in 2020 highlights the presence of New York City properties on the list:

Google Street View image of 220 Central Park South (September 2020)

By the end of September, the volume of Manhattan co-op and condo sales was down 43% year over year, according to a report by Douglas Elliman, as sellers held back from listing their apartments and buyers increasingly gravitated toward the suburbs

Of the top 10 national sales compiled by Jonathan Miller, president and chief executive officer of Miller Samuel appraisers, five were in 220 Central Park South, a new luxury tower on Central Park designed by architects at Robert A.M. Stern

Another trend from this year, namely rich people “fleeing” New York for Florida, didn’t manage to trickle up to the highest tier. Only two of this year’s top 10 sales were in Palm Beach; last year there were three…

Even the three Los Angeles entries diverge slightly from conventional 2020 narratives. Yes, the L.A. market is one of the few urban bright lights this year, with sales soaring and inventory hard to come by. But numbers at the very top are down from last year, when it notched four entries in the top 10, totaling $463 million. This year there were three, totaling $293 million.

The actions of the wealthiest homeowners matters not only because people often have an interest in what those who have lots of money do with all that money; it matters because these are people with clout and influence. If they are continuing to purchase in New York City – it is less clear how much time the owners would necessarily spend in the city – it is a sign of the importance of the city and the prospects for future development.

The optics of 2020 might not be favorable to the list above but the project and the trends were underway far ahead of COVID-19. In a very expensive land and housing market, purchasing a residence in one of the newest buildings and in such a location within Manhattan is an object of desire for some who have the resources to purchase such places. While a figure later in the article notes that the total price for the properties on this list is lower than the price for the properties the year before, this may only allow the wealthiest to get into hot markets even more.

It may (or may not) be worth noting that five of the ten properties are in a tower in New York City while the other five properties are large homes on some land. On the whole, Americans as a whole tend to prefer or idealize single-family homes but the wealthiest in the United States and elsewhere may be more inclined to purchase large units in multi-unit buildings.

The new residential skyscrapers in Chicago continue to highlight capital flows and disparities

While reading reporting about skyscrapers going up in Chicago even during COVID-19, I continue to wonder: who is purchasing all of the residential units in times like these? Here is one example involving Chicago’s new third-tallest building.

Part of the Chicago skyline from East Jackson Drive – Google Maps

Located on a multilevel riverfront site at 363 E. Wacker Drive that belongs to the same Lakeshore East development as Aqua, Vista will house a 191-room hotel and 393 condominiums once it’s complete in the third quarter of next year.

For now, as COVID-19 rages and office cubicles remain empty, the tower sends the upbeat message that downtown has a future, and it’s not just for the 1%. Vista’s ground-level amenities will benefit ordinary citizens as well as those who can afford the tower’s condos, which start at around $1 million.

The entry point of $1 million means that the clientele for such a building is pretty restricted. The Chicago area is not a superheated real estate market like San Francisco or Manhattan or several other coastal cities yet tall residential buildings are meant for a select few.

On the other hand, another skyscraper project in Chicago might move to make their residential units available for rent rather than purchase:

The biggest Chicago skyscraper to have construction halted by the coronavirus pandemic could be revived in 2021 — as apartments instead of condos.

Unit layouts are being redesigned at 1000M, the Helmut Jahn-designed condo tower on South Michigan Avenue, in an effort to refinance the project and resume construction next year, “primarily as a rental project.”…

It was the largest condo development by unit count, at 421 units, launched in Chicago since the Great Recession all but shut down construction of condos in the city for several years. At 832 feet, it also would be the tallest Jahn-designed building in Chicago, where the German-born architect is based.

With rentals being in demand, this makes some sense in order to help get the project started again. At the same time, these rental units will not come cheap.

All of this residential construction suggests there is a lot of capital continuing to flow for prestigious building projects in desirable locations. COVID-19 might be a bit of a speed bump – whose impact will continue to be determined by its length – but big lenders, developers, and buyers still have an appetite for these prestigious residential units.

Focusing on the construction of these units can both help the public pay attention to where the money is really going as well as continue to highlight the disparities in development money by location. It is hard not to report on these new tall structures; they require a lot of effort and resources and will be part of a celebrated skyline for decades. Yet, within Chicago, as the skyscrapers continue to rise for the corporations and residents with plenty of resources, needs for housing and other development are very present elsewhere.

