Behavioral Economics and a Flex Account for Your House

Tags

Behavioral Economics, Economics, First-Time Homebuyers, Home Repair

Photo by Tahar Abroudjameur via Flickr

I recently got a wisdom tooth removed. My dentist had been nagging me to do it for years. Why the delay? I don’t have dentophobia. I’m not an anti-dentite. I just didn’t want to save the money (or spend it). But for the grace of my flex account, I was able to squirrel away nearly $700 (tax free, no less), and pop that tooth out.

My flex account automatically takes money out of my paycheck and saves it for medical expenses. It’s an example of behavioral economics. Traditional economics assumes people make rational decisions; behavioral economics assumes we’re human. And flawed. And irrational. And it creates systems to correct for these weaknesses. Instead of assuming that I’m a rational person who knows I need to pay the dentist and will save money to do so, behavioral economics knows that I’m much more likely to save money if I don’t have to think about it. Take $25 out of each paycheck, put it in a special account, and voilà, I can pay the dentist.

I think we should transfer this concept to housing upkeep and rehabilitation — especially for first-time homebuyers. First-time homebuyers are typically cash poor. They’ve saved money for a down payment and closing costs and they’re tapped out. Anybody who owns a house knows they need to keep some cash handy for, say, a new water heater, furnace, or roof. Why not make a flex account for your house then? Add $50 to each mortgage payment, put it in a special account, and voilà, I can pay the roofer. I won’t even need to think about it.

Abandonment, Authenticity, and Transgressive Placemaking

Tags

Abandoned, Authenticity, Night Heron, Placemaking, Preservation, Riff, Transgressive Placemaking

Photo by Yoni Brook via The Night Heron

When people talk about how a city is “real,” they’re talking about the parts that make it a little dangerous. Places that have been abandoned, whether by rules or by people. Times Square before Disney. West Chelsea before the High Line. Hell, the High Line before the High Line. Authenticity is at the center of conversations within historic preservation, urban development, and placemaking. We want our places real, but not too real. Especially not if we have to live there. But if we don’t use a place — really live in it — we get ruins at best and lost history at worst. Is that enough? Do we need abandonment for authenticity?

A city’s lifecycle includes a certain amount of abandonment. A building outlives its usefulness, a factory closes, a tenant moves out. Abandonment may not be so deliberate as it is a disconnect between timing and value. It doesn’t make sense at this particular point in time, for this particular cost, to use this building. Even Ellis Island was abandoned.

NPS Photos – Ellis Island Before and After Restoration.

The Tenement Museum, in New York City, sits between restoration and abandonment. The detail I remember best is the portrait of FDR on the wall of one of the apartments. It hung there through the Great Depression and for another 50 years after its owners moved out. With too many fires destroying buildings’ only route of escape, New York City updated its codes to outlaw wooden staircases. The landlord couldn’t afford to put in metal stairs, so the building sat empty until it was rediscovered, now a time capsule. The museum has since restored several of the apartments, telling the personal stories of the families who lived there. They’ve also kept some apartments as stabilized ruins, just as they were when the museum founders discovered the mothballed building. Bare wood, cracked plaster, peeling wallpaper, closer to authentic. Closer to abandoned.

Our experience and perception of public space, history, and abandonment has been changed by photography and the internet. There are Facebook pages dedicated to old photos of places past their prime. Urban spelunking photography is now its own genre, museum exhibits and all. You can even take tours of abandoned places, some more dangerous than others. It’s turned into its own industry in some places. We can see the process of decay and we must really like it. By sharing images of abandoned places, are we making them public again? Taking ownership of them? 

At the intersection of abandonment, urban spelunking, and public art, is the Wanderlust School of Transgressive Placemaking. Their most recent project was a complete reimagining of public space — a speakeasy inside a water tower atop an abandoned building in Manhattan. There was a band. There were drinks. The bar, tables, and chandelier were made of piano parts. Your ticket was a pocket watch that only a friend who had been their previously could give you. Just read Dan Glass’s story about it in The Atlantic Cities. A closely related group, Wanderlust Projects, led an exploration of Brooklyn’s abandoned Domino Sugar factory and held a jazz show in an abandoned Pennsylvania honeymoon resort. Now they’re starting a series of talks on urban exploring and remaking invisible places. Is this the next wave of public art? Adaptive reuse? Temporary preservation? Whatever it is, I want more.

