Democrats Have to Come Up With a Plan to Make Real Estate Affordable Again
by John Lawrence
In the end Trump's and Musk's blitzkrieg may end up being a bunch of sound and fury signifying nothing. However, there is a lesson here for Democrats. They need to have a couple of bullet points and a well thought out plan that they can execute or start executing on Day 1 of the next Presidential election, and they need to start hammering on it now. This is exactly what Trump did. He hammered for four years in his campaign rallies on MAGA before the election of 2024. The major bullet point should be Make Housing Affordable Again. This is the Number One economic problem in the US, and is something that government can and should do something about. There are a number of ways to do this. Kamala's plan for down payment assistance is one. But a much larger effort is needed and it should be ready to go on Day One of a new Democratic administration in 2028.
The Federal government can also give much more than down payment assistance. It can provide much or all of the capital to pay for the home with the understanding that, when the home is sold, the government will be paid back. It can facilitate the transfer of equity that parents or grandparents may have in their homes to children to be used for their home in much the same way that a reverse mortgage works. That is equity in a home can be transferred from an older generation to a younger generation in such a way that there is no increase in expenses for the older generation. There are private companies that do much the same thing right now. It is called Home Equity Investment. They will take an equity position in a home in such a way that when the home is eventually sold the company will get a percentage of the profits. At the same time they provide the homeowner with a bunch of cash which can be used to help a child buy their own home. This is different from a HELOC- a Home Equity Line of Credit - in which monthly payments have to be made. A HEI doesn't require monthly payments.Democrats should get involved in this and other creative aspects in a big way and have well thought out plans that they can implement on Day One of a new Democratic administration.
Another idea is that government could let contracts to builders and developers to build affordable housing. Biden's Infrastructure and Jobs Act provided $547–715 billion for building and repairing infrastructure in the US which was and is very necessary. A similar act to build affordable housing could be implemented. It would also create thousands of jobs. These houses could be built in such a way as to be climate change resistant. These various ideas could be fleshed out in a document similar to Project 2025. The point is to have plans to make real estate affordable and to make this the Number One bullet point for Democrats in 2026 and 2028. Secondary bullet points could be taxing the rich and giving tax breaks to the middle class, enhancing social security and providing money for child care and elder care.
Trump's Idea for Redeveloping Gaza to Become the Riviera of the Middle East
by John Lawrence
At first thought Trump's idea doesn't seem all that bad. On second thought it seems terrible. Wouldn't it be nice if Gaza could be redeveloped to be the Riviera of the Middle East? But then what would happen to the Palestinians? Trump wants to move them to Egypt or Jordan. No way Jose say the leaders of those countries. Trump also implies that, after the Palestinians have been gotten rid of, then Gaza and the West Bank would become part of Israel. Israel would extend "from the river to the sea," and to boot rich people from all over the world could buy expensive ocean front property in what once was Gaza. Right wing Israelis and perhaps even Netanyahu himself like this idea very much. However, with some alteration, at least part of this idea might be a feasible solution to the problem. Gaza at present is really uninhabitable. It, as Trump says, is a demolition zone. If the Palestinians moved out, Gaza could be properly demolished and then rebuilt. Israel could finish the war without harming any more Gazan civilians. Gaza could be razed, the tunnels destroyed and then properly rebuilt. But where are the Gazans to go during this process? How about Israel itself? According to available information, around 93% of Israel's land is considered "state land" managed by the Israel Land Administration, which means it is mostly available for lease and not privately owned, effectively making it "vacant" land for development purposes; the remaining 7% is privately owned or under religious authority control. Therefore, temporary accommodations for Gazans could be built inside Israel itself possibly right adjacent to the Gazan border while Gaza is being redeveloped and while the war is being "finished." Supposedly at that point no Gazans whether Hamas or otherwise, would be left inside Gaza.
After Gaza has been redeveloped, the Gazans would be allowed to move back in. Security could be provided by UN peace keepers, other Arabic countries such as Saudi Arabia or some other coalition until the normalization of Gaza in its own right could occur, thus resulting in a two state solution ipso facto without ever proclaiming a two state solution. It would happen naturally as a matter of course. This would amount to not a two state solution but to a one and a half state solution until such time as it would eventually turn into a two state solution. In this way multiple things could be accomplished. 1) Israel could "finish the war." 2) No more innocent civilians would be harmed. 3) Hamas would be wiped out. Only militants would be killed. 4) Gaza could be properly demolished and rebuilt. 5) Gazans could return to a rebuilt and refurbished Gaza, a veritable Riviera of the Middle East and 6) Israel would no longer be Gaza's overlord. A third party would provide security and 7) Palestine would "grow into" its own de facto state.
