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Middle Class Leaving Cities — Quote Without Comment

April 18th, 2014

“[I]ndependent-minded, urban middle classes are quintessential swing voters. They can create political trouble for an unsympathetic mayor—and that’s why leaders in Chicago, New York, and elsewhere aren’t going to lift a finger to try to halt their flight. Indeed, in Chicago, even the black middle class is bailing. The city’s leadership appears unconcerned.”

“To the extent that the middle class abandons Chicago and New York, the Democratic Party’s stranglehold in such places will only tighten. In this light, the dramatic changes in Chicago since 1970 shouldn’t be seen as merely an accident of fate, but rather as a political result directly tied to the interests of the Democrats running America’s third-largest city. Urban liberal politicians may see value in continuing to beat the “tale of two cities” drum. Just don’t expect any of these big-city mayors to reach out to the middle class any time soon.”

Aaron M. Renn, Chicago’s Vanishing Middle Class, City Journal, April 16, 2014.  http://www.city-journal.org/2014/eon0416ar.html

Nobel Prize Worthy Discovery: If You Raise Prices, the Demand Falls

April 18th, 2014

The New York Times reports that young adults are leaving better suburbs and moving to cities. Why would they do a thing like that? Because on account of the soaring home prices, they can’t afford to start a household of their own in the desirable suburban areas where they grew up, so they move to cities where they can afford to join the gentrification trend, and if necessary, share an apartment with one or two roomies, saving a bundle in the process. For example, Rye, NY, a posh suburban community, “had a 63 percent decrease in 25- to 34-year-old residents and a 16 percent decrease in 35- to 44-year-olds.” Joseph Berger, Suburbs Try to Prevent an Exodus as Young Adults Move to Cities and Stay, N.Y. Times, April 16, 2014.

According to a housing maven quoted by the Times: “The greatest population losses, . . . were in ‘the least diverse communities with the most expensive housing, which happen also to be those that have almost no affordable multifamily housing.” Amazing. Don’t that beat all?

This is an important news story, but it leaves us wondering what took the Times so long to take note of it and why the tone of its coverage in one of discovery of surprising news. We were taught in Econ 101 that if you raise prices, you reduce demand. Yes? Any question about that?

Bubble, Bubble, . . .

April 16th, 2014

A quote from today’s L.A. Times says it all:

“Southern California home prices are surging as the spring buying season heats up, with the median price in March hitting $400,000 for the first time in six years.

“But a deeper look at the market reveals a recovery divided between the rich and everyone else.

“The market for high-dollar homes is hopping, with sales on the rise and buyers launching bidding wars. But sales of low- to medium-priced homes have plummeted during the same period — with many potential buyers priced out….” Tim Logan and Andrew Khoury, Home Prices Surge, Sales Plunge, L.A. Times, April 16, 2014, front page, above the fold.

http://www.latimes.com/business/realestate/la-fi-home-prices-20140416,0,4794538.story#ixzz2z43sCMIL

So y’all think that a home market where half the homes sell for over $400,000 isn’t going to end badly? What do you suppose will happen when interest rates go up?

We again  remind our readers, as we do regularly, that back in 1979, in his dissent in Agins v. Tiburon, California Supreme Court Justice Willam P. Clark, warned that California’s extreme regulatory climate would lead to a cleavage of the population, and its division into the well housed rich and others.

So, Shall We Move from the Suburbs to the Cities Like Those Wonderful Modern Planners Want Us To?

April 15th, 2014

For the past few years we have been getting the new “progressive” planners’ “party line” that suburbs are icky and passé, and that enlightened folk are abandoning them and moving back to cities. Alas, most of that appears to be BS. Bureau of census figures suggest otherwise. As we note in this blog from time to time, that vaunted “return to the cities” is largely a trickle consisting of young, well paid singles, and well-heeled middle aged boomers, both of whom tend to favor hip city neighborhoods, but neither of whom have to contend with the burdens and problems of raising and educating children in today’s shabby American cities.

Now drops the other shoe. Today’s New York Times (front page, below the fold) brings the news that — in the words of the headline — In Many Cities, Rent Is Rising Out of Reach of Middle Class, April 15, 2014, at p. A1. Whereas historically, city residential tenants would pay no more than 30% of their gross income for housing, now it’s more than that, ranging from 47% in — where else? –  Los Angeles, down to 35.8% in Hattiesburg, Mississippi. A Zillow study “found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.” Now that may be cool if you are a well-paid techie living in San Francisco and being transported to work in the Silicon Valley gratis by a luxury bus owned and operated by your employer, but it’s not so good for lesser folk.

