Housing Regulation Battle in NYC

http://www.cityandstateny.com/2/83/infrastructure/high-stakes.html#.VIdzMJUtDIU

 

 

The link to the article above titled "High Stakes: The Looming Battle Over New York's Housing Laws" by Jarrett Murphy discusses and investigates the current administrative initiative of NYC Mayor Bill de Blasco to build and preserve around 200,000 units of affordable housing by pushing for housing regulation reform in the NY state legislature.

In order to achieve the goal of a more affordable city, the mayor has set out an ambitious $4.1 billion dollar initiative to effectively strengthen rent regulations. The primary purpose of this initiative is to carve out a place for the working class and prevent lower- and moderate-income people to continue getting priced out of  neighborhoods such as the five boroughs.

The first restrictions on rent pricing or "rent control" in NYC began after WWI amid the housing shortage which benefited many of the cities lower income residents, but since then NYC housing regulations have been strengthened and weakened over the years but have most recently heavily swing in the landlords favor. The effect of these shifts has caused a major decline in the number of regulated apartments throughout NYC.

Mayor Bill de Blasco's current stand on the NYC housing debate is clearly pro-tenant, but there are inherent problems with his strategy as stated by the author:

"He wants stronger rent regulations to preserve existing affordability, but he also needs to create new affordable housing by leveraging private sector money, and investors might see permanent rent regulations as a disincentive to committing equity to projects."

The outcomes of his policy initiatives might prove futile due to bi-partisan opposition in pushing his legislation as well as affordability. It will ultimately depend on a broad consensus on the urgency or "need" of affordable housing and the severity of the housing crisis.

Ashby High Rise Controversy

 

 

http://www.wsj.com/articles/SB10001424052702304655304579549851635843622

 

 

The article titled "Opposition Mounts to Ashby High Rise Controversy" by Ana Campoy discusses the heated argument and legal battle over a proposed 21 story apartment tower known as the Ashby High Rise in Houston Texas. The legal battle and opposition over this high rise is ongoing in a 7 year suit filed against developers by Houston residents living near the proposed development who argue that the Ashby High Rise has decreased their property values, and are entitled to compensation.

 

Houston is known for being the 4th largest city in the United States, but also for its non-existent zoning regulations throughout the city. The most recent ruling in this case has declared that neighbors are entitled to settlements totaling 1.2 million dollars for the inconvenience of high rise developments near their homes. This has put a strain on developers making it more difficult and limit their ability to build high rise complexes in a city with a rapidly expanding population. A jury last year sided with the neighbors saying that "the project would damage homes' foundations, invade privacy and increase traffic".

 

The Ashby case itself has brought up the point that Houston should reconsider whether zoning is appropriate in order to deter inevitable development controversies in the future. The article states:

 

"As Houston's skyline grows taller, they say, they are establishing measures to protect existing neighborhoods. The Ashby controversy prompted them to require a buffer zone of at least 30 feet between new structures 75 feet or higher and the property line of single-family homes."

 

Even though this idea seems plausible and beneficial to many, the mayor of Houston believes that it is too late to implement zoning laws in the city of Houston.

 

Being a Houston resident, I have seen protests and signs against the Ashby High Rise and I feel that the ruling to pay compensation to the residents is just and fair. I don't agree with the proposed implementation of zoning laws in Houston however, because I believe this is what makes the city of Houston itself unique compared to other segregated US cities and has been more beneficial than harmful to the city.



The Accidental Real Estate Tycoon

http://www.wsj.com/articles/the-accidental-real-estate-tycoon-1415738259

In the online WSJ article above titled "The Accidental Real Estate Tycoon" the author, Eliot Brown, writes about Paul Allen, Microsoft co-founder and owner of the Seattle Sea Hawks, and his accumulation of wealth from participating and investing in real estate. It also goes into detail on the various projects that are owned and being developed by Paul Allen himself such as a $200 million dollar project which Allen plans to develop 3 parcels of land in Seattle into 650 apartments.

Being the co-founder of Microsoft, Paul Allen already had massive amounts of capital and a large net worth of about $17 billion, but he increased his wealth even more by investing in various real estate developments and projects to eventually form his own firm named Vulcan Inc. As the title of the article states, Allen did not initially plan to actively participate in real estate, but fell into it after giving a $20 million dollar loan to a non-profit that defaulted which gave him ownership of the non-profits land. Even though many wealthy individuals invest in real estate, many usually invest passively through private equity funds or established developers. Paul Allen went against the grain and aggressively invested a significant portion of his net worth into real estate projects himself without the middlemen and fees.

This article gave me some insight into the possible opportunities for accumulating wealth in real estate development for a wealthy individual such as Paul Allen. Being a senior finance major about to graduate and start a career, I'm considering investing a significant amount of my income into real estate. Maybe one day I'll have accumulated enough capital to actually become an owner/developer in various real estate projects, but I realize there are also significant risks in doing this. I'm sure Paul Allen didn't make significant or even positive returns or gains on all of his real estate investments, but when he did it was most likely extremely lucrative for him. Very wealthy individuals such as Paul Allen have the ability to take these risks.
 

China's Real Estate Bubble

I found this 60 Minutes segment very interesting, but also incredibly disturbing. In the above video, 60 Minutes investigates the extraordinary growth of the Chinese economy in the past decade which has been largely powered by an enormous housing market bubble.

 In an effort to grow China’s GDP, the Chinese government has been building what are essentially “ghost cities” that are uninhabited with almost no vacancies for miles. These developments are owned by Chinese investors who depend on rising property values driven by inflation within the Chinese economy, thus causing the largest housing bubble in history. Real Estate roughly accounts for about 30 % of the Chinese economy, and with real estate development increasing at an alarmingly fast rate, this partly explains the unprecedented boom of China’s economy in such a short amount of time.

