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)


  1. In light of not fueling the Bad News Housing fire:

    interesting 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
    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

    (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.)


Post a Comment

Popular Posts