Near-New Seattle Residential High-Rise Faces Demolition

Seattle's tony Belltown condo neighborhood hardly needs more bad news. Like many other similar areas in central city cores, the supply of new high rise condominiums has far outstripped the demand. Over the past year, the downtown area condominium market has experienced a median price decline of 35%. Units in at least three downtown buildings have been auctioned off at prices from 30% to 50% below the latest, already discounted prices.

Yet things have gotten even worse. A 25 story apartment building, only 9 years old, will be demolished due to substandard construction. Owners of the McGuire Apartments (photo on web here), Carpenters Union Local 131 and the Multi-Employer Property Trust issued a letter recently announced saying that "Since the necessary repairs are impractical, the decision ... is to dismantle the building.” The letter also indicated that tenants would be assisted in finding new housing.

A local blogger (Hideous Belltown) has provided a more than one-year long chronicle of the building, since scaffolding was erected, and concluding with two "death-watch" entries.

The Seattle tower may be the newest and tallest building to ever be demolished, especially in the United States.

$300,000-$400,000 for a Levittowner?

An article in The Wall Street Journal details the difficulties that were faced by home owners caught in the Goldman Sachs/John Paulson finance scheme ("The Busted Homes Behind a Big Bet"). The article calls the situation a "dizzyingly complex transaction, involving 90 bonds and a 65-page deal sheet. But it all boiled down to whether people ... could pay their mortgages." There is plenty of blame to go around, but surely there were both big winners and big losers is these deals. The big winners were Goldman Sachs and John Paulson. The big losers were the homeowners, though they were not without blame, since they were not forced to take out the excessively large mortgages.

The striking thing about this story, however, is the photograph of a Levittown style house in Aberdeen township, New Jersey, a distant suburb nearly 40 miles from New York City. The picture in the article cannot be directly linked, and the best view is on an interactive slide show linked to the article. We have provided a photograph of a near somewhat smaller house in Levittown (see photo).

In 2006, the owner had refinanced the house with a $308,750 loan, indicating a value more than triple that of comparable housing in much of metropolitan America.

Levittown, of course, was the late 1940s housing development on Long Island that set the stage for the automobile oriented suburban expansion that did so much to create the largest and most affluent middle class in the world. The Levittown houses were very small, starting at about 750 square feet, though many have been expanded. It was not long before suburban housing became larger, eventually rising to the present 2,250 square foot median. The Wall Street Journal's Aberdeen township house is under 1,500 square feet, according to Zillow and was built in 1953.

The Wall Street Journal article misses a significant point. How could such a modest (and doubtless comfortable) house have become so valuable that it could justify refinancing for more than $300,000? The answer is simple. During the real estate bubble, house prices in New Jersey exploded. The state's restrictive land use regulation largely prohibit new housing on the suburban fringe, leaving prices nowhere to go but up and up strongly. Between 2000 and 2006, the median house value in Monmouth County, where Aberdeen Township is located, rose 125% (according to US Bureau of the Census data). 2006 data for Aberdeen township is not readily available.

By the peak of the bubble, the median value house in Monmouth County was 5.8 times the median household income, up from 3.0 times in 2000. In 2000, prices were even lower in Aberdeen township, at 2.3 times incomes – well within the 3.0 standard that defined housing affordability for at least one-half century.

While owners were borrowing $300,000 or more on their modest early 1950s houses in Aberdeen township, households were buying brand new houses of the same size for under $120,000 in Dallas-Fort Worth, Atlanta, Houston, Indianapolis and a host of other metropolitan areas where the American Dream had not been outlawed. Expansion of the housing supply was allowed, and prices stayed within historic norms. For example, in Indianapolis, house prices were less than one-half that of Monmouth County, after adjusting for income levels.

Meanwhile, a judgment of $370,000 has been entered against the owner of the Aberdeen township Levittowner. The auction in late April by the Monmouth County Sheriff for a price that is probably closer to its real value if it had been in a rationally regulated jurisdiction: $100.


