back to article The good burghers of Palo Alto are entirely insane

El Reg treated us last weekend to the tale of the Buena Vista Mobile Home Park in Palo Alto, where the owner has a small ethical dilemma to deal with. The 4.5 acre site is apparently worth $55 million and the city council would like to buy it, but they've only got $39 million. The dilemma is that if he sells to the city council …

  1. Steve Davies 3 Silver badge
    Boffin

    Surrey and its golf courses

    Whilst it might be true about houses and gold courses, a good few of them have gone bust.

    It is not only in Surrey that this has happened.

    Golf (and everything around it including doing biz whilst playing a round) is dropping in popularity.

    It is also fiendishly expensive the S.E. blighty.

    so much of what Mr W compares with Silicon Valley is true.IMHO.

    I seem to remember seeing one decrepit GF that was farmland 20 years ago that has been recently sold for development of 4-5 bed houses. No affordable housing in that neck of the woods. It is the Surrey Stockbroker Belt after all. The locals can't have the plebs lowing the tone of the place now can one?

    I can't help wondering if this was all planned. Build a gold cource, run it for a few years, close it down and build houses. A good way round planning restrictions then? A good few millionaires made in the process I should imagine.

    As for the US, the NIMBY's don't go out protesting. Over there, they just sue everyone in sight. That will make the local councils tread very carefully. My guess is that those emply plots might have a bit of dodgy provenance on them. More than their jobsworth to rish developing them then!

    1. Anonymous Coward
      Anonymous Coward

      Re: Surrey and its golf courses

      I once analysed the golf course thing as farmernomics.

      Farmers work like this: very few of them have original ideas. What happens is, they watch what their neighbours do, then copy it (a former gf remembered watching a farmer being driven by his wife in the pickup of their Land Rover so he could see over the hedge and find out what his neighbour was up to. Do not try this on a road with potholes. But I digress.)

      So one farmer with some originality converted some poor land to a golf course and became rich. When the other farmers saw what was happening they did the same. But the inevitable laws of supply and demand crept in. They had to cut prices, so golf became cheaper, but they made much less money. Before long, the huge joining fee became just turn up and play.

      Also some of them didn't have marginal land so they built their golf courses on good agricultural land, thus reducing their total income. Result, bustness.

      Meanwhile the first farmer has probably invested in the profits in a solar farm, high tech milking system, state of the art equipment, a farm shop and café and paying off his mortgage. So he makes money farming.

      1. Fungus Bob Silver badge
        Holmes

        Re: Surrey and its golf courses

        "Farmers work like this: very few of them have original ideas."

        So they're just like every other businessman...

        1. fajensen Silver badge
          Coat

          Re: Surrey and its golf courses

          So they're just like every other businessman...

          ... businessmen who sometimes carry guns to work.

      2. fajensen Silver badge

        Re: Surrey and its golf courses

        Oh - THAT is what all the hedgerows are for: Keep those spying eyes off My Land!

    2. Evil Graham

      Re: Surrey and its golf courses

      Golf (and everything around it including doing biz whilst playing a round) is dropping in popularity.

      Good.

  2. YetAnotherLocksmith

    Spot on!

    Good article - and something that hadn't occurred to me in this respect.

    1. Zog_but_not_the_first Silver badge

      Re: Spot on!

      A fascinating discourse on that most tantalising of subjects - value. I had this brought home to me on a business course long ago where the presenter piled up some everyday objects in no particular order. He asked the audience, "What's it worth?" Various estimates followed, generally close to "nothing".

      "Now", he said. "What if Andy Warhol had constructed this little sculpture..."

  3. Zog_but_not_the_first Silver badge
    Alert

    Ownership and liability

    What worries me rather more is the statement by someone in the Gov a couple of years back (I think it may have been IDS) when answering a question on the UK national debt. "Not to worry, our housing stock is worth much more than that".

    Now as someone in the fortunate position of having the deeds to my house, I thought I owned it.

    1. The Axe

      Re: Ownership and liability

      And to correct IDS (if it was him) further, the price of a house is nothing - until it is put up for sale.

    2. Pierre Castille
      Go

      Re: Ownership and liability

      Many years ago I was told that part of the post war success of Western Germany resulted from massive loans from the USA made by Adenauer's government using German private property (deeds to houses) as collateral.

      If this was true it was a smart move. Germany needed money and US banks needed surety. It is a pity that the Greek government didn't think of this earlier this year.

      1. Tim Worstal

        Re: Ownership and liability

        Well, sorta. Actually, the Rentenmark, and to deal with the Weimar inflation.

        https://en.wikipedia.org/wiki/German_Rentenmark

        And sorta, sorta, a pledge of the land values. But also sorta a pledge of the tax revenues to be had over time from those recorded land values.

        But Germany though.....

    3. Steve Knox Silver badge

      Re: Ownership and liability

      Two Points:

      1. Now as someone in the fortunate position of having the deeds to my house, I thought I owned it. Yes and no. You own the land, but your ownership rights derive from and are controlled by the state. See https://en.wikipedia.org/wiki/Eminent_domain (aka compulsory purchase in the UK.)

      2. To whom do you think possibly-IDS was referring when he said "our housing stock"? Since the question was on the UK national debt, the logical answer would be the nation of the UK, of which you are either a member or under the jurisdiction of vis-a-vis your property deeds.

      In both cases, reference to "your" property as part of "our" housing stock makes sense.

      1. Doctor Syntax Silver badge

        Re: Ownership and liability

        @Steve Knox

        If you follow your own link you will see that E&W practice nowadays is that the if the state takes the land then it must provide compensation. If, therefore, the state wished to clear all existing debt by compulsorily acquiring sufficient property & reselling it it would have to raise an equivalent amount of new debt to do so leaving no reduction in the debt but a tidy profit to the solicitors who carried out the conveyancing.