Bottom line, “[f]or many middle- and lower-income people, high rents choke spending on other goods and services, impeding the economic recovery.” Developers are building new city apartments, but as long as their product is being snapped up by the affluent yuppie/boomer market, “there is little incentive to build anything other than expensive units.” But to our thinking, not many people can afford $2000+ per month for a studio or a dinky one bedroom place (CNN.Money says the median rent in LA — which means that half the dwelling rent for more than that — is $2100)? And be careful about what you read in the papers. CNN.Money.com also says that you can buy a home in the San Fernando Valley for $200,000. Our response: Stuff and nonsense. Should you by some miracle find a Valley home at that price, you wouldn’t want to live in it. Trust us.

And so, as the sun sets in the West, be careful, be very careful before you buy the “new” planners’ pitch that cities are where it’s at. It isn’t. At least not yet; not by a long shot. Current data show that in most cases buying a house is a better economic deal than renting. And if you want to save on rents by moving to more remote parts of the city and certainly to the far-out suburbs, you may discover that commuting to your city job is a pain in the neck, and that transportation costs erode or negate your rent savings. Bummer.

So in our view, there is no solution in sight as long as developers are prevented from building small, modest and inexpensive suburban ”starter homes” and garden apartments, like they used to do in the days of yore. Also, as long as a house is looked upon by buyers as a tax-advantaged investment rather than a dwelling, things are not going to get much better. And talk all you want about the fashionably hip foo-foo city scene, its existence is not going to attract middle-class families with children, who are indispensable to a healthy city.

So how do the “new urbanist” planner mavens expect suburban kids to form a household of their own and settle there settle in it permanently when they reach adulthood? They can’t. So they do the only thing they can, which is move to the city where affordable living space can be found that they can afford, especially if they share an apartment with a roommate or two.  In other words, as we noted years ago, the prevailing suburban regulatory climate and its consequent upward pressure on home prices, is creating an economic climate in which — unless they win the lottery, or outlive their parents, young people simply aren’t able to live anywhere near their parents’ homes where they were raised.

Follow up. Today’s L.A. Times (April 17, 2014) notes that the median home price in the San Francisco Bay area has topped a half-million dollars. As we noted, in the desirable parts of cities, rents are soaring out of young people’s reach. So these folks may have to climb down the socio-economic ladder, which — we have a sneaky hunch — is just what the “progressive” new urbanists want.

 

 

The 2014 Brigham-Kanner Prize Goes to Mike Berger

April 14th, 2014

2014 Brigham-Kanner Prize

Why is this man smiling? Because he is Michael M. Berger, a California appellate lawyer par excellence (former president of the California Academy of Appellate Lawyers), and he has good reason to smile. The William & Mary College School of Law in Williamsburg, Virginia,  has just announced that its annual Brigham-Kanner Prize for 2014 will go to Mike, a private practitioner from California. He will thus be the first law practitioner — as opposed to a gaggle of prominent law professors — to be the recipient of the B-K Prize which is awarded annually to an individual who has made an outstanding contribution to the subject of private property rights and their role in society. Berger tops all those professors in that he has an outstanding track record both as an advocate who has won more taking cases in the U.S. Supreme Court, and in the California state courts than any other practitioner we can think of, and whose track record as a legal commentator in the law journals beats the professoriate.

We will have more to say about this subject before long. In the meantime, if you want more details go to www.inversecondemnation.com whose impresario and our fellow blogger, Robert Thomas, has done his usual fine job announcing the award and commenting on Mike Berger’s many professional virtues. Go for it.

Full disclosure: Mike Berger has been your faithful servant’s friend for over 40 years, as well as a co-worker, co-author, and even — once — an adversary in an appellate case. As the local legend goes, we gave him his first job and he gave us our last one.

The Taking Implications of the Federal Circuit’s Decision on the Automobile Makers’ Bankruptcy — What About Those Screwed GM Bondholders?

