October 21, 2016
MZ Strategies has posted a white paper funded by the Ford Foundation, Advancing Equitable Transit-Oriented Development through Community Partnerships and Public Sector Leadership. It opens,
Communities across the country are investing in better transit to connect people of all income levels to regional economic and social opportunity. Transit can be a catalyst for development, and the demand for housing and mixed-use, walkable neighborhoods located near quality transit continues to grow. In some places like Denver, Seattle, and Los Angeles (to name just a few) land prices and rents near transit have increased substantially creating concerns with the displacement of small businesses and affordable housing.
In response, multi-sector coalitions are forming in a number of regions to advance Equitable Transit-Oriented Development (eTOD), which aims to create and support communities of opportunity where residents of all incomes, ages, races and ethnicities participate in and benefit from living in connected, healthy, vibrant places connected by transit. These transit-oriented communities of opportunity include a mixture of housing, office, retail and other amenities as part of a walkable neighborhood generally located within a half-mile of quality public transportation. This white paper pulls together emerging eTOD best practices from four regions, and highlights opportunities to use federal finance and development programs administered by US Department of Transportation to create and preserve inclusive communities near transit. It offers lessons learned for other communities and a set of recommendations for the Federal Transit Administration to better support local efforts by transit agencies to advance eTOD.
Achieving eTOD involves an inclusive planning process during the transit planning and community development phases. This entails long-term and active engagement of a diverse set of community partners ranging from local residents, small business owners, community development players, and neighborhood-serving organizations located along the proposed or existing transit corridor, to regional anchor institutions and major employers including universities and health care providers, to philanthropy, local and regional agencies and state government partners.
Equitable outcomes require smart, intentional strategies to ensure wide community engagement. Successful eTOD requires planning not just for transit, but also for how this type of catalytic investment can help to advance larger community needs including affordable housing, workforce and small business development, community health and environmental clean-up. (1, footnote omitted)
The report presents e-TOD case studies from Minneapolis-St. Paul; Los Angeles; Seattle and Denver. These case studies highlight the types of tools that state and local governments can use to maximize the value of transit-oriented design for broad swathes of the community.
- Since this spring the U.S. Department of Housing and Urban Development has issued several new guidelines and rulings to the Fair Housing Act, a law passed in 1968 that prohibits housing discrimination based on race, color, national origin, religion, sex, disability or family status. These new guidelines clarify certain actions or policies by landlords, property managers, real estate agents or lenders that could be classified as discrimination against those protected under the act.
- A NYT article explains how new programs from major lenders and mortgage investment giants Fannie Mae and Freddie Mac can help millennials, immigrant families and first-time buyers of all backgrounds.
- The Federal Reserve expects to increase its benchmark interest rae “relatively son” if the economy continues to advance at a reasonable pace, according to an account published Wednesday of the bank’s most recent policy meeting.
- Mortgage rates climbed higher this week following long-term U.S. Treasury yields. With the bond market anticipating a Federal Reserve rate increase later this year, Treasury prices fell this week, pushing yields to four-month highs. Investors have been selling bonds because they expect the Fed to raise short-term rates before the end of the year. Rising oil prices also pushed up yields.
- Freddie Mac continues to believe that mortgage lending is on track for a big year this year, but now expects the market to tap the brakes in 2017. Last month, Freddie Mac’s monthly outlook report showed the government-sponsored enterprises’ analysts were continuing to project that mortgage originations will top $2 trillion this year, which would be the first time originations have been that high since 2012.
- Unsurprisingly, mortgage applications barely moved in the Mortgage Bankers Association’s newest Weekly Mortgage Applications Survey for the week ending Oct. 14. However, the week did get cut short due to the Columbus Day holiday, which impacted the results.
October 20, 2016
U.S. News & World Report quoted me in Your Home Is a Better Investment Than Bonds. It opens,
With bonds paying next to nothing, where can you turn for a respectable yield, guaranteed?
Well, how about your home?
Many homeowners look upon the homestead as a valuable asset they can tap for retirement through downsizing or a loan. They typically count on building equity the old-fashioned way, by gradually paying off the debt and enjoying some price appreciation.