  4. graeme leggett Silver badge

    I'm sure that were any council to buy some land and then declare it buildable on, that someone else (a land owner or developer probably) would complain that they were being diddled out of something. And quite likely they would have an argument that it was some sort of abuse of privilege.

    And I wouldn't be surprised if having created more buildable land, council found it had to be sold "at market price" with the effect of inflating its cost such that only a developer creating 'executive housing' would be able to buy and Thu having little ameliorating effect on housing affordability.

    This example council could create a lot of land for building at once. Which ought to depress price and let other developers in. But would it be enough that lower priced housing occurred,or would it all get bought up for executive homes with garages for two cars and a hanky-sized garden?

    Add in the complaints about over development by owners of existing housing nearby, and who would want to be a councillor, or housing officer.

    1. Fibbles

      Pretty much what I was thinking.

      Planning laws are there for The Greater Good ®. The thing about doing something for the general good of everyone is that on a specific, individual level it might actually be against that person or organization's best interests. However, the council can't start moving the goal posts every time a decision goes against them. If they won't follow their own laws, why should anybody else?

      1. Charles Manning

        The Greater Good

        Sure, we must think of the Greater Good, but that needs to be balanced with the individual good too.

        As Tim has pointed, out, much - perhaps most - of the capital that individuals own is in property. That capital value is underpinned by a controlled scarcity caused by zoning laws.

        If the cities were to rapidly open up huge tracts of land for development through re-zoning then, in the short term at least, land prices will be driven down.

        That sucks for at least the following reasons:

        * If your house devalues from, say 600k to, say, 400k then that 200k shortfall is still real money for the individual. They're still paying mortgage on a 600k house that is now only worth 400k. Some people will end up owing more than the property value.

        * Cities charge taxes based on property value. When property values go down, they have a hard time pushing up the charges to compensate.

        So how does one act in the common good without ripping off the individual?

        1. JP19

          Re: The Greater Good

          "So how does one act in the common good without ripping off the individual?"

          You were ripped off when you paid too much money in the first place. You argue that we should carry on ripping off everyone so you can pretend that you weren't ripped off - common good my arse.

          I wish my house was worth £20 because I would go out tomorrow and spend £40 to get a much nicer one.

    2. Yet Another Anonymous coward Silver badge

      Remember though in small town America the local council is directly elected as individuals - not just a block of lib-dems or labour depending on which lot in Westminster you are currently mad at.

      So the local council is often stacked with local business owners (who else can afford to run and take an unpaid post).

      Our little town almost bankrupted itself 10years ago by buying a bunch of land to develop houses on. The sale of the houses would pay for the roads, water, sewage etc that it had to build first - it completed the empty lots in 2008 just into the housing crash.

      Now a block of local property developers got elected and not wanting any competition to their existing market - the lots are still empty, we are paying for the infrastructure, we are paying for the loans, and we still have a shortage of housing.

      1. Alan Brown Silver badge

        "So the local council is often stacked with local business owners"

        Same in New Zealand. one town (Palmerston North) had the council taken over by property developers - who then zoned flood ponding areas for housing and wrote themselves exemptions for minimum floor heights (In some cases, 5 metres below the expected ponding levels) - in the face of major objections by the regional river management board (catchment board).

        Eventually the whole mess got exposed by a major storm which came within a whisker of making 10,000+ people homeless when a levee (stop bank) started to fail under the load.

        1. Yet Another Anonymous coward Silver badge

          We have an extra terror here = Lawyers.

          If the council pass a bylaw that restricts development in any way they are threatened with a lawsuit where even if they won it would cost our small town $$$$ to defend itself. And whenever they pass a bylaw that might allow any development they get hit by a threat of an environmental objections that would take years and cost $$$$.

          The result is that nothing has happened for years - we might have invented the perfect form of government.

      2. JLV Silver badge

        >So the local council is often stacked with local business owners (who else can afford to run and take an unpaid post).

        and in Roman times unpaid senatorial or governor positions were heavily and expensively sought after. Because they gave the title holder all sorts of lucrative ways to stuff his pockets once in place.

        Remember that next time you evaluate pay for your elected officials. Which can be surprisingly low, but in some countries lead to all sorts of pension goodies, a form of remuneration which provides no value whatsoever to taxpayers.

        Re. Palo Alto, it would be unethical, and possibly illegal, for "zoning controllers" to purchase un-housing land at low cost and then rezone it into a higher bracket. This is a prime source of corruption by local (& low paid) officialdom in China.

        A low-cost housing only zoning classification would be fairer and more transparent.

    3. nijam Silver badge

      Exactly so. And in fact, the phrase "The answer is for the council to buy some land not currently zoned for such housing and then so zone it." is a pretty accurate description of insider trading.

      But apart from that, I'd generally agree that the whole lot of them are insane.

  5. Gordon 10 Silver badge

    so why can't

    The council just rezone the land back to lowrise use or mandate some mix of social housing like they do over here?

    Seems batshit crazy one way or another.

    I presume the rezoning laws are a little less simple than SIM City has led me to believe?

    1. Tim Worstal

      Re: so why can't

      Taking away the permission in US law would be a "taking". Something that they must compensate for at full value. Creating new stuff they can do.

      1. Peter Simpson 1

        Re: so why can't

        Taking away the permission in US law would be a "taking". Something that they must compensate for at full value.

        Uh...true, except they define "full value" as the value at which the property is appraised for tax purposes, which is often significantly lower than the market price.

        // this does vary by state, though

  6. LDS Silver badge

    The issue is tha building on 'virgin' land...

