patrick.net

Someone wrote:

> But I don’t believe problems can be solved just by throwing
> money at problems, and I am weary of too much government
> intervention because I’ve seen law of unintended consequences
> work a little too often.

Different Sean Says:

> this is just silly. i’m proposing govts don’t throw money, rather
> that they control expenses and curb expenditure using
> covenants and legislation.

I can tell that Different Sean Does not does not live in San Francisco…

My cost for renovation of a SF single family home = $26,000
Government cost for renovation of SF apartment unit = $220,000

Recent cost for a private developer to build 350 units = $73,000/unit
Recent cost for the new North Beach 341 units = $316,000/unit

P.S. the private developer cost per unit includes the cost of the land while the government project does not….

hmm, we'll edumicate you eventually, astrid -- might start you on the communist manifesto... :P

DS,

It depends on how much you think you can change people and engineer society. However, if your definition of progressivism means supporting a solution that leads to more and more people relying on government subsidy, then I am not your kind of progressive.

DS,

Sorry, read it already, and read tons of Mao's writing too. You'll have better luck with me if you quote from the Labor movement.

Economic rights and legal rights are different things. You've confuse the two when you talk about economic rights for the poor in response to my comment that the poor have only legal rights. I personally think all rights are mallable according to the society's resources, but I know others will disagree with me.

yeah, you keep saying that FAB, altho the govt here regularly renovates and constructs public housing cheaply.

you recently claimed it cost Willie Brown $250 M to renovate 100 apartments in SF in an existing building -- that's $2.5 M an apartment! do you expect me to believe that it cost $2.5 M to renovate each simple little apartment in a public housing project with new carpet, paint and some light switches? you can source your claims from now on...

absolutely the govt project excludes the cost of land -- that's the beauty of the whole thing. the govt would partner with a responsible construction firm to do the work in a PPP, but cut out the fat 25-30% developer's profit -- i'm sick of seeing billionaire developers driving mercedes maybachs off my back... just pay honest workers for an honest day's work...

the land is owned by govt, and gifted to the people at a nominal cost. they may even exercise eminent domain over a few people if they like the look of an area...

did i mention real estate agents and apartment brokers wold be excluded from the deal as well? sorry about that...

I wrote:

> There are two reasons why people in America are poor:
> 1. They are Lazy
> 2. They are Stupid

Then Different Sean Says:

> what if they couldn’t pay a $100,000 medical bill due to
> unexpected illness and no insurance…

It is stupid not to have health insurance (I don’t think that even Different Sean can argue that it is “Smart” to be uninsured)…

Then astrid wrote:

> My mom worked many years as a waitress and did tons of
> other near minimum wage jobs. It is possible to barely
> support a small family on two minimum wage jobs in the
> middle of the country.

Not to give astrid’s mom a hard time (since it sounds like she was not lazy), but it is not smart to have kids when the only income is coming in is from near minimum wage jobs…

the communist manifesto IS the labor movement. but not so strong on mao tse-tung, leninism, etc. things have to tempered with human rights after the glorious revolution. altho FAB might be the first against the wall before the human rights kick in... :x

It is stupid not to have health insurance (I don’t think that even Different Sean can argue that it is “Smart” to be uninsured)…

maybe they couldn't afford it? i wouldn't know, because here health care is free and guaranteed as a citizen's right for all by the govt...

FAB,

Hmm, except the part where my mom is an electrical engineer and she had me while holding a good job in Shanghai. She was working those minimum wage jobs because my dad was working on his Ph.D in the US. My dad was university lecturer on the fast track to a full professorship when he left China for grad school here.

Unlike lots of women, my mom continued to work even after my dad got a pretty good IT job. Her English was never good enough for white collar jobs, so she worked various blue collar jobs, including her current one. Her current job, because it came with good health insurance and was stable, came back to save both of them when my dad got laid off and took about two years to find another permanent position.