Photo by Yoni Brook via The Night Heron

 

Thirty Years Later, Nostalgia for Caldor

Tags

history, nostalgia, photography, snapshots

Photos by richie 59 via Flickr

I’m not sure who took these snapshots, but I’m glad they did. They’re scenes from around the town I grew up, Kingston, NY, around the time I grew up, the late ’70s and early ’80s.

They’re nothing special. Strip malls, parking lots, old cars. Seriously though, who would pose for a photo in a mall parking lot? But, the thing is, these are kind of special. I’m pretty sure Caldor doesn’t exist anymore. I know that hair style doesn’t exist anymore. Is that what makes these valuable? Worthy of nostalgia? A friend from high school recently posted these on Facebook and the verdict was resounding: these photos are awesome!

This probably doesn’t mean anything for our cities. I doubt anyone is going to try to save a big box store anytime soon. First of all, they’re not built to last that long and, second, they’re so mass produced and ubiquitous that they couldn’t possibly matter to anyone. Except me and my friends in Kingston. We apparently have a soft spot for the strip malls of our youth.

Citiography in The Atlantic Cities

Tags

Atlantic City, casinos, gambling, redevelopment

Revel Resort, Atlantic City, photo by Anjan Chatterjee via Flickr

When it published my story on Atlantic City this week, The Atlantic Cities may have confused Google (according to one editor). The city’s newest casino, the Revel Resort is having its premiere this weekend and that presents an excellent opportunity to take a look at Atlantic City’s, um, interesting relationship with casino-based redevelopment.

A couple blocks off the boardwalk, Atlantic City is a different place. photo by Kelly Bennett

Financing Solar, One Mortgage at a Time

Tags

mortgages, solar

Carrboro, NC Solar Panels

When my wife and I bought our house, we didn’t have a lot of cash for the down payment. Or the closing costs, either, for that matter. And we especially didn’t have a lot of cash to fix up said house. And why would we? We planned to move within five years anyway. We’re typical of our generation.

Which is one of the reasons we don’t have solar panels. Depending on the size of your house, how much light it gets, and the tax credit situation when you decide to go solar, they can take anywhere from five to 15 years just to pay for themselves. Solar hot water systems are cheaper than electricity-producing photovoltaics, but who knows if you’ll be living in a given house that long?

The barrier to solar may not be how much it costs, but how we pay for it. One way to get solar power for your house is to make a solar power purchase agreement (SPPA).  In a SPPA, a third-party developer owns, operates, and maintains a photovoltaic solar system for a host customer who agrees to site the system on his or her property and purchase the system’s electricity for a predetermined period. This gives the customer stable and sometimes cheaper electricity while the solar services provider gets income and, many times, tax credits. There are also lease-to-buy agreements in which the homeowner owns the solar array after purchasing power for a set amount of time. This seems like a pretty good way to get some solar panels installed around the country even if you can’t do this in every US state.

Still, there’s also the mobility issue. If you think you may not own your house for more than five or six years, solar panels are the last thing you’re going to buy. But what if we treated solar panels like a tank of heating oil? When you sell a house with an oil furnace, you don’t just give the buyer the leftover oil in the storage tank. Depending on how much oil is left, they cut you a check at the closing. Why not value a lease-to-own solar array in the same way, except pay for it in the mortgage instead of through the closing? When someone buys a house with, say, seven years paid into a ten-year solar lease, they could roll that price into their 30-year mortgage, pay for power for three more years on the lease, then get renewable energy for the foreseeable future.

