Friday, December 17, 2010

Next Year's Urban Scene – Some Thoughts

A short missive here at the end of the year. I intend to have an excellent Christmas and prepare for an even better New Year, so to clear the way this is it for 2010 but be ready for next year – there are a lot of interesting and challenging things to come.


• The architectural business, especially for housing, will continue to founder. There will be an increase in mergers (of failing firms joining other failing firms) like two stars that collide; they may be brighter but only for a moment. Star designers of firms will, out of necessity, join other firms to try and continue on.

• Interest rates on housing will continue to rise. This will, for those that can, start a brief but explosive push to refinance before rates go too high. Then demand will flatten, rates will continue to rise, new housing will continue to suffer.

• Solar power needs markets to grow, and for the time being housing will not be the place. After all the government buildings, Walmarts, shopping centers, and office buildings are covered, where will this market turn? Traditional housing designs are not suited to panel installation. There will be a change in the designs of residential and multi-family roofs – less hip and more flat designs. This will dramatically affect the look of residential housing; also look for solar leasing deals with the big builders.

• Master planned communities will still sit on the sidelines, waiting, waiting, and waiting.

• There will be a five year breather on high-speed rail. When too many public service union jobs are lost due to budget cutting, there will be a quiet revolution to put off increasing our bond debt for this frivolous venture. Especially when it is found the only people who will profit are Chinese companies – to the tune of billions of tax dollars leaving the US.

• There will continue to be a movement of Boomers to the healthier and sunnier urban areas (Austin, Houston, San Diego for example), but there will also be a strong and financially important segment of this group that will stay in place and seek local options. Look for high quality and well serviced condominiums and apartment complexes in these markets. As they leave their big homes they want to stay local, live well, and have access to amenities, family and friends. They are not going too far afield unless it’s on a cruise ship.

• Speaking of cruise ships, with all the trouble in European cities (I know it’s isolated – but the traveler thinks not), look for cruising to continue to be supported – it is perceived as a safe way to see the world, if only its edges.

• Urban retail (much overbuilt everywhere) will look to be repurposed (lovely phrase), like overbuilt office space that was converted to housing; look for retail to face some of these same opportunities. Infill housing in parking areas at urban malls comes to mind in many markets.

• The continued growth of urban senior and active adult housing; the potential to repurpose failed condos into high-rise active adult complexes may save some vertical properties.

• The growth of apartment complexes – especially high end. These offer a mortgage free lifestyle that will verge on the resort and hotel level. Big impact in high-salary areas (Silicon Valley, Chicago’s Streeterville, San Francisco, and other high-value urban markets) where housing costs are too high for a transient worker climbing the ladder.

• More and more shopping on-line – driven by less and less product in the stores and the difficulty in accessing stores with the products. Amazon will blow the doors off most retailers.

• The urban scene will embrace the electric car in its many forms. But it still consumes energy, will clog the expressway the same as a nasty gas guzzler, and will still hurt if you are hit by one. Very few, like a friend of mine, will be self-sufficient with a private solar power system recharging their Volt. (Still trying to figure out how that works when he’s home only at night).

• Look for some reality in the draconian and silly environmental laws pushed during the last five years - more tempering than elimination. Cities will be desperate to attract builders and residents, the approval process must be streamlined; it will have to with the smaller and smaller staffs in most cities.

• And yes, there will still be a suburbia (its death, while wished for by some, is a long way, if ever, off), still an urban complex, still places in the country, and still commuters. Get over it; it is not as bad as you hope.

By the way a friend and political blogger, Rich Galen has an excellent post today, go to:

And a wonderful video I suggest is:

And one last one on Quantitative Easing is:

Have a wonderful Christmas, hug your friends and children, and spend the time preparing for an exciting New Year.

Stay tuned . . . .

Friday, December 10, 2010

A Toy Train for Christmas

The Parts and Players:
Santa Claus (The Big Guy) – Washington D.C.
Santa’s Helpers (Men and Women in Elf Costumes) – State Governments
Billy (Good Little Boy) and Tiffany (Good Little Girl) – California, Florida, Washington State, Illinois, New York, et all
Sally (Not so Good Little Girl) – Ohio and Wisconsin
Toy Train – High Speed Rail

Our Scene:
Santa’s huge toy shop in one of the big department stores; a long line of children wait to tell Santa what they want for Christmas.

The first child climbs up on Santa’s knee with the help of one of the elves.

“And what’s your name little boy?”

“Billy, Santa Claus, Billy.”

“Have you been good?”

“Oh yes Santa, I have been very, very good.”

“That’s good Billy and what do you want for Christmas?

“Oh Santa I want an erector set to build bridges for my brother, a whole village of dollhouses for my little sister, and a turkey with all the stuff and stuffing for my dad, see he’s lost his job.”

“I’m sorry to hear about that, I’ll see what I can do. Billy, you want so much for your family and that’s good, very good, but Billy, what do you want for being so good?”

Billy thought for a moment then turned his head to Santa with a huge smile.

"Santa I want a toy train. It would be the most wonderfulous thing in the whole world, a toy train that I can play with, run the track all through my room and maybe even in the hallway. It just has to be the most special and wonderous train, all shiny and sparkly and new. Oh, oh Santa that would be so great and it would be real cool ‘cause none of friends have a train and they all would wan’na come over and see it and play with me in my room. Please Santa, please.”

“But Billy I gave you a set of Hot Wheels and racetrack a few years ago and a really cool airplane and terminal set last year. Aren’t they fun to play with anymore?”

“Nah, Santa. I broke the racetrack and the planes just aren’t any fun anymore, but a toy train would be real cool, did I say the other kids would wan’na come over and see it.”

“Yes you did, but Billy, that is a very big toy for someone your size.”

“No. I’m a big boy, see!” Billy puffed himself up real tall.

“Yes, I guess you are now that you are all puffed up. Yes, Billy, Santa has to agree that you are a big boy now and can take care of such a wonderous toy. Santa will see what he can do. Just watch for a big green box under your Christmas tree.”

“Oh thank you Santa, thank you.”

Billy, with the help of the elves (who were all smiling and singing), climbed off Santa’s knee and slid down the slide into a huge pile of green cotton candy. Billy was in heaven.

The next child in line wasn’t sure about Santa, he was so big and his suit was all red and furry. The bells on all the elves (who were scurrying about still talking about the good little boy Billy), jingled and jangled creating such a wonderous din. This all scared the little girl. When the elves helped her to Santa’s knee, Santa wasn’t sure what was going to happen. He was afraid for his suit.

“And what’s your name little girl?”

“Sally,” she said quietly, still shaking.

“That’s a pretty name, have you been a good little girl?”

Sally thought for a moment. She looked at the Big Guy and all the elves dressed in green elf costumes, green cotton candy billowed all around them, it was a wonderous sight.

“Santa, I have not been a good little girl. I have saved my lunch money and not given it to my friends at school like the teacher says I should. I used it to help my dad and bought him a new tie, he was trying to get a job, and he did Santa, he was so happy. And I yelled at my brother when he bought some ice cream just after he had a whole mouthful of candy. So you see, I have not been a good girl.”

“I see, yes Sally, those aren’t good things to do, you should always mind your teacher.”

“Yes Santa.”

“But Sally, the elves and I know you can improve and be better, I know you want something for Christmas. Billy, the fine young man who sat on this very knee just before you, said all he wanted was a toy train, all shiny and sparkly and new. Wouldn’t you want a toy train? Santa has a whole box full of them at the North Pole.”

Sally thought for another moment then looked over at the next child standing in line, her name was Tiffany. She wore a bright dress and was all smiles.

“Can you hurry Sally, I just have to talk to Santa and unlike you I have been a very good little girl.” Even the elves could hear Tiffany’s strong Valley Girl accent.

Sally looked back at Santa. “Santa, I really don’t want a toy train; I know that if I get it my parents will have to buy more track so that I can run it down the hallway and then I will have to get more cars and a new engine and then I will have to buy one of those fancy train stations and I will have to get a little bridge to run the train over the other tracks and then a crossing thing with arms that go up and down and then I will have to get a huge box to keep them it and besides it will be fun for a little while then I will get bored and want something new and then it will just sit around and be in the way and besides it will only go in a circle and not really go anywhere really fast.”

Santa was shocked; not because she said it all in one sentence and one breath, it was because everyone wanted a toy train, that’s why he had a box full.

“Sally you just aren’t a very good girl; you only think of yourself and not others.”

Sally was saddened to hear that from Santa who had always been a hero to her.

“Santa,” Sally said, “why don’t you give the toy train to Tiffany, she is always a good little girl and wears really nice clothes and always has a smile. I think she gives her lunch money to the teacher who uses it for good things. Yes, Tiffany is a good little girl, give her the toy train. She deserves it and besides I have heard that her parents are real rich and can buy her all the tracks and stations she wants.”

Santa was very pleased, he had so many trains to give away and the line of good little boys and girls disappeared around the green cotton candy mountain.

Santa, pulled from his reverie, felt a tug on his sleeve; Sally looked up at him with her sad eyes. “Santa I really don’t want anything for myself, but if you can, my little brother wants a Red Ryder BB Rifle.”

Santa was stunned and outraged beyond belief what his ears had heard. Sally slid off Santa’s knee all by herself and pushed her way through the green cotton candy. She crawled to the slide and started down the slippery surface but she heard the Big Guy and elves exclaim ere she slid out of sight, “Sally, you’ll shoot your eye out.”