I need a stronger dose of Vitamin G. No, not Riboflavin or Vitamin B2 as it is sometimes called, but Vitamin G: the Green Space Vitamin! Everyday there seems to be more data confirming my personal beliefs that being around, in and associated with green space promotes health, well-being and an enhanced social safety network (reducing stress, anger, frustration and aggression) in all of us. There is a strong, positive relationship found between the amount of green space in our living environment and physical and mental health and longevity.

Researchers have been studying this issue for some time and have discovered that us, human beings, are “phytotrophic”- we are attracted to environments that include trees, grass and other natural elements.

Much like a vitamin that you eat, drink or rub on your skin, Vitamin G can be taken in many ways. Research shows the benefit of nature broadens to varying avenues of exposure and beneficial contact with nature need not involve getting one’s hands dirty. Gardening is beneficial, but so is walking, jogging, biking or even canoeing through a natural setting.* Even non-nature focused activities, such as reading or playing basketball, in a relatively green setting is more beneficial than the same activities indoors or in a less green outdoor setting.* Even a simple window view has measurable effects. Also like a vitamin, evidence suggests that contact with nature is needed in frequent and regular doses.

“Vitamin G seems to be beneficial regardless of its physical form. Research shows that the benefits of nature seem to extend to a tremendous variety of stimuli (e.g. large forests, small urban gardens, prairies, nature preserves, vest-pocket parks, mountains, landscapes with water features, an aquarium in an office, tree-lined city streets, shady back yards, and soccer fields).”* Seeing and being in any form of green space benefits us, regardless of its shape, size and texture.

Unfortunately, many policy makers, at least up until now, view green space as a luxury good rather than as a basic necessity, overlooking the important and beneficial effects of green space on our health, well-being and safety. In fact, for those of us tied to our homes a bit more closely (elderly, children, low income adults), defined green spaces are even more important to our health! “The tight integration of natural elements into the urban fabric can now be thought of as preventative medicine – a public health measure designed to reduce physical, social, and psychological breakdown in urban dwellers.”

For many of us that don’t have the opportunity (and that green peace of mind derived from this) of owning a cabin or destination green space, we need better policy, design and implementation to happen within our communities, in order to maximize our exposure to Vitamin G. I know in St. Louis Park, we try to incorporate many green items, for example we have a master sidewalk and trail plan (some of it still needs to be implemented, but it is planned for) that provides opportunities to experience green boulevards, parkways, wooded areas and other green features. We also provide many parks, of varying size, easily experienced by most folks, since all are within a quarter mile of any residence. But there is room for improvement in our attaining our recommended doses of our citywide Vitamin G.

Vitamin G is a critically important vitamin. I hope Vitamin G becomes a daily staple of every community and person’s diet…our health and welfare depends upon it!

Jim Vaughn is the Environmental Coordinator of the City of St. Louis Park, Minnesota. This blog originally appeared in the St. Louis Park Sun-Sailor.


LA the Least Gentrified Major City?

Los Angeles has been "gentrified" and made more stable in many of its areas by immigrant settlement, but the phenomenon of Anglo “gentrification” – what used to be "yuppies" or their more contemporary counterparts (original "yuppies" are now in their 50s) upgrading a formerly "bad" neighborhood by pushing up rents and squeezing out existing relatively poor folks – is rarer in Los Angeles than in almost any other American city.

The closest thing to it has occurred in a few "paleo-urbanist" beach communities. ("Paleo-urbanist" means planned to New Urbanist specifications, but nearly a century ago!) And I think the reason for it has to do with the massive projects by the Irvine Company especially in the 60s and 70s. These projects, plus the nearby existence of Newport Beach – already a "watering spot" for the WAS (WASP but including Catholics, this being California) – plus the riots of 1965, plus the perception that the air in the Irvine and Newport region was less polluted at a time when smog was worse than now, led to a massive secessio patriciorum, a secession of the patricians, It was a physical manifestation of Christopher Lasch's The Revolt of the Elites. Corporate headquarters relocated en masse. Second homes near Newport Bay often became first homes. Many of the people that might otherwise be gentrifiers in Los Angeles were removed to the first great Edge City, at the head of Newport Bay.