There’s another option: making extra principal payments on the mortgage to reduce the debt faster. Every dollar used to pay down the loan earns a “yield” equal to the loan rate, since it saves you from having to pay that amount of interest. If your loan charges 4 percent, prepayments earn 4 percent, a lot more than you’d get in bank savings or a 10-year Treasury note, now yielding a paltry 1.8 percent.
“The advantage to paying off a mortgage over buying bonds depends on the cash flow created,” says Wyatt A. Moerdyk of Evidence Advisors in Boerne, Texas. “If the cash flow created by paying off a mortgage is greater than the yield of a bond investment, paying off the mortgage may be a wise move.”
“A very conservative investor who is averse to debt may find paying off his or her mortgage is the right choice,” says Eric Meermann, a planner with Palisades Hudson Financial Group in Scarsdale, New York. “If the alternative is sticking your money in a money market or savings account, you’re better off paying (the mortgage off) early.”
He adds, though, that prepaying a mortgage is not a good alternative to investments such as stocks that could be more profitable in the long run.
Mortgage payments involve various charges, often including sums for property taxes and homeowner’s insurance, but the key parts are the interest charge on the remaining debt and the principal payment that gradually reduces the debt over the years.
You have a right to pay extra principal, every month or in lump sums, and the payment slip you send with your check probably has a space for recording the amount.
Paying down a mortgage has a snowballing effect, since it reduces interest charges going forward. On a fixed-rate loan, that allows more of each month’s payment to go to principal rather than interest, and the loan is paid off early. With an adjustable-rate mortgage, extra payments reduce the required payment after the next annual reset, which applies the new interest rate to the remaining debt. After that, you can either pay less or pay what you have been, with more going to principal.
Prepayments can substantially reduce your interest charges over time, since less interest is required each month as the debt gets smaller. They also allow you to build equity faster.
A homeowner with a $300,000 mortgage for 30 years at 4 percent would pay $1,432 a month in principal and interest. By adding about $150 a month in prepayments, the loan could be paid off five years early, reducing total interest charges by about $40,500. Without the prepayments, the homeowner would still owe nearly $78,000 after 25 years.
“Many people like to have paid off their mortgage before they retire, and making extra payments on your mortgage can be part of that strategy,” says David Reiss, who teaches about residential real estate at Brooklyn Law School in New York City.
But although today’s low bond yields make mortgage prepayments appealing, stocks returns could beat prepayment yields substantially. Index funds tracking the Standard & Poor’s 500 index are up nearly 8 percent this year, and averaged 6.7 percent a year over the past decade. That’s a lot better than you’re likely to do with a mortgage prepayment, though the prepayment yield is guaranteed while a fund’s return is not.
- A report by the Brookings Institute, titled Time for Justice: Tackling Race Inequalities in Health and Housing, discusses some of inequities and issues in race relations within housing and healthcare.
- The Partnerships for Raising Opportunity in Neighborhoods, known as PRO Neighborhoods, is a program of JPMorgan Chase & Co. to provide funds to community development financial institutions (CDFIs) that collaborate to help revitalize low- and moderate-income communities and aid their residents and small-business owners. Here is its 2016 report.
- In an article by the Joint Center for Housing Studies, titled Housing Recovery by Income in Two Metros: San Francisco and St. Louis, the author illustrates the difference in housing prices and income for those two regions.
- An paper by the Division of International Finance, titled Can Learning Explain Boom-Bust Cycles in Asset Prices? An Application to the US Housing Boom, argues that boom-bust behavior in asset prices can be explained by a model in which boundedly rational agents learn the process for prices. The key feature of the model is that learning operates in both the demand for assets and the supply of credit.
- This paper by the Board of Governors of the Federal Reserve System, titled Do Mortgage Subsidies Help or Hurt Borrowers, shows how mortgage subsidies affect homeownership costs by reducing effective mortgage rates and increasing house prices. The author shows analytically the role of mortgage subsidies in determining house price changes, economic incidence, and efficiency costs using a theoretical framework for applied welfare analysis.
October 19, 2016
The most recent issue of Housing Spotlight from the National Low Income Housing Coalition is titled The Long Wait for a Home. The Executive Summary reads,
The Public Housing and Housing Choice Voucher (HCV) programs provide essential affordable housing to some of the nation’s most financially vulnerable households. Forty percent of new public housing admissions and 75% of new voucher holders each year are required to be extremely low income (ELI) households, who earn no more than 30% of their area’s median income (AMI) or the federal poverty guideline, whichever is higher. Seventy-one percent of the nearly 1.1 million public housing households and 74% of the 2.2 million HCV recipient households are ELI (HUD, 2015).