Merry Christmas and Happy New Year

Stay tuned . . . .

Thursday, December 2, 2010

Housing, Oh Housing – Wherefore art thou . . . going?

The Case-Shiller Home Price Index was released yesterday and after scratching my head and asking myself why I even bother to look at charts like this (too depressing–it is the same curve of my own business model), I came to the inevitable conclusion: open another bottle of wine; pull up a blanket–this ride is far from over. And the big question, (it came up in three distinctly different conversations today): When is this ride going to be over?

Impatience is setting in, big time. Everyone is forming their own opinions about where the housing market is going (hopefully to a better place than where it sits now). With the unstoppable growth in the American population over the next fifty years, there will be:
1.A pent up and poorly met demand, like the 1930s,
2.A slow growth in housing to match the needs of the marketplace,
3.A roller coaster ride of fed money and private capital trying to game the market and the system,
4.Or “Return with us now to those thrilling days of yesteryear” where we build like crazy, inflate prices, go bust then do it all over again, and again, and again (sound familiar Tonto?).

The big issue today is a lack of clarity in the marketplace, foreclosures, the cheapest housing in years, rental versus ownership – situation abnormal. Sure the next 100 million Americans (thank you Joel Kotkin, it’s all your fault) will need places to live and shop and work, but there is not a Central Planner in the world that could ever figure that one out, no matter how smart you think you are in Washington. There are fewer and fewer qualified buyers for more and more available housing units – what would Ludwig von Mises do? Probably have a good chuckle – history does repeat itself, itself, itself. "Ludwig, how is that Market is Supreme thing. Yeah, it does work, you may not like it but there it is." It is now no longer a regional problem but, like a virus, has begun to infect everyone everywhere (think Ireland, Portugal, West Covina).

It is interesting that a few bold thinkers are now challenging the American dream of homeownership, the fundamental tenant of the American psyche since WWII. In 2000 the average rate of homeownership in New York City was about 31%, meaning 69% rented, in Chicago the ratio was 43% owned to 57% rental and in Los Angeles 62% rented. I would offer that in the last ten years this number has not changed much.

Hanley Wood Market Intelligence said that national homeownership today is at 67% almost the exact opposite of the large city trends in renters versus owners. But in 1960 ownership was at 62 % – not a significant difference in fifty years. So what is the immediate future?

It will be easier to find funding for rental units than for single family units. Many for sale condominium projects are now converting to rental just to stay alive. And throughout the country, large regions (the suburban ring areas especially) are now two story detached single-family rentals (by foreclosure or hard choice). These units are part of the housing mix that is meeting the demands of the ongoing growth in this country. They are now horizontal apartment complexes not vertical.

Not everyone wants to live in a city, especially a big city. Not everyone wants to own a house, especially now. Not everyone wants to rent, but many will have to. What I am waiting for is how the building industry will address this fundamental American issue. I do not believe the government has a clue.

Stay tuned . . . .

Wednesday, November 24, 2010

The Windy City – A Love Story

Last week I was in Chicago for a presentation, actually a history lecture and book signing in Chicago. I was in the village of Park Forest, the subject of my book America’s Original GI Town, Park Forest, Illinois (see right and above header). Chicago is where I grew up and have my earliest memories of the “Urban Life.” High school escapes to Old Town on Wells Street (head-shops and deep dish pizza in Piper’s Alley), great jazz and Stan Getz, the movie Endless Summer at the Playboy Theater, illicit drinks at Mr. Kelly’s (now Gibsons and still a great watering-hole) and college tours of the great buildings and architecture balance the ‘68 Democratic Convention and Chicago politics.

Chicago is like New York but more manageable. The two core areas State Street and Michigan Ave. remind me of neighborhoods in San Francisco, Boston, Wall Street and mid-Manhattan: walkable, busy, good food, and a street level texture that keeps you involved. With the exception of an over-priced and inadequately poured drink at one hotel, the bars in this town know what a real pour is. Glorious food, good God, now I know why Oprah still lives in Chicago. As a kid I remember Italian – that was the special meal for a kid from the ‘burbs, even though our town 30 miles south of the Loop was half Italian. The magic of downtown restaurants is still here, walleye at the Millennium ice rink, great pizza – Chicago style, burgers at Gibsons, Italian everywhere, pancakes at the Pancake House (pure Midwest). Visiting Chicago is worse than a cruise vacation on the waistline.

The retail is both vertical and horizontal. Michigan Avenue for its ¾ mile is one of the best retail streets in America. Great on-street stores and the vertical malls at Water Tower Place and North Bridge, from Tiffany’s to Crate and Barrel to the American Girl store; high-end to low-end clothing are everywhere (New York is creeping in with Filene’s Basement, Bloomingdales, and Barney’s), sadly Marshall Field & Company only exists as a memory (the bastards!). In late autumn and at Christmas the streets are alive with shoppers from all over the Midwest making a day or weekend of it. Other cities would kill for the opportunity.

The town is also becoming a vertical residential community, especially to the east of the Loop in the areas between Michigan Ave. and Lake Michigan called Streeterville-it is a city onto itself. Thousands of high rise condominium and rental units have been built, most in the tradition of good to great Chicago architecture. This increase in downtown residents has pushed high-end boutique food and service retail into the area. There are excellent parks within walking distance such as Millennium Park (one of the best urban parks in America), a very classy park called Park No. 946 (I think?), all surrounded by high rise condos and apartments; numerous smaller urban parks as well as the 16 mile long lake front from Rainbow Beach to Grant Park are a short walk or stroller push from thousands of residents.

I love this city and get back often, but so as not to sound like a travel log all is not well in Chicago. I had lunch with one of the best Midwest and urban bloggers Aaron Renn whose base is in Chicago (go to his The site) for the latest, he cautioned that one must look beyond the glass and glitter. As a Californian now, it is easy to look around and wonder what's the big deal about race. California is without a doubt the most integrated place in the world. The friction is minimal, the advantages great. Sure there are problems, huge problems, but they stem more from small minds not big ideas. But across the heart of the country race plays an important part, and, as some tell me, we should watch the upcoming race for mayor of Chicago. It is pitting neighborhoods against neighborhoods, race against race, and sadly the future of the streets may be held up for ransom. Richard Daley, the current mayor, is the poster boy politician for not having term limits, he has helped to make this city one of the best and has adapted the city to the changes of the last twenty years, but the city is in serious debt and the ugly bits of urban life are returning with unemployment and empty stores.

Sitting out on the sidewalk at the Tavern-on-Rush on a comfortable Thursday evening brought home a unique urban experience that other cities dream of. A steady stream of residents, business suits, visitors, shoppers, and cute young and not-so-young ladies in tight skirts (not those ladies but as the bartender said, Thursday is “cougar night”). I had not seen this kind of sidewalk pedestrian life since the Left Bank days in Paris and the Sloan Square type neighborhoods of London. This is the urban life at its ancient best: sidewalk tables, a constant flow of the interested and disinterested, good looking girls, bright cars, good food and even better drink, shorts, suits, high skirts, cute dogs, a few chain smoking Argentinians, and horse drawn carriages. This is what the city is about, that is why we are attracted to it (even though rare), and it is what we aspire to.

Stay Tuned . . . .

P.S. My latest mystery/investigator story, Land Swap 4 Death is now available on Amazon as an ebook and in paper. Shady developers, oversexed environmentalist, and a good looking red head that carries a gun, what more do you want?

Friday, November 19, 2010

Affordable Housing – A Death Spiral

To ask what is affordable housing is a find oneself in a quandary. Affordable to whom, why is it affordable, and, most especially, who is providing this housing are many of the questions. Let’s make it a simple fact at the outset: Governmental affordable housing is not a direct result of market values and regional housing affordability. Affordable housing, in the United States, is a politically driven, subsidized, and artificial construct that provides a residential unit bought with intentionally contrived political land uses, OPM (Other People’s Money), and unrealistic social beliefs and demands.

During the last century there has been a consistent and successful growth of wealth and equity in this country, much of it due to the increase in property values. This has resulted in some being left behind. The obligation of supporting these people (a significant portion being urban dwellers) through welfare and subsidized housing; was taken on by the public institutions at all governmental levels. An inevitable divide was created between the “haves” and “have-nots,” a pejorative argument that implies one owes something to another. As such, housing, being the most visible, becomes a vehicle to push the agenda of supplying shelter by one group for another.

This effort is accomplished through fees paid by builders to the community so the government and its agents can provide this housing. It is also done by requiring a set number of units within a new community to be “affordable”-the formulas are fascinating to calculate. The solutions bear no semblance of current housing values and the marketplace. In fact, I would not be surprised, today in some areas of the Central Valley of California some affordable projects are MORE expensive than the current market value of foreclosed homes in the same area. These contrived housing units are the product of entrenched political operations within city, county and statewide housing programs.

The argument is that public housing is needed (there are Public Housing Authorities in most states) and the marketplace is not meeting this demand. In most cases this is true, but the developer and builder cannot compete in this marketplace, not when the carrot of approval hangs before the applicant. To not contribute means your development cannot be approved. Fairness is not a visitor to this party.

It is also a social issue of extreme importance. Wealthier communities are concerned that this type of housing (in reality it is not the housing—it is the resident) is not acceptable in their backyards. It is literally kicked down the freeway. The urban areas contain the largest number of people and as a result the burden of affordability falls on them the most. Like welfare itself, it becomes a vicious circle that continues from one generation to the next.