It depends on how much you think you can change people and engineer society. However, if your definition of progressivism means supporting a solution that leads to more and more people relying on government subsidy, then I am not your kind of progressive.

why not? the role of govt is arbitrary... they have a duty to regulate, i.e. 'govern' in the sense of a regulator. they have a duty to the 'commonwealth' and the 'welfare' of the people -- the common wealth and to fare well.

would you rather see a society where a handful of people screw more and more out of everyone else? those people only have the same 24 hours as you and me -- they don't work 10 000 times as hard as you and me in order to get 10 000 times as much, so they're hardly deserving, are they? they've just learnt the trick of leveraging suckers like you and me -- and then created a myth around how important 'hard work' is, etc. capital begets capital. etc.

i'm not actually proposing that govt spend any more than it already is, as a matter of fact, just to create a space for affordable development. it would be pretty well cost-neutral to the govt, that's why it's such a great idea and will work so exceptionally well.

about reading the communist manifesto or any other labor movement thinking -- i met someone who was raised as a buddhist who never 'got' buddhism, just learnt to recite the whole thing without thinking -- and they hated it, it was like forced piano lessons as a child...

DS,

Marx was only a part of the bigger labor movement. His idea of the revolution and utopia was also fanciful and didn't quite work out. He didn't have deep insight about how the mass of humanity worked. Marxism is more useful as an analysis tool for what has occurred than to predict what will happen.

Different Sean Says:

> FAB, altho the govt here regularly renovates and
> constructs public housing cheaply.

That’s great, but the government her in the US NEVER EVER builds ANYTHING cheaply. It does not matter who is in charge or what they are building. Every time the government has a big project the politicians use it as a way to pay off the people that put them in power.

> you recently claimed it cost Willie Brown $250 M to
> renovate 100 apartments in SF in an existing building

In the late 90’s Willie spent about $250,000 per unit (not $2.5mm) to renovate a crappy WWII era housing project that was and still is one of the worst high crime areas of SF. I did a little Google searching but could not find the numbers from 10 years ago.

> you can source your claims from now on…

Below is info on the newer over $300,000 per unit housing project in North Beach that did not include the cost of land (it was built on the site of an older housing project). Private developers can buy land “and” build a luxury homes for less than $300K but in SF it costs over $300K/unit just to build the apartments…

http://tinyurl.com/zqduz

you know that marx was knocked back at the 1st international with his proposal for a state-based communist economy -- everyone else said that it would create a totalitarian regime every bit as unpleasant as the capitalist one they were replacing -- and they had more foresight than marx ;)

the other option was a kind of 'communist anarchy', from memory, as a sort of velvet revolution which would abolish centralised govt altogether instead...

DS,

I already conceded that some public housing schemes could work and work very well. I'm not saying government is never the solution (though good oversight and properly aligning the administrators' interests to that of the public's best interests is necessary).

I just don't think government redistribution is the best way. A government that works best ought to leave as few marks as possible, doing as much as possible via regulation and the market.

FAB,

I think the problem with SF housing authority is with the incentive structure. That doesn't mean that public housing can never work. It has worked relatively well elsewhere without the same kind of cost overruns. SF does tend to be a city where liberal excesses run extreme, so perhaps you have an exaggerated perception of the overall problem.

DS,

Is that agreement I'm hearing ;) Marx was not a good clairvoyant, Communism ended up taking hold in the less advanced European and Asian countries, he is probably still spinning in his grave from the agarian nature of the Chinese Communist Revolution.

In the late 90’s Willie spent about $250,000 per unit (not $2.5mm) to renovate a crappy WWII era housing project that was and still is one of the worst high crime areas of SF.

OK, but you originally said $250 M and said it cost a developer that to do 100 houses including roads and infrastructure. So you multiplied the refurb cost by 10 and THEN compared it??? isn't that a bit intellectually dishonest?

the crime rate has got nothing to do with anything, so it was and is a bad area -- that's the nature of public housing locations...

still, it shouldn't cost more than, i dunno, $80K per unit just to refurb, unless they replaced all the lifts, wiring and plumbing in the building, and removed all the asbestos... how does that compare with the cost of demolition and rebuilding, i wonder...