The housing resources available to ELI renters however are insufficient. The private and subsidized rental markets make available only 3.2 million affordable homes for the nation’s 10.4 million ELI renter households, resulting in a national shortage of 7.2 million rental homes (NLIHC, 2016). ELI households face a long wait for housing assistance. Unable to find affordable housing, 75% of ELI renter households are severely cost burdened, spending more than 50% of their income on housing costs and leaving little money for other necessities (NLIHC, 2016).
The last nationwide survey of Public Housing Agencies (PHAs) regarding their public housing and voucher waiting lists was conducted in 2012. Since then, rental affordability has worsened, squeezing ELI renters even further out of the private market. To document the current state of waiting lists, NLIHC surveyed PHAs in the Fall of 2015 and Winter of 2016. Three hundred twenty PHAs responded with complete surveys, representing a diversity of size, location, and metropolitan status.
Survey data paint a bleak picture of waiting lists closed to new applicants and long waits for housing assistance. Key findings include:
- Fifty-three percent of HCV waiting lists were closed to new applicants for housing assistance. Sixty-five percent of HCV waiting lists closed to the general public had been closed for at least one year.
- Eleven percent of public housing waiting lists were closed to new applicants. Thirty-seven percent of public housing waiting lists closed to the general public had been closed for at least one year.
- The median HCV waiting list had a wait time of 1.5 years. Twenty-five percent of HCV waiting lists had a wait time of 3 years or longer.
- The median public housing waiting list had a wait time of 9 months. Twenty-five percent of public housing waiting lists had a wait time of 1.5 years or longer.
- ELI households accounted for nearly 74% of households on the average HCV waiting list and more than 67% of households on the typical public housing waiting list.
- Families with children accounted for 60% of households on the average HCV waiting list and 46% of households on the typical public housing waiting list.
- Seniors comprised the most common type of household on 15% of the public housing waiting lists for which these data were provided.
Closed waiting lists and long waits for housing assistance make clear that we must expand housing resources for our nation’s lowest income renters. Legislation introduced in the 114th Congress would increase investments in vouchers, public housing, and other housing programs.
* * *
These policy changes, and others like them, could end housing poverty and homelessness once and for all by providing the resources necessary for every low income family to afford a home.
This report rightly brings attention to the big problems facing extremely low income households and federal affordable housing programs. Whether anything is done for them depends completely on the outcome of the election.
- An article titled, The First Amendment and Fair Housing in the Sharing Economy, explains how the sharing economy—a marketplace made up of businesses that profit by connecting providers of goods and services with users of those goods and services—challenges us to reevaluate our anti-discrimination laws. This Essay considers one such challenge: how should public accommodation laws such as Title II of the Civil Rights Act of 1964 and the Fair Housing Act apply to the housing sector of the sharing economy?
- This paper, titled Pockets of Poverty: The Long-Term Effects of Redlining, studies the long-term effects of redlining policies that restricted access to credit in urban communities.
- An article titled, Home Equity Extraction and the Boom-Bust Cycle in Consumption and Residential Investment, explains how conventional wisdom holds that the consumption boom-bust cycle of the 2000s was caused by homeowners financing their consumption through home equity extraction. However, this view is inconsistent with micro evidence that home equity extraction is associated with large housing investment expenditures rather than consumer spending. This association is strongest among young households. I rationalize these findings using a life-cycle model with home equity-based borrowing subject to borrowing frictions.
- This article, Nowhere to Run, Nowhere to Hide, Asset Diversification in a Flat World, presents new international diversification indexes across equity, sovereign debt, and real estate. The indexes reveal a marked and near ubiquitous decline in diversification potential across asset classes and markets for the post-2000 period. Analysis of panel data suggests that the decline is related to higher levels of market credit risk and volatility as well asto technology and communications innovation as proxied by internet diffusion. The decline in diversification opportunity is associated with sharply higher levels of investment risk.
- A paper titled, Maintaining Condominiums and Homeowner’s Associations: Ending the Free Ride, discusses how the last five years have brought a spate of litigation over the relative rights of associations and mortgagees. The litigation appears to have settled one contentious but critical issue: the super priority lien confers on associations the right to foreclose. Other issues, however, remain unsettled, and often depend on state-specific statutory provisions.