    ... is far cheaper than buy, demolish old buildings, clean up and build new ones (unless a war helps you). Thereby 'investors' prefer to destroy new land while leaving behind old building areas which soon turns into slums - which has a negative economic impact also. Unluckily, the only way to stop this is through 'zoning', and then, yes, the 'artificial' value created can be good, if it puts constraints to redevelop areas instead of abandoning them while exploiting new ones in larger and larger circles - land in not an infinite resource...

    1. Zog_but_not_the_first Silver badge
      Trollface

      Re: The issue is tha building on 'virgin' land...

      Only in Yorkshire?

    2. Yet Another Anonymous coward Silver badge

      Re: The issue is tha building on 'virgin' land...

      So on one side of a road you have houses so astronomically expensive that people are spending 2/3 of their income paying the mortgage, leaving them too poor to spend anything in the local economy, leading to stagflation.

      And on the other side of the road you have fields that the farmer is being paid to keep empty because the crops they would grow are already so cheap it wouldn't be worth adding to the stockpile.

      And yet the government can't give planning permission to build houses on the land because ?????

      1. Anonymous Coward
        Anonymous Coward

        Re: The issue is tha building on 'virgin' land...

        Oh, I know. Is it because the fields are full of straw men?

      2. LDS Silver badge

        "fields that the farmer is being paid to keep empty"

        Just as long as you can import cheaper crop - which may not be true in the future... I'd be careful to build houses everywhere, you can't grow nor eat concrete... one day those fields could turn very useful.

        Houses prices have nothing to do with availability, in a few countries there are *more* houses available than people and demand, still builder/owners tries to keep prices far too high for the available income (and many houses stay unsold) - even if building is now cheaper than ever, especially since workers are mostly low-paid immigrants from East Europe and Africa - but it was a quick way to make money, together banks for which mortgage loans have been a huge, easy, no-hassle affair in the past years - far easier and less risky than to invest into other kind of businesses - which also explains part of the enduring crisis in many European countries.

    3. jake Silver badge

      Re: The issue is tha building on 'virgin' land...

      "... is far cheaper than buy, demolish old buildings, clean up and build new ones"

      Uh, no. Clearing land is clearing land. The cost is always the same, virgin or not. Bring in heavy equipment for a day or three, haul off the unwanted to a landfill. Houses, trees, brush, concrete, asphalt, whatever, it's all the same cost when clearing land for re-use. And in fact, older properties bring in the specter of asbestos and lead-based paint, which is REALLY spendy to clean up.

      For the record, a major cost of developing land is infrastructure. Water, electricity, gas, sewer. If these already exist, the developer is ahead of the game.

      I could tell you how I know this, but if I did you would probably shoot me.

      1. Anonymous Coward
        Anonymous Coward

        Re: The issue is tha building on 'virgin' land...

        In the UK you have to pay VAT on brownfield sites while greenfield sites are exempt. The brownfield site will also contain utilities etc that while totally unsuitable for your purposes will still be included in the valuation, again something you avoid with a greenfield site.

        BTW - I am not familiar with the situation in Surrey but many golf courses in the UK are legalised dumps for builders waste. Here is a link to the Adam Smith institute article on it: http://www.adamsmith.org/blog/planning-transport/why-golf-is-a-rubbish-sport/

      2. Naughtyhorse

        Re: Houses, trees, brush, concrete, asphalt, whatever,

        Let's add asbestos and cadmium to that list...

        although to be fair, prolly not much in the way of Japanese Knotweed which is equally outrageously expensive to remove from site.

  7. Pen-y-gors Silver badge

    Insurance value?

    IANA Insurance Broker but...I think you'll find that your insurance company actually insures you for the 'rebuilding cost' of your house, not the market value of the house (less land value etc). In expensive areas this may be a lot less than the market value of the entire site, but in cheaper areas may be a lot more than the market value, as it includes the cost of demolition and clearing the site, plus the cost of doing a one-off build (rather than perhaps building an estate all at once)

    1. Tim Worstal

      Re: Insurance value?

      Yes, you're right, sorry phrased that rather badly. Maxima culpa etc.....

  8. John Savard Silver badge

    Free Market Consistency

    If someone owns land in Palo Alto, then in a true free market system, of course he would be able to build on it. Preventing him from doing so is an act of interference in the free market system by the government. So the ability to build on land is not value created by the government of Palo Alto - it is value the city council has merely omitted to destroy.

    1. Tim Worstal

      Re: Free Market Consistency

      Umm, true, but I fear it's a little bit Randian even for me.....

      1. Yet Another Anonymous coward Silver badge

        Re: Free Market Consistency

        It's also where the free market and Bentham-ism align.

        If you wanted to create the greatest good for the greatest number of people you would sell the land to the highest bidder and let them create as many apartments as they could fit onto the land. The poor disposed would then benefit from the drop in house prices in surrounding areas as people there are able to move into the city.

        Deciding that some tiny minority of the poor are allowed to live in rent controlled apartments in Manhattan or a council house in Chelsea is silly. It's like solving the problem of public transit by giving 1 person in a million a free Rolls Royce.

    2. DougS Silver badge

      Re: Free Market Consistency

      If schools were truly equal, this would be less of a problem. One of the reasons people (both rich and poor) want to live there is that Palo Alto has great schools, due to the huge property tax revenue flowing in. If the schools were the same in Palo Alto as in any other city in California, there would be less demand to live within Palo Alto and property prices wouldn't be quite so high.

      1. Greg 16

        Re: Free Market Consistency

        Are the schools really that different, or does the wealth of the area lead to the good schools becoming a self-fulfilling prophesy? i.e. the area attracts parents who care about their kids education and are also presumably of above average intelligence themselves (they're high earners). That means the teachers will have a much easier job than teachers working in an 'average' school.

