Wednesday Morning Links
Bloomberg Looks To Wind Turbines On Bridges, Skyscrapers (NY Times)
Plans For Queens West Mega-Development Move Forward (Observer)
More DOT Tar And Pebbling On Broadway (StreetsBlog)
McCarren Pool Parties Look For New Home (NYDN)
"Moonstruck" Home Sells (NY Post)
Another Piece Of Riverside Park, Financed By Extell Opens (CityRoom)
Midstream Construction Financing Comes At A Price For 100 Eleventh (WSJ)
Plans For Queens West Mega-Development Move Forward (Observer)
More DOT Tar And Pebbling On Broadway (StreetsBlog)
McCarren Pool Parties Look For New Home (NYDN)
"Moonstruck" Home Sells (NY Post)
Another Piece Of Riverside Park, Financed By Extell Opens (CityRoom)
Midstream Construction Financing Comes At A Price For 100 Eleventh (WSJ)
In light of not fueling the Bad News Housing fire:
ReplyDeleteinteresting take:
Wire: BLOOMBERG News (BN) Date: 2008-08-20 04:01:10
America's Obsession With Housing Hobbles Growth: Amity Shlaes
Commentary by Amity Shlaes
Aug. 20 (Bloomberg) -- Everything will be all right if we
just fix the housing problem. That was the hope investors clung
to as they watched Fannie Mae and Freddie Mac crumble this
week.
The presidential campaigns reflect a similar faith in
housing's curative power. Senator John McCain recently
suggested that not merely mortgage-loan defaults but also
anxiety about those mortgages was our worst problem:
``Americans are uncertain about this crisis.''
``Three-Bedroom Ranch,'' a Barack Obama campaign
commercial, suggests that America needs a ``plan to build'' for
the middle-class rather than subsidize corporate interests. The
candidates seem to believe that recovery is something with
French doors and a new roof.
But what if houses aren't a haven but a prison? What if
even a booming real estate market itself is a problem? That's
the theory of a winning Phelps -- not Michael Phelps, the
Olympic swimmer, but Nobel Prize economics laureate Edmund
Phelps of Columbia University. Phelps deplores the collective
energy Americans spend on family housing.
``It used to be said that the business of America was
business,'' Phelps says. ``Now the business of America is
homeownership.'' To grow optimally, he says, America needs to
get beyond its house passion.
Like an apartment building, the Phelps argument works on
multiple levels. The first is obvious. The federal government
allocates too many resources to housing. Back in 2005, when the
troubles of Fannie Mae and Freddie Mac weren't yet commanding
the front page so regularly, the government was already
spending about $41 billion to subsidize housing directly.
Indirect Support
More than triple that amount, or $147 billion, was
foregone on indirect tax subsidies to homeowners. That chunk of
change might have been used for any number of government
projects that would appeal to everyone from Laura Bush to
Dennis Kucinich: pounding percentages into fifth-graders'
heads, lowering the capital-gains tax, declaring summer gas
holidays -- you name it. There's a certain laziness to the
national campaign for homeownership, and it has cost the
country a lot.
The real estate obsession is also a private-sector
problem. The most important component of U.S. growth is
productivity. To put it in schoolbook terms, if Americans find
new ways to make more widgets in less time, that translates
into higher wages.
Such productivity gains do occur in housing. But larger
gains are usually to be had elsewhere: Silicon Valley, for
example. Yet those tax incentives suck private funds into the
less-efficient housing industry.
Cult of Housing
Our economic forecasters perpetuate the housing cult by
emphasizing real estate data. Yesterday's report of lower
housing starts might not even be bad news, yet to listen to the
commentators, it was a signal of apocalypse.
Phelps points to a final subtle challenge to the American
economy -- the psychic weight we put on houses. Houses comfort,
but they also stupefy. After Sept. 11, many citizens discarded
travel plans and retreated into their homes for comfort. The
Bush administration's talk of the ``homeland'' also suggests a
premium on security, not risk.
Hurricane Katrina exacerbated the national homebody
tendency -- at the end of the summer of 2006, around the
anniversary of the New Orleans disaster, Home Depot Inc. even
began marketing a storm-safe room from DuPont Co.
Housebound, Americans are becoming ``less nimble,'' Phelps
says. Unsold homes prevent families from moving. The deeper
challenge is that they are so attached to their houses that
they don't even want to move when they can sell. This stuck-in-
the-mud attitude too closely resembles that of Europeans.
Economic Gridlock
Phelps's anti-house argument calls to mind the analysis of
one of his Columbia colleagues, Michael Heller. Heller's new
book, ``The Gridlock Economy,'' posits that that ``too much
ownership wrecks'' the economy.
The air traffic controllers' association says most flight
delays would be reduced if we built just 50 miles of new
runways. O'Hare Airport in Chicago desperately needs
reconfiguration. Yet, as Heller notes, homeowner associations
in suburbs such as Elk Grove Village and Bensenville have
managed to prevent such work, just as homeowners in Queens have
stalled expansion of LaGuardia Airport in New York.
But Phelps's argument is more profound. It is not anti-
property. It is pro-property -- just ``pro'' all kinds of
property, not merely bricks and mortar. His architecture of
reform starts with abolishing the massive housing subsidy,
including that sacred home mortgage-interest deduction.
Shifting Subsidies
Phelps also would subsidize innovation instead of
agriculture, including innovation by those corporations that
the candidates regard as suspect. ``Corporate governance,''
Phelps writes in an e-mail, ``surely requires a major rehaul''
so that more often ``a few talented investors can command
decisive stakes at the big companies.''
Concerned about inflation, investors may want to add a
demand to Phelps's list: Tighter money so that citizens aren't
forced into homes as an inflation hedge.
Phelps would also establish a Contribution Medal from
Washington modeled after the Medal of Freedom, rewarding
citizens for generating or funding an idea that has proven
itself in the commercial world. He suggests classes in high
schools that expose teenagers to Miguel Cervantes, whose Don
Quixote hero traveled rather than moldered, or philosophers
from Aristotle to Henri Bergson.
Philosophy as antidote to subprime foreclosure is a
different angle than the usual discourse about housing, but one
that reveals the limits of our political imagination. That
imagination is worth stretching, for while America's economic
salvation does lie somewhere, that place is probably not a
house.
(Amity Shlaes, a senior fellow in economic history at the
Council on Foreign Relations is a Bloomberg News columnist. The
opinions expressed are her own.)