Los Angeles proper ultimately recovered from the Great Secession. It did so with the help of immigrants on the one hand, and the entertainment industry on the other. In days of old "Hollywood" and "Los Angeles" had been two separate cities occupying the same space. Outsiders who were concerned with the film industry often didn't refer to "LA" at all, but to "Hollywood" or "The Coast." "LA" was the rather bourgeois city that happened to occupy the same physical space.

I remember, for example, when Los Angeles magazine was socially conservative enough to declare, "Why is it they never organize against the popular smut [pornography] – movies like Beach Party, for instance?" This is unimaginable now. I also remember how few were the movie stars in attendance at the openings of the major Music Center (now LA Performing Arts Center) in 1964 and 1967.

It is now recognized that Hollywood is at the center of cultural life in Los Angeles. The two largest political parties in the state are the Hollywood Democrats and the Eastside LA Democrats, with quite different social priorities. The third party, the Republicans, is desperately trying to hold on to its veto on taxation and the budget. As a matter of fact, the terms Westside and Eastside are used a lot more now. When I lived in Hancock Park in my high school years, I had somewhat of a perception that I was in the exact middle. Wilshire Boulevard, the grand prestigious street of Los Angeles, had, because of foolish zoning, a strip of vacant lots where it went by the Hancock Park residential district (not to be confused with the city park of the same name, two miles west, where LACMA and the Page Museum are}. These lots were not built on until the 70s, when condos were allowed there.

The so called "Park Mile" did provide a separation between the Miracle Mile on one side and the Wilshire Center – not in those days Koreatown, and in fact a serious rival to Downtown – but the separation between West and East has grown sharper as the Miracle Mile has faded a bit, and Koreatown is what it is and not a rival of Downtown any more. The perceived border between Westside and Eastside LA seems to run near Vine Street, through Old Hollywood and Hancock Park.

Pasadena and Santa Monica, both singularly uncool places 40 years ago, have become among the coolest parts of the city. Remarkably, Pasadena and nearby areas were the main source of the secessio patriciorum of 40 years ago. The vacuum has been filled in a very interesting way!

In contrast, downtown San Diego feels a lot like downtown Denver, except with palm trees and water. Both of those downtowns fill up on weekends at night with hard-partying young Anglos, not exactly to be seen on Broadway in LA at any hour. If there was a secessio patriciorum in San Diego, it was only to the UCSD area near La Jolla, much closer. If the secessio had gone, say, to Carlsbad, and upper class San Diegans had relocated to Carlsbad and La Costa en masse, downtown San Diego might be the ethnic wonderland Downtown LA now is. Carlsbad may be 30 miles away but the few Carlsbadians I know seem a lot more loyal to San Diego than OCers are to Los Angeles. Who knows?

Howard Ahmanson of Fieldstead and Company, a private management firm, has been interested in these issues for many years.

A Bad Business Cycle for the Creative Economy

Here’s a simple question for you…which metro areas did prospered the most during the past business cycle? (2000-2008)  Were the winners the highly-educated communities that make up the Creative Economy?  Or did someone else zoom ahead?

I asked myself these questions when I was preparing for a talk that I was giving at the Rochester Institute of Technology on innovation and economic development.  Being a man of numbers,  I calculated the gains in real-per capita income for all metro areas. Who do  you think was #1, and who do you think was #366 (out of 366)?

A bit surprising, isn’t it?  The common themes are guns and oil. The big gains in the #1-ranked Houma region are mainly connected with the increase in oil drilling, since BLS data shows that wages in the mining/oil industry in Terrebonne Parish, where Houma is located, soared from $58K a year to $78K from 2005 to 2008.  #2 Jacksonville (NC) is the location of Camp Lejeune. Fayetteville (NC). #5 Fayettville (NC) is home to Fort Bragg, one of the larget military bases in the world. #6 Killeen is obviously home to Fort Hood.  #8 Odessa, Texas, is  riding the oil boom.

Now let’s look at the metro areas which were the biggest losers in real per-capita income, 2000-2008.

Uh, oh.  This is not the list you might have expected, in a world where brains and innovation are supposed to be important. There’s Silicon Valley at the top (or the bottom) of the list, where incomes didn’t recover from the popping of the tech bubble that peaked in 2000.  But other tech-type metro areas, such as Raleigh and Austin were hit hard as well.

