Tag Archives: France

Comparing Rental Housing Across the Atlantic

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photo by Tiago Fioreze

The Harvard Joint Center for Housing Studies has released a working paper, Rental Housing: An International Comparison. The abstract reads,

This report compares rental housing in 12 countries in Europe and North America, using individual records from household surveys. Differences in housing characteristics, conditions, and costs across countries reflect a number of factors, including demographics, geography, culture, and government policies. A lack of comparable data can make international comparisons difficult to execute, but such analysis is valuable for understanding and contextualizing differences in affordability and other characteristics of renter households and housing.

The analysis revealed the US, along with Spain, as notably unaffordable for renter households, based on a number of measures. The greater apparent cost burdens reflected a variety of factors, including differences in characteristics of the housing stock and differences in tax burdens, as well as measurement problems.

However, two major influences – differences in the size and availability of housing allowances and the degree of income inequality – emerged as the main drivers of differences in housing affordability. The effects of supply-side factors such as the extent of social housing supply, supply subsidies, and rent controls were unclear, due to problems with the identification and description of below-market rentals in the household survey data. (1)

The housing stock and political context is so different among countries, but this type of analysis is still very useful and can offer valuable lessons to the United States:

One factor that appears to contribute to the pervasive affordability problems in the US is the degree of income inequality. That is not a feature of the housing market per se, but there may be opportunities to address the consequences of income inequality through appropriate housing policies.

Other countries have devoted more resources to ameliorating the problems of unaffordable housing. The US provides fairly generous housing benefits to only a small share of needy households. In the UK, a broadly available system of housing allowances offsets what would otherwise be a much more severe affordability problem than exists in the US. In other countries, affordable rental housing supplied by governments or nonprofits helps to address affordability issues, although the efficiency of that practice, relative to the provision of housing allowances, has been questioned, as it has been in the US. The EU-SILC data used in this analysis did not adequately identify or describe below-market-rate housing, making it impossible to adequately assess the effects of such housing.

The somewhat larger size and perhaps higher quality of units in the US rental stock also affects relative affordability, although relative quality and its effect on cost differences are difficult to assess using the available data. The large share of single-family detached rentals in the US reflects preferences, the demographic mix among renters, land availability, etc., but it could also reflect zoning and other regulations limiting the supply of less expensive multifamily rentals. It is hard to imagine that regulations are more stringent in the US than in some of the more dirigiste nations of Europe, but regulations elsewhere may dictate, rather than constrain, density and cost reductions. The size and quality of the housing occupied by low-income renters in the US reflect the fact that most of those units were originally built for owner occupancy or for higher-income renters. That’s probably true in other countries as well. Whether the extent of such filtering is greater or less in various countries is perhaps worth exploring in the future. (37-38)

Income inequality, housing subsidies and land use reform — the report hits on a trifecta of key issues that housing policy should be dealing with. While I do not see much of an appetite for major reform of the first two items in today’s political climate, there might be support for some loosening of land use restrictions on housing construction. I wonder if there is some room for movement on that third front. Can local jurisdictions be incentivized by the federal government to build more housing?

The Capital/Labor Split

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photo by Sue Gardner

Thomas Piketty

To commemorate Labor Day, a quote from Thomas Piketty’s Capital in the 21st Century:

On August 16, 2012, the South African police intervened in a labor conflict between workers at the Marikana platinum mine near Johannesburg and the mine’s owners: the stockholders of Lonmin, Inc., based in London. Police fired on the strikers with live ammunition. Thirty-four miners were killed. As often in such strikes, the conflict primarily concerned wages: the miners had asked for a doubling of their wage from 500 to 1,000 euros a month. After the tragic loss of life, the company finally proposed a monthly raise of 75 euros.

This episode reminds us, if we needed reminding, that the question of what share of output should go to wages and what share to profits— in other words, how should the income from production be divided between labor and capital?— has always been at the heart of distributional conflict. In traditional societies, the basis of social inequality and most common cause of rebellion was the conflict of interest between landlord and peasant, between those who owned land and those who cultivated it with their labor, those who received land rents and those who paid them. The Industrial Revolution exacerbated the conflict between capital and labor, perhaps because production became more capital intensive than in the past (making use of machinery and exploiting natural resources more than ever before) and perhaps, too, because hopes for a more equitable distribution of income and a more democratic social order were dashed. I will come back to this point.