I note that Bridge Housing is a non-profit developer, which makes all the difference... one less Mercedes Maybach on the road...

it looks as though the north beach development was a demolish and rebuild exercise in New Urban style. i think $300K per unit is reasonable for that sort of construction, including demolition and site remediation. you claim a developer can build a luxury house for $300K including the land, i don't accept that figure, a large luxury house would cost $300k in materials and labour alone, not counting the land. and, of course, as we know, the further cost of the land depends entirely on location...

astrid,

yeah, communism was very attractive to poor peasants in pre-industrial countries like russia, china, south east asia. marx intended it to be a post-capitalist phase for heavily industrialised societies... altho it was all just theory...

his idea of a 'revolution' being necessary to effect it was only a theory also, based on his observation that all social change around his time seemed to be by revolution -- he was a man of his time... the fabian social-ists came a bit later...

he actually thought he was discovering the 'laws of social history' as a science, in the mode of thinking of his time also -- much like 'modernism' is the dominant paradigm today... as in, the history of man is the history of class warfare, there have always been 2 sides only locked together to make a socratic synthesis that gives rise to 2 more parties, etc...

I wrote:

> It is stupid not to have health insurance (I don’t think that
> even Different Sean can argue that it is “Smart” to be
> uninsured)…

Then Different Sean Says:

> maybe they couldn’t afford it?

I just filled out a form at:

https://www.ehealthinsurance.com

And I can get Health Insurance for as low as $56 a month (with 10 other quotes under $100 a month). Every time I hire a couple day laborers to do yard work I always pay them more than $100 a day in cash. In America if you truly don’t have an extra $100 a month to pay for health insurance you can get on a government plan that will give you health insurance. In America the real poor are almost always insured it is the Stupid that don’t have insurance. I was recently talking with a tile guy (that I paid $4,500 to replace the tub tile and plumbing in an apartment bathroom) who said that he didn’t have health insurance. This is a guy who makes at least $500 a day (using a tile saw and other power tools) and he does not have insurance, stupid…

sources of finance for the north beach development:

Equity from 9% federal low-income housing tax credits and California housing tax credits syndicated by Related Capital, with Bank of America the main investor: $48 million
Citibank mortgage financing: $23.7 million
HOPE VI grant: $20 million
City of San Francisco, Mayor’s Office of Housing: $10 million
HOPE VI demolition grant: $3.2 million
San Francisco Housing Authority, ground lease reinvestment: $1.4 million
Federal Home Loan Bank of San Francisco, Affordable Housing Program grant, through Citibank (West): $1 million
Developer equity: $451,451
Miscellaneous reimbursement: $183,251
Total development cost (residential and commercial components): $108 million

how much would prime properties at fisherman's wharf retail for in the private sector? some $500-600K per apartment? and they built these for $300K per unit on average (including the cost of lifts, common spaces, etc, plus demolition and site remediation costs).

so they've developed these and valued them at about half retail price. given the normal developers 25% profit margin, it would have cost the developer at least $400 K per apartment to construct...

note that the financing is all 'for profit' private sector though -- so they took their cut, no difference there...

I can get Health Insurance for as low as $56 a month

what do you get for $56 a month?

"The project was nearly 100% occupied at the beginning of July. Demand for the apartments has been strong, but officials have been busy with a verification process to qualify renters. The team filled the tax credit apartments from a waiting list for which 2,100 people applied during a three-week period. The John Stewart Co. manages both the residential and commercial components. "

Hey, this way we can cut out all realtors and apartment brokers from the process as well... even more savings without all those bloated commissions to pay and expensive press ads to take out...

DS,

Marx's misperception about the science of history is shared by many of his contemporaries. Indeed, many twentieth century revolutionaries still did. The early members of the Chinese Communist Party attempted to ferment revolution amongst the urban proletariat, with disasterous consequences. They started living off the land and moving into agarian areas because they were being slaughtered in the cities.