Example of rent drop in San Francisco: one bedroom down from $4,300 to $3,150

After hearing of rent drops in Manhattan, I read about one example of rent dropping in San Francisco:

Until the pandemic hit, the city’s housing market was so tight that would-be renters lined up for viewings and arrived with thousands of dollars in cash, ready to sign a lease on the spot.

But now landlords are hard-up for tenants and some are offering several months free, said Coldwell Banker realtor Nick Chen, who recently rented out a one-bedroom for $3,150 that before would have easily gone for $4,300.

“San Francisco rents have been really inflated over the past couple years,” Chen said. “It will come back, but I think the question is: Will it come back to the level it was at previously? Maybe not.”

This is a sizable drop in rent, roughly 25% in a short time frame. Yet, that is still a price that few Americans across the country could meet. Even with significant changes in social life in cities like San Francisco and New York, this does not mean these places are now accessible to many.

Presumably, there is a bottom floor below which rents will not drop. The person who owns the property has their own bills to pay. Some people will see this as an opportunity to get a place in San Francisco at a lower rent and jump at lower prices.

Or, does COVID-19 shift housing prices in high-priced markets for a longer time? If businesses decide to continue work from home and employees are skittish about being around a lot of people in a dense city, do rents drop even further? Is there an opportunity for developers, buildings owners, housing groups, and local governments to jump in and acquire and/or offer cheaper housing? I would not guess expensive housing markets like San Francisco, Seattle, or Manhattan will soon become reasonable but perhaps there will be some opportunities for more people in the region to take advantage.

“Dream Hoarders” in exclusive locations

The 2018 book Dream Hoarders connects the actions of the top 20% in income to where they live and how they control who lives near them. Excerpts from the book:

https://www.brookings.edu/book/dream-hoarders/

The physical segregation of the upper middle class noted in chapter 2 is, for the most part, not the result of the free workings of the housing market. This inverse ghettoization is a product of a complex web of local rules and regulations regarding the use of land. The rise of “exclusionary zoning,” designed to protect the home values, schools, and neighborhoods of the affluent, has badly distorted the American property market. As Lee Anne Fennell points out, these rules have become “a central organizing feature in American metropolitan life.” (102)

Zoning ordinances, which began life as explicitly racist tools, have become important mechanisms for incorporating class divisions into urban physical geographies. This is not a partisan point. If anything, zoning is more exclusionary in liberal cities. (103)

So, those of us with high earnings are able to convert our income into wealth through the housing market, with assistance from the tax code. We then become highly defensive – almost paranoid – about the value of our property and turn to local policies, especially exclusionary zoning ordinances, to fend off any encroachment by lower-income citizens and even the slightest risk to the desirability of our neighborhoods. These exclusionary processes rarely require us to confront public criticism or judgment. They take place quietly and politely in municipal offices and usually simply require us to defend the status quo. (106)

There are numerous connections in this section to earlier posts. Here are a few:

One of the reasons Americans love suburbs is that suburban life allowed for excluding people they do not want to live near.

There is bipartisan white suburban support for homes rather than apartments.

-Housing rarely comes up in national political conversations. It may get a few minutes at debates or occasionally come up in trying to appeal to some voters.

-Tackling this at the state (example of California) or local level is difficult (example of Naperville, Illinois and suburban New Jersey).

In sum, it is hard to understand the life of wealthier Americans without also addressing how this wealth and the opportunities that come with it are closely connected to particular locations.

During COVID-19, wealthier people now less mobile than poorer people

Researchers found changes in mobility patterns among Americans of different income levels during COVID-19:

woman in yellow tshirt and beige jacket holding a fruit stand

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Writing in the journal PNAS, researchers from several California universities describe how they used anonymized cell phone location data and census info to show a dramatic reversal in how mobile Americans have been this year. Before Covid-19 struck, rich Americans moved about more than poor Americans—they can always afford to travel. But between January and April, that flipped. Rich folk are now far more likely to stay completely at home than poor folk: The study found that 25 percent more high earners stayed completely at home during the pandemic, compared to the number of them who had stayed home before. That increase was only 10 percent among low earners. And that has major implications for how we as a nation can fight the pandemic.