Brains and education did not seem to count too much in success in the last business cycle. Overall, the top ten cities, measured by growth in per capita income, had an average college graduate rate of 17.7% The bottom ten cities had a college graduate rate of 31.8%.

Is this inverse relationship between growth and education going to persist into the future? Impossible to say. My personal view is that the lack of rewards for education–which show up in the individual income statistics as well–is correlated to the lack of commercially-successful breakthrough innovations, which would immediate sop up all the excess college graduates.

To put it another way, innovative industries tend to locate where they can get a lot of college graduates. That means high education areas attract new companies, boosting growth.

But without innovation,  the whole economic development dynamic changes. You can’t attract growing innovative companies because they are few and far between. For their part,   companies are more likely to view cost as a main consideration in deciding where to locate.  Goodbye San Jose and Austin, hello China and India.

Mike Mandel is Editor-in-Chief of Visible Economy. This post originally appeared on his blog "Mandel on Innovation and Growth."

What Jobs?

According to the Bureau of Labor Statistics, there were 290,000 more jobs in the US this month than there were last month. Twenty percent of those jobs were added by the federal government. While the federal government added 69,000 new jobs last month, every other level of government – including the post office – cut an average of 2,250 jobs. State governments were hardest hit last month, cutting 5,000 jobs.

Since April 2009, the federal government has added 119,000 jobs while state and local governments cut 215,000 jobs.

Compared to April 2009, more than 500,000 jobs have been added in employment services. Another 329,000 jobs were added in the healthcare industry. These must be the “green shoots” that we were so looking forward to last summer because the overall economy lost 1,380,000 jobs in the last year.

Eighty percent of the jobs increase last month was added in the private sector. Of the jobs created in the private sector, only 22 percent were in goods producing industries; about half of the goods producing jobs added in the last month can be attributed to the bailout of the auto industry. In the last 12 months, the U.S. civilian population increased by 2.1 million persons. The labor force has remained about constant at 154.7 million. The difference – explained in the details of today’s jobs report – is attributable to discouraged workers, involuntary part-time workers, and marginally attached workers.

Rating the Unaffordable: The Economist and Mercer

An article by Carl Bialik in The Wall Street Journal questions the value of city livability ratings, such as lists produced by The Economist and Mercer. This issue has been raised on this site by Owen McShane.

(1) The Wall Street Journal notes a lack of transparency in ratings. In the case of The Economist and Mercer, this starts with the very definition of "city." They don't say. In the case of New York, for example, is the city Manhattan?, the city of New York or the New York metropolitan area. The difference? Manhattan has fewer than 2,000,000 residents, the city about 8,000,000 and the metropolitan area about 20,000,000. That makes a difference. The same problem exists, to differing degrees in the other "cities," whatever they are.

(2) The first principle of livability is affordability. If you cannot afford to live in a city it cannot, by definition, be affordable.

The Economist ranks Vancouver, Melbourne, Sydney, Perth, Adelaide and Auckland among its top 10 livable cities. In fact, in our 6th Annual International Housing Affordability Survey, these metropolitan areas rank among the 25 least affordable out of 272 metropolitan areas in six nations (the United States, the United Kingdom, Canada, Australia, Ireland and New Zealand). The Economist's champion, Vancouver, is most unaffordable, with Sydney second most unaffordable. Mercer's top 10 list also includes Vancouver, Auckland and Sydney.

By contrast, the three fastest growing metropolitan areas with more than 5,000,000 population in the developed world, (Atlanta, Dallas-Fort Worth and Houston) have housing that is one-half to one-third as expensive relative to incomes (using the Median Multiple: the median house price divided by the median household income) as all of the "cities" noted above in the two lists.

Purpose of the Lists: The purpose of these lists, for all their difficulties, is often missed. The Economist and Mercer do not rate livability for average people, but rather for international executives. Thus, the lists are best understood as rating cities for people with a lot of money and a big expense account. The lists may be useful if one is contemplating a move from Manhattan's Upper East Side to London's Mayfair.