Messianic revolutionary movements occurred with great regularity in Chinese society and probably elsewhere. The peasants greeted the CCP and the Red Army as saviors and attributed quasi-religious devotion to the organization. Mao became a godhead. To understand that is to understand the essence of the Cultural Revolution.

that's cos they were doctrinaire, astrid... they completely failed to exercise their own judgement and common sense or to critique marxian theory, but literally 'took it as gospel'...

the interplay of religious thinking is interesting -- this is taking place in a pre-industrial country which did not have the european 'enlightenment' and 'age of reason' behind it...

north korea was, and is, very devoted to kim il sung as well, i believe, in a very similar way...

bet you're glad you're out of there ;)

Happy Independence Day to all!

To me, this day would be extra sweet, if I were independent of my neutron bomb mortgage. I was one of those duped by the realtors, mortgage brokers, and the professions of the creative financing gurus. “Real estate always goes up…. The best way to build wealth is OPM, other people’s money. Leverage is the best way to build wealth quickly. Everyone needs some place to live…they aren’t making any more land…. Location, location, location…. Today’s high prices are tomorrow’s bargains. Don’t miss the boat…. There are haves and have-nots…. Secure your future by getting your foot in the door. Inflation and appreciation will make it all work out. “ @#!$#%$@#$

I openly confess my ignorance, and bought a $699K Mcmansion, and put in $115K in upgrades. The place has 2550 square feet, granite counters, tile throughout, upgraded custom paint, solid core doors throughout, drip system, a large flat yard, quiet street, great location, fabulous school district and lots of other bells and whistles.

The broker said, “never mind the negative amortization. Even if you neg-am $15k per year, the projected appreciation of 8-10 percent per year will greatly overshadow the neg-am. You will be making huge gains, although in a neg-am. Most people sell or refinance within 7 years, so an ARM is an attractive option.”

The UCSB finance guru supposedly projected a “healthy” continued appreciation of a conservative 8-10 percent, “he has never been wrong”. Lol….It seemed like the right thing to do at the time.

In the previous couple of years, close to 70% of the new mortgages in California were ARM’s. I now realize that we are facing a bubble of unprecedented historical proportions. The option ARM gives options all right. One Option is to sell now at a steep loss. Another option is to live in the place for four years, then hand the keys over to Countrywide Mortgage when most of the state is upside-down. Other non-viable options are suicide, homicide, bank robbery or alcoholism. CARNAGE is on the horizon, and percentages reset, mortgage brokers downsize or go out of business, builders are out of work, real estate agents have no sales, and foreclosures are the norm. When the market is flooded with foreclosures offered at a steep discount, no one will get close to 2004 or 2005 prices for their real estate. The “soft landing” of the market is apparently headed for a “Titanic” sort of soft landing, on the bottom of the Atlantic.
Greenspan’s “irrational exuberance” of our “frothy” market was a horrific understatement. He has watched out for the interest of the big banker cronies, but they will be bit in the butt when they are sitting on a TRILLION dollars in defaulted properties. What then?

The old Chinese curse comes to mind, “May you live in interesting times.”

DS,

Most people are into easy one sentence mantras. That's certainly the case with this housing bubble. While housing valuation and situation is actually quite transparent and fairly easy to for a layman to understand, most people don't bother and buys into "RE never goes down" without hesitation.

The spirit of science of the 18th and 19th century made a lot of "wise men" believe that truth is measurable and knowable. Marx and his ilk wasn't simply doctrinaire, they thought they had found the scientific method (of course, their testing wasn't all that rigorous) for society. This sense that society is knowable continues even today in Communist societies, including China. The CCP still puts out publications on Communism orthodoxy, but nobody really buys into them anymore, except maybe my revolutionary Commie grandma.

I just don’t think government redistribution is the best way. A government that works best ought to leave as few marks as possible, doing as much as possible via regulation and the market.

