EconomyBeat.org » real estate

Ice House Detroit

Jon Brooks — Tue, 13 Apr 2010 18:17:15 +0000

Completed in February, Ice House Detroit is an abandoned house in Detroit sprayed with water and frozen by two artists seeking to dramatize the foreclosure crisis. The project was funded through Kickstarter, an arts-funding web site that we wrote about last September. Here is the Flickr pool of photos of the house, and below is the Kickstarter video explaining the project.

And a rather arty video of the result:

Ice House Detroit from gregory holm on Vimeo.

Warding off foreclosure – one story

Jon Brooks — Wed, 07 Apr 2010 10:00:03 +0000

Blog post from How To Be Poor In America, by Susan Kemp, who has “gone from being a teenage welfare mother to being appointed Assistant Welfare Commissioner for my State.” Now, due to her health and ‘bad business decisions,” she has fallen on hard times.

Foreclosure – Finding the Federal Mortgage Money

…The day the foreclosure papers arrived in the mail I went (as they used to say) wang dang doodle nuts! I dropped to my knees because I couldn’t support my own weight and on the other hand I’m not a fainter. I had a vision of my furniture being hauled out on to the front lawn. I’ve lived in neighborhoods where people actually watched for eviction notices to be posted on doors so they could raid some stranger’s belongings. I’ve watched people frantically trying to hang onto their belongs while people darted in and out stealing away bits and pieces of their life. The woman would cry while the man yelled and threatened and their children watched like those wide eyes paintings. Did I mention these things never seem to happen on bright sunny days? So anyway, the process server handed me a thick envelope that basically boiled down to “GET OUT,” said in legal language. One of the few things that has helped me get through the last three years of my woman-made financial nightmare is facing almost everything as if I’m doing it for someone else. In this case I was working to help someone save their home. But the gravity of what was happening, the possibility of having nowhere to live made it impossible to pretend it wasn’t actually happening to me.

From 1995 to 2006 I was privileged to be appointed by then Governor George E. Pataki and my primary responsibility was research… I’d been hearing a lot about how some portion of the Federal bailout money had been set aside to help people like me who’d fallen behind on their mortgages. In my case I’d had to make some hard choices. It takes up to six months for review of your application for disability. While the review is ongoing you cannot make any money. Some friends have speculated that the idea is to force you into bankruptcy while you wait for a decision. I still had bills to pay while I was waiting. Electricity to keep on, fuel oil to keep me warm and medical bills, lots and lots of medical bills and co-pays to cover. Let’s not even talk about the cost of medications. So I used what would have been mortgage money and I’m willing to bet I’m far from alone. It’s called robbing Peter to pay Paul and if Paul’s up in heaven waiting for his cash he’s going to be a very rich man when I die.

Well there was no doubt about it – being three months behind on your mortgage pretty much guaranteed foreclosure. I once referred to my house as “home crap home.” 20 years later I would have fought like a pit bull to keep it. I put the word out on several listservs that I wanted to know “where the cash is.” Any number of non-profits were openly available to help people figure out how to create a budget or save to buy a house but where was the actual cash and why wasn’t anyone talking about it openly? I’ve got this real problem with secrecy. The more you try to hide something from me the harder I’ll search for it. Childhood issues and all that. Well a wonderful woman on one of my listservs got in touch with me and gave me the website for something called PHASES (Preserving Homeownership and Savings Education Strategy (PHASES) program.) This is not easy money but I will tell you its fair money. I’ve worked in the grants field for 25+ years and what has often pushed me to the edge is when you hear about an “available” grant when the truth is they already know who they’re going to give the money to. PHASES is fair. They look at everything from your debt to income ratio, the reason(s) you fell behind on your mortgage payments, the application you have to complete as well as the online finance course. This is not easy money to obtain but it is obtainable.

I received a foreclosure notice a week before I was approved by PHASES. They understood the urgency of my situation. Sometimes I felt like a jockey riding a house instead of a horse to the finish line. But they did get me to the finish line. I had to make a commitment to pay the mortgage on time from that point on and check in on a quarterly basis with my budget to show I’m keeping on the straight and narrow. I was approved for social security disability just before Christmas and got my pension check started. My husband found a job that meets our need for him to be available during the day to take care of me. I’ve been reading a lot about the good people who don’t get the happy ending. Believe me I know how lucky I am. I’m trying to make myself as available as possible to help people facing possible foreclosure.

