Brad's Tiny World

Build It and They Will Come

Posted on 24. Mar, 2009 by Brad in Economy | Twitter: @bradhart |

If there is one thing I hope communities and states in general learn from this poor economy is new construction is not necessarily the way to go.  For too long we have put all our hopes on indicators like housing starts and new business construction, but it has cost us more than most people realize.  It is pointless to keep building new homes on every piece of greenery when we can’t sell the ones we have. much less rehab the ones in need.  Then their is the problem with commercial real estate.  Everyone gets excited when they hear some company wants to build a new bigger big box store or replace the existing one in their community.  The problem is no one ever bothers to ask them what they are going to do with the building they are currently inhabiting or if you really need another near duplicate of the two or three stores already in a community

These aren’t merely economic issues we are dealing with when it comes to new construction either, there are serious environmental and social issues that must be dealt with as well. The fact is we either need radical new zoning laws passed while few are thinking of expanding or in some localities strict enforcement of the ones already on the books.  If a company moves out of an established economic zone they should be required to not only do something with the building they are vacating, but assume the cost of redirecting or adding additional public transportation.  It wouldn’t hurt if they were also required to offset the environmental impact by maintaining extensive lands around their new property, but to rehab other environmental blights within an area.  Last but not least of the new regulations we need in place is zoning permits must be issued only to companies those who can show an economic need.  This wouldn’t affect most small business owners, but it would give pause to the rampant competition driven corporate minds who try and stamp out the other guy from making money.  For example if Mc Donalds wants to open a new restaurant in an area where there are already a few other burger joints, then they need to prove t they they will enhance the business of non food establishments and allow for every other restaurant in the area to still make a fair profit.  The days of setting up shop because your biggest national rival does has got to stop.

Our building crisis isn’t only the fault of commercial real estate either.  Residential builders are as much to blame for the sub-prime crisis and bust of the housing bubble in general as any other entity.  By continually building new homes on the fringes of existing towns they artificially raised the value of existing homes and with an over supply of homes caused the prices to drop.  Along with their buddies in the banking industry conspired to sell the existing properties to risky buyers.  This isn’t to say this was a bad idea.  It worked very well and was good for lower income buyers at first, but once the greed factor really kicked in and loans were made to people who hadn’t a hope in hell of converting or paying once the rate changed the situation was very different.

In this future climate of home building we need to insist several of the same measures I proposed for commercial developers.  Furthermore we need to discourage rampant home building by making developers responsible for community upkeep.  One such proposal would be to buy and maintain either as a rental or personally financing the sale of one vacant home within a community for every X number of new homes they want to build.  Companies must also be required to accommodate the economic realities of a community.  if they want to build quarter of a million dollar homes three  bedroom homes on the fringe of the town they need to buy, rehab, and sell a certain number of existing three bedroom homes within the heart of the community at prices affordable to members of that community.  The practice of finding comparative prices or comps also must be changed to reflect real comparisons instead of comparing a sixty or seventy year old home with one that is six or seven months old. Comps also must reflect a price range rather than comparing it only the two most expensive houses with similar stats, they must reflect say ten houses and the city’s medium price.

In the end if we want to prevent future real estate crises we need to take this opportunity to put new guidelines into play that will stop old behaviors.

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