In the wealthier neighborhoods these housing projects have literally changed the name of the game by calling this housing “workforce housing;” housing intended to keep the resident with essential skills the community needs, police officers, firemen, teachers etc., in the community. With today’s excessive benefit packages for these specific groups one wonders whether this is a good argument now.

There will always be a place for affordable housing, but the model must be changed to reflect the marketplace. And, in fact, during some economic times, it may be necessary to drop the charade entirely. These housing institutions must be accountable to the taxpayer and the development community. In fact one of the most fascinating arguments has been that this socialized housing (let’s call it what it really is) is necessary to protect the capitalist system by providing economical housing for workers closer to jobs. In fact this housing has been cited as a solution to congestion, sprawl, family problems (more time with kids) and not having enough time for yourself. Aren’t we lucky that it is available; let’s plan more!

Stay tuned . . . .

Wednesday, November 10, 2010

Centrist versus Decentrist – The Future of American Growth

I apologize right up front that this posting may be a bit disjointed – but the following bits are my initial thoughts in an rough attempt to get my arms around the subject of where growth will occur in the United States during the next fifty years. It is a personal view – but based on a lot of experience.

There are today two broad schools of thought on American growth. The first says we must return to the cities (use force if necessary), reuse and revitalize our urban centers, densify, and above all use transit to make this all happen. These are what I call Urban Centrists. The second school is certain that most of the new growth necessary to absorb the next 100 million Americans has to be in the outlying suburbs and small towns across the country. These are the Rural Decentrists.

I am a Rural Decentrist.

The growth of suburban and urban areas since the end of World War II has continued to feed this discussion to the point of rabid reaction and political leveraging. These schools have had their champions and buzz words. To mention a few: Transit Oriented Design (TOD), Traditional Neighborhood Design (TND), Edge Cities, New Urbanism, Neo-Traditional, Sustainable Development, Penturbia (the 5th Internal American Migration), Satellite Towns (a Cold War remainder?), Greenbelt Communities, and one of the most curiously recent, New Pedestrianism. Billions of dollars have been spent and made in each camp promoting and building their view, like Ebenezer Howard and Raymond Unwin one hundred years ago, of the Utopian community.

Each has their intrinsic value and success stories. The neighborhoods and villages built and reconstructed on the New Urbanist model are excellent examples of low density, mixed-use neighborhoods; their long term viability is yet to be determined. But it is safe to say they are very expensive and, for some, elitist in their maturity. These concepts are strong — their execution expensive.

Decentrist neighborhoods tend to be sprawling (there is that word) and are areas of growth connected to existing communities and towns. They are more affordable, adaptable, and accessible to more people. While not paradigms of planning in their choc-a-block layouts and executions they meet the most important need – demand. And yes this can lead to excess (witness the current housing mess), but the community designs are not the reason for their collapse.

The fundamental flaw of each school is that old bugaboo, the marketplace. People can only rent or buy what they can afford (except the last few years). As land values increase (usually closer to urban centers) the costs to develop and build increase, sometimes substantially. The result is higher and higher housing costs. To counter this affect either units get smaller, densities rise, heights increase, or they become too expensive. The increase in price directly affects who buys and where. While the European model works (the expensive and really nice housing is downtown) for Paris, London and other old-world cities I suggest, quite strongly, that that is not the traditional American model.

The American housing model and its attendant marketplace is unforgiving – look at the current rates of foreclosures. Many foreclosures were based on the attempt to subvert the marketplace with political incentives (tax rebates, subsidies, and outright grants), others through fraud and deceit. I do not include those that face foreclosure due to illness and job loss — the market already includes these difficulties in its traditional model.

The rural decentrist model begins with a significantly lower basis in the land cost (land costs within a few miles of Urban Growth Boundaries can be 10% of the inside land values). Approval costs are less, utilities are significantly easier to build and the costs of labor - lower. No matter how loudly the centrist school stomps their collective feet; they cannot come close to offering the same competitive product to the marketplace. The urban areas do offer a more diverse society, more arts, more distractions, finer stores, restaurants, and even more and better opportunities for employment — but it is not a moral issue.

To attribute and/or apply a moral aspect to this growth is just wrong. This castigation continues to appear in articles and even books that espouse one form of development as intellectually and morally superior to others. Phooey. There is good development and bad development; there is profitable development and there is unprofitable. The marketplace takes care of the bad and unprofitable in a very unforgiving manner. Developers with high standards. imagination, and community spirit will continue to develop excellent projects no matter where they are located. And there will also be a lot of junk foisted on the public covered with sustainable green neo-traditional transit oriented worker’s housing labels (SGNTTO&WH).

There are state and national efforts to change how we grow through political muscle and legislation. These regulations fight the marketplace and its simple needs. They will become very costly and take revenues from more important community needs. I suggest a time-out, a sideline breather — put your hands on your knees and take a breath.

Off to Chicago tomorrow for a presentation and book signing in Park Forest, Illinois. Talk with ya’all next week.

Stay tuned . . . .

Thursday, November 4, 2010

High Speed Rail and Vision California - Boondoggles

With the change at the top in California, what will be some of the big things that Governor Brown will try to deal with? Will he, by doing so, tick off his supporters and constituents and at the same time raise the eye brows of the loyal opposition? Let’s start with a big ticket, in fact THE biggest ticket on the agenda of the state: the “Vision California” plan and the high speed rail system.

The “educated citizens” of the state have voted to support AB32 (Global Warming Act) and in doing so give ballot lip-service to the $45 billion high speed rail line (current estimate) to connect California’s northern and southern urban areas. I would caution the reader to remember that the new eastern span Bay Bridge construction estimates are three to four times the initial estimates of $780 million to $1.4 billion; it is now pegged at $6.3 billion. Simple math (pardon my hyperbole) would suggest by the time this rail system is functioning throughout the state it will have run the costs north of $100 billion—about $3,000 for every California resident (or 15 round trips on Southwest Airline from LAX to SFO). And by the way Governor Brown, as mayor of Oakland, had a big hand in adding to the cost overruns of the bridge by challenging the design.

Yesterday the new governor elect of Ohio, John Kasich, announced that he is putting the brakes on the Cincinnati to Cleveland high speed rail in his state. It is one of 13 selected systems to receive federal money. The amount he turned down was $400 million. How much from the state coffers has yet to be determined. For now the 3C, as it is called, is dead. Why? One can assume that with all the difficulties in the federal budget and Ohio’s state budget it is time to put off buying those new toys. It can be done later; the cities aren’t moving, the land is there, and when the economy is right, built it then. The end of the world, due to global warming, will just have to wait. This rejection, along with Governor Chris Christie of New Jersey’s canceling of the new rail tunnel under the Hudson River, is beginning to show a trend.

These may be the first significant salvos across the tracks of high speed rail. With the change in congress there will be a major review of the funding of these systems. This review is similar to the slow decline in federal dollars for state highway systems. Now states and counties are carrying the costs of road construction and maintenance. There will not be the rich uncle to fund these systems; they will have to be paid for by the states and the users. Any federal funding will be for upgrading and expanding existing rail systems, commuter lines, and transit. Transit systems where millions of people will reap the benefits, not thousands.

Governor Brown will be faced with some very hard choices. As California’s Attorney General he led the fight, and contributed to the confusion, about global warming and air quality issues, to the point of holding the updated General Plans of cities hostage until they toed the line (and spent millions doing so). Brown now says the state needs to cut wasteful spending and lower-priority programs. This will be very difficult, painful, and my guess, extremely difficult for him.

The rail is an expensive distraction and boondoggle, especially in a state that has a $12 billion budget deficit. There are hundreds of millions of dollars being spun off to unions, planners, engineers, brokers and land owners in an attempt to ADD four to six hours of travel time between the north and the south. This system will add tens of thousands of dollars to tax bills and bond indebtedness to every California. I do not believe there is the stomach to fund these systems in congress during the next two years; there will be no money coming to bail these programs out. And based on the results of November 2nd, Brown said, “…the electorate is in no mood to add to their burdens.”

We cannot afford these systems. They must be self-sustaining. There are cracks appearing in the world of solar energy (once they lose their subsidies, they do not make sense), electric cars (comparative costs to operate), and expensive high speed rail. To continue throwing federal and state tax money down these holes is vanity. We need to move on and rebuild and improve the current infrastructure, before we start asking for new Christmas presents from Santa.

Friday, October 29, 2010

The Californian Labyrinth – Part 2

Last week I pointed out the number of state agencies and boards that are either indirectly involved or directly control and/or influence the development industry in California. There are over 75 of these agencies. Those, combined with the 59 counties and 478 incorporated cities, form a significant bulwark to mount while trying to move a development forward. While I am a proponent of local control over development it is my impression that these local agencies have now taken on the role of gatekeeper. This reminds me of the bouncer at the head of a line to a night club – you ain’t on the list, you ain’t getting in!

These local planning departments use their home-bred categories to try and slice the planning effort into thin manageable bits as opposed to looking at the whole. And, at the same time, the phrasing for these categories confuses and, at times, alarms the residents. And because there is not a statewide uniformity of these categories that defines and details land uses, one city’s Mixed Use and another’s Mixed Use can and do mean different things. Some communities have more than six levels of multi-family housing based on density, users, and height.