        1. jake Silver badge

          Re: Free Market Consistency

          "or does the wealth of the area lead to the good schools becoming a self-fulfilling prophesy?"

          Yes.

          Palo Alto native, born at Stanford Hospital.

        2. codejunky Silver badge

          Re: Free Market Consistency

          @ Greg 16

          "Are the schools really that different, or does the wealth of the area lead to the good schools becoming a self-fulfilling prophesy?"

          Almost certainly and would we want to change that? Do we drag everyone down in the name of equality or do we allow people to group up and gain a reputation of their own? Some place must always be at the bottom of the pile but it allows others to excel at their strengths.

          1. This post has been deleted by its author

            1. codejunky Silver badge

              Re: Free Market Consistency

              @ Arnaut the less

              "So tell me - did you get a scholarship to Eton or did Daddy just buy a place as usual?"

              This is where I really want to pat you on the head while looking at you with sympathy. Cmon Arnaut, dont feel like less, we cant all be like that.

              In fact I didnt go to Eton, no scholarship nor daddy buying me a place anywhere either (not much hope of that). The conversation was about good schools in a wealthy area which I am sure includes private schools but I doubt it excludes state schools. Either way I still wouldnt have a problem with it.

              I got the wonderful state education (UK) and the hell it was until finally being released. The aspirations of the fellow inmates was to get a crap job, preferably the dole or (if female) knocked up for the free house and money. But instead of feeling sorry for myself and looking with green eyes at anyone I may accuse of having it easier/better I did what I could to get away from that life.

              So when I say I wouldnt want to change good areas having good schools etc what I am saying is I wouldnt want a hell hole inflicted on everyone in the name of equality and at least with good areas and good schools there is hope of good education until the others can be dragged up and improved. Regardless of how much money people have.

        3. Naughtyhorse

          Re:above average intelligence themselves (they're high earners)

          Greg 16, let me introduce prospective candidate for POTUS donald trump, you have clearly never met!

  9. Identity
    Boffin

    I'm shocked!

    "given that it's the good burghers of Palo Alto – through their city council – who decide on which pieces of land you can build on in that fair city, then they're fucking insane to be paying for something which they themselves created for free."

    Is TW serious? Since the current owner has undoubtedly paid for the property, for the city council (et al) to simply withdraw permission for anything other than the current use amounts to government seizure by eminent domain. Surely that does not jibe with Worstallism. In fact, the US Supreme Court (in Kelo v. the City of New London [strangely by majority of the liberal justices]) ruled that a higher tax value is sufficient reason for such seizure.

    Not that I'm recommending this. Among the other problems with this week's screed is externalities. When we say, "for our wealth stock is, by definition, our capital, and GDP is the annual income that we gain from employing that capital. If we're getting less GDP from the same capital, or we've more capital producing the same GDP, then the society is becoming less efficient," we are saying that things like environmental preservation have no value, primarily because they are not monetized.

    And I will say again that rises in prices (too often confused with value) are more often than not synonymous with inflation, and are not really growth.

    1. Tim Worstal

      Re: I'm shocked!

      ERM, I've not suggested that the current permission be withdrawn, which would indeed be a taking.

      Instead, that they grant new permission on another piece of land.

      1. This post has been deleted by its author

        1. Tim Worstal

          Re: I'm shocked!

          It's not " a taking" in law, no.

          1. Identity
            Boffin

            Re: I'm shocked!

            @ TW — taking in law

            Not sure what you're referring back to, nor do I know UK law. In the US, while the point is somewhat moot, there are plenty of examples where it is.

            • On the [New] Jersey Shore, landowners have been barred from building on land they bought for that purpose.

            • In Massachusetts,Title 5 requires homeowners on septic systems, before the sale of their houses, to either hook up to city sewers (at their own expense, and with the ensuing sewer charges, where once it was free) or have their systems tested and certified by state-chosen contractors (again at their own expense which, 25 years ago, was $800). Should the system fail the test, it must be remediated (again at the owner's expense) or hook up as above. The Massachusetts Constitution states:

            [ARTICLE X] "…no part of the property of any individual can, with justice, be taken from him, or applied to public uses, [EMPHASIS MINE] without his own consent, or that of the representative body of the people. "

            (When I brought up this inconsistency during the hearings for Title 5, I was told there are some issues more important than the Constitution!) Apparently, this issue has been problematic for a long time. In the current legislative session, a bill has been put forward to remedy this:

            Bill S.896

            "An Act relative to due process to prohibit the Commonwealth and its political subdivisions from adopting environmental and developmental policies that would infringe or restrict private property rights"

            I could go on, but I won't.

      2. Yet Another Anonymous coward Silver badge

        Re: I'm shocked!

        Alternately the council could give every other plot of land in Palo Alto permission to build a skyscraper - thus reducing the value of the mobile home park.

        If the valley wanted to cure the housing problem all it has to do is give automatic planning permission to any development that will increase density. Then the marker will decide how many $10M mansions, $250K single homes and $100K studio apartments the city needs.

      3. DougS Silver badge

        Re: I'm shocked!

        The only problem is, people don't want low income housing to be located near them. Changing zoning on one of those 20 acre undeveloped plots and getting a trailer park or (eventually, due to lack of funds for maintenance caused by below market rents) run down apartment buildings on them will damage property values of nearby properties.

        At best, those residents are able to get the assessment knocked down, and there is less property tax flowing into Palo Alto's coffers. At worst, they sue for the loss in property values. Either way, it isn't clear that Palo Alto comes out ahead versus the "buy that other plot for $39 million" strategy.