“In the early stages of the Covid-19 pandemic, there was a clear mobility response across the board,” says University of California, Davis environmental economist Joakim Weill, lead author on the paper. “In the US, everyone started to stay at home more. But we also found that there is a clear differential between wealthier communities and poor communities, where individuals in wealthier neighborhoods tended to stay at home much more than people in poorer neighborhoods.”…

Close to half of the wealthiest Americans stayed completely at home on weekdays in April, compared to less than 40 percent of low-earners. The poor traveled farther distances on average: In the same month, people who live in lower-income areas traveled between 5 and 6 kilometers, while the rich traveled closer to 4. The rich nearly halved their visits to recreational and retail areas in April, while the poor cut their visits by only a quarter—perhaps because their jobs required them to return to work there.

To be clear, the researchers can’t definitively say why the data shows this dramatic discrepancy, but they can begin to speculate. For one, essential workers often earn lower incomes, like clerks at grocery stores and pharmacies. Indeed, the US Bureau of Labor Statistics has found that among Americans 25 and older with less than a high school diploma, just 5 percent teleworked in June. On the other hand, 54 percent of Americans with a bachelor’s or more advanced degree were able to work remotely.

Social class is connected to mobility, health, and a whole lot of factors in social life. The anonymized cell phone data also seems to align with other patterns: those who can leaving certain big cities as well as differences in COVID-19 cases across communities and racial and ethnic groups.

As the article goes on to note, the fact that anyone can contract COVID-19 is not the same as saying everyone has the same likelihood of contracting COVID-19. Those with resources have more options in how to respond to crises plus more options when it comes to treatment. These differences are generally present regarding health but a large pandemic reveals some of the underlying patterns that deserve attention.

Wealthier Americans have a larger carbon footprint in part due to larger homes

Large homes and McMansions do not just take up land and resources at construction; according to a new study, they have larger carbon footprints. Here is the abstract:

aerial photography of gray houses

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Residential energy use accounts for roughly 20% of greenhouse gas (GHG) emissions in the United States. Using data on 93 million individual households, we estimate these GHGs across the contiguous United States and clarify the respective influence of climate, affluence, energy infrastructure, urban form, and building attributes (age, housing type, heating fuel) in driving these emissions. A ranking by state reveals that GHGs (per unit floor space) are lowest in Western US states and highest in Central states. Wealthier Americans have per capita footprints ∼25% higher than those of lower-income residents, primarily due to larger homes. In especially affluent suburbs, these emissions can be 15 times higher than nearby neighborhoods. If the electrical grid is decarbonized, then the residential housing sector can meet the 28% emission reduction target for 2025 under the Paris Agreement. However, grid decarbonization will be insufficient to meet the 80% emissions reduction target for 2050 due to a growing housing stock and continued use of fossil fuels (natural gas, propane, and fuel oil) in homes. Meeting this target will also require deep energy retrofits and transitioning to distributed low-carbon energy sources, as well as reducing per capita floor space and zoning denser settlement patterns.

More from the study linking energy use, wealth, and housing size:

We find that both household energy use and emissions per square meter vary widely across the country, driven primarily by thermal energy demand and the fuel used in electricity production (“grid mix”). ZIP-code level analysis shows income is positively correlated with both per capita energy use and emissions, along with the tendency for wealth and living area to increase together. City and neighborhood analyses underscore the environmental benefits of denser settlement patterns and the degree to which carbon-intensive electrical grids counteract these benefits.

Bigger homes require more energy to heat, cool, and light. Wealthier people can afford these expenses. Indeed, being able to shoulder all of these costs with a larger home may be a form of conspicuous consumption: “I have enough resources to live in a larger home and maintain it.” Critics of McMansions argue that such homes are meant to impress those who see them, not necessarily great spaces for residents to inhabit.

The study also connects the findings to possibilities for making single-family homes more green. The models work with two options: (1) retrofitting homes to make them more energy efficient and (2) reducing power generated with fossil fuels (“grid decarbonization”). Yet, there are other options to pursue that could help with the situation:

1. Promoting the construction of or the inhabiting of smaller homes. This could range from tiny houses to the “not-so-big home” to smart-sizing or down-sizing. This may require more significant lifestyle changes – cutting on consumption would be difficult – that are too hard for many people.

2. Promoting fewer single-family homes. While they are the basis of suburban life and popular in many other American communities, multi-family housing is more energy efficient. Given the rhetoric surrounding suburbs (such as President Trump claiming Democrats want to abolish suburb), this may not be easy.

