19 March 2017

What if condos weren't a scam?

Condos as a form of land tenure got invented in New York State to get around a new, strict, builder liability law.  If the builder of record is the condo corporation, all the liability falls on whoever bought in, rather than the actual builder, and so the actual builder -- on this scale, developer -- is safe from the legal consequences of their shoddy practices.

Note that the people "buying a condo" -- buying a share of the condo corporation that entitles them to live in a particular portion of the structure -- don't get design input.  The actual building is built to maximize the profit of the developer, and has almost nothing in it that referenced the preferences of the people who are going to live in it.  (Observe the increasingly tiny size of condos as the optimal small-investor-attracting price stays roughly constant and real estate markets get pricier and pricier as low interest rates shift the price associated with a particular monthly payment.)  There is basically no feedback from the people who are going to live there.

The other part of this is that there's not really a housing market; one of the things required for a market is buyer knowledge, and hardly anyone buys houses often enough to have the necessary knowledge.  People buying something to live in are not participating in a market.  (The building trades might be, but there you get issues of concentration and number of participants and functional monopsony.)  Houses, as a broad general class of things, are built right at the limit of the local building code in ways where the developer is seeking to maximize their profit at the expense of the building trades and the buyer gets all the liability for the result.  This sort of feedback can't give good results.

What could we do instead?

Well, let's look at where the collective structures are.  (The human trick is ganging up on problems; if you want to find the problem being solved, look for the co-operating group.)

There's a group of developers who exert political influence through the concentration of money.  There's a much more diffuse group who are complaining about the perverse incentives and unfortunate consequences of the developers seeking to "maximize their profit"[0] as a form of political opposition.  The second group is, well, losing.  Everybody[1] believes success means a house in a suburb with a lawn and a two car garage.

So part of this is PR (though keep in mind there's a chunk of the population who _likes_ knowing they're getting more out than they put in, and never mind how the system breaks in time), but part of it is finding some way for the people who live in the housing stock to provide direct feedback into what kind of housing stock it is, where it is, and what it does.

First off, it does need to be collective; hardly anyone has enough money to go buy a chunk of land and get just what they like built on it.  Secondly, it has to meet the needs of the people involved.  Thirdly, it should, from a public policy perspective, recognize that there's a housing density of less than one per ten hectares and a housing density of more than ten per hectare that make sense, but the stuff in the middle doesn't.  (It's ecologically unwise and it's expensive to service.  Remember that roads are a service.  So is sewage.)

So how many people does it take to have something that can build good housing -- the kind where the soundproofing between units is an insulated gap between concrete walls, and the plumbing has been put in with the expectation of paying for the next fifty years of maintenance, and so -- with some day care spaces and some senior assisted living spaces and just generally function, not as a condo, but as a really full service credit union; housing and child care and retirement planning/investment as well as financial and insurance services?  Most of your income would go into it; your taxes would have to fall as this means took over from current public means of meeting those needs.  And, yes, you have to deal with other people, but dealing with other people is a consequence of being a social primate.

If we want better communities, we must want better feedback, which means collective organization because individuals aren't communities and can't individually afford the services of communities.  That means we can't permit a system where the feedback is driven by developer profit.

[0] this means "shift as many costs on to the defenseless as possible" at least as much as it means "get the largest difference between our expenses and our income as we can"; many of the costs (infrastructure) of the most profitable forms of development aren't borne by the developer, but the tax base.  There's an argument that "most profitable" and "largest share of costs borne by the public purse" is an identity relationship.

[1] not literally everybody; it's generational.  Sure.  But the "don't tax me and I want more highways and less traffic and more convenience and services in my suburb" voter is a very reliable voter.

18 March 2017

My fellow Canadians...

The next Canadian federal election is in 2019.

Just exactly when solar got less expensive than coal as a means of generating electricity I'll leave to future historians; it might have been 2016.  It might be this year, or 2018.  It really isn't going to be later than that.  The Chinese are investing very large sums -- equivalent to hundreds of billions in USD -- and good for them.  They need to solve their smog problem.  Solar getting cheaper for everybody else in the process is hardly bad, either.

About a quarter of everything, market-value-wise, sits on fossil carbon.  Thereabouts of 70 trillion-with-a-T USD.  Even if you completely ignore climate change[1], anthropogenic climate forcing with atmosphere dumping of (mostly) carbon, all of that 70 trillion is overvalued.  When the market puts a sustained excessive value on something, we call it a bubble.  This one is the Carbon Bubble.

It's going to pop before the next election.  It's, well, there's no reason to suppose it isn't going to make 2008 look like a modest price adjustment.  Trudeau's government will have low odds of re-election, because generally Canadians won't vote for the government if the economy is bad.

(On a scale from "downturn" to "abandon capitalism as a failed experiment", it's going to be much closer to "abandon" than "downturn".  Everybody's political energies for the next few years in most of the developed world[0] are going into trying to hang on to a vaguely tolerable status quo in preference to a neo-con death cult; the will and the ability to do something sensible about the economy isn't going to be there.  So we're going to go off the cliff.)

Are we going to vote for the NDP in 2019?  Well, it depends on the leader.  If the NDP elect another leader who is sober and respectable and runs to the right of Brian Mulroney, very probably not. Voting for the austerity candidate in an economic crisis is a terrible plan.  (Voting for someone out for moral purity of doctrine is a terrible plan, too.)

So it's somewhere between plausible and highly likely we're going to get a Conservative government in 2019,  EVEN IF the Conservative leader is some sort of seriously detached from the consideration of facts.  People will not let go of the expectation Conservatives are good at the economy, no matter how much contrary evidence they get.

March 27th is the last day you can buy (for 15 CAD) a Conservative Party membership[2], enabling you to vote for Conservative Party leader.  There's one choice -- Michael Chong -- who is engaging with facts[3].  The other dozen choices are at least as blessedly free of the taint of factual knowledge as a bunch of new-hatched chickens.  (They are, for example, nigh-all climate deniers.  What they think this will do for Alberta's bitumen economy after the Carbon Bubble[4] has burst I can't imagine.)

If you're Canadian and not particularly politically committed, I urge you to buy a Conservative Party membership and vote for Michael Chong.  We really don't need someone who can't do arithmetic or face facts running the country in a crisis, and that's otherwise what it looks like we'll be getting.

[0] Canada, too.  Both our largest trading partner and some of our federal politicians keep having what amount to excursions from consensus reality.

[1] DO NOT completely ignore climate change.  Food security goes first, and will go before the sea rises and the coastal cities drown because we can't move them uphill if civilization has collapsed due to starvation.

[2] don't use a pre-paid credit card.  There's an ongoing something-or-other with fraud being alleged involving pre-paid cards.

[3] in a worrisome "markets are great!" sort of way.  Markets _can_ be great, if they're properly maintained (which is to say, regulated); they don't get or stay great on their own.  Of course, if you're running for CPC leader, you had better not go saying you think markets require regulation to function, and let people read between the line in your policy papers to make up their own minds about whether or not you're sane.

[4] https://en.wikipedia.org/wiki/Carbon_bubble  Note that this is talking about "we can't burn it!" more than it's talking about "the markets are going to undergo a correction"; the plummeting price of solar is going to get there and cause the correction long before carbon pricing or other regulation driven by governments shall.