      4. John Savard Silver badge

        Re: I'm shocked!

        I've got nothing against that, just to clarify my original criticism.

      5. Identity
        Boffin

        Re: I'm shocked!

        @ TW — re: ERM

        Presumably, whether developed or not, this other land you speak of is owned. If not by the City itself, such a required use would again be a taking. If you are saying the current owner(s) would be allowed to build low-income housing or a trailer park for same, there can be no objection — save for the rancor of the abutters should such a project be implemented.

  10. Doctor Syntax Silver badge

    "One of which is the rise in the value of housing."

    Do we actually mean value here? As opposed to market price?

    The value of the house is in the shelter it provides for its inhabitants. House price inflation might push up the market price of the house but the shelter it provides is unchanged unless changes are made to the house itself, say by a developer splitting it into flats.

    We really should have learned this by now. We've seen house price inflation put up "valuations" with loans taken out against the supposed new value but as soon as it becomes clear that the loans can't be serviced the prices collapse. Cue printing of money (under one name or another) to try to prop up the financial system. Maybe the "value" of that printed money should be included in the GDP, then the economy would really look efficient. Alternatively we should stop pretending that unsustainable house prices constitute wealth - but that would be really scary.

  11. Harry the Bastard

    seems clear

    kill the golfers

    /with apologies to philip k dick

  12. Mark 85 Silver badge

    What I see is that the good city fathers are probably caught in a PR nightmare.

    If they don't make the offer (even a low-ball one) then they're not "thinking of the poor or working class".

    If they get the land, then they get stuck with all the headaches and little profit.

    If it sells at full price and a developer builds it up, they get the tax money on the value of the land and buildings.

    The logic of taking "undeveloped land" and turning into something else is fine if the land is usable.. depends on the terrain. Also, this is California we're talking about. They seem to have their own rules of engagement with these things, like the way they pump much of their reservoir water into rivers because they must save the fish. There's probably some ecological (mandated by the greenies) reason for not developing said land also.

  13. J.G.Harston Silver badge

    "The search string “Palo Alto, CA, USA” gives you the city boundaries on that map"

    Bloddy 'ell. Can somebody say "squashed salamander"?

    1. Tim Worstal

      "Can somebody say "squashed salamander"?"

      Some days, before lunch, yes. After lunch, some other days, weeeeel.....journos do have a reputation to keep up.....

    2. graeme leggett Silver badge

      Not a squashed Gerrymander?

  14. Anonymous Coward
    Anonymous Coward

    Excellent article

    Similar dynamics are in play with the Uber debacle - you have a taxi industry that requires the purchase of a medallion that in hot markets like Manhattan can cost $1M or more, plus a commodity $20K vehicle. Licensed taxis therefore could all be replaced with McLaren F1's if their owners didn't need to purchase a medallion, or conversely, a company like Uber that offers nothing new other than bypassing that artificial restriction can be valued at billions of dollars.

    Anyone interested in the economics behind land distribution should read the Natural Economic Order

    1. Allan George Dyer Silver badge
      Facepalm

      Re: Excellent article

      A McLaren F1 would be an odd choice as a taxi: only room for one passenger, insignificant luggage space, difficult to get in or out of. I can't imagine what the insurance premiums to use it as a hire car would be... but do Uber drivers care about proper insurance?

      1. imanidiot Silver badge

        Re: Excellent article

        Actually, the McLaren F1 is one of the few "supercars" with a capacity for 3 people (driver and 2 passengers). It does however have only very limited luggage capacity.

  15. ecofeco Silver badge

    Insanity?

    Agreed. But land deals on that scale in the U.S. are usually dirty as hell and you can bet someone or all of the council will personally benefit from it in some way.

    You can literally take that to the bank.

    I also forgot to add that you can find shady and stupid million dollar government land deals in almost every U.S. city.

  16. Fazal Majid

    Stanford

    Stanford University is the elephant in the room. They own a huge amount of property in Palo Alto and are too rich and lawyered-up for the city council to tangle with. Like many prestigious universities in the US, they are really a hedge fund with an education sideline as a tax dodge, and Stanford's endowment is growing fastest in the country, thanks to all the tech wealth it has generated.

    The value of property in Palo Alto is tied directly to the tech industry that sprung from Stanford. Detroit can put all the property restrictions it wants, that would not raise prices one whit since no one actually wants to live or work there if they have any choice in the matter. Planning regulations are just a multiplier on top of demand that already exists.

    1. David Roberts Silver badge

      Re: Stanford

      Upvote for the classification as a hedge fund.

      Reminds me of Trinity College Cambridge.

      Allegedly you can walk from the coast (Port of Felixstowe) to the college in Cambridge without even once stepping off land owned by Trinity.

      1. Kubla Cant Silver badge

        Re: Stanford

        It used to be said that you can walk from Oxford to Cambridge on land owned by St John's College, Oxford.

        Dateline Cambridge Science Park - owned by Trinity College.

      2. Yet Another Anonymous coward Silver badge

        Re: Stanford

        Port of Felixstowe - where they invested massively to handle containers while every other traditional port was fighting to maintain it's old way of life..

        Or Cambridge Science park - while the city council was blocking IBM building a chip fab near the city because it would industrialise the surrounding countryside.

        It looks like olde-worlde Trinity are cutting silicon valley capitalists.

  17. Greg 16

    Nimbyism

    The main problem in the UK is nimbyism. Cambridge is supposedly our silicon valley and produces a nice amount of GDP, but look on a map and it's not much bigger than a village. It could be doubled in size and it would still be a lot smaller than most towns. And yet if that was to happen there would be mass protests and accusations of concreting over the entire UK countryside.