So what about the West Bank? That could be considered a separate issue. Or other ideas might also make sense. One would be a land swap. Increase the land area of Gaza proportionately to the land area of the West Bank and absorb the West Bank into Israel. Then the Palestinians would have one contiguous homeland instead of being divided into two pieces. In the final analysis Trump's idea with some modification is not all that bad. Gaza is really uninhabitable in its present condition. Hamas is still there. Why wouldn't Gazans want to temporarily move to a place with more humane and hospitable conditions? Eventually, the Paletinian government itself might want to lease a portion of its ocean front property for a Trump Tower Gaza.
Finally, none of the above measures should be undertaken until all the hostages are out. The cease fire should continue till all the hostages are out
Kamala Harris is a Pragmatist, the Only True American Philosophy
by John Lawrence
Kamala wants to strengthen the border. That's supposedly a right wing issue. She wants to give the middle class a tax break. That's a right wing issue too. She wants to strengthen the safety net. That's supposedly a left wing issue. The division of the political spectrum into left wing and right wing issues doesn't make sense any more. No one seems to be interested in foreign policy as an issue in this election so left and right are moot in terms of foreign policy. I am so glad that Democrats have co-opted the tax issue. President Biden first caught on to this when he said he wouldn't raise taxes on anyone making less than $400,000. This makes so much sense. Tax the rich, but give the middle class a tax break. Why haven't Democrats thought of making this the issue till recently? The only people opposing Kamala's suggested increased safety net provisions such as giving first time home buyers $25,000 for a down payment or increasing Medicare to incorporate home care for elders are right wing Republicans who don't believe the government should help anyone especially if it raises their taxes by one cent. Increasing the safety net does not necessarily mean anyone's taxes need to be increased. During the 2008 Great Recession, the government spent billions to bail out the banks without raising anyone's taxes. The US dollar is a fiat currency which can just be printed to pay for anything. Thanks to Modern Monetary Theory for explaining that. However, the danger in printing too much money is inflation which the MMT theorists have pointed out. Inflation has come back down to normal so that that shouldn't be an issue going forward. Whether the problem was the dollar giveaways during the pandemic or other issues has not been conclusively determined. The point is that there is not necessarily a cause and effect situation between taxation or lack thereof and government spending.
So the difference between Republican proposed tax breaks and Democratic proposed tax breaks should be made clear. Republicans, Trump in particular, will give huge tax breaks to the rich and modest tax breaks to the middle class with the resulting deficit being added to the national debt. Kamala's tax breaks would only affect the middle class while increased taxes on the rich would pay for them. Thus would not add to the national debt. In fact taxes should be raised on the rich not only to use the money to benefit the middle class but just on principle, the principle being that economic inequality is at levels not seen since the era of kings, monarchs, emperors and czars, in other words not since feudalism. Extreme economic inequality bodes ill against a democracy which must have a strong middle class in order to stay a democracy. Otherwise, you have extremely rich guys like Elon Musk out there buying votes with his million dollar a day giveaways.
I predict this election will see women outvoting men so that Kamala will win. It won't be men electing the first woman President; it will be women doing it. Men will do their best to elect Trump. They all seem to be making excuses for him saying "he doesn't really mean that" to all his outrageous statements. There's no reason not to think that Trump is a dangerous guy who will transform the nature of America and estrange our allies by implementing a radical change in foreign policy. There needs to be a change from Biden's foreign policy in order to end the two wars, but it should be done in association with our allies, not by abruptly separating from our allies. The people out there who are apologists for Trump need to think twice before voting for him.The American economy is the envy of the world, not in the toilet as some of them would have you believe. We need continuity with the Biden government, not a radical change. Inflation is under control. The main economic issue is the high cost of real estate and rent. Kamala has proposed specific plans to deal with this; Trump has not. Trump's proposed tariffs would add to the financial burdens of the middle class. Any one who has a brain in their head will vote for Kamala. Unfortunately, there are many Americans that do not.