- This paper titled, Local Media and the Local Housing Market, provides evidence for media affecting households’ home-buying decisions, which in turn leads to an impact on short-term housing return. Individuals and households have been known to be affected by the media. Together with specific assumptions about the housing market, this implies a positive correlation between lagged media content and subsequent housing return.
- In this paper, titled Producing Affordable Housing in Rising Markets: What Works?, we describe the problem of affordability in rising markets and review existing evidence on how well local policy approaches work. The most widely used policies, local inclusionary zoning and statewide “fair share” laws, have produced relatively small numbers of affordable units, and are therefore unlikely to substantially mitigate the effects of rising housing costs. More effective policies to develop and preserve affordable housing, particularly in high opportunity neighborhoods, will require increased public and private funding and political support.
October 18, 2016
Realtor.com quoted me in Neighbors Sue Man for Tinkering With Cars in His Own Garage. It opens,
Charles Williams loves working on cars, a hobby he’s continued even after losing his legs in 1993 in a freak construction accident. So in 2007, he poured $65,000 into building a nearly 2,000-square-foot four-car garage next to his house in Harbeson, DE. The place—which has vintage license plates covering the walls and lifts so he and his buddies can tinker to their heart’s content without lying on the concrete floor—is a car nut’s fantasy. At least, it was, until some of Williams’ neighbors—apparently offended by the sight, smell, and sounds of guys doing guy stuff—decided to sue Williams for repairing cars in his own garage.
In 2014, three of Williams’s neighbors—Margaret Foulke next door and John and Carol Kane, who live 800 feet down the road—filed a lawsuit against Williams saying that the garage was a noisy, stinky nuisance and must be torn down, according to The Cape Gazette. In June, a judge ruled in favor of Williams, explaining simply, “Mr. Williams has a not-uncommon hobby—working on cars—that he pursues with an uncommon vigor.”
Nonetheless, the neighbors plan to take their case up the chain to the Delaware Supreme Court.
Williams says he’s spent $30,000 defending himself from his accusers, who also claim he built the garage without permits and runs it as an illegal business. But Williams denies these allegations as well, saying he received the proper permission to build and has never accepted money in exchange for repairs. In fact, he has even fixed vehicles owned by the very people are demanding that he tear down his garage!
“I’ve fixed their lawnmowers, I’ve fixed their tractor, I’ve fixed their golf carts… I did everything for them, anything they asked, since that’s what neighbors do,” says Williams.
At first glance, the plaintiffs seem like candidates for a “worst neighbors” award. But we had to wonder: Is there anything to this case? Is it ever illegal for to tinker with cars in your own garage?
While local laws vary by area, as a general rule, David Reiss, a professor of Law at Brooklyn University and editor of REFinBlog.com, thinks the neighbors are spinning their wheels.
“The facts sure don’t seem to be on their side, at least as this article portrays them,” says Reiss. Here’s a rundown of the neighbor’s complaints about the garage, and why Williams appears to be in the clear.
“There are a lot of loud things in and near homes,” points out Reis. Compare a vacuum cleaner at 10 feet (70 decibels) to a lawnmower (as high as 90 decibels) to a train (100 decibels).
“Many localities have restrictions on the decibel level of noise that can come from a property, but those levels can be pretty darn high,” Reiss explains. “New York City, for instance, limits garbage trucks to 80 decibels from a distance of 35 feet when they’re not compacting. It limits music from commercial establishments to 42 decibels when measured from inside a neighbor’s home.”
In other words, the sound of a few motors running or rock music probably aren’t loud enough to write home about—or to sue over.
Noxious fumes and other nuisances
Sure, these neighbors could claim that the eau de motor oil emanating from William’s garage is a “nuisance.” It’s just that they would have to be deemed “unreasonable in the context of their residential neighborhood,” says Reiss.
“The neighbors could also argue that the increased traffic that resulted from this use was a nuisance too, but that also seems like a major stretch,” says Reiss.
“The neighbors could claim that Williams is running a commercial establishment in a residential neighborhood, but it sounds from the article like the facts don’t support this claim,” says Reiss. So unless the neighbors catch a huge wad of cash passing hands, Williams is just a regular dude who digs cars.