    A similar example that I saw on Countryfile yesterday, was company which is going to open a potash mine in North Yorkshire. The investment is £1.7 Billion (largest in the UK) and when opened it will employ 1000+ workers, account for 2.5% of all UK exports (not potash exports - ALL UK exports) and increase the productivity of every working person in Yorkshire by £1500 per year. The problem is that it's in a National Park, so they are hiding the whole thing and even transporting the potash to the ports in a 25 mile tunnel. Despite this, there are still campaigners protesting against it, because there will be machinery there for a few months while they build it!

    1. Zog_but_not_the_first Silver badge
      Devil

      Re: Nimbyism

      Yes, the potash mine article was very interesting. At first sight the reactions seem overegged and laboured, but I think the real issue is precedence.

      Don't forget, our political masters (of all colours) would sell our kidneys for their profit if they could get away with it.

    2. LucreLout Silver badge

      Re: Nimbyism

      @Greg

      The main problem in the UK is nimbyism

      No, the main problem is decades of under supply coupled with a soaring birth rate, a lingering death rate, and mass immigration. The Uk has a similar population to that of Germany, with rather a lot less land. I'd agree NIMBYism obviously exists, and it is a feature, but it isn't the main problem.

      So the NIMBYs. Lets be logical. You own a house in Cambridge. The government decide to double its size over ten years. On the face of it, that is fine, however... Nobody is allocating funding for infrastructure - new (good) schools, more doctors surgeries or dentists, new road capacity, new carriages on the train into the large city where everyone goes to work etc etc.

      The schools are full, the hospitals are full, the roads are full, and the train into / out of London is full. So what you're doing is taking the value of all that missing infrastructure and you're taking it from the existing owners; owners who are already facing significant negative equity because of your rampant building program. Logically then, you should expect rational people to object to the new housing, especially if it is social housing which will further devalue their property.

      The only alternative is to add an infrastructure charge onto the new housing, which will make it manifestly more expensive than the existing stock, which is hardly solving the problem you're trying to solve.

      1. Greg 16

        Re: Nimbyism

        Obviously I wasn't suggesting doubling the size of Cambridge without any infrastructure to support that growth, but councils do charge developers money for infrastructure when they grant planning permission. Government would have to invest money outside this though, for the things that central government are responsible for.

        Also I think you could double the size of Cambridge and not see any fall in house prices - you could make it ten times bigger and it would probably still lead to higher prices! The town loses out on a lot of investment due to the planning constraints making it unattractive to business (which is what my point was).

        1. LucreLout Silver badge

          Re: Nimbyism

          @Greg

          councils do charge developers money for infrastructure when they grant planning permission

          They do, but it is nowhere near what would be required to fund the infrastructure.

          Also I think you could double the size of Cambridge and not see any fall in house prices

          Then you think wrong, I'm afraid. The value of the property is mostly in the restriction on the planning system, as detailed by Tim.

          Look further down the Cambridge-London train line and you'll find Baldock. It's a small town on the edge of a larger one, but still pleasant. That is going to roughly double in size in the next ten years and prices are already static there before the ground has been struck. Nobody wants the expansion and its out of all scale for their town.

          Much of the value in Cambridge is because it is a very small very old city with excellent transport links to London, and almost unlimited supply of highly educated people wanting to make a home there due to the colleges. I can't afford to live there, but would love to do so. Double it in size and prices will drop like a rock - it won't be nice anymore and it won't be what it is today. Look further up the paralell line and see St Neots for an example of that - Massive expansion just being finished with all of the wholly predictable problems I raised earlier.

      2. John 62

        Re: Nimbyism

        UK similar population of Germany? Well it's in the same ball-park. UK: 60ish million. Germany: 80ish million. Though there are predictions that the populations will equalise in the next 10 years or so. Germany is worried about its low birth rate (slightly higher than Greece, but still below replacement - which is why people don't want to bail out Greece: even without tax evasion there won't be anyone to pay back in the future). Though the UK's birth rate is only booming in comparison: it's barely above replacement. If you're worried about space, apart from Germany's lack of understanding of tea and the need for milk in it, I can think of worse places to move to than the beautiful Extertal.

        The UK's population is very unevenly spread. On a macro level, Scotland has areas that have the lowest population density in western Europe. On a micro level, Northern Ireland has most of its population in the greater Belfast area. There's plenty of space.

        1. Yet Another Anonymous coward Silver badge

          Re: Nimbyism

          >apart from Germany's lack of understanding of tea and the need for milk in it

          Munich is nice and has a cricket club - so there is hope for German civilisation

        2. Doctor Syntax Silver badge

          Re: Nimbyism

          " Germany's lack of understanding of tea and the need for milk in it"

          If you want milk in tea you need better tea.

    3. Anonymous Coward
      Anonymous Coward

      Re: Nimbyism

      "Cambridge is supposedly our silicon valley and produces a nice amount of GDP, but look on a map and it's not much bigger than a village."

      You must have a very funny map. That, or you haven't realised that the little bit in the middle with some of the colleges and the older departments is a tiny fraction of an enterprise that spreads out all over the Fens.

      1. Greg 16

        Re: Nimbyism

        "Much of the value in Cambridge is because it is a very small very old city with excellent transport links to London, and almost unlimited supply of highly educated people wanting to make a home there due to the colleges. I can't afford to live there, but would love to do so. Double it in size and prices will drop like a rock - it won't be nice anymore and it won't be what it is today."

        Mmm, so an "unlimited supply of highly educated people wanting to make a home there", but if you double it's size, prices will drop like a rock because no one will then longer want to live there? And thanks for pointing out that if you make changes "it won't be what it is today". Impressive - you're a Nimby and it's not even your back yard. The main built up area of Cambridge is about 6 sq miles, not much bigger than Heathrow airport. The sky would not fall in if there was (sympathetic) development. If it was well planned it would actually improve the town.