In residential development there are only two basic types of housing: rental and ownership. Within each of these there is single-family and multi-family. These are further defined by whether the residential units are attached to each other or not. From here on it is a free-for-all and confusing miasma of chopping each of the housing types into smaller and smaller bits until we have categories so focused that it is impossible to see their logic and reason. I am working in a community with a hillside ordinance so complex Stephen Hawking could write a paper on the subject.

How should we look at this? Leave it alone? Make wholesale changes across the state? Force counties and communities into a set of rules and land use ordinances? Sounds awfully Big Brother, but as it is said, “We are from the government and we are here to help.” Some direction is needed. Scroll through and call up any number of cities and review their individual listings for residential districts (or other term). As I said, one city’s horse is another’s camel.

The state has review control and approval for all county and city General Plans. This is required by state law. I would suggest that over an extended period of time, say ten years, that the various codes and categories conform to a standard list of definitions, categories, and district designations. Obviously Modesto would have little need for a hillside ordinance like those found in Woodside, but then again waterfront uses for San Francisco have little bearing in Barstow. Am I stirring up a tempest in a tea pot—probably. But my goal here is to stand back and thin out the costly confusion that is generated by these, and at times conflicting, ordinances and districts.

As we come out of these difficult times we will be faced with the inevitable backlog and pressure to move quickly with housing and commercial development. It is going to happen. My concern is that simple things, like land use categories, will become more and more complicated out of the fear of doing wrong rather than doing right or . . . doing anything at all. Are land use definitions development barriers or opportunities? I fear that they have become barriers in most cities.

The most famous city in America, poster child if you wish, for “no” zoning is Houston, Texas. I am not sure how true this is. The marketplace can and does do a very good job of controlling adjacent land uses. It is hard to sell detached housing next to urban high rise. In fact an aerial view shows that Huston is not unlike others in the United States of the same size and structure. I know we are different and special here in California, but get over it.

I suggest that a simplification is in order. Basic categories that broadly define the land use permitted and then require the proponent to show how they perform in that category. Isn’t that why we have planning commissions and city councils? Unfortunately I also know that planning staffs use these categories to exert their opinions and planning trends into the process and push the newest and latest fad they learned at the last American Planning Association meeting on TODs, TNDs, Greenfields Developments, LEED certifications, and the latest trick: Form-Based Codes. All try to explain and codify the messy process of change and growth.

Much of this process is fee driven and is a source of significant revenues for the various agencies. Just look what has happened to counties and cities during this collapse in the housing industry. No fees plus no permits equals massive staff reductions – or at least in cities that imagined unlimited growth. Witness many Central Valley and Inland Empire communities and their problems.

I will try to delve into this more during my next blog and lay out a more simplified list of categories for land use. It is daunting but then again much of California grew, expanded and prospered over the last hundred and fifty years under far, far fewer controls than we have today.

Stay Tuned . . . .

Friday, October 22, 2010

The Californian Labyrinth

While preparing for my book tour in Chicago and presentation to the Village of Park Forest, I was again struck with these incredible facts: this village of 3000 plus acres and over 6000 housing units, schools, parks, and seminal commercial center was planned between June 1946 and the first homes occupied in late fall 1948, two years and five months. By 1952, six years after the first meeting, over 20,000 residents called the village home. The world did not end, the forests and wetlands were protected, existing roads were expanded, and a new community was built that provided homes for the jobs that were created in Chicago.

As the economy revives and the opportunities for growth return (California continues to grow regardless of the politically charged demographic numbers), we are not prepared to efficiently and proactively build for the future. This state cannot repair an important bridge let alone plan for the millions of future residents waiting in schools and colleges for new homes and facilities to raise their families. I am involved in communities that are now into their fifth and sixth years of bureaucratic involvement and approvals. Clients discuss, with great hope and trepidation, which economic cycle will they face when they finally receive approvals, finish with the lawsuits, and are blessed by some future housing czar.

All real estate is local – except in our state. Currently the State of California has over 520 caucuses, commissions, associations, departments, divisions, boards, bureaus, agencies, networks, councils, courts, and authorities as well as universities, and the senate and assembly. Within each of these there are innumerable programs and sub-committees. Without expanding or stretching the imagination at least 75 of these agencies have a direct involvement with housing and development within the state. Some have almost veto-like control through the morass of approvals. For your entertainment listed below are these agencies, be advised: each has a director, staff, programs, and attendant consultants in the private side (you can skip it unless you need to take a nap).

California Air Resources Board (CARB) ** California Architects Board ** California Arts Council ** California Attorney General ** California Bay Conservation and Development Commission ** California Bay-Delta Authority ** California Bay-Delta Office ** California Biodiversity Council ** California Board for Geologists and Geophysicists ** California Board for Professional Engineers and Land Surveyors ** California Building Standards Commission ** California Bureau of Home Furnishings and Thermal Insulation** California Business, Transportation and Housing Agency ** California Coastal Commission ** California Coastal Conservancy ** California Cultural Resources Division** California Delta Protection Commission ** California Department of Community Services and Development ** California Department of Conservation ** California Department of Fair Employment and Housing ** California Department of Housing and Community Development ** California Department of Public Health ** California Department of Real Estate ** California Department of Toxic Substances Control ** California Department of Transportation (Caltrans) ** California Department of Water Resources ** California Division of Codes and Standards ** California Division of Engineering ** California Division of Housing Policy Development ** California Division of Land and Right of Way ** California Division of Land Resource Protection ** California Division of Occupational Safety and Health (Cal/OSHA) ** California Division of Planning and Local Assistance ** California Division of the State Architect ** California Electricity Oversight Board ** California Energy Commission ** California Environment and Natural Resources Agency ** California Environmental Protection Agency (Cal/EPA) ** California Environmental Resources Evaluation System (CERES) ** California Fish and Game Commission ** California Floodplain Management ** California Governor’s Office of Planning and Research ** California Grant and Enterprise Zone Programs HCD Loan ** California High-Speed Rail Authority ** California History and Culture Agency ** California Housing Finance Agency ** California Indoor Air Quality Program ** California Industrial Development Financing Advisory Commission ** California Integrated Waste Management Board ** California Land Use Planning Information Network (LUPIN) ** California Lands Commission ** California Landscape Architects Technical Committee ** California Office of Historic Preservation ** California Park and Recreation Commission ** California Public Utilities Commission (PUC) ** California Real Estate Services Division ** California Regional Water Quality Control Boards ** California Registered Veterinary Technician Committee ** California San Francisco Bay Conservation and Development Commission ** California San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy ** California San Joaquin River Conservancy ** California Seismic Safety Commission ** California State Assembly ** California State Lands Commission ** California State Park and Recreation Commission ** California Tahoe Conservancy ** California Transportation Commission ** California Water Resources Control Board ** California Wetlands Information System ** California Wildlife and Habitat Data Analysis Branch ** California Wildlife Conservation Board ** California Wildlife Programs Branch

Without a doubt some of these are necessary for the future of the state and well managed growth. Some continue to meddle and offer ordinances, controls and “guidelines” that contribute nothing to the efficient course of development in the state. The market does as good a job of determining the quality of a project more than a staffer in some small cubicle in Sacramento.

On top of all these state agencies are the numerous and, many times, contradictory county and city departments and agencies. There are 58 counties and 478 incorporated cities in the state. Each has their own planning department (there are almost as many different names for this particular agency as there are cities, i.e. Department of Development Services, Department of Building and Planning, etc.). And in many of the larger cities affordable housing agencies, transportation agencies, fair housing agencies, park and recreation commissions and who knows what else. Each has put their finger into the pie. By the way did you know there is NOT an approved and required list of land use categories in the state, there is not even a Chinese menu of options. So a horse in one city CAN be called a camel in another. There are hundreds and hundreds of definitions of multi-family housing alone.

And on the federal level, let’s not go there but oh let’s name a few: FHA, HUD, FEMA, Fish and Wildlife, and the most notorious - Corps of Engineers. The Labyrinth of Crete and the corridors of Sacramento have much in common.

While I am no Don Quixote and do not wish to challenge windmills, there must be a better way to move this process forward. There are state mandated timeframes for approvals that even my clients don’t understand – and the cities ignore unless sued. The development community wants to play nice and they bring their own bats and balls (and buckets of cash for fees). The governmental agencies make up the rules as they go along and keep the scoreboard.

I will try and throw out some ideas over the next few weeks and see if there is some possible way through these tunnels and maybe find the Minotaur.

Stay Tuned . . . .

Sunday, October 17, 2010

The Future of Housing Development in California

After looking at the title of this missive I am shocked that I even have a tenth of the expertise to ponder such a thought. Let’s go over my qualifications: homeowner, community planner, urban designer, mortgage holder, and California resident. I do not have banking credentials, a financial resume, or even a minor in accounting. So there . . . I have all the necessary qualifications and maybe more than the usual talking face on the tube.

I just finished reading John Mauldin’s latest newsletter on the current state of banking and mortgages. If I wasn’t concerned before, I am very close to extremely concerned and breathing heavily now. I recommend his weekly newsletter, it is free and worth millions.

Without the underpinning of secure titles and mortgage papers there will not be a housing industry. If there is no assurance by a title company that the house and property being purchased has clear title, no one will expose himself or herself to the risk. The banks won’t, the builders won’t, the landowners won’t, and the buyers won’t.