Having just emerged from the foreclosure process I know how truly desperate you can get to find a way to keep your home. It seems like there are signs everywhere – in the ground and on telephone poles – telling you that, if you call the phone number they could help you keep your home. In New York State such “help” requires entering into a contract including details of services and fees. This may be true of other States also. Look carefully into each individual business’s offer of assistance. Check them out with the Better Business Bureau and/or the local Chamber of Commerce or your State’s Attorney General’s website or office. Protect yourself. Your already going through one of the toughest times of your life. Don’t let someone compound that for their own personal gain.

Detroit demolition

Jon Brooks — Tue, 06 Apr 2010 17:06:00 +0000

Spotted on Facebook, two photos from Detroit, by Dan Haddad.

Dismantling consumer protection – a history

Jon Brooks — Mon, 05 Apr 2010 17:38:06 +0000

“Federal regulatory functions all had become dominated by political pressure from the providers of services promulgating ‘free markets’ and ‘lifting the regulatory burden’, greased by millions of dollars of campaign contributions and lobbying.”

One of the sticking points in the Senate in enacting the financial reform bill is the creation of a new consumer financial protection agency, which Republicans have ardently opposed.

This post by former World Bank and Federal Reserve economist Barbara N. Opper, on the financial sector policy blog Finance: Facts and Follies, summarizes the dismantling of consumer protections in the mortgage and credit card industries in the 2000s.

Many of the steps violating unsophisticated consumers’ protections against predatory lending came from a cascade of federal, not state, regulatory actions and legislation.

The financial industry’s influence on Washington, evident in the late 1980s when Alan Greenspan went to Chair the Fed, gained momentum between 2000 and 2008 when the industry ‘captured’ the administration and Congress. Investors sophisticated or not lost protection, as did consumers, especially the unsophisticated. As the famous post-Napoleon expression goes, this was “worse than a crime it was a blunder” because US financial institutions’ ability to attract profitable business worldwide rested on the trust that had been the outcome of our once-effective regulation.

To set the stage, in the 1970s a lot of consumer protection came into place. States enacted “Truth in Lending Laws” and the Fed was to handle consumer protections related to bank lending. By then, 64% of residents owned their homes, financed by self-amortizing home mortgages most of which carried fixed rates. With regulators enforcing strict underwriting standards, delinquency and foreclosure rates were very low. Credit cards were issued only to those with very strong credit records.

So when we started hearing about consumers being lured into very disadvantageous credit card and mortgage loans, it was reasonable to ask how so much predatory lending could prevail against Truth in Lending and other consumer protection in place. The answer is two rulings from the Office of the Comptroller of the Currency (OCC). One in 2003 prohibited states from enforcing their own truth in lending laws. Eliot Spitzer, former NY State Attorney General, said “Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye … all 50 state attorneys general and all 50 state banking superintendents actively fought the new rules.” It took until June 29, 2009 for the U.S. Supreme Court to rule in favor of the states. The other, in 2004, prohibited state bank supervisors from inspecting, supervising and overseeing national banks located in their state.

The impact of this regulatory approach on the examination and supervision functions should not be ignored. Examiners used to look at samplings of loan underwriting that would have caught “liars’ loans”, no-down-payment loans, wishful thinking property valuations, and other abuses of the go-go-mortgage lending years from 2003 to 2008. Instead, they focused more on the way banks handled Bank Secrecy Act and Patriot Act laws monitoring customer transactions.

Between 2000 and 2008, the economy was stagnating. Encouraging consumption with ready access to debt evidently turned into a policy tool to maintain economic growth. Household debt doubled. That growth was fueled not just by mortgages but also by credit card use as federal regulators looked the other way while credit cards were issued to youth and other elements of the population ill-equipped to handle such ‘easy’ credit. By then, states could not effectively offset federal regulators’ inaction because of the OCC rulings and the domination of the banking industry by national banks. Also, interest-sensitive home building with its collateral durable goods purchases is always a standard Fed policy tool. With more-than-accommodative monetary policy and lax underwriting standards, home property values rose at a pace never before seen. This was the kind of bubble the Fed was created to prevent. It was possible to track GDP growth with and without consumption fueled by home-equity draws.