Unfortunately, The Economist and Mercer lists are often treated by the press as if they rate the quality of life for average citizens, which they most surely do not.

The average Vancouverite does not live on English Bay, nor does the average Sydneysider have a view of the Harbour Bridge. Because of escalating house prices, they are far more likely to live in rental units, with the hope of home ownership having made impossibly expensive by rationing, through restrictive land use policies, of an intensity that not even OPEC would dare adopt.

State Auditor Says Only Part of California High Speed Rail Line May be Built

The California State Auditor's report title says it all: High-Speed Rail Authority: It Risks Delays or an Incomplete System Because of Inadequate Planning, Weak Oversight, and Lax Contract Management.

The report, which can fairly be characterized as "damning," criticizes the California High Speed Rail Authority on a wide range of issues, some of which go to the very heart of the project itself.

For example, the State Auditor says that without additional bond funding from the taxpayers, the state "may have to settle for a plan covering less than a complete corridor." Given the financial and administrative disarray of the California High Speed Rail Authority, this is a distinct possibility, which was raised by the Reason Foundation California High Speed Rail Due Diligence Report, released in September of 2008 (co-authored by Joseph Vranich and me).

This could produce a system that spectacularly fails to meet the promises of its promoters, while enriching the income statements mostly offshore firms that build trains and of firms that failed so spectacularly in managing the Big Dig in Boston. Martin Engel, who leads an organization of concerned citizens on the San Francisco peninsula frequently notes that the real driving force behind high speed rail is spending the money. In this regard, the California High Speed Rail Authority will deliver the goods. The vendors and consultants will get their money.

The State Auditor also raises questions about the potential to attract the substantial private investment necessary to completing the project. This is a legitimate concern, since the California High Speed Rail Authority has raised the possibility of government revenue guarantees for private investors. This could lead to "back door" taxpayer payment of the "private" investment.

The Authority continues to skirt legal requirements. The State Auditor notes that the "peer review" committee, ordered by state law in 2008, is still not fully constituted. This is not surprising for an agency that delayed its publication of a legally mandated business plan from two months before the 2008 bond election to days after it.

In its response, the California High Speed Rail Authority was relegated to taking issue with the report's title, characterizing it as "inflammatory" and "overly aggressive." It hardly seems inflammatory and overly aggressive to point out that an ill-conceived plan is rushing headlong to failure. The State Auditor rightly dismissed the criticism saying: "We disagree. The title accurately characterizes the risks the Authority faces, given our findings."

This potential financial debacle could not have come at a worse time for California. California's fiscal crisis is of Greek proportions. Economist Bill Watkins has raised the possibility of a default on debt. Former Mayor Richard Riordan has suggested bankruptcy for Los Angeles, the nation's second largest municipality.

Unlike many in California, Riverside's Press-Enterprise in high-speed rail in the context of California's bleak financial situation: The dearth of answers to basic fiscal questions suggests that taxpayers might end up paying for big financial deficiencies in the rail plans. Deficit-ridden California has better uses for public money; no list of state priorities includes dumping countless billions into faster trains.

Governance in Los Angeles: Back to the Basics

Few would want to be in Los Angeles Mayor Antonio Villaraigosa's shoes. The Mayor, a tireless ally of public employee unions through his career is in the uncomfortable position of being forced to choose between his allies and the taxpayers. To his credit, as hard as it is, the Mayor seems inclined to favor the interests of the citizens who the city was established to serve in preference to the interests of those who are employed to serve the people. But the circumstances place the Mayor of having to approach the city's unions with an inappropriateness that lays bare fundamental flaws in the public sector collective bargaining arrangements that have emerged over the past one-half century. Noting that the unions have a choice between layoffs and cutting pay, the Mayor told The Wall Street Journal I was a union leader now. Rather than lay off workers and cut services, I'd agree to a pay cut.

The Mayor has been relegated to asking the city's unions to make decisions that should only be made by the city itself. The Mayor has asked the unions to accept pay cuts, so that impending public service cuts can be minimized. In effect, the unions are being asked to make a fundamental policy choice that should be the city's alone to make. The city of Los Angeles, the Mayor and the city council, are the legal policymaking body for the city of Los Angeles. There is no state statute or provision of the city charter that grants policy making authority to others.