The Marikana tragedy calls to mind earlier instances of violence. At Haymarket Square in Chicago on May 1, 1886, and then at Fourmies, in northern France, on May 1, 1891, police fired on workers striking for higher wages. Does this kind of violent clash between labor and capital belong to the past, or will it be an integral part of twenty- first- century history? (39, footnotes omitted)

Craziest Real Estate Windfalls

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"Le Voyage dans la lune" by Georges Méliès - Roger-Viollet

Realtor.com quoted me in A Brief History of Crazy Real Estate Windfalls. It opens,

Real estate is one of those things where it’s hard to differentiate between a once-in-a-lifetime deal or an epic bomb without the benefit of hindsight. Want proof? Let’s take an invigorating jog down memory lane and view a few of the land swaps that are considered the most lopsided in history—windfalls for one side, colossal blunders on the other. Let’s crack open the history books!

Proof that Portugal needs better maps

The historical highlights: In the 15th century for the Treaty of Tordesillas, global superpowers Portugal and Spain sat down with a map of the world (as they knew it in the 1400s) and drew a line down the middle. Portugal got everything on the left, Spain on the right. Even Steven, right? Not quite. Once they decided to actually look at their new “empire,” Portugal found it basically had nothing (well, besides Brazil), while Spain had pretty much the entire world (you know, Europe, Asia, Russia…).

It taught Portugal a harsh lesson: Approaching land deals the way the kids in “Family Circus” deal with sharing toys is not a viable global expansion strategy.

Real estate update: Granted, Portugal botched this deal at the table, but it’s not quite as bad as it sounds. According to David Reiss, a professor at Brooklyn Law School and research director for the Center for Urban Business Entrepreneurship, the treaty was “heavily modified afterward” to give Portugal more land to the west, including control over most of the Indian Ocean.

Still, in the end, no one won: Both empires eventually shrank back to the size you see today. If Spain won anything, it’s the language war: Most of Central America speaks Spanish, while only Brazil parlays in Portuguese.

America goes through a major growth spurt

The historical highlights: In 1803, America made its historic Louisiana purchase, buying 828,000 square miles of land from France for $15 million—roughly the catering budget of an “Avengers” flick today. That territory gave the fledgling nation a hell of a growth spurt, adding land that would become 15 Midwestern states from Arkansas to, of course, Louisiana.

Real estate update: It was a lot of land, and it cost a lot at the time. But it was totally worth it. “You got New Orleans, so right there it was a good deal,” says Reiss. “If you look at the home sales in New Orleans today, $15 million is the price of just the top four most expensive houses combined.”

The Alaskan ‘oil rush’

The historical highlights: In 1856, Russia negotiated with U.S. Secretary of State William Seward to sell Alaska for about 2 cents per acre, or $7.2 million. The purchase was derided, and the American people quickly dubbed Alaska “Seward’s Folly.”

Real estate update: Most people think that the measly $7 mill we spent on Alaska is pocket change compared to the gushing vats of cash funneling into the U.S. through the Alaska oil pipeline, right? Not exactly.

“We think of Alaska and its pipeline, and we think it’s a great deal,” says Reiss. “But economists have deduced that the pipeline earns the government less than it costs to govern Alaska, so it’s a net loss. Calling it ‘Seward’s Folly’ makes sense.”

$24 for … Manhattan?

The historical highlights: It’s one of the oldest stories in our history—Savvy Dutch settlers, preying on the naiveté of the Canarsie Indians, bought all of what would become Manhattan for $24, less than the price of a sweater from a Times Square Forever 21.

Real estate update: True, New York City is estimated to be worth $802.4 billion today, and Manhattan is its busiest hub. However, before you express outrage about those poor Indians, consider this: It was the Dutch who got conned. You see, the Canarsie Indians who brokered the deal didn’t live in Manhattan. Sure, they’d hop over there to party with the Manhattoes tribe, but it wasn’t their home and they certainly had no right to sell.

“The common story is that the Europeans swindled the natives,” says Reiss. “But it does look like the other way around.” (The Manhattoes, however, are another story.)

*     *     *

Man sells the moon

The historical highlights: In 1967, the United Nation Outer Space Treaty stated in regard to our moon: “No nation by appropriation shall have sovereignty or control over any of the satellite bodies.” In 1980, a Nevada resident named Dennis Hope came to the conclusion that the treaty forbade nations from owning the moon but not individuals. So he wrote a letter to the U.N. saying he was taking ownership and that it should contact him if it had any issue with that. The U.N. did not respond, and he’s been selling moon acreage ever since. Hope claims to have sold over 600 million acres, with the largest going for over $13 million.

Real estate update: If he really has those checks in hand, then Hope is a genius and this is indeed a very lopsided deal—he’s selling uninhabited land that will be completely inaccessible in the lifetimes of the buyers. Not that we should necessarily applaud him for it.

At worst, “I’d classify him as a huckster,” says Reiss. “And it appears his interpretation of the law is incorrect. The fact that the government hasn’t responded to his letter doesn’t give him rights to the land.” So, even if he does have all that money, it could get him in a whole lot of trouble.