The Low Hanging Fruit of Economic Growth

Here are two things that can be done right away to help the economy:

Republican economist Douglas Holtz-Eaken says one thing we can do right away is repurpose wireless spectrum:

For this reason, as a part of the 2009 National Broadband Plan, the Federal Communications Commission is working towards making 500 megahertz of additional spectrum available over the next decade, 300 megahertz of which will be made available by 2014. The government, however, remains embroiled in the process of developing a plan to repurpose spectrum from its current uses for wireless broadband.

The benefits of additional wireless capacity are widespread. The FCC estimates that releasing an additional 275 MHz of spectrum by 2014 will save carriers in excess of $120 billion in capital costs. According to former Director of the National Economic Council Lawrence Summers “total surplus from expanding wireless [is] estimated to be $40 to $50 billion every year.” The High Tech Spectrum Association estimates that additional investments in 4G wireless technologies will create 205,000 jobs in the next five years.

Another thing we can do right away is use the GSEs to rent foreclosed homes. From Nick Timiraos:

The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.

While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.

Trimming the glut of unsold foreclosed homes on the market is “worth looking at,” said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.

The Looming Rental Boom, Cont’d.

Time to check in on the hypothesis that the fundamentals point to a rental/condo boom in urban housing.

Here’s rental vacancy rates:

Bill McBride comments:

A record low number of multi-family units will be completed this year (2011). Only 8,700 apartments came on the market in Q1 (in the Reis survey area). This is the second lowest quarter since Reis has been tracking completions – the lowest was 6,000 last quarter…

Multi-family starts are increasing, and that will help both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably decline all year.

Here’s multi-family starts and completions:

We would expect declining vacancies to continue putting upward pressure on rents, creating demand for new multi-family construction and downtown office capacity. And we are already starting to see this happen in some metros. The LV cities can preempt the squeeze on renters by zoning for greater density in and around their central business districts.

Bethlehem in particular is guilty of maintaining current density in its new zoning ordinance proposal, when increasing net density would make housing more affordable and increase the number of property owners and jobs (aka taxpayers).

Obviously a few loud people are going to have crazy things to say when you approve density-increasing development near where they live, but planners and zoners need to ignore these people and focus on getting the macro-level housing policy right.

Ruggles Introduces Plan to Fine Vacant Property Owners in Easton

Edward Sieger has a great report on Roger Ruggles’ new anti-blight plan:

Easton City Councilman Roger Ruggles said he plans to bring a vacant property law to council next month that would require owners to register their empty buildings and pay an annual fee based on how long a building has stood dormant.

Ruggles, who chairs city council’s planning committee, said the ordinance will be based on one in use in Wilmington, Del., since 2003. That ordinance assesses a $500 fee for properties vacant for at least one year but less than two years and up to $5,000 for those vacant for at least 10 years with an additional $500 for each year thereafter.

And:

Ruggles said he’s spoken briefly to the police department, which supports the idea of a comprehensive list of the city’s empty buildings that would, in part, let patrolmen know which properties should be empty…

About 360 of the city’s roughly 8,539 properties are either vacant lots or house an empty building, according to Becky Bradley, Easton’s planning and codes director.

This is the program I teased in this Patch column back in December.

The fairness argument for this proposal is impenetrable. Vacant land and properties decrease the value of neighboring properties as much as 20%. If you have a vacant property, you’re imposing a tax on nearby properties. It’s unfair, and the vacant property owner should have to pay that external cost.

This is a big problem with foreclosed bank-owned properties. Paul Muschick has an excellent article on how this problem is playing out in South Whitehall. These properties decrease home values throughout the whole neighborhood, but banks just sit on them because they don’t want to eat the losses. But in doing so, they’re passing the costs on to local governments.

Each foreclosure costs local governments $20,000. Three foreclosures = one more teacher you have to lay off:

Local governments should not let the moochers pass these costs on to taxpayers. Levying financial penalties on vacant properties is exactly the right way to fix this problem.

The Growing US Housing Shortage

Ryan Avent:

Since the onset of recession, household growth has fallen short of population growth as families doubled- and tripled-up on housing to economise. There are now nearly 2m fewer households than one would expect given growth in population.