April 10th, 2014

In case you didn’t catch it, the U.S. Court of Appeals for the Federal Circuit upheld the U.S. Claims Court decision that we commented on a while back (http://gideonstrumpet.info/?p=4727). The ruling was that the automobile industry’s bankruptcy proceedings of a few years ago do not collaterally estop car dealers whose franchises were terminated by the auto makers at the government’s behest from filing an inverse condemnation case in the U.S Court of Federal Claims, claiming a taking of those franchises.   A&D Auto Sales, Inc. v. United States, Nos. 13-5019, 13-1520 (Apr. 7, 2014).  Those dealers will now have to amend their pleadings but their right of action has been upheld. If nothing else, only the U.S. Court of Federal Claims has the jurisdiction to award just compensation for takings against Uncle Sam, so anything along those lines that may have been decided in the bankruptcy court proceedings is not binding.

As usual, our colleague Robert Thomas has the Federal Circuit opinion up on his blog today http://www.inversecondemnation.com/#.dpuf , so if you are minded to go through that opinion he has a link to it, and your faithful servant, being a lazy dude, is not inclined to duplicate Mr. Roberts’ effort which, as usual, is pretty good and is highly recommended by us.

But as far as we are concerned, that decision not only opens the door to claims by solvent car dealers whose franchises were terminated by that bankruptcy, but also those of the folks whose GM bonds were nullified to facilitate that bankruptcy. The bottom line of that aspect of the case is that the UAW made out like a bandit, but the GM bondholders had their bonds de facto confiscated in order to facilitate the public purpose of perpetuating the operations of the American car industry. If it’s a constitutional “public use” to take privately owned land in order to carry water for the likes of General Motors and Chrysler (see the Poletown and Vavro cases respectively), then surely it’s also a taking, albeit an inverse one, to take individual citizens’ GM bonds — which, last we heard, are private property — in order to serve the public purpose of keeping the automobile industry going at their expense. Yes?

We are aware that the principal of the  insurance giant AIG is pursuing a taking action in the Federal Claims Court for an alleged taking of its assets in that bankruptcy. We wrote about that a while back Which may be legally OK, except that in that case AIG was saved by Uncle Sam, so it’s rank ingratitude for it to claim  compensation for a transaction that saved the bacon of the complaining party. Maybe that can be taken care of by the familiar eminent domain doctrine of offsetting benefits against the complaining party’s just compensation. We shall see.

So why shouldn’t the [former] bondholders not be the beneficiaries of the same legal reasoning? Alas, we don’t know of any such action being pursued on their behalf, and the limitations clock is ticking. Still, hope springs eternal, and we hope that someone will bring such an action on behalf of the abused GM bondholders to vindicate the Fifth Amendment and the Eighth Commandment.

Steve Anthony’s Fight Against Phony Eminent Domain Revisited

April 4th, 2014

One  of the old, classic California right to take cases is County of Los Angeles v. Anthony, 224 Cal.App.2d 103 (1964). Ostensibly, it was a taking for a site for a new motion picture museum. In reality it was at best a botched up mess, and at worst, and underhanded way of glomming on to some land which the county wanted in order to expand parking at the Hollywood Bowl. The case gained notoriety when Steve Anthony, a homeowner whose house was the subject property resisted the taking both in court and physically: he confronted the Sheriff’s Deputies who came to take possession, with a shotgun.

Steven Anthony, aiming a shotgun, refuses to vacate his home

 

 As you can imagine, this made for a lot of publicity but did not do poor Steve any good. He was arrested and prosecuted.

And the museum? Was it built? Don’t be silly. Of course not. The subject land became part of the Hollywood Bowl parking lot. Rather than giving you our version, we offer the dispatch from  the Central Library blog, which is linked to this post.  It will give you the essential facts compleat with the names of show business personalities behind this caper.

