Cocoposts

Blaming Smart Growth

In a mighty leap of logic and misdirection, not unusual for the Heritage Foundation, author Wendell Cox blames smart growth for the housing bubble, economic downturn and alopecia.       

These policies, often referred to as "smart growth," create a scarcity of land, artificially raise the price of housing, and, again, have increased the exposure of the market to risky mortgage debt. When more liberal loan policies were implemented, metropolitan areas that had adopted these more restrictive policies lacked the resilient land markets that would have allowed the greater demand to be accommodated without inordinate increases in house prices.

This is simultaneously ridiculous and boring - other typifying traits of  HF material.

There is a glut of housing tied directly to those  liberal loan policies, not a shortage of land caused by excessive land use regulation.  And we should be so lucky.  The sprawl pattern paradigm of the last twenty-five years was constrained by very little and the least of these was "smart growth" regulation.   The term itself was only more recently popularized to describe the largely ineffective and pathetic attempts to rein in the juggernaut - like Albuquerque's Planned Growth Strategy in 1996 - the potential of which was nipped in the bud by sprawlmeisters.   

Albuquerque's most obvious development constraint is land ownership, not regulation.  The edges of our ubiquitous suburbia are defined by federal, Indian or old land grant boundaries, not smart growth boundaries.  The entire idea of effective growth boundaries was kneecapped by the very developer friendly Legislature early in the decade.

Blaming planning or local government regulation seems popular with those who made record breaking profits in the housing boom and on the way down they are grasping at straws. 

Dependent and Obsessed with Real Estate

Dr. Housing Bubble estimates almost $3 trillion in real estate equity is gone and notes Bloomberg on the State of California's $20 billion deficit.   The Dr. says:

Now tell me, what other industries are going to start hiring to boost the so-called phantom housing bottom especially here in California?  Never mind the astounding fact that according to the California Association of Realtors the median price statewide is now off by a stunning 30 percent. It only logically follows that real estate declining will hurt a state that is utterly dependent and obsessed with all things real estate.

SunCal Defaults

California news of troubles for SunCal. 

BAKERSFIELD, Calif. -- The company behind the McAllister Ranch project is in default on its $235 million loan.  That project southwest of Bakersfield was designed to build 6,000 homes, but the project may now be in peril.  The notice of default was filed on Tuesday at the County Recorder's Office.

The three page document said that as of April 15, Suncal McAllister Ranch, LLC, a partner of Irvine-based Suncal Companies owed more than $4.1 million on the $235 million loan Suncal took out in order to develop the site near South Allen Road and Panama Lane southwest of Bakersfield.  The loan company, Lehman Commericial Paper Incorporated filed the default notice and now Chicago Title Company is responsible for collecting the remainder on that loan or the property could be sold.

Photo from KERO 23 News.   Thanks Hunter.

TIDD Hugs and Understanding

The vote to amend the City of Albuquerque's ordinance regarding tax increment financing failed 5-4 last night.    Proponents for the changes were clear.   In short they said, you should understand consequences before you embrace something wholeheartedly. 

Councilor Cadigan spoke of baseball, failed promises of the railroad builders and the meaning of the  anti-donation clause in the New Mexico Constitution.  Councilor O'Malley described life, planning and TIDDs in all their fractal animal-print complexity.  Along with Benton and Garduno, they demonstrated understanding of the risks and rewards of  TIDD financing.

Opponents didn't say anything that even registered on the common-sense o-meter.  They have unquestioningly embraced the whole idea.  Curiously, Councilor Sally Mayer talked about her intelligence getting insulted and  Councilor Trudy Jones picked up this.  Ken Sanchez talked about how the City might get sued.   Chamber of Commerce, Homebuilders and NAIOP spoke against the bill and evoked the magic word -  jobs. 

A great piece from Planning and Environmental Law by Greg LeRoy about TIF is here.  New Mexico Voices for Children has good stuff here. 

From the LeRoy article:

How much is enough?  The U.S. is arguably well overbuilt in retail space, some of it subsidized by TIF.  The National Trust for Historic Preservation estimates the nation has 38 square feet of store space per capita, compared to other industrialized nations with between 1.5 and eight square feet (and eight square feet in the U.S. 30 years ago).

A 2001 study by the Congress for the New Urbanism and PriceWaterhouseCoopers about "grayfields"--the euphemism for dead malls--found that 7 percent of regional malls were already grayfields and another 12 percent were "potentially moving towards grayfield status in the next five years"; that would be 389 dead malls.

   

Bank and Builder Bailout

The Senate proposes to reward builders and the twisted sprawl financing  machine with $6 billion in tax credits to fix their over leveraging "mistakes".  They drag down the entire economy and get to keep their paychecks in the name of building more sprawl housing (Because NAR says to.)   

Common Dreams calls it the Bank and Builder Bailout Act, aka Foreclosure Prevention. 

Alan Farago describes this pathetic attempt to rescue housing in Counterpunch:

It's also a form of quintuple taxation: first you bought the dream, then you paid the taxes on the dream. Now you are subsidizing-a third time-the purveyors who were egged on, relentlessly, by Wall Street financiers and lawyers taking down billions in fees and bonuses for structured finance, CDO's, CMO's, and derivatives on derivatives as the whole house of cards built to gargantuan size, spreading suburbs into ten thousand valleys, wetlands, and watersheds, now imposing the quintuple costs of law enforcement to bring in the fraud and courts swamped by the volume of illegal activities.

