Monthly Archives: April 2012

Never Mind that Facebook IPO — You May Make Money Buying a Palo Alto Home Instead reports that, anticipating the “feeling rich” effect of the upcoming Facebook IPO, local folks in Palo Alto are going bananas in anticipation of the new wave of Silicone Valley rich boys rushing out and overpaying for homes in the wake of making serious money on their Facebook shares which they mean to buy as soon as the Facebook IPO becomes reality. David A. Kaplan, Silicon Valley Real Estate: The Facebook Effect, April 30, 2012 — click here ).

“Though the number of actual prospective home buyers with Facebook connections is only a fraction of all buyers in the Valley, their psychological effect on the market is unmistakable. In Palo Alto, in particular — which Mark Zuckerberg calls home –sellers are either keeping their homes off the market until the IPO or ramping up expectations. For the first quarter of 2012, according to BrokerMetrics, the median price of a single-family P.A. home went up 11%, whereas inventory declined 57%.”

Which nicely illustrates one of the things that are wrong with California: when the ol’ homestead rivals hot securities investments, you know things are in bad shape, with another “bubble” being blown up by people who have more money than sense.

Down is Up in Cleveland

A headline in the Plain Dealer sure got our attention. It reads Cleveland’s Inner City Is Growing Faster than Its Suburbs As Young Adults Flock Downtown (Robert Smith, Plain Dealer, April 27, 2012). Sure sounded good. But then we remembered that newspaper headlines concerning such matters are often much more optimistic than warranted by reality, and indeed more optimistic than the contents of the headlined articles. And so it is here. We read the article (click here) and came across the following passage:

“Meanwhile, the newcomers are too few to offset a larger exodus. Cleveland lost 17 percent of its people last decade as nearly one in five residents left the city.”

‘Scuse us for asking, but this is a rate of growth to brag about?

Not only that, but it says here that the Cleveland newcomers fall into the 21 to 34-year old age cohort. Nice to see the youngsters leave Mom & Dad’s digs and strike out on their own. But do you really believe that when they get around to getting married and procreating, they will remain in the center of Cleveland? Or is it more likely that they will head back to the suburbs where life is nicer, schools are better and safer, and where one can buy a family home rather than blowing money on rent?

Wait and see.

Lowball Watch – Kansas

We are reliably informed that in the case of Hobbs v. Miller, Circuit Court of  Finney County, Kansas, No. 09 CV 150, the DOT just abandoned a condemnation case under the following circumstances. The taking would shut off driveway access to the subject property (which DOT argued was noncompensable because it was only a case of circuity of travel). It offered $5000. The trial court found this to be a taking of access, and the appraisers (which we assume in Kansas means “commissioners”) awarded $231,000. DOT then abandoned the taking, and the court awarded $121,000 in attorneys fees.

Certiorari Denied in the NY Dormitory Authority Case

We note that River Center LLC v. Dormitory Authority of New York, No. 11-922, is on this morning’s list of SCOTUS orders denying certiorari. This was a case in which the owners argued that the condemnor had depressed the value of the subject property before filing a condemnation action to take it. Unfortunately, the record on that one was not the best from the owner’s point of view.

It was a biggie. The New York Appellate Division reduced the owner’s recovery by some $14,000,000. The questions presented to SCOTUS were:

1. Whether the Fifth Amendment permits a state to deny compensation to an owner for loss of the reasonably probable development potential of a condemned development site taken through eminent domain proceedings, unless the property owner can show that development will come to fruition in the near future.

2. Whether, in awarding just compensation under the Fifth Amendment, a state may exclude damages resulting from deliberate governmental interference with a development project that delays development and suppresses the property’s value at the time of the taking over what it would otherwise have been.

3. Whether the Fifth Amendment permits a court in a condemnation proceeding to restrict evidence of value to the testimony of appraisers and to exclude or ignore otherwise competent testimony of property value (a) from the property’s owner, and (b) from third parties able to provide market-based evidence of value, such as financing proposals and offers to lease and buy.

The subject of precondemnation blight and how to handle it in the appraisal process has not received the attention it deserves from the Supreme Court whose efforts only made things murkier. If you have an interest in that subject, you may find of interest our article Condemnation Blight: Just How Just Is Just Compensation? 48 Notre Dame L. Rev. 765 (1973) — an oldie but a goodie that one. It received the Shattuck Prize from the American Institute of Real Estate Appraisers (now the Appraisal Institute).