        1. LucreLout Silver badge

          Re: Nimbyism

          @Greg16

          You'll just have to suck it up fella and work a little harder for a little longer. You're not getting a half price house in Cambridge any time soon. You might as well face reality now rather than waste time becoming increasingly bitter about it.

          You can't double the size of a city and expect prices to remain static. If you don't already understand why, then you've a lot to learn before anyone could even begin to explain it to you.

          If it was well planned it would actually improve the town.

          It won't be well planned. It wouldn't improve anything. And it ain't happening.

          1. Greg 16

            Re: Nimbyism

            I don't have to suck up anything - I live at the other end of the country and would never be foolish enough to live in that neck of the woods thanks. I just used Cambridge as a good example. And my point was never about half price houses - which I doubt very much would be the result anyway. The reason it should happen in various places is to help the UK economy, by allowing growth.

            1. LucreLout Silver badge

              Re: Nimbyism

              The reason it should happen in various places is to help the UK economy, by allowing growth.

              Deliberate destruction of wealth, for that is what the value of existing housing stock is, never leads to growth. You can't build your way out of population growth, but you can build your way out of greenbelt and quality of life.

              We have enough housing in the UK, for there are very very few homeless. What is required is an adjustment in terms of the expectations of would be first time buyers. Your first house will not be the same standard as your parents last one - the one you grew up in.

      2. Yet Another Anonymous coward Silver badge

        Re: Nimbyism

        Not quite the same scale that Stanford has had in Palo Alto though

  18. Decade
    Holmes

    Just as TechCrunch reported

    Kim-Mai Cutler at TechCrunch reported on this exact issue last year: How Burrowing Owls Lead To Vomiting Anarchists (Or SF’s Housing Crisis Explained)

    Bay Area Regional Governance is difficult and counterproductive. Allowing companies to build tens of thousands of units of office space, but only thousands of units of living space? Are they insane? Yes, they are.

    It’s quite sad how a bunch of romanticists, pining for the way things used to be, are contributing to the very gentrification that they claim to be fighting. My brothers and I are native San Franciscans, but we all had to go into tech to afford to stay here. Lucky for us that we have that aptitude. I used to work with school kids, and I worry about their futures here.

  19. LucreLout Silver badge

    @Tim

    Think how much we could bring down the cost of Home Counties housing if we did something about that.

    Agreed, but then take a moment to do what no politician ever does, and think another step ahead.

    Dropping the value of existing housing dumps recent buyers into permenant negative equity. It drops the book value of the mortgages through the floor as people elect to go bust. You now have a banking crisis from which there is no escape and a generation trapped forever in their starter homes. Economic destruction quickly follows, and people become far more concerned about feeding their family and keeping them safe than they ever were about affording a bigger house or buying rather than renting.

    That is not to say that society should accept ever higher prices, only that simplistic idealism won't work. House building, in order to stabilise prices, must be matched to immigration, birth, and death rates; and to household formation and seperation. Stability would allow the gradual backing out of the problem with none of the economic end of days that simply deregulating planning or meaningfully increasing the housing stock would have to cause.

    The answer is for the council to buy some land not currently zoned for such housing and then so zone it.

    Can you imagine the uproar? You paid $$ Million for your pad and the council come along and dump a trailer park next door? Your house just halved in value, and in the land of the free lawsuit, the council zoning department will be busy from now until doomsday.

    Ultimately, the answer is that employers will, if they want to employ people in a location, have to pay enough for their employees to live a commutable distance to work. Anything else is tinkering around the edges and trying to buck the market, which as we know, never works.

    Most people can't, by definition, afford to live in an expensive area. Subsidising a small handful to live there at the expense of vastly more that would like to live there but can't, is manifestly unfair, and in the longer term, unsustainable.

    1. codejunky Silver badge

      Re: @Tim

      @ LucreLout

      "Dropping the value of existing housing dumps recent buyers into permenant negative equity."

      I dont see any way out of this scenario. Housing is an investment and suffering the highs and lows of being an investment, but actually it is shelter which is a necessity. The over inflating and long boom has caused prices to be massively excessive without making people richer.

      The funny thing is people feel richer if their house goes up in value, but they cant access that value without selling it (even as a guarantee against a loan) and the other properties are inflating similarly. People could have to move significant distance to find a place with lower price inflation and the cost of moving would eat that alive too. But if property values fall people feel poorer as they pay the agreed price for a product of now lower value. How can regular people win?

      Somehow the property prices must come down. Either a crash or stagnating for a long time. Or maybe a population restriction could solve it (looking at the insane immigration problem).

      1. LucreLout Silver badge

        Re: @Tim

        @Codejunky

        I dont see any way out of this scenario. Housing is an investment and suffering the highs and lows of being an investment, but actually it is shelter which is a necessity.

        The necessity is the use of a property, not the ownership of it. Rent, then, works societally just as well. What causes the most unhapiness among the young is the loss of the capital gains they see owners accruing.

        The over inflating and long boom has caused prices to be massively excessive without making people richer.

        Some people get richer. My folks recently sold their pad and moved into rented housing. They've made out like bandits on capital appreciation over the decades. BTL landlords will one day bank the capital gains too.

        How can regular people win?

        I'm afraid that comes down to stumping up the purchase price to get on the ladder, then hanging onto it for dear life. Property moves in cycles - I had years of negative equity to get through - but over the longer term it is the main leveraged investment open to regular people (Try borrowing money to invest in emerging market equities!)