The Economist Says the US Economy is the Envy of the World: How Dumb Can Half of Americans Be Who Think Trump Would Do a Better Job on the Economy?
by John Lawrence
The October 19, 2024 edition of the Economist headlines that the US economy is the envy of the world. Yet Biden is given hardly any credit for a good economy. Why that is? The only explanation is that at least half of US citizens are terribly ill informed which is another way of saying they're ignorant. Probably because they listen to news sources totally biased against Joe Biden, the Democrats and everything they stand for. The dumbing down of American is exemplified by the fact that at the Republican convention the high point was when Hulk Hogan ripped off his shirt. Dumbing down? To the max. The cultural divide between red states and blues states may be mutating, but, as Fareed Zakaria has characterized it, it is still there. It's a divide between college educated and non-college educated people and it's a divide between men and women. One could even go so far as saying it's a divide between the well-informed and the ignorant or between the smart and the dumb. Trump's cult of personality has drug all of one side of this divide into his camp. Kamala and the Democrats represent the other side of this divide.
The left right political spectrum makes no sense any more. Unless, that is, it can be said that the left represents an intelligent approach to the problems of American society and the right represents a bunch of angry, hateful people. The right, as represented by Trump, seems to be only interested in creating an alternative universe in which facts don't matter and only an entertaining form of spite does. Half of America seems to be complicit in Trump's lies and bellicosity. Half of America seems to be entertained by Trump's antics. Half of America seems to look no farther than a bunch of symbols of patriotism characterized by Trump flags and even Trump God Bless the USA Bibles (made in China).
The American economy has now been characterized as having achieved a "soft landing." "I think we should declare a soft landing now," said James Bullard, former president of the Federal Reserve Bank of St. Louis, in an interview with CNN earlier this month.
American shoppers continued to fuel economic growth in the third quarter with their spending, according to the report. That marked the biggest contributor to GDP growth in the third quarter by far. Consumer spending accounts for about 70% of economic output. Spending accelerated sharply in the third quarter, driven by purchases of big-ticket items, while spending on services eased a bit.
So why are so many voters so concerned with the economy? Why is this the biggest issue for so many voters? The American economy is the envy of the world. However, just because "the economy" is doing so well doesn't mean that all those within it are doing well. We would have to look at the distribution of income and the distribution of wealth. Some well off people could be doing most of the spending while others have very little to spend. 31.3% of the households make less than $50,000 a year. 27.8% make between $50,000 and $100,000, and 40.9% make over $100,000. If a household is making less than $50,000 a year, they are certifiably poor. Those making $50,000 to $100,000 are probably lower middle class. They are those who probably cannot afford to buy a house, but are able to afford to pay rent. 40.9% are making over $100,000. Those making over $100,000 are probably the ones doing all the spending making the economy "the envy of the world". What about the distribution of wealth? The bottom 50% own 3% of the wealth. Obviously they don't own assets such as a house. They are renters and will remain so. Between 50% and 90% of the households own 31% of the wealth so 10% of households own approximately two thirds of the wealth. According to the latest Gallup poll, only about 54% of Americans own any stocks. Meanwhile, only about 63% of Americans own real estate according to the Census Bureau. So income and wealth are not evenly distributed over the American economy, and roughly the bottom 50% of American households have little wealth and meager incomes. The upper 50% are doing quite well, thank you.
Kamala Harris is a pragmatist. She's not ideologically driven. She combines both left and right pragmatically. But primarily she appeals or should appeal to the lower 50% in terms of income and wealth. The upper 50% traditionally vote Republican. However, Trump has attracted a cult following which includes a lot of lower income and lower wealth people. These people are voting against their self interest thinking that Trump is going to help them economically more than Kamala would. Then Kamala is attracting a lot of higher income people who want the US to remain a democracy governed by the rule of law and also want reproductive freedom. That's why traditional voting patterns are somewhat obsolete.