There is no way of knowing this for sure, but we increasingly believe that SCOTUS’ veture into taking law — both inverse and direct condemnation — in the past two decades, screwed things up and resulted in such a justified public uproar that the Justices figure that they best leave well enough alone, and stay away from this subject. We further think that the division of views on the court is such that there simply aren’t enough votes, one way or another to come up with a coherent view of a workable Fifth Amendment jurisprudence. So what we got in the cases the court did consider on the merits is — if you’ll pardon the expression — jurisimprudence.

Follow up. For a detailed writeup of this case see Kelly Rizzetta, Developer’s $189M Valuation Case Denied High Court Review,, April 30, 2012.



Lowball Watch – New Jersey reports (Evonne Coutros, Saddle River Asks State Supreme Court to Review Eminent Domain Ruling, April 24, 2012 — click here) that the Borough of Saddle River just took it on the chin. It took a 2-acre vacant former service station site, and valued it at $1.35 million. But the owners, contending that there was a probability of zone change, opined to a market value of $5.25 million — which is what the trial court awarded, and the Appellate Division affirmed.

The borough has petitioned the New Jersey Supreme Court for review. Stay tuned.

California Dreamin’ of a Roof Over Your Head

We urge our readers to check out an interview with Joel Kotkin in the Wall Street Journal (Weekend Interview – April 20, 2012), by Alicia Finley, entitled Joel Kotkin: The Great California Exodus. A good read, that.  Mr. Kotkin has written about urban/suburban problems, particularly in California for years, and is knowledgeable about them. Whether you agree with him or not, you should read this article. Click here.

Mr. Kotkin is “singin’ our song” when he stresses that a major weakness of California is its housing cost. “Basically, if you don’t own a piece of Facebook or Google and you haven’t robbed a bank and don’t have rich parents, then your chances of being able to buy a house or raise a family in the [San Francisco] Bay Area or in most of coastal California is pretty weak.” His astute point is that if you are going to settle for living in the inland parts of California, where housing costs are lower — but not low — you will discover that the climate and amenities are not all that different from what’s available in other western ststes, like Utah, Nevada and Texas, so you may as well live in those places and enjoy better employment opportunities, lower housing costs, lower taxes, less onerous government regulation, and  neighbors who are not committed, as they increasingly are in California, to the creation of a radicalized society that is run for the benefit of the rich, the poor, and unionized government employees, while driving the middle class out.

“According to Mr. Kotkin, [the] upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half class society. On top are the ‘entrenched incumbents’ who inherited wealth or came to California early and made their money. Then there’s a shrunken middle class of public employees and, miles below, a permanent welfare class. As it stands today, about 40% of Californians don’t pay any income tax and a quarter are on Medicaid.”

What that means is that more and more Californians have no stake in assuring fiscal soundness of their society because they figure it’s somebody else’s money that’s being blown on them. So what’s not to like?

“And things will only get worse in the coming years as Democratic Gov. Jerry Brown and his green cadre implement their ‘smart growth’ plans to cram the proletariat into high-density housing. ‘What I find reprehensible beyond belief,” says Mr. Kotkin, ” is that people pushing [high-density housing] themselves live in single-family homes and drive very fancy cars, but want everyone else to live like my grandmother did in Brownsville in Brooklyn in the 1920s.'”

Follow up. Today’s Los Angeles Times informs us in a front-page article that things are looking up. How? In the words of the headline, Housing Market May Be on Rise at Last (L.A. Times, April 25, 2012, at p. A1). But wait a minute! Wasn’t it a rise in home prices that got us into deep doo-doo out here? Wouldn’t increased affordability of California housing rather than a return to the days of the “bubble” be better for us in the long run?


Sir, We Need You to Put Your Hands on Top of Your Head and Step Away From that Birdbath

Yeah, we know. You think the above headline is a put-on. Right? Actually, no; not quite. While, true enough, no dispatches have reached us yet that an armed officer of the peace has arrested a suburbanite homeowner for the offense of maintaining a birdbath in his back yard, it has gotten close in — where else? — New York. [Note to self: Remember to offer thanks to the Lord for not letting this news item come from California, the usual nutcake venue when it comes to bizarre land-use laws.]

The New York Times reports (Sam Roberts, Water in Your Birdbath? That Will Be $300, April 23, 2012 – click here) that the City of New York has been issuing three-hundred buck citations to homeowners who maintain ornamental birdbaths in their back yards. No, we are not making this up — we couldn’t if we tried. It seems that the city mothers are concerned with the spread of the Nile virus, and have declared war on “standing water.” Does that mean that all New Yorkers have been conscripted to drain standing puddles on their land? Technically, it would so appear, even though the Times reports that only four “surprised New Yorkers” have received such citations regarding birdbaths which, along with neglected swimming pools, are deemed by the city to be a special hazard. Which caused one of the citees to remonstrate that he has seen (and photographed) “manhole covers outside the 94th Precinct that have as much water as I do” in the aforementioned birdbath.