Why's that?

you're right, you're better off with Enrons and Worldcoms running the show... robber barons and fly-by-nighters are much more accountable...

of course, this 'minimal govt' conception is textbook right-wing marketspeak which is in vogue and attempts to sideline govts wherever possible so the private sector can get on with gouging innocent dupes...

That's no good, Option Dude, you seem calm about it now...

unfortunately, mortgage brokers and realtors will continue to get work in a collapse, as they take commissions for reselling properties and writing new mortgages on the way down. but they've been doing exceptionally well out of the boom as their commissions have stayed at a fixed percentage of sale price...

Option Dude,

Don't panic yet. When and where did you buy? You might not be as badly off as you think. Also, can you afford to move to a higher monthly cost fixed rate mortgage?

Be wary of the foreclosure option. It sounds like you have more than one mortgage, in which case, you might not be able to walk away scots free. Regardless of that, your credit will be torn to shreds for at least 7 years. That could impact your life in lots of ways, including any future rentals you may wish to take. If you're thinking of getting out and can't sit on the house long term, it might be better to sell at a loss.

Disclaimer: just my opinion, do your own investigation before acting on anything I say

Marx and his ilk wasn’t simply doctrinaire

no, he wasn't so doctrinaire, all the people who followed after him til the present were...

freud was apparently quite doctrinaire and unscientific, if anyone disputed his 'interpretation of dreams' and psychoanalytic theory, he would just dismiss them as irrelevant... jung fell out with him... freud's had a rather bad press in recent years...

Native speakers, please make an effort to speak proper English as befitting the class you were born to or the class you now find yourself in or the class you aspire or pretend to belong to. For example, when you say "less" you really mean to say "fewer."

Mercy boogoo.

Don't fucking say poor people are lazy and stupid, or they'll kill you fucking smart asses. We poor people don't like to work. Work is for slaves. Your money from hard work is and will be redistributed to us poor people by my governmnent. Note, my government, not yours. Anyone here who boasts his money and looks down on the poor is a middle class sucker. Let me tell you how the upper class (a few of us poor, lazy and stupid) got their money: Plunder, crime, thievery, robbery, and you name it. NOT BY HARD WORK, you fucking middle-class ass sucker.

DS,

Just because I don't usually support direct government subsidies doesn't mean I don't support enforcing existing regulations on the market. I'm all for government policing of the private sector. I don't see why you're jumping from my lack of support for government subsidies to individuals (I have no such opposition to large community projects like dams and electricity generation plants) to assuming that I don't want SEC to enforce rules on book against Enron et cie.

I don't think that's right wing marketspeak. I just want an efficient government that consistently yields the highest level of utility for overall society.

That's a very well written description of the situation, Option Dude. It sounds like your place is very solid, though, and will retain value - construction, location, etc.

I think you've spelt out the deception of the real estate racketeers perfectly.

Probably forget about 10% appreciation every year, but if you sold now, would you be able to break even? Based on the quality of the place? That might forestall a loss and the continuing negative amortization if you tried to sell later if the market tanks.

I just want an efficient government that consistently yields the highest level of utility for overall society.

so you keep saying. i don't know if it's as simple as that... not even allowing for crony capitalism and government-industry corruption and revolving doors...

the latest fad is to sell off all public assets to PPPs -- energy is sold off, infrastructure, everything...

on direct subsidies, i tell you, there's subsidies galore here -- $7000 to $14000 as a first home buyers grant, plus a stamp duty waiver; $4000 grant to a mum just for having a kid... every kid they pop out now they get $4000... but then, the Federal govt is in about $10 bn surplus, which is a lot for the size of population...

Let me tell you how the upper class (a few of us poor, lazy and stupid) got their money: Plunder, crime, thievery, robbery, and you name.

often

NOT BY HARD WORK, you fucking middle-class ass sucker.

generally not. certainly not the hard physical work of low paid labourers.

A Government of Thieves - Bush family

Thanks for the thoughts, Astrid.
You have raised some valid and good points. The fixed rate, higher payment mortgage will become less of an option, and then a non-option as prices plummet, and interest rates rise. If debt exceeds appraisal, no refinance will be possible, for me, and countless others.