Yet, under the public sector labor bargaining system that has emerged, the city may have no choice, unless it is willing to file Section 9 bankruptcy to void the union contracts and impose a solution that favors the interests of the citizenry. A predecessor, former Mayor Richard Riordan has called for such a filing. Short of that, perhaps the city should require some sort of a "sovereignty" clause in the next round of negotiation that permits labor contract provisions to be altered during emergency situations, so that public service levels can be preserved.

Whatever the solution, the union public policy authority is an ill-gotten gain. This is not to suggest that the unions are wrong for having exercised the power; that is only natural. However, they should never have been able to gain such a position.

It is fundamentally wrong for the city of Los Angeles and countless other municipal jurisdictions around the nation, to have abdicated its policy authority over recent decades. There is a need for a new public employment paradigm in which the incentives of governance favor the interests of the households that make up the cities, towns and counties.

Drew Carey and John Stossel Tell Cleveland to Learn From Houston

What started as a humble video segment for Reason TV has mushroomed into a lot of positive PR for Houston (and less than positive for Cleveland).  It started with famous actor and comedian Drew Carey working with the libertarian Reason Foundation on a video series about saving Cleveland, his hometown.  Houston is held up as a "best practice" example for land use regulation.  There are lots of suggestions and positive comparisons to Houston on red tape (minutes 29:20 thru 32), zoning (37:30), and opportunity (47:50). Yours truly has a short cameo at 38:55. (If you want to be able to jump around, the trick is to start playing it, then hit Pause. You'll see the grey loading indicator continue to download the video. Come back later after it's fully loaded and you'll be able to jump to any point you like.)

After the series was released to the internet and Forbes declared Cleveland the Most Miserable City in America, John Stossel at FOX Business News picked it up.  A friend of mine loaned me a DVD of the 45 minute show (thanks Nolte), but I haven't been able to find it online.  There are shorter segments about it here and here.  The first one jumps right into talking about Houston 16 seconds in, and the second one jumps into Houston around 40 seconds and 58 seconds in.  The Cleveland newspaper writes about the show here.

Unfortunately, one of the professors he has on the show to present the other side brings up another one of those Houston myths that just won't die: that you can build anything next to anything, including a strip club next to a day care center or school.  No, we have narrow nuisance and SOB regulations to prevent that.   We also have private deed restrictions. You don't have to prescriptively control everything to prevent the worst-case scenarios.

Then Bill O'Reilly picks up the story in an interview with Stossel (hat tip to Jessie):

STOSSEL: People go to where the weather is good. We already have...

O'REILLY: Well, you can't blame the city for the weather. I mean, look at Chicago. Great city, bad weather. Boston, come on. You can't blame the city for the weather.

STOSSEL: You can rank them for that. And you can blame the politicians for saying we're going to raise taxes to build our wonderful projects, and that's going to make things better. The cities that prosper like Houston are the cities that have fewer rules and lower taxes.

O'REILLY: But remember Houston used to be the crime capital? They cleaned that place up pretty well.

STOSSEL: But Cleveland has 22 zoning categories. Houston has none.

O'REILLY: Twenty-two zoning categories? Very hard.

STOSSEL: In Cleveland, to start a business, a politician bragged, "We could get you in there in just 18 months." In Houston, one day.

O'REILLY: One day? The problem with no zoning is you can have, you know, the No-Tell Motel right next to you. And...

STOSSEL: You could. But that rarely happens. And it's not an ugly city, Houston.

O'REILLY: No, I didn't say it was ugly. Who said it was ugly?

STOSSEL: Lots of people. No zoning. The city planner said it will be ugly. You will have...

O'REILLY: We have a lot of Houstonians watching "The Factor," and I love going to Houston. All right. There you are, the Forbes magazine list, and Stossel laying it down.

We've come a long way.  Five or ten years ago, you couldn't find many people - including libertarians - that were willing to hold Houston up as a land-use model in public because our reputation was so bad.  But now they do, and it's (slowly) changing our national reputation for the better.

This post originally appeared at