3. Promoting less energy use within homes. What if residents used less heat, air conditioning, and lighting? What if they watched less TV and used their phones and computers less? Again, this might require large lifestyle changes that many would find difficult.

4. Constructing newer homes with much stricter energy guidelines, perhaps even net-zero-energy homes or passive houses. Even if these are restricted to wealthier homeowners who can afford the changes, this could help limit the energy use of larger homes. Also, if such homes are viewed by the public as cool or desirable, perhaps these features trickle down.

5. Could wealthier homeowners purchase carbon offsets for their homes? This would allow them to keep their bigger structures while providing funds that could be put to good use elsewhere.

The scenarios in the paper as well as the ones I proposed all require working multiple sectors of society to get to a place where homes, particularly large ones, use less energy.

Poor Census response rate in neighborhoods with fleeing New Yorkers

Here is another consequence of city residents leaving for other places during COVID-19: absent New York residents are not filling out Census 2020 forms at a good rate.

chart close up data desk

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Only 46 percent of Upper East Side households have filled out their census forms, according to a June 25 report circulated by the Department of City Planning’s chief demographer, Joseph J. Salvo — well below the neighborhood’s final response rate in 2010, and short of the current citywide rate of almost 53 percent…

Even if New Yorkers have asked the Postal Service to forward mail to their second homes, census forms are addressed to the household, not the individual, which — unless New Yorkers pay for premium forwarding — prevents the post office from including them with the forwarded mail…

Officials hope that many of the coronavirus evacuees will return by the end of October, the new extended deadline for final responses to the census. But with Manhattan parents now enrolling children in schools outside the city, it is not clear that the evacuees will return to New York City in time…

The pandemic has prompted census outreach workers to adjust their tactics, especially in trying to reach undocumented immigrants and residents in illegal housing, who may be fearful of sharing information with the government. In the heavily immigrant neighborhoods of North Corona and East Elmhurst, outreach workers have approached New Yorkers while they wait in lines at food distribution sites, for example.

A lot of effort goes into conducting the decennial census and the data collected is helpful to many. Trying to boost response rates to surveys in a world awash in data collection is a difficult task without a global pandemic. But, I imagine this might lead to some interesting lessons about data collection. Researchers need to have some flexibility in all cases as circumstances can change and plans may go awry. This could be a helpful story about how a large organization adapted in a difficult situation and maybe even made future data collection more robust.

While the article mentions the potential consequences for New York City, there is another consequence of the movement of people: would these wealthy New Yorkers boost the Census numbers elsewhere, provided that they fill out the forms about residing in other locations? Granted, they would still have to fill out a Census form but others might do that for them (if they are living with others) or they might fill out a form once they are more settled in.

The McMansions and their wealthy owners who do not need house numbers

As one writer walked every street of zip code of 22207 to look at house numbers, they noticed something about some of the larger homes:

pexels-photo-2053903.jpeg

Photo by Daria Shevtsova on Pexels.com

Some exorbitant McMansions featured no address numbers at all, only very pointed security-company signs. (The cars parked at those homes often sport diplomatic plates.) Many of the richest houses in Arlington—for example, the mansions overlooking the Potomac near Chain Bridge—were not visible from the street at all, and so the only address numbers ascertainable were on mailboxes or security gates at the foot of long, winding driveways.

One of the purposes of McMansions, particularly according to critics, is to broadcast the status and money of the owners. Through the garish architecture and an imposing facade, McMansion owners show what they have.

So, if a homeowner does not have a street address visible, does this mean their home is not a McMansion? Perhaps the home still shows off even if it more difficult to connect the home to its particular owners.

The story might be a little different here. Might these be less of McMansion owners – those who want to project their success – and more of people with real money and status who want to stay quiet about their success? One of the advantages of being elite and/or having resources in insulating yourself from the public. This may be why it is harder for sociologists, journalists, and others to get access to the elite as they can better control access to themselves. Not having easily visible house numbers is just a start.

Coming back to the McMansion status of such homes. I wonder if this could turn into a minor addendum to defining McMansions: how does the visibility of the home to the street affect whether it is a McMansion? Let’s say the McMansion is shielded from the road by trees and a gate; does this render the home less offensive since it is not broadcasting its architecture so much?