There could be a lot of winners using this system. The original homeowner and solar investor would essentially have their power bills paid for them by a future buyer. The solar services developer would probably sell more solar systems. And homebuyers could finance solar systems as a part of their house (like their furnace, or central air conditioner) over a longer period of time. It’s likely there will be problems in valuing solar systems in the short term and we need to get solar purchasing agreements more widely accepted while we’re at it, but this could be an easy way to knock down another barrier to renewable energy.

– Special thanks to Chelsea Conover Barnes at the North Carolina Solar Center.

@Citiography on Instagram

Tags

Instagram

A City of Missing People

Detroit's Michigan Central Station

Tourists usually pick a place to visit that’s the best at something. New York and Chicago have their skyscrapers. Orlando has its amusement parks. Detroit has decay. My wife and I stayed there a few days last summer and, honestly it was just sad. Detroit was built for 2 million people but only 700,000 people live there now. It’s a city of 1.3 million missing people. Detroit has this endless supply of buildings–wonderful buildings–that nobody uses. That’s what really gets to me about this city. All the lost potential, wasted effort, abandoned beauty. The world’s biggest ghost town.

I just saw  Detropia, a film that explains the problems of Detroit through a collage of lives, no narrator. It doesn’t get overly nostalgic and it’s not a movie of “ruin porn,” although you can’t tell Detroit’s story without ruins. Detroit’s strategy is to invest in its best places and try to build outward again. Some young people are moving downtown and that’s probably the best way for the city to start over. The problem is, the city can’t really afford to invest in itself anymore. It’s spread out over 140 square miles and it just can’t support its current population with this massive infrastructure footprint. When there’s block after block with one house where there used to be 20, how can you afford to maintain the streets, water and sewer lines, the police and fire departments, or even to plow the snow?

The thing that builds a city, millions of people making individual decisions, has been the undoing of Detroit. It’s become a repository for the state’s poor, and when they’re lucky enough to find more work, they leave. It’s a logical decision. The city is so far gone, so disappeared, that I’m afraid no matter how much the economy recovers, pretty soon it just won’t be a logical place for anyone to live.

Corktown neighborhood

Grand Army of the Republic Building, built for Detroit's Union Civil War veterans

Why Your City Should Support Local Food

photo by Josh Jackson, nautical2k via flickr

Farmland has value, just not in small packages. As agricultural profit margins have gotten thinner and thinner, farm operations have had to become more productive and farms themselves larger and larger. So, as far as agriculture goes, small farms aren’t worth so much. And, all this cheap land on the edge of so many cities has helped fuel our suburban sprawl. It’s happened in every metro across America — cities are expanding faster than their population, taking up more acres for each person. Even cities that haven’t seen population growth have grown in overall area.

Cities lose when development moves outside their boundaries. They have to keep up with their infrastructure and maintenance costs — their roads, water and sewer lines, plowing snow — but they lose their tax base. It costs the same amount to resurface a road no matter who’s paying the property tax. Local governments around the country have tried to preserve rural areas and farmsteads, usually by purchasing land or development rights. All of this is, to say the least, expensive. But, we’re seeing a better way to help our rural areas. Instead of trying to catch up with the value suburban development pays for farmland, another tactic is to make farmland more valuable. Local food trends are already leading the way.

More and more people are interested in getting their food from local organic farms instead of the “1,000-mile Caesar Salad,” shipped from across the country. Local organic food is a little less efficient and a bit more expensive. Better for smaller farms. (Cage-free eggs are really tasty; they cost $5 a dozen, too.) Cities and towns surrounded by rural areas should try to make farming more profitable — set up farmers markets, promote their city’s connection to its countryside, set up local food networks with restaurants. For those lucky enough to have joint city-county governments, give farmers more choices. Make it easier to add B&Bs or wedding reception halls. The more people that can make money farming near our cities, the less likely it is our cities will spill into our farms.

