Want an example of how to shift from ownership to rental? Here it is via the Wall Street Journal. It’s a doozie. And it’s a model of what the federal government – instead of propping up the mortgage and home-ownership markets – can and should do more of. The Miami Development Community Corp. is buying up “busted” condo developments and turning them into affordable rentals.
The public-housing agency recently paid $5.7 million for the 35-unit Neptune Beach, one of the many failed condo conversions remaining from the housing boom, in prime South Beach … The Mediterranean-style building, which boasts high-end porcelain floor tiles and Italian kitchen cabinets, will be used as affordable rental housing for employees of nearby stores and restaurants, says Roberto Datorre, the development agency’s president. Renters will pay from $550 to $650 a month. The agency already has snapped up a 16-unit failed condo conversion in North Beach for a little more than $1 million out of foreclosure. Another purchase is in the works. The city of Miami Beach and the state of Florida helped make the deals possible.
This is the way a reset works as gradually market pressures cause changes in investment, public policy, and individual behaviors. These kinds of public-private partnerships make good economic sense, while providing affordable housing. But I expect the shift from owning to higher-quality rental to be driven mainly by private sector calculations and investment, as multi-family housing remains the one profit-making segment of the industry.
June 10th, 2010 at 11:38 pm
Absolutely, this is what the feds should be doing. But starting with Reagan’s cuts in the 1980’s, HUD’s budget for low income housing has been decimated. It doesn’t matter if its instead of mortgage breaks or not, in terms of creating affordable housing.
While not the only cause of the homelessness that started appearing in the ’80’s, there is a definite correlation between the HUD budget and rising homelessness. From the 1940’s until the mid-late 80’s, homelessness in America was limited to addicts on skid rows. The homeless people on every city’s streets today are a relatively new phenomenon.
June 11th, 2010 at 1:56 am
Practical question: Whose money will maintain all those high-end features?
June 11th, 2010 at 10:34 am
A future where the government owns your home ? What’s next, government owned transportation?
June 11th, 2010 at 1:09 pm
Back of the envelope calculation shows a gross income of 4.4% on the investment out of which has to come maintenance, cost of capital and possibly real estate taxes. If as a partial government entity, they don’t pay taxes that just puts further pressure on local governement revenues. The concept of many more people renting rather than owning is based on the assumption that private investors will be willing to put up the funds to build rental units and absorb the risk the area they are investing in will become unpopular and vacancy rates will rise. Investors will insist on being compensated for the risk and presumably the cost of renting will meet or exceed cost of owning.
In the housing bubble many people bought who should not have bought either due to the short term nature of their plans or inadequate income. However, that does not mean that owning ones personal residence is not a good idea for many other people.
June 11th, 2010 at 3:48 pm
great idea, we took an old building zoned as a rooming house and built a 66 unit rental unit on it. Each unit is self contained like a university residence. The kitchen and bathroom is shared. This was the only way to get affordable rentals in downtown Toronto. Neighbourhood associations were quite active against housing for the poor and previous homeless. Toronto, once we get back to a standard home being 3 times income and mortgages at 25% net income, the prices will come down a lot, the condo buildings are downtown and could easily convert to rentals. My own experience with luxury rentals was St. Jamestown. I ran a communit Y there and the pools in the buildings had been shut down and turned into rabbit farms for the maintenance workers.
June 12th, 2010 at 5:47 pm
Wil,
Most people would not be able to afford their home were not for the fact that the government subsidizes them through tax write offs on mortgage interests. Unlike most countries the government has allowed Americans to put as little as 10-20% down for a house.
“Government owned transportation”. Last time I checked highways didn’t magically appeared overnight. From building highways to supporting the auto industry to fighting for our oil, we cannot move from point A to point B without the big bad government.
June 12th, 2010 at 10:24 pm
Deep, In some countries, like Canada, the government does not allow mortgage deductions….Cars provide personal mobility, the socialist solution might involve government owned mass transit.
June 15th, 2010 at 12:54 pm
We need transportation oriented cities now.