Getting *Funky* With Housing

A few weeks ago Jaime Karpovich had a post about a trip to Philly in which she admired some modern condos::

Two weeks ago Ryan and I went to Philly for an afternoon. We wandered around a part of the city I’d never been to, any every single house looked like Dwell magazine’s Best of the Year issue. I wonder if historic Bethlehem would throw me out of town if I eventually build a home like this:

I think this sort of housing would be more likely to get built on Southside Bethlehem than on the Northside. I think it would be cool to build many of these on the surface parking lots facing 3rd Street and facing the Greenway. My one wish is that planners will reject the view that there should be plenty of surface parking directly next to the Greenway. That is going to be very valuable land, so I think it’s critical to get the most productive and aesthetic value out of it.

I’ve noticed everybody who’s working on marketing Southside Bethlehem is currently using the word “funky.” So why not go with it? It’s the blend of old and new structures that makes cities look interesting. For example, the Sigal Museum in Easton. In anticipation of a growing interest in city living, I think Bethlehem should start soliciting proposals from developers who want to build interesting housing and storefronts on the lots along the Greenway and 3rd, 4th and 5th Streets.

The buildings Jaime posted are about 3 stories tall. In other areas of Philly they can be 5-7 stories. In the area closer to SteelStax, I would say go higher. Just like along the Greenway, the Steel land is going to be really valuable 15-20 years from now when it is more fully developed. Holding down building height on purpose, or alternatively, accepting building designs that are below a certain height on the former Steel land is no different from flushing tens of millions of dollars in sales, tax receipts and productive capacity down the toilet.

Going back to Jaime’s comment about historic Bethlehem, she’s clearly correct that the neighbors are going to be way more protective of the Northside’s existing characteristics than I think would be the case on Southside. Main Street and New Street south of Broad are important areas where the existing character needs to be preserved, but I really don’t see anything especially historic about the houses and apartments in the area between North and Fairview going north and south, and Main and Linden going east to west. I don’t see any reason that those properties couldn’t be replaced over time with taller, more modern buildings.

Along Broad Street downtown is another place where I think many people would say the existing structures aren’t more attractive than the sort of thing Jaime wants to see. The Public Sector building, for instance, is not a good looking building. It’s a relic of a recent era of really bad planning, and tarnishes that block by bringing its retail space indoors, interrupting the pattern of street-facing storefronts. It would look much better if the pattern of storefront retail with upstairs apartments simply continued from Main up Broad.

I guess the theme here is that cities do change – Bethlehem has embraced different planning ideas in the recent past,  and it will embrace other planning ideas in the future. I have found the planning and economic development staff in Bethlehem to be very open-minded, so Jaime shouldn’t feel discouraged that she’ll be run out of town on a rail for liking condos. As I’ve been saying here on the blog, I think there are good reasons to expect increased demand for this sort of thing over the next few years.  So keep talking about it and hope that the real estate agents are reading…

The Looming Rental Boom, Cont’d

WSJ on a rental boomlet in Miami:

When the real estate market collapsed five years ago, this city’s downtown soon became an emblem of the worst excesses of the building boom. Glittering new towers sat mostly vacant.

Those towers are filling up much sooner than some analysts predicted. The new arrivals, mostly renters, are spurring the establishment of restaurants, bars and shops.

The thing to note is that increased density means a larger, more concentrated customer base that can support a lot more retail.

The Looming Housing Shortage

Brad Delong:

And starting in 2007 construction spending did indeed fall below trend. But we were expecting a minor one: a fall in construction spending below trend of $150 billion a year for two years or $100 billion a year for three years or $75 billion a year for four years. Instead, it fell $300 billion a year below trend. And it has so far stayed down for four years. And there is no prospect of rapid return to anything like normal levels.

Therefore when this construction cycle will have run its course, the United States will have first have spent an excess $300 billion, and then fallen short of trend by a cumulative $2 trillion of construction spending not undertaken. The net effect will be an at least $1.7 trillion construction shortfall in the United States: $1.7 trillion of houses, apartment buildings, offices, and stores not built.