You know that Trump wants to make the Trump tax cuts permanent. These are the tax cuts that added $7 trillion to the national debt and primarily benefited the rich. Kamala should finesse this issue by taking it away from Trump. Here's how: make it part of her platform to keep the Trump tax cuts for the poor and middle class while sunsetting them for the rich. Even better use the money saved by sunsetting the tax cuts for the rich to give the poor and middle class an even bigger tax cut than the Trump tax cuts provided. The important thing is to get out in front of Trump on this issue. Let him respond to her. Trump will then be behind the eight ball on this and other issues. All Trump has to offer is personal attacks, and they seem to be falling flat with respect to Kamala. Her politics of joy seem to be winning, and the Democratic National Convention should add another boost to the Harris-Walz ticket.
CNBC has just reported: "[Harris'] policies include a ban on “corporate price-gouging” to lower the cost of groceries and prescription drugs, and they aim to expand affordable housing and cut taxes for the middle class." Of course nothing will happen unless Democrats also control both Houses of Congress. But that should not prevent Kamala or any other Presidential candidate from promising big things. The important words are "tax cuts for the middle class." Some of the other plans Kamala is espousing are "the first-ever federal ban on “corporate price-gouging” on food and groceries". Well, good luck with that. Good talking point though. Her other plans include encouraging builders to build starter homes and Federal help with down payments on a house. CNBC reported: "As the supply of entry-level homes expanded, the Harris plan would “provide working families who have paid their rent on time for two years and are buying their first home up to $25,000 in down-payment assistance, with more generous support for first-generation homeowners,” according to the fact sheet." $25,000 will not be much help for a down payment though. At 20% down, $25,000 would only provide a down payment on a $125,000 house. This might be possible in some parts of the country as real estate values vary a lot with region. However, in San Diego starter homes are around $1 million. It would be a non-starter.
Harris will also call for the U.S. to construct 3 million new housing units over the next four years. I don't think this would be very effective as long as those new houses are subject to the market. Market rate housing is the problem, not the solution. Preventing hedge funds from buying up houses and then renting them out would help the situation. Some mechanism must be found such that the average middle class family can afford to buy a house. The emphasis on affordable starter homes is a big deal. Democrats are also all about lowering the price of pharmaceuticals. We can thank Joe Biden for that. However, he won't get credit since that deal doesn't become effective for another year. The various other parts of Kamala's economic plan won't resonate all that well with the American public because they won't understand them. However, "tax cuts for the middle class" will resonate and will steal Trump's thunder. Let Trump complain, as he did with not taxing tips, that it was his idea first!
Advocating For Public Housing as a Solution to Homelessness
by John Lawrence
Simple Fact: As housing prices rise, rents increase and more people are forced out onto the streets. In a market economy, whether a person is housed or not has nothing to do with human needs. It has everything to do with how much people are willing and able to pay for housing. Recent history has shown that there are few if any alternatives for those at the bottom of the economic scale. Market rate housing will never be able to accommodate them. Every day more people all over the country fall into homelessness. Section 8 is a joke. Landlords can always raise rates, section 8 or not, and people must wait for years even to obtain it. Affordable housing is a joke as is mixed economic level development. As long as housing is a totally private part of the economy, some people will inevitably be left homeless. So what is the solution? In lieu of an economic right to housing, government provided and owned public housing must take up the slack for those who can't afford market rate housing or market rate rents. Past history of public housing is not auspicious. That's why a new approach needs to be tried. It seems to me that a mixed level development in which some units are government owned and, therefore, rent controlled outside the market and some units are private market rate development might make sense. That way you wouldn't just have a development consisting of all poor people. There would be people there at all economic levels and also hopefully ethnically diverse.
The problem with prior public housing developments is that they turned into ghettos consisting of people almost exclusively on the bottom rung of the economic ladder and usually consisting of people of one particular ethnicity, usually black. They were poorly maintained and degenerated into crime infested and unhealthy pits. So the problem is how to provide non-market rate housing for people who can't pay for market rate housing in such a way that it doesn't degenerate into a ghetto. It can't be private development because private development without rent controls will always inevitably price people out of affordability. So it must be government owned so that it can be priced outside the market and in many cases be free. In order that it not become a ghetto consisting exclusively of those on the bottom rung of the economic ladder, it must be mixed in terms of different rents and different ownership levels, also different sizes and amenities. For instance, some units in a mixed level building could be privately owned and priced at market rates and other units in the same building could be government owned and priced at a level that people on the lowest rung of the economic ladder could afford. For instance, some units might be one bedroom, others could be 4 bedrooms.