Flat Tires on Economy

From a Denver Post story yesterday came news about jet manufacturing entitled "All the Air Taken Out"  in which they mention Eclipse Aviation's challenges:

The very-light-jet industry, which just recently seemed a promising economic-development niche for Colorado, has nearly fizzled out in the state. Within the past 3 1/2 months, Adam Aircraft and Aviation Technology Group, both based at Centennial Airport, have gone from up-and-comers in a potentially lucrative new business to shells of their former selves.

Even Eclipse was challenged   Even the most successful startup in the VLJ market, Eclipse Aviation in Albuquerque, has run into challenges.  ...

This morning the Albuquerque Journal's Sean Olson gives us the news about a defaulting developer  who insists this doesn't mean a thing for 57,000 acres in Albuquerque.   

California-based SunCal, developer of Albuquerque's massive Westland project, has had a rough year with some of its California and Nevada ventures— but insists that will have no bearing on its plans here. 

SunCal Companies defaulted on $184 million in loans— losing five properties in foreclosure.  At least nine lawsuits are pending in those states.

Moody's last month removed a bond rating on one SunCal company responsible for four developments in Southern California.  About $17.5 million in liens have been filed in two of its California projects.

But SunCal, which bought 57,000 acres from the heirs of the Atrisco Land Grant on the West Side last year for $250 million, insists none of its struggles to the west will affect the Westland project here.

DOT Public-Private Partnership

 From the Albuquerque Journal

The Governor's Office issued a scathing review Thursday of the Transportation Department's effort to redevelop its headquarters and district offices in Santa Fe, calling it a "fatally flawed process." ...

Gov. Bill Richardson halted DOT's plans for a private firm headed by Santa Fe art dealer Gerald Peters to develop $350 million to $400 million in office space, housing, a commuter train station and commercial and retail property on the headquarters land downtown. ...

"While there may have been a conspiracy to defraud private developers involved in these projects, there is no evidence that any kickbacks or illegal payments were achieved," the Governor's Office said.

Whoa, whoa, whoa.  Defraud private developers?  What about bilking public projects?  How are private  developers even potential victims?  It takes two to tango. 

The Governor's office left the door of la sala wide open:

We need to go back to the drawing board on this," said James Jimenez, the governor's chief of staff. He added, "I still think that whole private-public partnership makes sense."

It never made sense in the first place.  How can it still make sense?

Oh,  just relax and listen to the music.  Hear a tango?

 

Tumbling

World Markets Tumble Amid US Woes
New York Times

LONDON (AP) -- Markets in Europe and Asian (sic) slid Friday, signaling alarm over a broadening deterioration in the U.S. housing sector that is beginning to resonate worldwide. ...

The Mortgage Bankers Association said Thursday that the proportion of U.S. mortgages falling into foreclosure jumped to a record 0.83 percent in the final quarter of 2007.

The Federal Reserve reported that Americans' home debt exceeded their equity for the first time since the central bank began tracking the figures in 1945. Homeowners' percentage of equity fell to 47.9 percent in the fourth quarter.

''We are worried about the U.S. market,'' said Shim Jae-youb, a strategist at Meritz Securities Co. in Seoul. ...

Us too, Shim.   

In the Albuquerque Journal we hear KB Homes is leaving New Mexico.  Sign of the times.  But I imagine this loss will be attributed to those burdensome impact fees and water conservation measures in some future development debate.

Polish Blanket Economy

Howard Kunstler's post this morning;

The maneuvers that the big banks are making nowadays, along with their enablers at the Federal Reserve and elsewhere in Washington, really amount to little more than the old Polish blanket joke -- in which (excuse my concision) the proverbial Polack wants to make his blanket longer, so he scissors twelve inches off the top and sews it onto the bottom.

Only in this case, the banks are shearing x-billions of losses off the top of their blankets and re-attching x-billions of new debt onto the bottom. This new debt, of course, goes to cover the old losses and only represents further losses-to-be-reported-later, since the banks are basically insolvent. Borrowing more money when you're broke doesn't make you less insolvent.

Developer Nannies

UNM economics professor opines in the Albuquerque Journal that the developers shouldn't have to provide water conservation measures on new houses they sell.  The economist says, call off the water nannies.  Let the free market decide.

Adding special gutters and rain barrels to new homes should be decided between homebuilders and their clients in the free market. The authority can be helpful by putting hydrologic and economic information on their web site.

Now that you've provided the water, go away and be helpful - hand out these pamphlets. 

Having to squint my eyes in order to see free market principles at work in the building process.   Providing dedicated streams of public tax revenue for TIDD's to pay the developer's  infrastructure costs puts new construction firmly outside of the free market.  So do the other public projects  that boost developers' profits.  Professor says,

Let the price of water— reflecting all production costs, including the cost of the new conversion dam and the rental cost of water rights— guide users on how much water to consume.     People do not need water nannies, they can decide for themselves how to conserve toilet water and if and when to replace their lawns by desert shrubs and invest in rain barrels.

People don't need nannies but apparently the developers do.