A few months back I wrote about whether the master planned community is dead, I offered that I thought it was. The reasons are numerous and obvious to all in and out of the industry. Now I am concerned that this mortgage mess and with it the attendant foreclosures will lay low the housing industry as a whole for years to come. There are very few adults supervising the children now. Lax management, creative and outright fraudulent banking practices, too much money chasing too much money, and a general “I am in it for myself,” attitude has contributed to this mess. With very, very, few examples most of the players in this industry have contributed to the problems we face today. Builders, developers, bankers, unions, politicians, and even the buyers have all had their collective hands in the cookie jar. The jar is now empty and there is a sharp bear trap on the dark bottom.

There will be a few housing projects that will move forward. Most are urban high-density projects that have some political muscle behind them. They fit agendas and programs created through the particular cities they are in. Salvaged school sites, environmental reclamations, transit oriented communities, and maybe even a few old fashion developments. But large-scale communities with thousands of acres and units are well out of the realm of the possible now. And probably through the rest of this decade; we are reliving the 1930s.

Coming is a time of retrenchment and financial reconstruction on a scale not seen in modern banking and it will be worldwide. This banking rebirth must be based on the underlying principle of property rights and ownership and on the free market exchange of money, goods, and land. If these are not supported through regulation, law and insurance they are meaningless.

As can be seen in the Mauldin article we are in tenuous times and I fear for the whole structure of our industry. The first blog I wrote in early summer dealt with the demise of the design industry and the collapse of architectural and engineering firms. While some still cling to a few projects it is now a war of attrition and survival. This economic disease will spread through the construction industry; few will remain and they will be the very large conglomerates and the very small custom builders.

Look at a house. Walk through a new home (assuming you can find one) and count the industries it took to build, equip, and furnish it. Then multiply those items by one and a half million and you will understand what I mean. We waste our political wind taking about green industries, alternative energies, electric cars, iPads and other distractions. To say our politicians are intellectually lazy would be too kind, these impacts on the banking and housing industry need far more coverage than the sound bites of the foreclosed house sign and the grieving owner. Where are the adults when the sand box needs them?

Stay tuned . . .

Sunday, October 10, 2010

The Urban Umbilical Cord, Part 3

Once more into the never ending wonder that is the electric car. I posted, about six weeks ago, two blogs about my take on the vehicle and how the public may receive it. I did not and will not deal with the mechanics or even the whole issue of batteries and recharging and what their real impact is, I leave this to the experts. Remember, it is nothing more than a car with a different and yet quite conventional power source; one that has been around longer than the internal combustion engine – the electric motor. (Oh by the way honey, did you plug-in the car last night?).

What I do object to is how federal and state governments are now the financiers and marketers for this form of transportation. Besides being involved with the ownership of GM, governmental agencies dangle freebies to the market in an unabashed effort to prevent their failure.

In an article in the NY Times on Thursday it was laid out simply for all to understand. These incentives include for the Nissan Leaf (due in December): a $7,500 federal tax credit, a $2,500 cash rebate from the state of Tennessee if you live there (in California you will receive a $5,000 tax credit). Also, in many states, they will install, at no cost, a home-charging unit provided by the Energy Department (some provide tax credits for this). By the way you cannot just plug this baby into your toaster outlet – it feeds on 240 volts and it will require you to rewire your garage.

These cars are not cheap, the Leaf starts at $32,780, the Chevy Volt $41,000, and for the racy Tesla Roadster – north of $100,000. These prices are well inline with the gasoline market and I am sure they will be physically worth the price. They will have leather options, cool cup holders, a jack for you iPod, and maybe even a back seat (except for the Tesla). And don’t worry about the noise issue, gas cars are so quiet now they can sneak up and bite you even with their conventional motor.

But why are our governments in the car business? The rationales include saving us from the oil companies, cleaner air, the environment, and jobs. All well and good; I certainly would rather leave the hundreds of billions in dollars we spend for fuel here at home than send it to folks who really do not like us.

The urban environment would benefit. There will still be millions of cars on city streets but they will reduce particulates and carbon dioxide by significant amounts. We will all be happier as we go to jobs in our electric mix-masters while we save the environment.

But what about apartment complexes and condominiums, how in the world will these electrical systems be integrated into this market - an important customer base? Imagine trying to rewire and accommodate these facilities. I can just see the association meetings, who is to be first and who is last. It will not be pretty and it certainly will not be cheap. I guess the gov’ment will just have to help. And what about the work place, who will cover that? (I am beginning to sound like Andy Rooney, one moment while I slap myself.)

For a product to be successful the market has to embrace it. The product must meet demand (real or perceived), be affordable to enough buyers, tease others to follow, and be profitable. The last is the most important. With all this government meddling how can the manufacturer even understand the real market and the profitability of its product? A recent affect of this governmental diddling can be seen in the credits offered to first time homebuyers. The sales dropped through the floor after these “rebates/discounts” were dropped. Homebuilding is one thing – billions in manufacturing plants and jobs is another.

The electric car is a palliative. It is a trophy to be driven, proving the driver’s worth and social concern. It is also a provocateur; it will roil the social and economic structure of the country. Is it for better or worse? This remains to be seen. But to be successful it must be profitable and that is still hidden in the fog.

Stay tuned . . . .

Friday, October 1, 2010

The Potential Impact of Infill – Not In My Backyard

Short missive today.

I attended a neighborhood meeting last night sponsored by the county traffic agency, even one of our elected county supervisors showed up. Their intent was to find out our neighborhood’s needs and desires to improve safety and circulation. I think they hoped if they had a couple of dozen neighbors show up it would be great meeting, instead probably more than 200 attended to voice their concerns — it both impressed and shook the county staffers.

Background: Our little piece of the American dream is 20 years old, we designed it and it was constructed by one of the best builders in this part of the state, a half-acre of heaven sitting with hundreds of others in a donut hole of county jurisdiction, surrounded by Walnut Creek, California. Every vote to annex into the city has been turned down. Why is another matter for another time.

For this privilege we sit along narrow county roads that both bypass and lead to the town center. We revel in our country roads, no curbs, large lots and idyllic life. That is until the freeway backs up and then we become a conduit of excessive traffic trying to find a short-cut to wherever. This is simply a result of development and growth, not in our neighborhood, but elsewhere.

We are not unique or special. This is happening everywhere. Our heavenly donut hole is found in every expanding community across the country. We are the drive-through (instead of fly-over) bits of the American dream. And I honestly don’t know what the answer is. To improve the streets and add the shoulders for bikes and pedestrians (no one wants sidewalks) will take portions of some lots and increase speeds – and while improving traffic flows, most of residents reject this because of very real safety concerns.

I bring this up because this is what is confronting city planners, developers, and designers of infill neighborhoods. Existing streets and utility systems were designed for one development density and pattern then changed to denser neighborhoods that may be three or four times the number of units of the older community. In some cases, such as mega-apartment complexes, it may be 50 times the number of units. These existing systems have great difficulty in dealing with these “improvements.” The builder may replace nearby stoplights and add a few signals - even widen the streets. But often it is these other neighborhoods, sometimes miles away, that are also affected by the accumulating growth. Impact fees can be collected – but money does not necessarily solve the problem or the physical impact.

This is not just a traffic issue; it is also a very expensive utility problem as well. Three old houses are taken and replaced by 50 apartments. You can imagine the impact on water mains and sewers, streets are opened and lines replaced, sometimes in the case of huge developments, for miles.

I realize that this is a bit of a rant (I sound like some of the residents last night who just didn’t understand the why of it), about growth and density. I have had a great career doing exactly this elsewhere, it now coming home to roost. I realize all too well that there is no simple answer.

Stay tuned . . . . .

Friday, September 24, 2010

The Three Cornered Hat

All housing built in the United States during the last fifty years or so, is a result of difficult compromises between three partners: local governments, builders, and buyers. These compromises have resulted in the finest homes built anywhere in the world. Improvements to the basic housing stock, like airbags and ABS in cars, have created safer, warmer, more cost effective and more durable homes than at any time in the past.

The continual push and pull between these three has forced up the price of homes and driven them into the ground, created surpluses and shortages, and put more enough politicians in jeopardy (or worse, jail) than prohibition. Billions of taxpayer’s dollars have gone into local and regional planning to try and conjure a strategy for the future placement of homes and other land uses. It can be more profitable for some than winning the lottery. Just put the right color on the map over my property and bingo – “Johnny we have a winner!”

The builders (it really makes no difference whether they build twenty custom homes a year or are the mega-giants), have to find the land. Like 21st century prospectors, their search pushes them into the hinterlands and marginal areas trying to keep their basis low, or into strange alliances with base closures, derelict urban properties and surplus school sites.

But the real power, as we have seen these past three years, is held by the buyer. Argue all you will about the banks and the manipulations that went one, point the finger everywhere, but the fundamental collapse of the market is due to the buyer – the marketplace – stepping away and saying enough. And this “enough” ripples through builders and governments like the Black Plague through Europe in the 14th century; even the fittest were thrown down.

Currently governments are trying to consolidate their positions, and for the smart ones, prepare strategies for the next push of the marketplace. General Plans are being updated and new ordinances that tend toward the Green Movement are being passed – solar, water quality, water use, and density are high on their agendas. Most are benign or at worse preemptive; governments hope the systems will be affordable and available when this turns around.

The builders are either hiding out in Hawaii or prospecting, very few are building. Each believes they have the model for success for infill properties or old school sites. They will dance with the devil (local and/or federal partners) and hope to not get their toes stepped on. Or maybe they can invent profits from thin air, like ancient alchemists. For now, the smart ones are drinking Mai Tais on the beach.