Washington, DC farmers market

Taxicabs, Economists & a Revenue Stream

photo by Rogelio Fernandez via Flickr

Evidently, New York City has a taxicab shortage. This fall, two medallions — the license to operate a cab there — sold for $1 million each. That’s because the Taxi and Limousine Commission restricts the number of cabs allowed in the city. Cab numbers were limited in 1937 to 16,900 and fell to 11,787 in the 1940s. Today, there are only 13,237 yellow cabs and those medallion owners are sitting on an investment that’s outpaced the price of gold and the stock market.

Economists hate this system. It has them going on about competition, the invisible hand, market inefficiencies, service shortages, windfall profits, etc. And all these arguments make sense, until you bring physical space into the story. Limiting the city’s taxi fleet is actually a good idea. For Manhattan, anyway. It’s just been limited for too long.

The goal of a taxi system is for any user to be able to always have a free cab at their disposal in all places. The thing is, taxis take up physical space. And when you get too many cabs in Manhattan, you get clogged streets and you may as well walk. So you have to limit the number of cabs. And when you limit the number of cabs, you have to protect consumers from the inflated prices that follow. Besides, if drivers all charged different rates, how much congestion would that cause? People would be perpetually waiting for cheaper cab to hail.

Yellow cabs should be thought of as part of the city’s larger transportation system (and their regulation brought under the city’s Department of Transportation). It’s a transportation system that needs to reduce congestion, expand mass transit, and keep fares affordable. The pent-up need for more taxis could even offer an opportunity. With cab companies signalling that million-dollar taxi medallions are a reasonable investment, the city government should print some money… err allow more taxis. Just figure out what the appropriate number of cabs is for its streets and have some medallion auctions. Then, for a city that’s famously congested, expand transit (perhaps even freeing up the streets for more taxis).

photo by Noel Hidalgo via Flickr

The Tar Sands Pipeline Loves Suburban Sprawl

Open Pit Bitumen Mine. Photo courtesy of Louis Helbig (click for link)

A lot of people are upset about TransCanada’s Keystone XL — the 1,600 mile pipeline that would ship tar sands oil from Alberta, Canada to Gulf Coast refineries in Texas. They’re protesting outside the White House. They’re protesting in Canada. Hell, they’re even protesting in Nebraska.

There are plenty of good reasons to hate this project. It’s a complete disaster for the areas surrounding the mines, obviously. But lately, the arguments against the pipeline are piling up in two main areas: the possible mess this stuff will cause in a spill, and the guaranteed mess it will cause when it’s refined and burned. There’s no shortage of opportunities for this pipeline to cause major problems if there’s a spill. The proposed path would cross 70 streams and rivers along with the Ogallala Aquifer, a major supplier of ground-water for US agriculture. There are plenty of bad scenarios that can play out here, but the main issue is going to be the refining of this garbage. It takes two-and-a-half times as much energy to refine as conventional oil. That means your Prius is effectively going to get the same mileage as a Camry. And your Camry is going to get the same effective mileage as a Tacoma pickup truck. And your pickup truck? That will get you mileage closer to a U-Haul.

71% of the oil we use is for transportation. That is, cars and trucks. Driving to work. Driving to the store. If we don’t want this pipeline going across the center of our country, and we don’t want to burn the dirtiest fuel imaginable in our 254,000,000+ cars and trucks, we need to drive less. And while it’s true that higher CAFE standards for new cars will help, and electric cars will help, the energy used to refine tar sands or drill in the deep waters of the Gulf of Mexico, or in the Arctic is going to make quick work of any efficiencies Toyota, GM and Honda squeeze out of their engineers. And alternative energy? Daniel Yergin, the Pulitzer Prize winning oil historian says in his latest book that our current renewable technologies aren’t likely to provide enough inexpensive, reliable energy to replace fossil fuels.

So what do we do? If tar sands are profitable, we’re going to get tar sands gasoline. And if we perpetuate this situation in which we have to drive everywhere, we’re going to buy tar sands gasoline, whether we protest or not. The alternative isn’t going to be what we drive, but where we live. We need to build real cities. Real towns. Walkable neighborhoods. Places where transit can work. Places where we can choose not to drive.

Bitumen Slick. Photo courtesy of Louis Helbig (click for link)