Homelessness cannot be solved with market rate or even privately owned "affordable" housing. Privately owned housing will inevitably seek ownership by those who want to profit from their ownership either by charging market rate rents or by selling the property at market rates. Government owned or public housing can be subsidized in such a way that everyone, who otherwise would be homeless, can be housed precisely because they need not be priced at market rates. Rent or ownership can be determined outside the market and units that are government owned can be interspersed with units that are privately owned in the same development in order to insure economic and ethnic diversity. Additionally, the government owned units must be well maintained at government expense. Poor people will never properly maintain housing units because maintenance is a luxury compared with the necessities of life such as food. Proper maintenance helps to insure that a development will not degenerate into a ghetto.
The US proxy war in Ukraine is teetering on the brink. If the US does not provide more money and weapons, Russia could march right past the lines as they now exist and take over all of Ukraine which, of course, was Putin's original goal. However, if there were to be a peace deal now with the front lines becoming a de facto border, Russia would have much of what it wants which is eastern Ukraine, which is mainly Russian speaking, plus a land bridge to Crimea where Russia has its deep sea fleet anchored in Sevastopol. Besides that there would be no more death and destruction which is something not even taken into account by the powers that be. So now while Biden is gung ho for continuing the war, the demands of democracy are such that he alone does not control foreign policy. I like President Biden. I think he has done more on domestic policy then any President since FDR. But on foreign policy I don't agree. He has a Cold War mentality about Russia. He has demonized Putin and not given him what Russia most wants - respect as a great power. This was evident on the lead up to the war when the US would not even consider Russia's main demand - that Ukraine not become a member of NATO. Of course the history of Russia and Ukraine was not considered either.
During the reign of Catherine the Great, she extended the borders of the Russian Empire southward and westward to absorb New Russia, Crimea, Northern Caucasus, Right-bank Ukraine, Belarus, Lithuania, and Courland at the expense, mainly, of two powers – the Ottoman Empire and the Polish–Lithuanian Commonwealth. Under her rule, some 200,000 square miles (520,000 km2) were added to Russian territory. Catherine made Russia the dominant power in south-eastern Europe after her first Russo-Turkish War against the Ottoman Empire (1768–74), which saw some of the heaviest defeats in Ottoman history. In 1786, Catherine conducted a triumphal procession in the Crimea, which helped provoke the next Russo–Turkish War. This war, catastrophic for the Ottomans, legitimized the Russian claim to the Crimea.
Of course this is nothing new. Americans are notoriously ignorant of other people's history. Biden is no exception. His ideas were forged during the Cold War. They do not take into account much more than the idea that America is good, Russia is bad. The fact is that there is more or less a stalemate in the war in Ukraine. If the fighting continues, it just means that more Ukrainian civilians will die and have their lives destroyed as well as their real estate. So far no or very few Russian civilians have died and very little Russian real estate has been destroyed. What's wrong with this picture? Pretty much everything. It doesn't make sense that US money is fueling actually not the winning of a war against Russia but the destruction of Ukraine. This is stupid. If US foreign policy gave a hoot about Ukrainian lives, not to mention real estate, it would pursue a peace deal based on a cease fire and a de facto recognition of the lines as they exist at present. This would mean that Russia would control eastern Ukraine - Luhansk, Donetsk, Zaporizhia, Kherson and Crimea - which are the historical borders, and the rest of Ukraine would remain under Ukrainian control and possibly become a member of NATO. UN peacekeepers could patrol and guarantee the border with a plebiscite at a later date to determine the final situation. Ending the war now would accomplish the most important thing - not one more Ukrainian would be killed or wounded. But that does not even seem to be a consideration either for Biden or Zelensky.