The buyers are also sitting this one out – for now. But their numbers are steadily growing. According the last census (2000) and modified by adding ten years to the count, there are 40 million citizens between the ages of 20 to 30 and many are starting families. And I would guess a good chunk of them are living at home or renting. This is a huge demographic to anticipate for both the building industry and city governments - and it is a good bet these people will not be buying McMansions. How this demographic groups acts with respect to housing will determine what the next song on the dance floor will be. Will it be the Texas two-step, the jerk, or a new form of break-dancing? My guess - a combination, watch your back.

Stay tuned . . . .

Friday, September 17, 2010

Own or Rent — Controlling the Chaos

We have owned a home for over thirty years (my wife would successfully argue as to who the property manager is); it is both a source of pride and value. None-the-less, from a meager down payment in the late 1970s we have significantly leveraged that payment into a comfortable home and not unreasonable sum of equity – I said equity not cash – ah . . . there is the rub.

The Wall Street Journal notes this week that Fannie Mae (now there is a reliable source) says that the percentage of people who consider a house a safe investment has declined from 83% in 2003 to 67% this past July. My guess it corresponds to number of foreclosures, unemployed, and speculated homes – but that is just my guess.

To own or rent is a debate that will never end. In the mid-1940s articles were written in Harper’s Magazine and others saying that home ownership would be a disaster to your personal finances and implied that the buyer didn’t know what they were getting into. Other types of housing were offered as the solution: rentals, apartments, mutual associations, and the like. At the time there seemed to be a fear of homeownership – fifteen years of almost no ownership construction will do that. This obviously passed as all irrational fears do. Americans built and bought millions of homes since then.

The current debate is more economic than challenging the fulfillment of a dream. In America there has been a cultural, economic, and social desire to plant your flag on a chunk of ground and call it your own. It is a visceral desire – in fact many of the current sad stories are a direct result of this yearning. In other times and different economics, this longing would not have caused the chaos of today. Many competing and opposing forces came to bear to create this disaster.

But markets try to balance themselves. When inexperienced or even experienced homeowners are sadly forced out, other opportunities appear. The foreclosed house now becomes a rental, and large suburban tracts are changed to horizontal rental complexes, street after street meeting the need of the marketplace. Good or bad, I am not sure, only time will tell. But what is critical is the residential structure is preserved and can be adjusted to reflect later market forces, from owner to rental and back to owner.

Rental and ownership are perceived differently across the country. New York City, where almost everyone rents (or more cultural appropriate leases) a residential unit; extreme allowances made and tolerance giving to rent control, obituary diving, and under the table rentals. But there is no stigma to the renter – all are in the same boat. But that is an entirely different market than the suburban foreclosed homeowner who is forced into a rental property. Iowans would not understand.

The Census Bureau notes in an August release that renters pay a higher percentage of their income for housing than do owners – go figure. In most cases the age and the structure of the family has something to do with it. As these families mature, incomes and stability increase, homeownership follows – it is the long term that is often thought of by the homebuyer. The renter tends to be transient, mobile, socially and culturally looser – age changes these actions. Rents try to reflect the current marketplace, ownership costs do not – they are often fixed at the time of purchase and incomes increase reducing the relative percentage. Today’s foreclosures do tell a different story for some, but the trend will always go back to the mean – consider your own home and situation if you bought prior to 2000.

To rent or own will always have its champions and rationalizations will be made that prove, without a doubt, their position is correct. As I noted above the desire to own is visceral – the reason for renting may be cerebral. Rationalize away . . . .

Stay tuned . . . . .

Friday, September 10, 2010

1920 to 1940 – Is It Déjà Vu all over Again?

The 1920s brought on one of the greatest housing booms in U.S. history. The post-World War I depression and low numbers of homes built during the war only exacerbated the problem. The 1920s saw great changes in the character and look of America whose population in 1929 was 121.5 million people and the federal budget was $3.13 billion dollars:
• Annual housing production accelerated from 449,000 units in 1921 to 937,000 units in 1925.
• For the entire period from 1921 to 1928, production totaled 6.3 million units, an annual average of 785,000 units.
• The non-farm population increased 2.2 percent annually from 1921 to 1928.
• Immigration, while somewhat curtailed, still continued with 707,000 immigrants arriving in 1924.
• Average household size dropped from 4.20 to 4.00 persons.
• The average non-farm income rose 22 percent from 1920 to 1928.
• Automobile ownership rose from 6.8 million in 1921 to 17.5 million in 1928.

The 1920s were not known for social reforms, but concepts and advances in housing made prior to World War I at the state and local level were extended and refined. These areas included building and housing codes, city planning legislation, and zoning ordinances, and the government actively supported these actions. Local zoning was upheld by the U.S. Supreme Court in the Euclid case, and other federal agencies promoted the use of model statutes for city planning, zoning and building codes.

The collapse of the stock market and banks in 1929 through the early 1930s destroyed most of what was accomplished in the 1920s. Significant planned communities, such as Radburn in New Jersey, failed after completing less than half of their intended plans.

In the spring of 1933, four years after the development of Radburn was stopped, Franklin D. Roosevelt was inaugurated. As he held up his hand to swear to the American people his fealty as their new President, more than ten million American workers were unemployed, great numbers were homeless and many were on the verge of losing their homes. That same year, in Germany, Adolph Hitler was appointed chancellor by President von Hindenburg.

In an effort to promote housing, using the need for jobs as one of the justifications, Roosevelt placed Rexford Guy Tugwell, a member of his inner circle or “brain trust” and a true believer in the English Garden City idea, in charge of the Resettlement Administration. Tugwell was teaching economics at Columbia University when he was selected by Roosevelt as an assistant secretary of agriculture and would coauthor the Agricultural Adjustment Act. It was under his authority the Greenbelt Communities would be designed and built. The creation of these communities, due to the usual federal reorganizations, later found a home within another agency formed within the Resettlement Administration, the Suburban Resettlement Division (great name!).

Tugwell had been very interested in the concept of the satellite city regardless of its social impacts. “My idea,” he wrote in 1935, “is to, just outside centers of population, pick up cheap land, build a whole community and entice people into it. Then go back into the cities and tear down whole slums and make parks of them.” The Suburban Resettlement Bureau was set up in a mansion on Massachusetts Avenue in Washington D.C.

All government projects of that time (as now) needed justification, and the purposes for the Greenbelt Communities were officially stated:
1. To give useful work to men on unemployment relief.
2. To demonstrate in practice the soundness of planning and operating towns according to certain Garden City principles (Ebenezer Howard and the English Garden Cities).
3. To provide low-rent housing in healthful surroundings, both physical and social, for families that are in the low-income bracket.

Tugwell rejected the concept of individualism and believed that Americans had a “cooperative mentality”. He proposed a collectivist economic policy. He believed that this could be achieved through planning and public control of the economy. It was his belief that the idea of the Greenbelt Community was closer to the habits and aspirations of the American people. He was blunt and, at times, tactless in the presentation of his gospel and soon became a target of the press and a political liability for Roosevelt. Tugwell’s important legacy focused on the strength of suburban resettlement areas which he thought were more consistent with the current trends in American growth. Tugwell initially proposed that twenty-five Greenbelt towns be built close to existing urban employment; only the three (Greenbelt, Maryland, Greenhills, Ohio, and Greendale, Wisconsin) were built. It was in this decade and during the worst economic time the country has ever known, that some of the best and most creative talents in community and residential planning were hired (by the hundreds) and brought to Washington to design and develop these communities. (Excerpted from my book America’s Original GI Town, Park Forest, Illinois – new edition)

It is my great concern that the Obama administration is on the verge of trying the same thing that failed in the late 1930s: Government sponsored, designed, and built housing. It will take the form of a number of specific needs already stated by the government:
• The need to lower unemployment in the construction industry (unions)
• Repair the financial industry and the building industry (Fannie and Freddie)
• Show the American people THEY know how to do things better than private builders (the Green Movement)
• Fix housing problems as the population grows and there are no residential units to meet the need (sizes of immigrant and minority families)
• The implicit desire of academics to show they know more than the entrepreneurial builder (profits – we don’t need no stinking profits).

As during the Roosevelt years, there is an unquenchable need by this current administration to show that they are smarter than your average five year old and when it comes to the housing market they know best. Granted after the debacles and failures of the building industry, banks, congress, and the speculative buyer, I sometimes believe that a roomful of first graders, bartering over candy and ice cream, could have come up with a better system.

There will be an effort, I believe, by this administration to do the same thing that Tugwell and Roosevelt attempted to do in the late 1930s. They will enlist the building industry as their facilitators (they will find willing partners due to potential free land, egos, and fee issues), they will be marketed as the best examples of LEED building with all the administration’s pet projects included (i.e. solar, wind, water quality and reuse, global warming, green, green, and green), and they will be shown as egalitarian and wholesome places to live (I can imagine the brochures showing the Al Gore cul-de-sac).

An aside: Why is it the latest green communities I am working on have so little green in them, plants and landscaping that is – oh never mind?

The greenbelt communities failed for a number of reasons. The most important, I believe, was the then current market for homes/rentals was about $3,500 per unit. The government’s units, as badly and brutally designed as they were, cost taxpayers at least $18,350 each to produce.

Sound familiar, and I bet they can beat that number, which way – guess.

Stay tuned . . . . .