The court of appeal opinion which we cite above was wretched. It held that a taking for a private, profit-making museum was OK when incidental to a valid taking. But in the Anthony case, as you can see by reading the opinion cited above and the background facts, there was nothing in this taking to be “incidental” to – no public works, no blight, no redevelopment to improve the community — nothing like that. It was purely a private caper, that didn’t even accomplish its stated purpose. Rather than us giving you our version, here is the story, pictures and all, as presented by the Central Library Blog. Here it is: http://www.lapl.org/collections-resources/blogs/central-library/here-lies-liberty-steven-anthonys-fight-against-eminent

Afterthought. We note that the subject of this post ties in with the recent spate of stuff in the blogosphere, reflecting on the aftermath of the wretched  2005 Kelo case, where a 92-acre waterfront tract of land was taken supposedly to create a spiffy new neighborhood that would cater to the wants of high-class employees of the nearby Pfizer Pharmaceuticals facility. But it didn’t happen. After displacing a well kept lower middle class neighborhood, and razing the land, nothing, absolutely nothing, has been built on those 92-acres after the waste of millions — over $100 mil, as we recall. And instead of expanding and providing new employment, as represented to the Supreme Court, Pfizer packed up its bags and moved out of New London, taking some 1400 jobs with it.

Follow-up. For a full, detailed story of Anthony’s doomed fight to protect his home for the taking, click on http://paradiseleased.wordpress.com/2012/01/13/the-siege-of-fort-anthony-part-iii-conclusion/

Nullum Prandium Gratis!

April 4th, 2014

That means “No free lunch” in Latin. In accordance with that principle, we learn that (a) our Interstate Highways — a marvelous achievement of our era — are falling into disrepair, but (b) nobody wants to pay the cost of repair and maintenance . Ron Nixon, Agreement on Interstate Repair Needs, but Not on How to Pay for Them, N.Y. Times, April4, 2014, at p. A13.

The simplest and fairest solution would seem to be the imposition of tolls payable by Interstate users, which would place the burden on the recipients of the benefit, but — guess what? — the folks who make heavy use of those freeways are fighting this proposal tooth and nail, and demand that somebody else do the paying, and do so by methods that are invisible — not by forking over money to a highway toll collector, but some other way.

The surprising part is that the opposition includes not just highway users like trucking companies, but aso the likes of McDonald’s and Dunkin Donuts who argue that if — Heaven forfend! — members of the travelling public have to get off the tollway, get their vittles, and then get back on, they’ll avoid interstates instead, and the fast food business will go to hell in a hand basket. We have trouble accepting that because there are states with toll highways, and last time we looked people were using them and duly tossing their money into the toll collectors’ baskets. But, hey man, what do we know? Our inquiry is: where is it written that each of us has an inalienable right to a nonstop trip to wherever we are going, compleat with Big Macs on the way, without paying the full cost of the highways we travel on?

True, all motorists pay taxes, but not all of them are freeway users. So if those who are, are called upon to throw some money into the toll collectors’ basket, that would seem only fair since they are the ones receiving a special benefit of speedy, uninterrupted travel. If doing so isn’t worth is, that means that these folks don’t think the freeways are worth their true cost. If so, it’s time for the responsible government officials to do their job, confront the would-be public free lunch consumers, and remind them that there is no such thing as a free lunch.

If you won’t do that, you run the hazard that — as Margaret Thatcher put it — sooner or later you run out of other people’s money, and in this case,  you wind up with lousy, unsafe roads.

 

Who Owns Grand Central Terminal and Why? Once More With Feeling.

March 31st, 2014

A week or so ago, we posted the question of who owns the Grand Central Terminal, but so far, nobody came up with the answer. This is not surprising once you learn the answer. No, it isn’t Penn Central; though it is still around – it’s now an insurance company or something unexpected like that. And it isn’t the City of New York or any other government/transportation entity. You might think that after all the sturm und drang of the Penn Central Transp. Co. v. City of New York litigation, that would be the case. But it isn’t.

According to the New York Times (Sam Roberts, Grand Central’s Flesh-and-Blood Landlord, N.Y. Times, Jan. 29, 2013), it’s “the balding 52-year old” fellow named Andrew S. Penson who  — in the words of www.crainsnewyork.com of June 13, 2013, “quietly snapped up ownership of one of the most famous train stations in the world, Grand Central Terminal” some eight years ago. He is said to have done that “with dreams of minting hunderds of millions of dollars by selling off the landmark’s more than 1 million square feet of unused development rights.”

“Developments rights”? You mean those air rights above Grand Central? It would so appear. But in a familiar repetition of a familiar story, Penson’s plan “was broadsided by Mayor Michael Bloomberg’s proposal to create out of whole cloth millions of square feet of development rights in midtown east and sell them off to jump-start a new generation of bigger, smarter office towers.” So “Mr. Penson is fighting back,” and has hired none other than David Boies of Bush v. Gore fame, as Crain’s puts it, ”to press his case in court if need be.”