Securitization was once a reasonable approach to improving the marketability of a home mortgage portfolio but it became destructive. One reason is lenders’ eliminating the free prepayment option to improve predictability of the payment stream for the investor. That removed a long-standing valuable right of borrowers, especially those who woke up too late to the predatory terms of their mortgages.

Many criticize the patchwork of overlapping banking regulatory authority involving several federal agencies and the state where a bank did business. But these two OCC rulings show the value of that overlap. Federal regulatory functions all had become dominated by political pressure from the providers of services promulgating ‘free markets’ and ‘lifting the regulatory burden’, greased by millions of dollars of campaign contributions and lobbying. If it had not been for these two OCC rulings, state authorities could have prevented the predatory terms foisted on unwitting borrowers.

The United States system had been designed by people who understood the dangers of concentration of wealth and power, moral hazard, conflict of interest and self dealing. It was a lesson learned from the Pecora hearings, and is the lesson to be relearned by the Angelides Commission.

The 12 Months of Default

Jon Brooks — Fri, 12 Mar 2010 17:16:28 +0000

From the blog of You Walk Away, a company that helps homeowners “strategically default” and walk away from their property (and mortgages) when they have negative equity.

Real estate porn

Jon Brooks — Thu, 04 Mar 2010 17:17:33 +0000

As you struggle to pay your mortgage or break even on the sale of your home, does it help to take a gander at Big Time Listings? This blog by a Chicago-area real estate site focuses on the sales of celebrity homes. Considering the current state of the housing market for folks who don’t appear regularly on “Entertainment Tonight”, reveling in the purchase of a $35 million mansion by Dreamworks CEO Jeffrey Katzenberg might or might not be just the ticket. Or try this “exclusive”:

Brad and Angelina enlarge their Los Angeles compound further; long-goateed actor quietly pays $1.1M to buy a missing link for his estate in Los Angeles’ Los Feliz neighborhood — a two-bedroom, 3,232-square-foot house that his compound had bordered on three sides

Brad Pitt and Angelina Jolie have increased the size of their compound in Los Angeles’ Los Feliz neighborhood, with Pitt quietly paying $1,100,000 to buy a missing link for his property in the form of a 3,232-square-foot house that his estate largely had surrounded.

In a Big Time Listings exclusive, we can report on Pitt’s latest purchase, which like some other property of his was made through his Mondo Bongo Trust. Records show that Pitt purchased the property on August 6 from the estate of the late Anne Tyler Sherman.

Built in 1920, the two-bedroom, former Sherman house — whose property is shaped like a key — sits on a 0.25-acre (10,759-square-foot) lot in the Oaks area of Los Feliz. It helps Pitt round out his compound and means that Brad now owns close to 2 full acres in the Oaks…

Features in the house include two baths, a stone fireplace, a huge main room, a bonus room, and “a bar area and a secret cave,” according to the MLS.

Secret cave? Well, they gotta keep all those kids somewhere…

Other celebrity real estate items of note:

Artist David Hockney sells 1,908-square-foot house in Los Angeles’ Hollywood Hills to his former lover and now working partner and friend Gregory Evans for $600K

Retired tennis stud Pete Sampras pays $5.6M for a six-bedroom, newly built house in Los Angeles’ Brentwood neighborhood

Joan Rivers has her estate in New Milford, CT on the market for $6.5M

You know, when I was a kid, my best friend lived right down the block from that last listing, and I hung out there all the time. How grand it feels that Heidi Klum now trods the very ground where I used to play stoop ball, and where I couldn’t afford to live these days if I sold two of my most-functioning organs.

Housing declines by city

Jon Brooks — Tue, 02 Mar 2010 19:34:44 +0000

Last week the Commerce Department announced that new home sales had dropped to their lowest level in almost 50 years of tracking. Below is a chart of Case-Shiller-index price declines in real estate from 2007-9, by city. Posted on Dr. Housing Bubble.