It blows my mind that the Chinese government spends $2 trillion dollars a year building these deserted cities in order to keep the Chinese economy going, and are essentially running on borrowed time with non-existent supply and demand. I can’t even imagine the worldwide implications of this bubble bursting and assessing what I’ve heard and seen in the video above, it doesn’t seem like a matter of IF the bubble will burst but WHEN. 

Texas Real Estate Market Trends in 2014

http://dallas.culturemap.com/news/real-estate/12-07-14-texas-real-estate-end-of-year-report-luxury-condo-international/

According to the above article titled “Luxury Home and Condo Sales Help Drive Banner Year in Texas Real Estate” by Johnathan Reienstra, an annual report from the Texas Association of Realtors and the 2014 Texas Annual Housing Report shows that there has been significant growth in all areas of real estate over the past year. What I found interesting were that these gains are significantly attributed to affluent international home buyers with increases in luxury home sales and condo town home sales. This boom in real estate is fueled by the high demand of homes from the huge influx of people moving to Texas from other countries daily. Texas is known for having a business friendly atmosphere, a better than average economy, and lower cost of living compared to the other states in the US.

The demand for luxury housing and condos in Texas is predicted to steadily increase into the future according to the article which states:

“Luxury homes priced over $1 million were a significant portion of the market’s growth. January 2014’s Texas Luxury Home Sales Report showed an average 35 percent year-over-year increase for luxury home sales in Texas’ four major metros: Dallas, Houston, Austin and San Antonio. In Austin and Houston in particular, the luxury housing market grew twice as fast as the housing market at large.”

This growth has predicted 2014 to be the second-best year in home sales for the state of Texas. As discussed in class, I think current real estate trends infer that the market is currently in middle of a booming period coming out of the recession and housing market crash of 2008. Could this be another bubble? Possibly. I predict that the market will go back down in 3 to 4 years, as real estate booms usually last 6 to 7 years. If this is the case, hopefully the bubble won’t burst as bad as in 2008. Regardless, Texas is definitely at the forefront of this real estate boom with twice as much recorded growth compared to other areas of the country.

Gentrification in Houston Texas

http://www.salon.com/2014/11/28/how_oligarchs_destroyed_a_major_american_city_partner/

The online article above titled “How Oligarchs Destroyed a Major American City Partner” by Anis Shivani discusses a controversial and relevant to Houston real estate in recent years; gentrification. Gentrification refers to shifts in urban community lifestyle and an increasing share of wealthier residents and/or businesses and increasing property values. As stated in the very opinionated article, the author claims that the gentrification of central Houston has turned the areas around Alabama and Kirby into “an exclusive playground for the rich” and that Houston itself has “transmogrified into a city ruled by a brutal strain of neoliberalism”.  Those statements are pretty overdramatic but being from Houston and living there most of my life, I can confirm that major gentrification is and has been taking place across all areas of the city, especially central and downtown Houston. 

Is this necessarily a bad thing? The people who would be affected negatively would be Houston’s less affluent pre-gentrification residents who are unable to pay increased rents or property taxes to be eventually forced out of the area. The positive side is that gentrification has led to a massive increase in business all across the city with new restaurants, music venues, bars, living complexes, etc. in areas that were nowhere near as attractive to businesses five years ago. This has the potential to increase the average income of all residents who live and work in those areas and displacement might not occur to residents who were already making a decent income. I think gentrification benefits the entire city of Houston as a whole, but there are definitely individuals that it can affect negatively as well.

 

 

Blog Assignment # 2

Task #1 - Real Estate vs. Real Property

1. Real estate is defined as a land  plus any permanent attachments or fixtures such as buildings, housing, or natural resources. Real property is similar, but also includes intangible  legal rights and interests that come with the property.

2. Below is a link to an article that discusses a legal dispute between a property owner and the local government over his real property rights to build a dock over an abutting body of water along his property. The city passed an ordinance which forbids the right to build a dock in order to protect "seagrass" which they claim is "an invaluable natural resource".

http://www.cato.org/blog/yes-florida-constitution-protects-property-rights

Task #2- Private Restrictions on Real Estate

1. Private restrictions in real estate, also called " private encumbrances", are restrictions on the fee simple ownership rights that generally run with the land. There are many types of private encumbrances such as CC & R's, liens, easements, profit a prendre, adverse possession, and encroachments. For example, a deed restriction  would be considered part of covenants, conditions, and restrictions (CC & R's) which limits the way a property owner can use his or her property.

2. Below is a link to an article describing a legal dispute concerning private restrictions on real estate between preservationists and a developer named Tistar Capital over the right to build a retail center in the courtyard of a historic community church. The preservationists argue that the building would not only block views of the church, but would be built in a courtyard that should remain open due to a 1920 deed restriction.

http://www.miamiherald.com/news/local/community/miami-dade/miami-beach/article3510703.html

Task #3- Public Restrictions on Real Estate

1.  Public restrictions on real estate are limitations on the ownership of real estate which are created through the government's power of taxation, eminent domain, police powers, and escheat. For example, in order to protect the health, safety, morals and general welfare of the public (police powers), the government is given the power of regulation which can be used to create residential, commercial, and industrial zoning laws and building codes.

2. Below is a link to an article discussing how Houston, Texas is the only major U.S. city without  a formal zoning code. The article states that Houston's separation of land uses is driven by economic forces instead of mandatory zoning which has lead Houston to be noticeably similar to many other major cities, despite the absence of zoning regulations.

http://www.businessweek.com/the_thread/hotproperty/archives/2007/10/how_houston_gets_along_without_zoning.html