We admire Mr. Boies’ forensic accomplishments, but somehow his name does not leap to mind when the subject of inverse regulatory takings comes up. In fact, we would like to know how many inverse condemnation cases Mr. Boies has actually tried, or handled on appeal as lead counsel. Still, a big-shot New York lawyer is a big-shot New York lawyer, and he may just pull it off. Then again, he may not. We await the event with bated breath.

But be that as it may, we recall how in the days of the Penn Central litigation the police power hawks in New York and elsewhere, carried on how valuable those Grand Central terminal air rights were, and how their existence — if only on paper — should keep Penn Central content in the belief that it could use those “rights” to build elsewhere, even on lots that were already occupied by substantial buildings  — like the Biltmore Hotel, if memory still serves.

If you are interested in a detailed autopsy of the earlier Grand Central/Penn Central litigational fiasco, we invite you to read our efforts in Making Laws and Sausages: A Quarter-Century Retrospective on Penn Central Transportation Co. v. City of New York, 13 William & Mary Bill of Rights Journal 679 (2005).*  It’s all there, but if you aspire to claiming any mavenhood on this subject, at least do read the description of the Penn Central litigation in the lower courts (the SCOTUS part has been commentaried on to death), plus footnote 56, and of course, our article’s Conclusion.

The Penn Central litigation is noteworthy for the largely unnoticed fact that of the three appellate courts that decided it, no two agreed on the nature of the legal issues being litigated, so each decided issue(s) that had nothing to do with the issues decided by the other two appellate courts. Honest, folks.

Anyway, it looks like we may get to see another chapter in the Grand Central terminal litigational wars — sort of like the Punic Wars. We can’t wait.

______________________________________________

*     The kids running that law journal screwed up big time and mis-paginated the printed copy of the article; it starts either on p. 653 or 679. But since the article is, er, on the long side, you should have no trouble finding it in Volume 13 of the William & Mary Bill of Rights Journal. Do try.

 

 

Bubble, Bubble — Is That the Sound of the post-Bubble Bubble beginning to Pop?

March 29th, 2014

This one is serious, folks, so pay attention. As we noted in this blog from time to time, the California housing market has been goosed upward recently by big-buck folks buying up distressed homes cheaply en masse in order to rent them out, and make a buck that way, as well as score some capital gains as the California housing market recovers.

According to today’s L.A. Times — front page, no less — it looks like that gravy train is slowing to a halt. Tim Logan, Investors Curb Home Buying, L.A. Times, March 29, 2014, at p. A1. “Companies are dialing back their purchases of houses to rent out, a signal prices hit a ceiling in SoCal.” The peak  in the numbers of such sales was reached in 2013, when it hit 613 homes being bought by the 20 largest single-family home buyers. This year it came down to 96. Sounds like a peak in numbers has indeed been reached.

But this isn’t all. Markets have this habit whereby they rarely stand still — they either move up or down. And given these figures and the economy generally, we don’t see how home prices can keep going up. Other than the big-boy cash home buyers, we don’t see how Mom-and-Pop homebuyers — the kind of folks who want a nice roof over their heads — can pay more than the current median prices of $385,000. And the other thing about big-buck professional homebuyers, is that they are not likely to sit there and watch the market value of their investments go down — they’ll bail when the market turns hinky and do their best to sell and collect whatever gain they managed to accumulate – and move on to other investments.

Still, some of big-time buyers are still at it. The L.A. Times reports that Starwood Waypoint Residential Trust is still buying homes in Southern California, and just popped $144 million on “a portfolio of 707 homes, ” which according to our calculator comes to $203,000 per home. We should also note that should you be able to find a $200-grand home around here, you wouldn’t want to live in it. So those $200-grand bargains must be in highly disfavored parts of the state.

So stay tuned, and see how it turns out. Being a congenital pessimist we have a hunch that this isn’t going to end well.


The purpose of this blog is to provide a forum for people, whether eminent domain professionals or not, for exchange of ideas and a discussion of eminent domain news and issues. It does not provide legal advice. Questions concerning actual cases should be directed to the readers' own legal, appraisal and real estate advisers.

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