Obviously, this absurdity contains virtually unlimited possibilities for satire, but as is often the case in such situations, there is a serious matter lurking within this farce. The N.Y. Times article fails to mention the matter of the application of the Clean Water Act to what the feds are pleased to call “wetlands” which can consist of some pretty small bodies of water. In fact, this may come as a surprise to you, but the federal definition of a wetland may include dry land that never gets wet, exccept when it rains. If you want an explanation, such as it is, check out 38 Santa Clara Law Review at p. 844, footnote 37 and accompanying text. Actually, it won’t hurt you to read that entire article, starting at p. 837.

So what we have here is the potential for a situation in which a landowner can be simultaneously hassled by the city for maintaining large puddle that can serve as a breeding ground for mosquitoes, and by the EPA for draining it in violation of federal regulations that protect it, mosquitoes or no mosquitoes. We may be wrong, but we never heard of an exemption from the provisions of the Clean Water Act from on the ground that the wetland in question can be a breeding ground for disease-carrying mosquites. Have you?

Follow up. And if you think the scenario described in the preceding paragraph is too far fetched, recall when the federal government was subsidizing tobacco farmers while simultaneously putting warnings on cigarettes and denouncing smoking as a health hazard?

Indeed, an analogous situation is already afoot in the Big Apple. The New York Times reports (Jim Dwyer, Giving Away, then Seizing, Condoms, N.Y. Times, April 25, 2012, at p. A18 — click here) that (a) last year New York City health workers gave out 37.2 million condoms (70 condoms per minute during the past year), while (b) New York’s finest are hassling folks suspected of prostitution by confiscating condoms found on their persons as illegal “sexual paraphernalia.” Free condoms are a good idea in keeping people safe, it can even help those who are going abroad and using an escort hamburg service so they are both practicing safe sex too.

Sad But Dependable News for the Bald from Washington

We are sorry to note that the U.S. Supreme Court has denied certiorari in Harmon v. Kimmel, No. 11-496, a truly wretched rent control case from New York. What makes this case truly bad is that rent control — i.e., the regulation ostensibly limiting the amount of rents that can be charged to tenants occupying the rented premises — was almost incidental to the real problem in this case. Here, the New York city “rent control” ordinance also provides that the tenant can stay on for an unlimited pertiod of time, and that upon his demise he can leave his right to occupy the rented premises at the controlled rent to his heirs. Thus, the ostensible “rent control” ordinance is not only a taking of the landlord’s right to receive the same rents that are received by owners of unregulated rental properties, but actually an expropriation of the landlord’s right of reversion at the end of the lease. And if that isn’t a de facto taking of a landlord’s property interest — the reversion — we would like to know what is.

What made the Harmon case noteworthy was that when the landlord filed his petition for certiorari, the city didn’t even bother to respond. But to everyone’s surprise, the Court odered the city to file a response, an event which generated a big deal foofaraw among takings mavens who rationally believed that this indicated that the court (or at least one or more Justices) were treating this petition seriously and needed time to reflect on it. Then, to add to the feeling of anticipation, the court passed over this petition during the regularly scheduled conference, and postponed its consideration from April 13th to April 20th. What did all that mean? Nothing, as it turned out. Certiorari was denied with none of the Justices voting in favor of granting it. Maybe the clerk charged with preparing the conference memo was out with a cold. Who knows?

So the judicial jihad against American owners of private property goes on.

Follow up. For the New York Times take on this case and the denial of certiorari, see Adam Liptak, U.S. Supreme Court Declines to Hear Suit Challeging the Rent Stabilization Law, N.Y. Times, April 23, 2012 — click here.

Do Cities Really Need Those Stadiums for Professional Athletic Teams?

No, they don’t, argues Steve Greenhut, an astute commentator on the misuse of eminent domain and the author of a book on that subject. This time, his dispatch comes from Sacramento where a highly touted plan for a downtown basketball stadium has just come a cropper. Steve Greenhut, Sacramento Is Fresh Victim of Bad Stadium Deals,, April 16, 2012 – click here.

It seems that assorted city mothers cling to a childlike belief that stickig local taxpayers for the cost of building a stadium (and associated infrastructure) for billionaire owners of professional athletic teams will revive the city. But  these deals mostly revive the contents of team owners’ wallets, not cities. Nonetheless, city hall denizens, like Charlie Brown who every fall believes that this time Lucy will hold the football for him, so he’ll be able to kick it and not fall on his little keester, believe that this time for sure the deal will do wonders for their city. It’s sort of like 17th century physicians who bled their patients and when those patients grew weaker, the bled ’em some more.