Hedge Funds Outbidding Average Americans for Single Family Homes
by John Lawrence
Want to know why single family homes are less affordable? Hedge funds are buying them up and turning them into rentals. The long term implications of this are that the American people will become a nation of renters. Home ownership has been the traditional way that Americans have increased wealth. A home represents an asset which increases in value over the years. Renters typically end up with no assets and very little to provide for themselves in old age. Those with fixed incomes are even priced out of the rental market as rents continue to increase. That's why so many seniors are ending up on the streets. This issue is even becoming noticed by Democratic politicians. In the Senate, the End Hedge Fund Control of American Homes Act of 2023 would force big investors to sell off all the single-family homes they own over a period of 10 years, and eventually ban hedge funds from owning any single-family homes entirely. "The housing in our neighborhoods should be homes for people, not profit centers for Wall Street," co-author of the bill, Senator Jeff Merkley, D-Ore., said in a press release. "Yet, in every corner of the country, giant financial corporations are buying up housing and driving up both rents and home prices. It's time for Congress to put in place commonsense guardrails that ensure all families have a fair chance to buy or rent a decent home in their community at a price they can afford."
If home ownership is taken off the table for most Americans, there is only one asset class remaining in order to build wealth - the stock market. Today about 58% of Americans are invested in the stock market in some form or other. That's a huge increase from 1990 when only about 20%of Americans owned stock. If the stock market continues to go up in value, those Americans so invested will have a nest egg in their advanced years. However, there is no guarantee that this will be the case. Money has been made in the stock market, and money has been lost. Home ownership by and large has always been a much safer bet. The dotcom bubble of 2000 was a rapid rise in U.S. technology stock equity valuations fueled by investments in Internet-based companies in the late 1990s. When the bubble burst, the Nasdaq, which rose five-fold between 1995 and 2000, saw an almost 77% drop, resulting in a loss of billions of dollars. Home ownership, however, maintained its value. It took 15 years for the stock market to regain its value.
This does not augur well for Americans who are placing all their bets on the stock market to provide for them in old age. Stock market based wealth can vary considerably over time based on economic conditions over which the average investor has no control. Sophisticated investors can buy and sell on an almost instantaneous basis. The average American, however, doesn't have the expertise to exit the market if a crash or even a downturn is imminent. The stock market does not represent a stable investment in the same way that real estate does. Even though real estate values collapsed during the 2007-2008 Great Recession, rents remained stable in that time period. Notably rents did not decrease. Between 2007 and 2011, the worst years of the 2008 Recession, rental prices increased. So an investor in rental property continued to receive the same or more rent, even if the underlying property value decreased temporarily. People should not look to the stock market for all their wealth building needs because it can collapse leaving one with nothing. A rental investment, however, will probably continue to produce rental income in perpetuity unlike a pension or social security which will terminate on the death of the recipient. "This [affordability] crisis [for home ownership] has been exacerbated in recent years by an increasing number of large investors purchasing a significant percentage of single-family homes, squeezing out prospective buyers," said Rep. Adam Smith, D-Wash., in a statement.
"The San Diego City Council voted 5-4 Tuesday [June 13, 2023] to adopt a controversial policy to ban homeless encampments on public property after hearing hours of public testimony.
"The ordinance was supported by Councilmember Stephen Whitburn, who proposed it, and Councilmembers Marni von Wilpert, Jennifer Campbell, Raul Campillo and Joe LaCava.
"Mayor Todd Gloria also supported what they referred to as an unsafe camping ordinance, with he and Whitburn saying it would address a public safety issue while also helping to get homeless people off the street and into a shelter and connected to services."
In approximate tandem with this ordinance is the City's plan to provide safe sleeping and camping areas and also to buy 3 motels and convert them to housing for the homeless. Father Joe also plans to build a high rise with additional rooms. The problem is that these additional housing units and camping areas are not ready yet. So this ordinance and the plan to provide additional shelter units will have to be somewhat compromised until the additional units are available. The opposition to the ordinance seemed to be based mainly on the fact that the additional units are not immediately available. The larger question is do the homeless have an unconditional right to live on public sidewalks which trumps the rights of downtown residents and business owners who also would like to use those sidewalks in a clean and safe manner. The answer in my mind is no they do not have an unconditional right to use the sidewalks as living areas. If I went downtown and set up a stand selling something, anything, I would be arrested if I did not have a license. However, homeless advocates would argue that the homeless have an unlimited right to sleep wherever they please on public sidewalks.