Las Vegas has been the worst market for sellers, having dropped from 15% to 45% to a shocking 55% off the highest level, in 2007, 2008, and 2009, respectively. Phoenix, Miami, Detroit, and Tampa also continue to look just dreadful, while San Diego, San Francisco, Los Angeles, Washington, and Boston appear to have stabilized somewhat.

For an in-depth analysis of and/or more news about the real estate situation, check out Dr. Housing Bubble and The Housing Bubble Blog.

Reaction to bulldozing homeowner

Jon Brooks — Tue, 23 Feb 2010 19:28:57 +0000

Making news around the world: An Ohio man has bulldozed his home rather than let a bank foreclose on it.

From WLWT Cincinatti:

Terry Hoskins said he’s been in a struggle with RiverHills Bank over his Clermont County home for nearly a decade, a struggle that was coming to an end as the bank began foreclosure proceedings on his $350,000 home. Hoskins says he owes $160,000 on the house. He says he spent a lot of money on attorneys and finally had enough. About two weeks ago he bulldozed the home 25 miles southeast of Cincinnati. “When I see I owe $160,000 on a home valued at $350,000, and someone decides they want to take it – no, I wasn’t going to stand for that, so I took it down,” Hoskins said.

Photo WLWT

Hoskins said the IRS placed liens on his carpet store and commercial property on state Route 125 after his brother, a one-time business partner, sued him. The bank claimed his home as collateral, Hoskins said, and went after both his residential and commercial properties. “The average homeowner that can’t afford an attorney or can fight as long as we have, they don’t stand a chance,” he said.

Hoskins said he’d gotten a $170,000 offer from someone to pay off the house, but the bank refused, saying they could get more from selling it in foreclosure. Hoskins told News 5′s Courtis Fuller that he issued the bank an ultimatum. “I’ll tear it down before I let you take it,” Hoskins told them.

And that’s exactly what Hoskins did.

Here’s a local TV news report on the story, from the “The Mess That Greenspan Made” blog.

Reaction from around the Web:

Yesterday, Joseph Stack sent the corporatocracy a deadly message about how fed up he was with the stranglehold corporations have on our Government, our lives, and our wallets. But Stack’s method of delivery was totally wrong; he targeted an office building with innocent people inside. People like the ones who cheered on Bush’s Glorious Oedipal Crusade on Iraq might celebrate the killing of innocent people, but the rest of us are appalled by it.

Terry Hoskins, however….. this guy knows how to get a point across, and I’m proud to say he’s right here in Ohio.

We’ve been hearing for awhile now that the President’s attempts to get mortgages modified are failing in large part due to the intransigence of the bankers, who don’t want to talk about any possible outcome save foreclosure. This has been reported all over the country by credit counselors and homeowner advocacy organizations. Terry Hoskins ran smack-dab up against that himself when he offered a solution that should have been satisfactory to the bank.

As you can see, the bank didn’t want to hear it; they preferred to squeeze every drop of blood out of the guy. Unfortunately for them, Hoskins figured he’d bled enough. As a result of their greed, the bankers will now get just about what they deserve.

This is civil disobedience I don’t have a problem with. Nobody gets hurt. And the message “Enough is Enough” comes through loud and clear.

Good for Terry. The bankers have become predators, and their ability to profit from the ways in which they’ve conducted themselves ought to be limited. Terry Hoskins has most definitely found a way to do that.

It is a shame that it has come to this, but really…. what chance does a schmuck have these days in the corporate-owned court system?
    -REConstitution

Mr. Hoskins claims (he bulldozed his house) only after trying to work out his problems with his lender, RiverHills Bank.

I think he might have a problem. Riverhills Bank will never be confused with a TARP bank. According to their website, they are a community bank with only five branches. He says they wouldn’t talk to him and be reasonable. Maybe so. I don’t know. I do know that my Texas community banker is very reasonable. Of course, they have my money. I don’t have theirs. Maybe it would be different if that was the case. Again, I don’t know.

I do know two things. The first is that when you borrow money, it’s not unreasonable for the lender to expect you to pay it back. You sign a mortgage pledging your home as collateral for a reason. Without that pledge, you wouldn’t get the home. Mr. Hoskins was obviously fine with those terms going in because he signed the mortgage. Now that lady luck is smiling elsewhere, he decided to change the rules. If you want your bank off your back, Mr. Hoskins, all you have to do is pay them back what you borrowed from them. It works every time.