Friday, September 3, 2010

The Urban Umbilical Cord - Part 2

The electric car will arrive and be in your garage or more likely the garage of your children. It is foretold and prophetically announced here. The current politics and your tax dollars are pushing this as the savior to all our problems: the Middle East and Venezuela (we will show them), the oil companies (the unfeeling bastards), pollution (that ol’ CO2 thing), and the car companies (we will force them to make them). Now if we could find a way to make them run on static electricity like John Galts’ motor.

The biggest difficulty the automobile consumer has with the electric vehicle is the fear of no power and a too short extension cord. This anxiety cannot be breached by government grants, free plug-ins for your garage, or assurances that there will be a power station just a short push down the road. It was the same in 1915, gas stations were few and the rise of the automobile forced the market to supply the product – gasoline. No government grants back then, just Standard Oil and Sinclair to name two.

I suggest, quite strongly, that the current designs with their self-contained battery are just plain wrong. Think of it as a rechargeable flashlight, you need the flashlight when there is no electricity to light your household – yet you cannot recharge the flashlight because there is no electricity. That is why they have replaceable batteries (rechargeable or not). Two major industries: the flashlight makers and the battery makers and throw in the bulb manufacturer as well – each trying to make the best product. The electric car can be exactly the same.

Imagine a system where, as you are getting low on power for your snazzy electric car (the one with the cool cup holders), you pull into your neighborhood power station. There you are guided by laser sensors (not unlike the self parking features of today), that align the vehicle with an exchanger that uses hydraulics to slide out battery packs from a tray under you car, and then slide in replacements – fully charged. The cost is charged to your credit card. You are on your way in less time then it take to fill up your old gas-guzzler with its 20-gallon tank. The power station makes its profit by recharging the packs with electricity the station buys wholesale and what it charges for the pack to be placed in your car. In effect the pack is like the old milk bottle (bear with me youngsters), it is returned and refilled, you may never see the same bottle twice in your icebox. This system is less complicated than the current car washes out behind the gas station of today.

The electric car is exactly the same as your gasoline or natural gas powered car. The only difference is the power plant. I have often heard that the electric car companies are more concerned about the batteries in their cars than the car itself – why should they even need to worry. Did Henry Ford spend his fortune trying to build gas stations for his cars? The solution is simple - there must be standardization of interchangeable batteries for the electric car industry. Put that annoying pink bunny in undercarriage of the Leaf or Volt or whatever silly name you want to call them. Let the battery industry develop efficient and rechargeable power packs under international standards – these can be leased or owned to an oversight company – and each recharge sends a small payment to the manufacturer and the oversight manager. In many ways it is like the shipping container industry – those steel boxes are independent of what they carry – funds are allocated to the box owners each time they are used. I can imagine companies that own millions of these power packs, each receiving payment each time a charged pack is sold.

Well that’s off my mind. The system is no more complicated than the current gasoline supply system – except for that Middle East and Venezuela thing, those damn oil companies, pollution (except for that pesky nuclear waste thing), and the car companies (private and government owned) who will again compete for the best cup holder category.

Next week let’s take a look at what the government will do to promote housing – it was tried in the 1930s.

Signing off from Alaska's Inland Passage

Thursday, August 26, 2010

The Urban Umbilical Cord -

I have always been a proponent of the electric car - especially in urban areas. It provides transportation, moves goods and services and rarely needs to go more than forty miles in a 24 hour period. It is only a car with a different engine – that’s it. In the city there is available power, maintenance systems and support and there is a growing market. In time, I believe it will be the primary vehicle of choice for urban and most suburban dwellers, and can be recharged at home, just like your iPad.

What galls me is the need by the government to get involved in their creation and maintenance. Put aside the GM thing and other “stimulus” excuses; if the product can compete in the market - it will succeed. Ask Steve Jobs if he needed a grant to force the iPad (or iPhone for that matter) down the throats of the consumer. If the product is wanted, and resonates with the consumer – it will succeed.

Recent announcements and news articles:

The feds have allocated over $37 million dollars to build charging stations for electric cars across the country. And about half of the charging stations will be installed free - in your own home - if your buy an electric car (installation guessed to be $2,000 each – taxpayer money). There are also federal tax credits being discussed for both the car and the charger. As the old Tubes song goes: “a herd of Winnebagos we’re giving’em away,” especially if they are electric.

The state of California has approved $1.9 million (your money) for a company to update 600 of the old inductive chargers (some from the 1990s), many of these are in Costco stores and at Best Buy and its Geek Squad of electrics – they and other private businesses will also benefit from this state money (your money).

A battle is well underway between companies that want to supply the service of charging your vehicle and those that sell those companies the electricity. It is being fought at the California Public Utilities Commission. The major power companies in the state want these under the state’s control (and the future control by the utilities themselves!).

From the “Where do they get the money file?” The Bay Area Air Quality Management District has approved $5 million dollars (your money) to “support” the development of an electric vehicle charging infrastructure in the Bay Area.

Barack Obama, in early July, visited a factory in Kansas City that makes electric trucks. The plant’s capacity is to be upgraded with $36 million in “stimulus funds” and a matching $36 million in private funds. They expect to build 500 trucks – based on these numbers their street value is $144,000 each – buy two, there is probably a grant and tax credits in there somewhere.

And for those that want a little more gov’ment help, go to, they are there so your neighbors can help make you feel better about yourself.

Please! If this product is wanted by the consumer, like the iPad, Kindle, the toaster oven, and the Starbucks’ half-caf, skinny, no foam, iced lattes, they will buy it. But if it is padded and subsidized (and all the costs hidden behind grants, “stimulus monies,” sweet deals for manufacturers and suppliers, fed and state rebates, quasi-governmental controls, and the “if you fund it they will come” mentality) - it will fail.

I believe that the urban market wants the electric vehicle to happen. But the electric car is so hidden behind these false costs and “magic” that it is confusing the consumer. A confused consumer is one that will not buy – especially a $40,000 science experiment. The consumer is wary of something that is pushed this hard by the federal and state bureaucracy. They will stand on the sidelines until there is clarity. They want to feel responsible as long as the car is durable, pretty, well designed, easy to understand, modern, has a bit of a status about it, and affordably cool. Like the iPad.

Friday, August 20, 2010

Part 4 – The Death of the Master Planned Community

A few notes questioning my numbers from last week. I noted that the projected residential development this year (ownership and rental) is estimated at 1.17 million units, the source was the National Association of Home Builders (NAHB) – May 18, 2010. Some readers (thank you) have pointed out that we will be lucky to build half of that amount (and two months later so has the NAHB). That may be, and during these days it is safe to assume there is no shortage of hope at the NAHB, both due to their dwindling membership numbers and wishful dreams. The underlying point is that whether it is 1.17 million or six hundred thousand units it is woefully below the need. This is exactly the same problem in America between 1930 and 1946 where virtually no support for the housing needs of Americans was met. In the 1930s there were feeble governmental attempts with the greenbelt communities but there was none due to World War II. This back-up will continue until it becomes a very serious problem, both economically and socially.

Last week I announced the death of the Master Planned community for a number of reasons: lack of institutional financial support (some are just gone from the scene, i.e. Lehman Brothers)), high state and local fees, approval costs, entangling environmental reports and issues, fundamental problems with loans to homebuyers, capital sitting out the current economy, and a general lack of cultural support for these communities in the current literature. What developer would jump over these hurdles to try and build the next Shaker Heights, Park Forest, Illinois, Country Club Village in Kansas City, Columbia and Reston? As it normally is, it is the third or fourth owner that makes any money anyway. Seldom do the original founders of the idea survive the vagaries of the economies that they must pass through to complete these fifteen and twenty-yearlong projects. And today? Why would you even consider the opportunity or possibility?

The future? One reader noted the potential for a more rational and focused type of development, the Master Planned Neighborhood (MPN). There is much to this argument and type of project. It is a development that as they say “one can get their arms around.” Peripherally urban, densely suburban, built into the current fabric of streets and utilities, and broadly mixed with rental and for sale; these projects can deal with the vagaries of the market – and most can be completed from design to last move-in, in less than five years. There is little about these that make them TODs (Transit Oriented Development) though some may take advantage of these stations or lines, or TNDs (Traditional Neighborhood Development) with their myriad rules and regulations trying to be all things to few people. These developments must be flexible, buildable, marketable and above all burdened with few fees and costs to the residents. They cannot solve the economic woes of the surrounding community.

We are entering a time where there will be little aid from the cities and state and you can forget the feds. They cannot afford to be surrogate landlords, managers, policemen, arbiters, tax collectors and superintendents to large communities of disconnected and often culturally unrelated owners. The builder will leave a community to the residents that may be too expensive to maintain with HOA dues, too hard to operate because of complex environmental restraints and regulations, and complex social structures defined in the required documents and manuals.
During the next few missives, I will try to explore some ideas as to what these MPNs are, how they differ from TODs and TNDs (don’t you just love the acronyms), and where they can be applied in our need for housing.

Stay tuned . . . .

Friday, August 13, 2010

Part 3 - Are Master Planned Communities Dead?

Bear with me a moment. Let’s assume a middle of the road MPC. It is 2000 acres of interesting land: a couple of creeks, marginal farmland, small woods, and good access. Nearest major city and region has over 500,000 people and expects to grow over the next fifteen years, the land is 40 minutes from downtown.

The net developable land is 1600 acres. The other 400 acres is in parks, open space, preserved habitat, major roads, schools and other extractions. The potential project will have an average net density of 4 units per acre. The project will contain 6400 units (avg. price $450,000). It is, when completed, worth over 2.5 billion dollars of value to the region. Sounds great, right?