Finally, I think the Mayor and the City Council are taking a serious approach to this problem after farting around for decades. It amounts to government admitting that people have a right to housing - public housing or social housing, whatever you want to call it - something that American governments at all levels have never before been willing to concede. Once the units the City has promised come online, they need to expand that program since the proposed units are unlikely to be a once and for all solution. As rents are continuing to increase, the City has to be in the business of providing the SROs that the free market used to provide and now doesn't. Getting people off the streets and into housing or safe camping and parking areas with proper sanitation and other services accomplishes not only more humane conditions for the homeless. It prevents San Diego from becoming a tourist desert. Also residents and businesses will be moving out if the streets cannot be returned to their safe and proper usages. People living and running businesses downtown should have rights too. This argument that the new City ordinance is criminalizing homelessness is entirely bogus. If shelter beds or other accommodations are available, the homeless should be forced to take advantage of them IMHO. On the other hand,to the extent that these resources are not available, they should be cut some slack. That does not mean an unlimited right to park their tents wherever they please.
I noted the story of the parent pushing a stroller who was almost run over by a car because they could not use the blocked public sidewalk. I had a similar experience on Commercial street when my car was almost run over by the San Diego Trolley. The fact that the City will be providing SRO type rooms and other accommodations for the homeless as well as social services does not mean that that will be permanent housing for the contemporary homeless. The social workers will be attempting to reintegrate if possible currently homeless persons and families back into normal society. That means that they will be trying to find them jobs and get them living accommodations that they can pay for in the mainstream of society. Problem is that rents are so expensive that it will be impossible for many people, even if they have a job, to provide housing for themselves especially in San Diego where housing prices and rents are continuing their upward cost progression. That's why the next step for the City should be to do something about affordable housing. This means that the City needs to counteract the free market with respect to housing so that people who are reintegrated into society can at least function within the parameters of that society. The free market tendency for rents to keep on rising needs to be counteracted by the public sector. The free market will continue to make housing unaffordable which will result in more people becoming homeless. What is happening is that hedge funds are buying up housing units, rehabilitating them to some extent and turning them into rental units if they aren't rental units already thus driving up rents. People who in prior years could afford to buy a home now can't in the current environment. This process is turning more and more would be home owners into renters and renters who are devoting more and more of their income to paying rent.
The only way children of long time San Diego residents can buy homes today is if the parents can convert some of the equity in their homes to a down payment on the child's home so that they end up with a mortgage they can afford which is something I was able to do. I bought into the San Diego real estate market exactly 50 years ago for a house that I paid 3% of the market value of that same house today! There are companies that will make a home equity investment in your house which means that they will loan you money that you can use as a down payment on a child's house if that's the way you decide to use that money. There are no monthly payments. When the contract period - which can be as long as 30 years - is up, the house must be sold or the contract settled in some other way and the home equity investment must be repaid in proportion to the equity increase in value over that time period. Since I will probably not be here in 30 years, my heir, who can also inherit the contract, will sell the property and have to split the profits with the home investment company. Meanwhile, the property she bought with the down payment they provided and with a mortgage she can afford is increasing in equity. It's a pretty good solution, but only available to people who bought into the San Diego market when prices were cheap. The Home Equity Investment is like a reverse mortgage, but there is no age restriction and it can be used in conjunction with a rental property.
In January a massively powerful landlord sued to evict hundreds of tenants across the country.
The landlord had bought up billions of dollars of real estate when prices were low during the pandemic–taking advantage of the economic downturn that hurt so many.
And now that eviction moratoriums are lifting, that landlord is starting to kick people out of their homes.
Stephen A. Schwarzman is the co-founder, chairman, and CEO of Blackstone Group, the world’s largest alternative asset firm with almost a trillion dollars in assets–including real estate. The firm has made Schwarzman very, very rich.
And he’s not afraid to flaunt it.
One example: his 60th birthday party reportedly cost between 3 and 5 million dollars.
It was hosted by Martin Short. Patti LaBelle sang a song written for Schwarzman. And it was held in an exact replica of Schwarzman’s apartmentbuilt for the party.
Here’s the egregious part: Schwarzman’s big bash was in 2007, just as the economy was on the precipice of a disaster caused by people like Schwarzman.
That same year Blackstone had their IPO, netting Schwarzman hundreds of millions of dollars instantly.
Sensing a theme here? It’s not just COVID and recession profiteering:
Major economic downturns and national crises have coincided with hugely profitable milestones for Blackstone… and Stephen Schwarzman
This is The Class Room from More Perfect Union, and today we’re looking at how Stephen A Schwarzman got rich.