        I'm the best contraindicator I know when it comes to property. Do the opposite of what I do and you'll do well. But even then I've managed to accrue a capital gain slightly ahead of inflation having bought at the worst time in a generation and then just waiting.

        Somehow the property prices must come down. Either a crash or stagnating for a long time.

        I'm not so sure they will come down very far or for very long. Property as a place to live is affordable (I've previously posted detailed numbers on this) even if that place isn't as desirable as what can be rented for the same outgoing.

        When I was young I used to think that one day, when renters outnumber the owners, the government could be made to act. The thing is, as time went on, more and more of my generation bought a place such that most Generation Xers are now property owners. The same is happening to Generation Y too. Renters won't out number owners for a long time to come and MPs own self interest would have to be overcome.

        Changes in the workplace (women working, in essence) have driven prices permenantly higher than would otherwise be the case. The days of a normal mortgage being 25 years seem numbered to me too, if we're all to be made to work until 70 then there's no specific reason not to take a 30 year mortgage, which would lead prices higher still.

        I know that what I'm saying is going to be unpopular with the young. I just wish I'd understood it 10 years sooner than I did, as I could have been mortgage free by now.

        Or maybe a population restriction could solve it

        I just don't see how that would ever fly with voters. Either you all but stop immigration, or you restrict the number of children people are allowed to have. Any rational argument you may make either way will be shouted down by the more... emotive elements of society. The left can't even stomach restricting how many children the state will pay you to have, never mind somehow preventing you having them; and Scotland would explode with tartan rage at the thought of BrExit form the EU without which you cannot control immigration. I'm not lobbying for or against either, by the way, just pointing out that electorally neither is likely to happen.

  20. BinkyTheMagicPaperclip Silver badge

    Rather poor article Tim, far too many 'what if' situations

    It's a nice point you raise about the true value of land, but in this case I don't see the conflict. Without extensive local knowledge, there could easily be lots of reasons other land can't be used.

    In that case, the assumption has to be there's not a lot of available land, and that the council's action is sensible. A company has told the owner they'll pay 55 million, the council has a cost associated with maintaining its responsibility for the people in the trailers, therefore they're offering a still sizable amount of money for the owner to 'do the right thing'. Without such an offer, though, the owner is very likely to go for 55 million USD.

    Run the numbers - 39 million offered by the council. 400 people in the trailer park, plus businesses. That's 97,500 USD each - a staggeringly small number considering.

    What could the council do otherwise? Infrastructure, perhaps. Assuming (big if) there is sufficient land elsewhere, perhaps in parts, they could potentially improve roads, bus services etc, to ferry residents from locations that currently don't have coverage. However, you have to assume the council are not stupid and have considered other options - I'm speculating as much as you are. Also, 39 million USD won't actually buy many roads, very little building and bus services can be surprisingly expensive to maintain.

    39 million could quite easily be a bargain

  21. Daedalus Silver badge

    Crazy like foxes

    Probably the site owner is related to or otherwise connected to somebody on the council. If the circumstances say cockup, suspect conspiracy.

  22. jake Silver badge

    The thing about Palo Alto is ...

    ... It was designed & built as a bedroom community in the 1950s. Yes, the University Avenue and California Avenue corridors between Bayshore (now Hwy 101), the rail line, and The Farm (Stanford) existed back before WW1, and have large, expensive houses built by Professors at Stanford along them. But most of the town was built roughly during the Korean war.

    The town planners decided that "the great outdoors" was important. Thus places like Mitchel Park, Rinconada Park, Foothills Park, and later the Astradero preserve (etc.).

    My parents bought their house for US$12,000 in 1962.

    Nice place to grow up. Nice place to live, as a kid.

    Then the Intel 4004 happened ... Students at Stanford, Berkeley, San Jose State, Mission College, and San Francisco State, already noting that the Bay Area was a nice place to live, decided to stay here after graduation.

    The word got 'round. SillyConValley became a "location". Many of the Engineers graduating from the above schools decided to stay and set down roots, regardless of where they came from. Most PaloAltans had no issue with this. We love our multiple ethnicities, for many reasons.

    About 1980, a certain group of people who believe in numerology decided that the 94303 and 94306 zipcodes were "good luck". They out-bidded each other into purchasing nominally $120,000 properties into $450,000 properties.

    The entire over inflation of property values on the mid-peninsula was driven by high-tech, and people from all over the world discovering that it's a nice place to live, having a reasonable degree, and the tech-boom providing really good wages.

    Trying to describe this phenomena in terms relating to a 2000+ year old London is an exercise in futility. Palo Alto ain't old enough for that kind of thing.

    Most native Palo Alto citizens aren't insane. Some of the imports might be.

  23. Gary Bickford

    US Doctrine of governmental 'taking'

    Tom,

    The problem with your thesis is that under US law (legislation and precedent), if the City Council were to just zone the property as park or whatever, reducing the value of the property by $38.5 million, the present owner could take them to court for the difference in value. There are some circumstances under which it can be done, but in general any zoning or other action after the fact that reduces the value, or the owner's right to 'enjoy the benefits', without compensation for the lost value, is an illegal taking.

    The most recent major case I can think of was in Oregon, where a business in Tualatin had a back parking lot that abutted the Tualatin River. The City decided to install a "River Walk" to allow folks to enjoy a walk along the river, and attempted to use Eminent Domain to take the land from the business. The business, which was about to lose several of its parking spaces, sued and won (IIRC after it went all the way to the Supreme Court). Had the City made the River Walk easement a condition of the original construction of the business, there would have been no case. This was about 10 years ago so I may not have all the facts right ...

    What makes it interesting is that the right of the public to travel along the river is unimpeded - it's a navigable waterway. But there was no way to walk along it on that side at that point. I don't know what the final result was.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2019