The second thing I know is that just because everyone else is acting like a criminal doesn’t give you the right to act like one as well. Like Joseph Stack who flew his plane into an Austin office building housing the IRS, Terry Hoskins wants somebody else to pay for his mistakes. Like Joseph Stack, Terry Hoskins is just plain wrong and all the self-righteous justification in the world won’t change that.

It’s time for America to man up and take responsibility for our messes while leaving the airplanes and bulldozers parked.
    -Economic Winter

Terry Hoskins does what many other homeowners would probably love to do – bulldoze the house that the bank had planned on taking back via foreclosure. His situation is different than most as he owes far less on his house than it is worth, however, due to business debts and a lawsuit, RiverHills Bank in Ohio wanted the house. Now they’ll have it.

    -The Mess That Greenspan Made

Dramatic events (like this and Joe Stack flying his plane into an IRS building) were completely unnecessary. There’s no fighting the system, you come out the loser. There’s no winning when you scam the IRS. You have to pay your taxes if you want to avoid IRS issues. Heed the warnings of these stories, file and pay your taxes on time this year.

    -IRS – Hitman

Guess he doesn’t have a plane.

    -MyHattiesburg.com forum

When you do what Mr.Hoskins has done …. you’re a “patriot” in these time’s, in my opinion. Protecting one’s property and assets is as patriotic as defending American soil, and truly an American quality. Protecting our country some may say from these new tyrannical forces who figured out how to sweep up every business and property in this land if they needed to and have complete ownership….Mr.Hoskins ….. you’re my hero Sir!!
    -Ranch Chimp Journal

Whether Terry the Bulldozer was looking to get a Facebook following out of this isn’t entirely clear. But we will give the guy credit; even if he did this to himself by putting up his personal residence for some bad business deals, he’s got pretty creative for the sake of making a point.

“I made a bad business decision. F***you IRS! Up yours, RiverHills Bank! You think I’m not serious? I will rent heavy machinery to prove my point. I will make my loved ones temporarily homeless. I will go on a local NBC affiliate to talk about it. How do you like me now?”

Unfortunately, the timing couldn’t be worse. If that attention whore Joe Stack hadn’t gone on his little flight, Terry could be enjoying Joe the Plumber-esque fame right now. Next time, Terry.

    -Going Concern

This guy hasn’t paid his bills for years. I am surprised the county didn’t take his business and home years ago. He hasn’t paid taxes for years.

Check Clermont County Auditor in Ohio site to see his delinquent taxes.

Can you really go 9 years without paying property taxes? He did. He is a real tea bagger. He doesn’t pay any taxes- he is a sponge. Now we will have to support him in jail.

    -In Your Face Radio user commenter

Wow. This is sad. This guy had an asset he claims was worth $350K and liabilities of $160K. Had the bank foreclosed, they would have sold the asset and any surplus above the note would have had to be paid to this guy. Even if they sold at a massive loss, he would still have likely received a check for $50-100K (or the IRS would). either way the net result would have been he lost his house but cleared his debts. Now he is sitting on a lot, probably worth tens of thousands, and once the bank forceloses, he will still owe the bank the difference ($140K+) and the IRS whatever he owed them and those liens will follow him forever until paid. So now teh net result is that he lost his house anyway but is still massively in debt.

    -Huffington Post user comment

There is really nothing to be said for just f***ing shit up . The housing prices are artificially high. Had that house been foreclosed on and put on the market, not only would the debt been paid, but also someone could have bought that house and had home. And the supply of homes on the market and the price of housing would have been that much better.

He borrowed the money. F*** him. Send him to jail and slap a fine for the value of the destroyed house on his ass. That way when he gets out he will spend the rest of his life paying for the house he destroyed. There is nothing funny or interesting about people who commit fraud and brazenly fuck shit up to keep from paying lawful debts.
    -Reason.com user comment

Imagine if ONE MILLION Americans did this…This man shot his credit rating forever, but what he did was GOOD FOR THE COUNTRY.

Now we only need 999,999 more.

    -Huffington Post user comment

Boy, these sure are interesting times. If by “interesting” we mean “awful.”

