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Socialist Cities

So, you think the planners in your area are taking something a little too far? Be glad you aren’t in Venezuela… I wish I could link to the article by Michael Mehaffy in The Urban Land Institute’s May edition of Urban Land titled “Venezuela’s New Socialist Cities”, but ULI doesn’t provide the online edition to non-members. However, I have been able to find some related articles online, which I can share with you. Development of Caminos de Los Indios, the first of five “Socialist Cities” has begun south of Caracas. In his 2007 inaugural speech, Hugo Chavez said, “We need to a system of cities based on federations, federal regions. We need to build communal cities, Socialist Cities.” “Economic power needs to be transfered to these local bodies (“councils of popular power”) – so that we can work toward the communal and social state and move away from capitalism.” The concept is tauted by the government as a way of empowering locals and creating sustainable places for the 1/2 million residents. In Nov 17, 2007’s Washington Post, Ramón Carrizales, Venezuela’s housing minister is quoted “A city that’s self-sustainable, that respects the environment, that uses clean technologies, that is mostly for use by the people, with lots of walking paths, parks, sports areas, museums and schools within walking distance.” However, many environmentalists are appalled, since these cities will be build in the wilderness, requiring roads and infrastructure to these newly deforested locations. Not only that, many rural residents will be forced to resettle into the “Socialist Cities.” The history of these sort of projects are dismal. From the Washington Post article Chávez’s ‘Socialist City’ Rises: “The majority of socialist cities that were built in socialist countries failed,” said Maria Josefina Weitz, an urban planner in Caracas. “When you create something by […]

Bush’s “Ownership Society” and Subprime

From Rationalitate – The WaPo finally realizes the root cause of the subprime crisis Agencies like FHA and HUD, and pseudo-private agencies like Fannie Mae and Freddie Mac, were the government’s tool to manipulate the market for mortgages, and manipulate it they did: 40% of all mortgages are financed by lending companies Fannie Mae and Freddie Mac, which hold $5.3 trillion in outstanding debt, and receive tax breaks (read: subsidies) to the tune of $6.5 billion a year. Part of the irony of Bush’s “ownership society” is that it requires taxpayers to fund it. While on its face home ownership might seem like the paragon of private property and private ownership, it’s really not in very high demand in the actual free market. While America does indeed have very high rates of homeownership, it’s in spite of the market, not because of it. (I don’t really agree with the phrasing, “it’s not really in high demand.” I think almost all people desire to own their dwelling, but at a price that makes sense for them.) “Experts” often say how important it is for people to “own” their homes. I agree that ownership is great. But, at what cost? Market distortions that create bubbles? Wealth transfers from the less fortunate and landlords to “owners” of homes? “Ownership” isn’t best for everyone, especially the “owners” of a junk loan…

Want Density? Turn the Free Market Loose

Matthew Yglesias – What Price Density The solution, as Ryan Avent says, is to build denser communities. We ought to build more transit infrastructure, of course, but it’s cheaper to use what we already have more intensively. And, of course, it’s more practical to build new infrastructure if there’s a reasonable expectation that it will serve intensive development. Beyond that, density also serves to make walking and biking more practical for more trips. And best of all, getting denser could be accomplished mostly through growth-enhancing relaxation of regulatory burdens. And of course if the supply of housing in central cities and nearby suburbs were radically higher, then it would be much easier for people to afford to live in them. Instead, restrictions on the supply of conveniently located housing lead to high prices and the “drive until you qualify” phenomenon that’s currently leaving many Americans in deep trouble as they try to pay for fuel. In general, relaxing density restrictions will ease housing prices. But, a couple notes: Creating more socialized infrastructure, whether transit or roads, disperses development. High densities create demand for transit, not the other way around. Transit creates demand to locate near the stations, but not elsewhere. This is because as commuters are diverted from roads, congestion subsides, allowing drivers to commute from further-out places. So, if density is the goal, I would privatize highways & parking, while putting the breaks on construction of new public highways & parking prior to building new expensive transit. If individual commuters were to pay for their use of the roads, many would alter their habits and perhaps where they choose to commute to / from. The change in location preference will, no-doubt, increase density. Building densely has higher construction costs per unit as land costs are dispersed among more units, […]

LA’s New Housing Rules Band-aid the Symptoms, Exacerbate the Problem

LA Times: Los Angeles limits ‘mansionization,’ downtown hotel conversions Reason: In Soviet Los Angeles, Housing Affordables You! LA’s City Council voted unanimously to treat the symptoms of the City’s gentrification problem by restricting property owner’s right to improve their property. Did anyone ask the council what would be the long-term effects of restricting the supply of upscale housing? As supply is restricted, eventually what was once considered middle class housing will be needed to meet the needs of the wealthy. With less stock for the middle class to afford, they will move downscale as well and gentrify the most affordable areas. Then, when the affordable housing is gobbled up, the City Council will probably enforce even greater restrictions. It won’t be long before upper-middle-class people will be living in tiny studios just like New York and everyone else is priced out. So, the solution is to do the opposite of what the council did. Remove restrictions on property and allow developers to build densely to meet the needs of the market. Some single family neighborhoods would gradually be redeveloped as multifamily, allowing the city to meet the housing needs of more people. Otherwise, gentrification will sweep over LA faster than ever and affordable market-rate housing will be a thing of the past.

Mortgage-Interest Deduction: The Unseen Costs

In general, I am opposed to just about any tax increase. However, the mortgage interest deduction is one of my least favorite tax breaks. First of all, it’s a regressive tax deduction that transfers wealth from renters and businesses to homeowners. Second, it causes home prices to rise relative to the value of similar rentals, causing conversions of rental properties to condos and other imbalances. Thus, many markets have had a net loss of rental housing stock. As a result of this imbalance of demand related to ownership incentives, developers have less incentive to build for long-term holding since it is more profitable selling condos instead of rentals. Because condo developers will not be responsible for maintenance over the life-cycle of the property, they tend to care less about durability and energy-efficiency than construction cost. In the long run, the homeowner pays the added costs of the higher-maintenance, less-efficient home. Repealing the deduction will be an uphill battle. Homeowners are a reliable voting block, so pandering to them usually pays off for politicians. Repealing the deduction would probably drive home values down further, so it will probably have to be tabled until the credit markets recover. For more in-depth economic insight, read John Tammy’s article: Repeal Housing’s Mortgage-Interest Deduction

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