"Plunder, crime, thievery, robbery, and you name. NOT BY HARD WORK, you fucking middle-class ass sucker."

Yikes.

I guess I am one of those idiots who believes in love, honesty, hard work, friendship, faithfulness, and good family values.

editor, please edit "you name" to "you name it." Thanks.

I only lambasted the ass suckers of the middle class. The predominant majority of that class are good, unpretentious people. They don't look down on us poor as lazy and stupid.

DS,

If you're not willing to talk straight economics, we can't conduct a functional economic discussion. Of course crafting government policy is not as obvious as what I've just said, but I've just stated my starting point. You've also ignored all the instances where I was quite willing to concede and have the government run things, if that yields the most efficient solution.

It sounds like the Australian government has a wad of cash and its burning a hole in its pocket. Howabout saving it for a rainy day? Or set up some research labs that will drive the economy ten years from now? I think direct subsidies given out are a bad idea, the home buyers have already demonstrated a willingness to pay crazy money for houses, so wouldn't giving them more money just push the prices up higher? As for kids, it's not as if $4000 would cover much cost, I doubt it would encourage more kids. Wouldn't that money be better spent on better childcare for those kids? I don't think families who depend on that $4000 to have the kid should really have the kid.

Option Dude,

It's good that you found out. Now is as good of a time as any to act. If you want to stay on and have the means to do so, now is the time to refinance into a fixed rate mortgage. If you would rather go, then now will likely be the best time to sell, while the sellers still have high price expectations and a lot of priced to sell properties are still moving briskly. If neither of those options are workable, think very carefully about the consequences of just staying put and waiting for foreclosure to come.

Disclaimer: just my opinion, please do your own research before acting.

If you’re not willing to talk straight economics, we can’t conduct a functional economic discussion.

well, that all depends... i'm more than happy to talk straight economics. when i started talking straight economics with FAB, it turned out all his costings were wrong and his assertions based on prejudices. the govt did it for the same price as the private sector because they used the private sector. and the end result was much cheaper because it was not for profit.

we can't cover every single combination and permutation of govt vs private sector activity in the known cosmos, so there's no point trying to make generalisations about who should be doing what at what cost, it's just not realistic... pick one example if you like, i just did PPP affordable housing development with FAB and ran the numbers...

You’ve also ignored all the instances where I was quite willing to concede and have the government run things, if that yields the most efficient solution.

no, i didn't ignore them, i said i'd realised you weren't a lost cause. should i have seized upon them with glad cries of evident joy? :P glad you've come 'round. ;)

It sounds like the Australian government has a wad of cash and its burning a hole in its pocket. Howabout saving it for a rainy day?

they are. giving some away and saving some.

Or set up some research labs that will drive the economy ten years from now?

they're pretty bad at that, missing opportunities for solar cell research, all kinds of things. but that's because their cronies can't make money out of solar cells, their cronies are all into mines.

I think direct subsidies given out are a bad idea, the home buyers have already demonstrated a willingness to pay crazy money for houses, so wouldn’t giving them more money just push the prices up higher?

yes, that's what i argued. altho $7K is a drop in the ocean, and a smart first home buyer wouldn't let the realtor know... other suggestions are accessing the 401(k) fund to buy property, which would definitely feed the boom without price caps in place...

As for kids, it’s not as if $4000 would cover much cost, I doubt it would encourage more kids. Wouldn’t that money be better spent on better childcare for those kids? I don’t think families who depend on that $4000 to have the kid should really have the kid.

they're not necessarily relying on it, it's just a sweetener. however, it's bad policy, just a vote winner and a way to get people to populate or perish. the PM actuallyl opposed it, but got rolled somehow. a lot of really young girls who are on welfare are eyeing the $4K and thinking what they can spend it on, as they know they wll get welfare for life for the kid growing up anyway... $4K buys a lot of drugs...