Rent control debate

Jon Brooks — Wed, 03 Feb 2010 20:34:13 +0000

In working up the two posts on Stuyvesant Town in New York City, I came across this rent control debate in the comments section of an article in New York magazine. The two main posters are a long-time resident of the Manhattan housing complex, which includes many rent stabilized apartments, and an opponent of rent control. Somewhat nasty, the exchange is indicative of the emotional responses that the rent control issue provokes.

Anti-rent control guy

I’m tired of hearing the residents of Stuy Town complaining that their low rents need to be preserved because Stuy Town is a middle class oasis filled with hard working firemen and teachers.

This is nonsense.

There are people who have been living their for decades paying obscenely low rents. Good for them, but everyone else is subsidizing them with obscenely high market rents.

There is no law that everyone has to live in Manhattan. If they can’t afford a market rate rent, let them move across the river to Queens.

StuyTown resident replies

I’m sick of the wealthy real estate developers catering to the wealthiest citizens. I’m even more sickened by the complete lack of a community oriented, humanistic approach to urban development. Furthermore sickened am I by the lack of even half-way decent public schools to send your children to. Do you work for Bloomberg?

Anti-rent control guy

Hey StuyTown Resident-

If you can’t afford to live in Manhattan, or are too cheap to pay to live here, get out. Everyone else in the city is subsidizing deadbeats like you.

StuyTown resident

(BTW I’m not looking for a fight.)

A) I am not a deadbeat.
B) I can afford to live in Mahhattan, because I’m lucky enough to live in Stuyvesant town.
C) I don’t want to move, because this is my home. I’ve lived in Manhattan for 20 years. My wife was born and raised and publicly schooled here. Our children were born, are being raised and attend public school here.
D) Can you explain to me, clearly, how high market rental rates are directly subsidizing my rent stabilized lease?

Anti-rent control guy

When some people are paying artificially low rents, this creates housing shortages. Other renters not lucky enough to have a rent controlled or stabilized apartment wind up paying artificially bloated rents.

This is not some far out right wing theory. This is basic economics 101.

StuyTown resident

There is no housing shortage. There IS a shortage of AFFORDABLE housing. Occupied, existing apartments, don’t create housing shortages. Poor foresight and greedy development to cater to the wealthy do. Reagan tried supply side, trickle down economics. Look where that got us.

Anti-rent control guy

This has nothing to do with Reagan.

You have been living in Stuy Town for 12 years. You have not moved from your apt. for 12 years because you have an artificially low rent. In other words, since your apartment is essentially off the market it causes a housing shortage.

Trying to make housing more “affordable” by enacting price controls is a bit like putting out a fire by pouring gasoline on it. No other city in the US has rent control and no other city in the US has the endemic housing problems like NYC. The only reason why your apartment is kept artificially low is because of a bunch of pandering spineless politicians. It has little to do with good economics or creating a truly efficient and affordable housing market.

Apparently your version of liberalism does not extend beyond your apartment. As long as you have a cheap place to live to hell with everyone else who is paying a bloated rent subsidizing you.

Stop justifying your greed by attacking Reagan and a bunch of mysterious, faceless landlords. I’m sorry, but you lose this argument.

StuyTown resident

I haven’t moved from my apartment in 12 years because I like it there. It’s my home. I’m not a transient.

Many other cities in the United States have rent control including Washington, D.C. and Los Angeles, CA.

I never stated my version of liberalism, and your concise description thereof is based on assumption and inaccurate.

I made no justification of my greed by that statement. I am not greedy. I didn’t attack Reagan. I simply stated that his idea of supply side economics didn’t work, which is fact.

You are allowed to believe you won an argument.

I am allowed to believe you are wrong.

I wish you wealth, so that you never have to worry about the cost of living and can afford any place you may so desire to live.

Anti-rent control guy

You have been living in Stuy Town because it is cheap. If NYC would do the right thing and get rid of rent control your rent would rise to a more rational level (and everyone else’s rent would plunge).

If you had to pay a fairer, market-based rent for Stuy Town you would leave in a New York minute.

StuyTown resident

If I had to pay a “fairer market based rent” in Stuyvesant Town, I’d get a second job to be able to afford it. Just like my parents worked two jobs when we were kids to afford the mortgage on their house so we WOULDN’T HAVE TO MOVE OUT OF OUR HOME.