But the cost to entitle this project can go like this: fees for engineers, architects, land planners, landscape architects, the environmental impact report (EIR), general plan changes, annexation issues, specific plan production, zoning changes, soil reports, new environmental carbon estimates, fees for this and that and that and that, and marketing. All of this is before the regional utility connections are built, the two new free interchanges are constructed, the regional sewer plant is upgraded, and road intersections, miles from the community, are completed. And much of this has to be funded before the project can start. Some bonds, some cash.

It is reasonable safe to assume that the professional fees could exceed $10 million, the city’s fees could be as high as $80,000 per unit (or higher), utility hook-ups (if available) $25,000. Still look good? The average house has to be at least 2400 sf. Off-site costs are $100 million ($15,600 per unit). The only way this can work, with any profit, is to build the house for $100 a square foot – I do not think so. (oh - by the way I did not put in the cost of the land).
The realities of the current market cannot support homes in the $750,000 range. And this will not change for at least 10 years. Maybe the market will support a few but not the thousands needed to make a MPC work. And, in fact, the average home-buyer in our current marketplace cannot even support $450,000, the new norm is somewhere in the $250 to $325 K range.

Where is the developer going to find the $20 to $30 million needed during the entitlement process when there is no guarantee that there will even be customers after the five year approval process is complete? What bank or institution today would wait that long without a return (that old ROI thing and that old what have the banks done for you recently thing)?

But we still need homes and houses and they will not all be in the infill lots scattered around the old urban cores; they will have to be in planned neighborhoods –smaller and more compact, more efficient and cost effective. The coming demand of the next 100 million Americans will require 30 to 40 million new homes. We have 118,000,000 residential units in the United States for 301,000,000 Americans. We are currently building 1.17 million units a year, well below the 1.85 million that is considered needed to sustain the current demographic trends.

With these numbers in mind, one inescapable fact stands out – there will be a serious push again in the cost of housing at some time in the future – and it may be as strong as the past trend of the 2001 to 2007 era. I predict it may start in the 2014-2015 period when we may be short 4 million housing units. And the greatest demand may be in rental housing.

How does this impact MPC’s and their potential rebirth? For the short term – MPCs are dead. No sane person would try to develop in this high fee and assessment burdened market – even if money was free (as it almost is). When rates rise and money and financing can be found again, they will push pricing upward and may allow profits to return. Maybe! The next hundred million will not be older, wealthier citizens; they will be younger with families and will be trying to carry as little debt as possible. They will have learned, like their grandparents of the 1930s, to be frugal: rent their vacation houses– not own, buy smaller homes, purchase in neighborhoods that do not have homeowner associations. They will still look for good school districts that are in communities with fewer older people – more families mean better schools. They will not be looking at high cost resort communities – there are hundreds existing today that will cycle those who wish to live with, and pay for, those amenities. For the coming population they will have less meaning.

But in another thirty years - watch-out.

Friday, August 6, 2010

Part 2 - Is the Master Planned Community Dead?

A Bit of History

Over the next few weeks I will try to put some context into the question: Are master planned residential communities dead and never to rise again? As I noted last week, there is some sympathy for this belief. Land, costs, energy, local and federal approval policies, and long term financial backing and guarantees for large new town communities all pose very difficult and expensive components. Each will derail a project.

What size? What sets a master planned community apart from the usual “big” subdivision? I will go out on a short, yet strong, limb here and give you my opinion – but like all opinions they are just that. A master planned community should be under one management group or owner, be at least 620 acres (one square mile), have a range of residential densities (the market will choose the regional need and mix), have defined entries and boundaries, offer a complex package of recreational facilities, include a center for service retail for the resident’s needs, include other possible land uses such as office and commercial space, and feature a central land use that may define the project; these amenities could be golf courses, lakes (man-made or natural), natural features, extensive interconnecting parks and trails, or other unifying theme. There; now argue.

We are all familiar with small master planned communities of a few hundred to a few thousands of acres – remember that places like Reston, Virginia was built around a small village and distillery is over 17 square miles and has over 55,000 residents, Columbia, Maryland is over 14,000 acres and has over 90,000 residents, and others such as Stapleton, Co., Summerlin, Nv., and the grandest Irvine, Ca. have all set very high and expensive benchmarks (and for most: successive owners, each trying to make them work).

As I noted in my new book America’s Original GI Town, Park Forest, Illinois (3,000 ac. and 24,000 people - today) the history of planned American communities goes back to the mid-nineteenth century:

The new community that Klutznick (developer) described for Sweet and Manilow (partners) was a manifestation of planning concepts and designs for communities aggressively designed and built between 1900 and 1939-communities that shared many of the same planners, visionaries, and theorists. Even more revealing is that many of these new communities could trace their lineage back to the Chicago area of 1869. Five great planners would be the grandfathers for Park Forest-whose careers extended over almost one hundred years of planning for human settlements. They were Frederick Law Olmsted, Ebenezer Howard, Henry Wright, Clarence B. Stein, and Elbert Peets. All five, through their visions for new towns, would build on one another’s work in an effort to create better and more successful places for people to live.

In 1868 Emery E. Childs, a Chicago developer, asked the noted American landscape architect Frederick Law Olmsted and his firm, Olmsted, Vaux and Company, to design a “suburban village” on his sixteen hundred-acre property twelve miles west of Chicago. The plan for Riverside was revolutionary in its concept and breadth and unlike anything else in country. Olmsted and Vaux created a residential community along the banks of the Des Plains River, with a hierarchical plan of lot sizes, separated by generous open spaces and parks. Not designed to the current trend of the time, the grid pattern of streets in mid-American cities, Riverside’s residential roads curve in generous sweeps and meet with soft tangents at well-landscaped intersections. The only portions of the village that which did not curve were the business streets that paralleled the Burlington Railroad. “In the highways,” said Olmsted, “celerity will be of less importance than the comfort and convenience of movement . . . we should recommend the general adoption, in the design of your roads, of gracefully-curved lines, generous spaces, and the absence of sharp corners, the idea being to suggest and imply leisure, contemplativeness and happy tranquility.”

Although its early days were financially troubled, the village’s overall design is a testament to the genius of the concept and the thoroughness of the execution. The automobile, thirty years in the future when the plan was completed, has not destroyed the village. Garages are placed in the rear of the lot, driveways are narrow and the streets not overly wide. The design is still an example of melding the plan to the topography of the land. Riverside changed one of the fundamental concepts of town design more than any other American community: the integration into the standard grid pattern of streets curving streets with deep residential setbacks. Olmsted wrote that a well-designed suburb is “the most attractive, the most refined and the most soundly wholesome form of domestic life, and the best application of the arts of civilization to which mankind has yet attained.”
The completeness of Riverside can not be overlooked. It has stood unchanged in both plan and substance while, during the last hundred years, the area around it has grown, suffered, and deteriorated. The village’s strongest defenders are the current residents.

From this one community, developed after the Civil War, American community planning has evolved, changed, died, been reborn, and without a doubt, has never had universal professional agreement as to what it is, what it should be, and where it is going.

From Olmsted’s Riverside, to the Van Sweringen’s Shaker Heights east of Cleveland, to Stein and Wright’s Radburn, New Jersey, to the Country Club District of Kansas City, to the Greenbelt fiascos of the Roosevelt administration and the post war market driven communities of William Levitt; they all laid the groundwork for the Watercolors, Summerlins, Ladera Ranches, Rancho Santa Magaritas, and Celebrations of today.

Friday, July 30, 2010

Is the Era of the Master Planned Community Dead?

How, during these times, can you talk about Master Planned Communities or even think about starting one? Last week I received RCLCo’s (Robert Charles Lesser & Co.) Special Advisory spread on Trends from Top-Selling MPC’s, they listed the top selling communities from a survey of over 400. Of these ten, four were from Texas (all Houston), three from Arizona, two from Las Vegas and one from Utah. This I would not call a representative slice of the pie. While pointing out the growth in sales of some, there was little emphasis on the six communities that had drops of over 20% in sales over 2008 (which was a disaster of a year to start with). Statistically these numbers and communities are meaningless within the national residential market.

It is painfully obvious that these communities are in sunbelt areas. How many sales are to older/retired buyers is not mentioned. How many foreclosures sit empty in these same communities? Why are these communities even selling units (other than the expanding energy industry in Houston) is also hard to tease out. The residential industry is so deep in the tank that I am reminded of what my old boss told me in 1990, “the era of the master planned community is over.” It may have been, but then was reborn, took sick, took last rights, healed itself, and is now once again ill to the point of death (mourners are being summoned). Will there be resurgence? What will its form be if it miraculously recovers once again, and how can anyone afford to even considering developing master planned communities over 500 acres during the next ten years?

Over the next few weeks I will take out a murky crystal ball, wave a T-square over the thing and see what might appear. Trends, locations, styles, and markets are just a few of the issues to look at. I will also note some of the historical points made over seventy years ago just before and after WWII concerning MPC's of those times (somewhat similar).

A few questions to ponder:
What will the involvement of the existing community and city be in the process?

Will the feds, through energy and environment issues, take on an even greater role?

What will the impact be on the mid-market home builder, who often fleshed out the MPC?

Will we end up pricing ourselves out of our own housing market by do-good and feel-good issues, fees, regulations, materials costs, mortgage fears, and federal control of the housing market through Fannie and Freddie?

This is lot to chew over. I look forward to the challenge – stay tuned…….