Maybe I should make assumptions about you as you do about others. I assume you are seated pretty comfortably and don’t understand that most of us work very hard for financial gains that aren’t very lucrative and have to struggle to make ends meet. If you understood that dynamic, you may be more sympathetic to those of a lesser standing than yours.

Anti-rent control guy

I work very hard for my money, thank you. The difference between me and you is that I don’t have a sense of entitlement. I don’t believe I have the right to live somewhere that I can’t afford.

As I said before, if living in Manhattan is too expensive for you, why don’t you move to Queens, Brooklyn or Staten Island? How dare you assume that society owes you a cheap Manhattan apartment with gardens and a river view simply because you want to live here.

Against rent control too

I’m not going to defend Anti-Rent Control Guy’s tone, but don’t be so quick to dismiss the substance of what he’s saying by merely calling him a crank.

What he’s saying is fact: rent control is a market distortion that creates winners and losers, and what’s more sacrifices efficiency in the process. Whether you’d leave Manhattan or work two jobs absent rent control is besides the point. You are a lucky winner in the current situation by not having to do either, but others pay the price and the whole system is suboptimal and unfair.

StuyTown resident

Anti-Rent Control Guy,

I don’t doubt you work very hard for your money. You’re welcome. But again you read into my words. I am saying that you may not understand the dynamic of the struggle to make ends meet.

I don’t want to move to those areas you name, because I’ve made my home in Manhattan.

I don’t have a sense of entitlement. I can afford Stuyvesant town.

Society owes me nothing and I don’t dare to make that assumption (the assumption I made was about your standing). Anything I have I’ve earned. No one owes me anything.

I would pay a higher rate if the laws were to change, in order to be able to keep my home.

To me, it’s beginning to sound like you are a little jealous of we Stuyvesant town residences with our park and river views. TS is still renting some apartments. Maybe you should consider moving here.

Anti-rent control guy

The only reason you’ve been able to make Manhattan your home is because people like me are subsidizing your lifestyle.

I remember a year or so ago the NY Times, hardly a bastion or right wing thinking, ran an editorial critical of Tishman’s antics in Stuy Town. However, in the same editorial it had harsh words for a system that was so dysfunctional that it allowed a lucky few to have cheap apartments in Stuy Town.

You’re damn right I’m jealous. I wish I had a cheap apt. with a garden and river views.

Pro rent-control

Anti-Rent Control Guy, could you please enlighten us as to how YOU specifically are subsidizing rent stabilized tenants?

Another issue for you to grapple with, aren’t tax paying renters subsidizing home owners who get tax breaks on their mortgage interest and property taxes?, plus a $500,000 tax free capital gain on the sale of their home every so many years?

What about the regressive FICA taxes paid by the poor and the middle class on their entire income while the wealthy stop paying it once they reach just over $100K

Warren Buffet, a multi-billionaire and the second richest person in the US, complained to Congress that the wealthy are not paying their fair share of taxes, telling them that his tax rate was 16% and his secretary’s is 25%.

If you are upset over what you consider to be societal inequities, you are better off starting with the wealthy who take governmental financial bailouts from the middle class taxes, then pay themselves insane compensation and bonuses.

Another person against rent control

The fact that there probably exists someone (many ones, in fact) in StuyTown Resident’s exact financial position who is unable to live in his same neighborhood in a comparable apartment for a comparable rent is proof positive that the system as it stands is unfair. He is LUCKY to live in a nice neighborhood, in a nice apartment, in the most desirable borough of the most desirable city in the US, if not the world. No use in comparing him to someone who makes more and can afford more. But plenty of people DON’T make more and CAN’T afford more and DO live in the outer boroughs in much worse neighborhoods in much worse apartments! Is it because they don’t work (as) hard? NOPE. Is it because they are worse people? NOPE. Just like the wealthy are paying high(er) rents to subsidize cheap(er) rents, the UNLUCKY middle and lower classes are paying to live in areas/apartments that are a far cry from where StuyTown Resident lives. Can they afford his rent? YEP. But they didn’t get lucky. Fair?

The Stuyvesant Town debacle

Jon Brooks — Wed, 03 Feb 2010 19:43:41 +0000

“So for all of those fiduciaries supposed to be investing money for teachers, firemen, the people of Singapore and God, shame on you. This was never a good deal for anyone but Tishman Speyer.”

Yesterday, we posted about what’s happening in New York City’s Stuyvesant Town: The companies that bought the apartment complex for $5.4 billion three years ago have defaulted on loan payments and walked away from the property, turning it over to creditors. That’s the equivalent of a homeowner stopping mortgage payments and mailing his house keys to the bank (see today’s New York Times article for a report on that phenomenon), except that in this walkaway, 25,000 tenants have been left in limbo.

An interesting post last week on the Manhattan real estate blog UrbanDigs.com explains just how wrong-headed the economics of the deal were in the first place, and why, as one observer said to the Times, the transaction is the “poster child for the entire housing bubble.”

Stuy Town – Not The AOL/Time Warner of Real Estate – Worse!

“At the time, it looked like a sound investment.”

-Clark McKinley, a spokesman for Calpers.

Some of us are still wondering whether mass hallucinations were at work during the bubble years, allowing so many to act so thoughtlessly on such a grand scale…

I keep being plagued by the idea, that after a period of reckless profligacy, lessons must be learned, prudence must be rediscovered and tough choices made and vigorously executed to heal the prior transgressions. Yet our society seems unable to actually tolerate even the most preliminary steps in this process, including fessing up to prior bonehead maneuvers.

Example number one being the statement made above by Calpers regarding its investment in the Stuyvesant Town/Peter Cooper Village buyout by Tishman Speyer. I hate to disagree with the world renowned stewards of capital at Calpers, but in my humble opinion this deal was patently absurd from the day it was first proposed. If I had a fedora I would pledge to eat it if Tishman Speyer was actually unaware of how ludicrous the deal was when they first proposed it. But alas despite the sponsor having precious little skin in the game, a fantastical deal price and an incredibly pompous assumption that the seller had no clue as to the upside still embedded in the property, a bunch of Stuy Town losers stepped up to fund this deal which will go down in history as one of the biggest and stupidest real estate deals of all time.

I know, I know, you can’t believe it. Why would Tishman Speyer, heretofore an organization of sterling reputation, knowingly invest its hard earned dollars in a deal that was more than likely to fail from day one?

According to news reports the complex of 11,232 apartments was purchased for $5.4B, or $480,000 per unit. As a rule of thumb, savvy (meaning long-term profitable and surviving) investors in New York City rent-regulated buildings like to pay under $100,000 per unit. Granted deals at those prices are very hard to find and this rule of thumb applies more to Brooklyn, Queens, the Bronx or Morningside Heights, than to prime Manhattan locales south of 95th St. On the Island of Manhattan many would probably consider $200,000 a unit to be workable long-term, though not a “value investment” as you would need to eventually turn over all the apartments and do a condo conversion to really make out big. But these kinds of deals have been done pretty frequently.

Now the Stuy Town/Peter Cooper complex includes 80 acres of downtown property, an asset with long-term value for sure. But how likely is it that a massive block of airspace largely dedicated to rent controlled buildings would be upzoned in our lifetime…even in a Bloomberg administration…..not much.

The post then goes into specific reasons the numbers never added up, and ends with this analysis, which to my eyes reads like calling the deal pretty much a scam in which the smaller investors — like the Califonia retirees’ fund, the government of Singapore, and the Church of England — were the ones left holding the bag.

For the record, Tishman Speyer was not the first or the only deal sponsor to look at the ridiculous financing parameters available in the market with no recourse to the borrower and say damn the pricing…let’s do the deal. If it works out….. great!, if it doesn’t we get most if not all of our money back and then some (through various fund management, property management and in some cases financing fees) and we just hand the keys back to the bank. The well publicized Riverton Apartments fiasco enjoyed many similar features of the Stuy Town deal.

So for all of those fiduciaries supposed to be investing money for teachers, firemen, the people of Singapore and God, shame on you. This was never a good deal for anyone but Tishman Speyer. The sponsor should have realized, however, that although the debt holders may have no monetary claim on them there is always recourse to your reputation in a deal as high profile as this one was.