Like many great stories of people plundering America, this one starts at Harvard Business School.
Schwarzman was raised in the suburbs of Philadelphia then went to Yale, where he joined Skull and Bones, the infamous and… kind of corny secret society.
Then to Harvard Business School and then on to the finance world. Schwarzman landed at Lehman Brothers, then a vastly powerful investment bank shortly after getting his MBA.
At Lehman he worked in mergers and–helping the firm scoop up other businesses–until he eventually oversaw the absorption of Lehman Brothers itself into American Express.
He left Lehman, and in 1985 started his own firm–Blackstone. He teamed up with his Lehman colleague Peter G. Peterson, former Secretary of Commerce under Nixon.
Despite the founders’ pedigree, they tried to push the scrappy startup image in the press. The New York Times wrote in 1987 that Blackstone “operates out of cramped quarters… where secretaries and bankers share offices and boxes are stacked in the hallways”
Blackstone started as a mergers and acquisitions consulting firm before transitioning into merchant banking and private equity.
It wasn’t a great time for investing—but Blackstone got lucky: they had finished raising money for their investment firm just days before the crash.
And it was all part of their strategy. The New York Times pointed it out that year with the headline, “A Big Fund Ready to Capitalize on Hard Times”
In the early profile, published right after Black Monday, Schwarzman’s business partner admitted that their strategy involved taking advantage of economic downturns.
”There are going to be fascinating opportunities… There’s a good chance the dollar will continue to fall, interest rates over the long term will go up and we will experience slow growth… You raise capital when you can raise it, and then you move in opportunistically and make investments in distressed industries.”
It’s a business model based on profiting when everyone else loses.
If we fast-forward through 20 years of Blackstone pioneering and perfecting the private equity and leveraged buyout, tearing apart businesses to maximize profit, we get to their IPO–that’s when a company goes from private to public so that anyone can buy shares on the stock market.
The IPO made Schwarzman 500 million dollars.
Once again months later, the greed of Schwarzman’s colleagues in finance made this happen
Because the collapse was directly linked to housing millions of working Americans had their homes foreclosed, meaning they were available to buy for cheaper-than-usual rates.
So Blackstone swooped in. According to reporting from the Neighborhood Assistance Corporation of America, “Blackstone was one of the first private equity firms to begin buying foreclosed homes in the wake of the financial crisis, fixing them up and renting them out.”
So as Americans suffered, Blackstone profited three times: their backers and investment companies were directly responsible for the crash, some of those entities got government bailouts, then after everything crashed, they bought up property at rock-bottom prices.
It’s the exact strategy Schwarzman’s business partner outlined in 1987: “you move in opportunistically and make investments in distressed industries.”
Blackstone was able to buy millions of dollars in cheap housing, which gave a jumpstart to their real estate business.
Post-recession exploitation was just one big push in Blackstone’s journey towards becoming one of the biggest landlords in America.
Today, they own nearly 300 billion dollars in real estate.
Real estate accounts for nearly half of their earnings. Schwarzman called their profiteering on housing “the most remarkable results in our history on virtually every metric.”
But then another downturn: COVID. When the pandemic that killed nearly 7 million people drove down real estate, Blackstone scooped up billions of dollars worth of homes.
And now that eviction moratoriums are starting to lift, Blackstone is kicking tenants out of their homes. And they’re happy about it: the Financial Times reported that on a global call with Blackstone staffers, the head of real estate optimistically shared that they’re allowed to start evicting people again.
They even brag about how inflation lets them jack up rents, gleefully pointing out in this investor document that rent went up more than inflation.
Blackstone makes money when the rest of us suffer. It’s by their own admission a huge part of their business strategy.
And Schwarzman fights to keep as much wealth as possible. When the Obama administration almost started taxing people like Schwarzman fairly, he compared them to Nazis.
That’s why he donates so much money to the GOP: they protect his interests. Blackstone earnings reports even say that a Democratic government is bad for their business.
Blackstone admits they need unfair taxation legislation to make as much money as they do, they write to investors, “If we were taxed as a corporation, our effective tax rate would increase significantly…. it would materially increase our tax liability, which would likely result in a reduction of the value of our common units.”
And meanwhile Schwarzman tries to launder his image by making big donations to some of America’s most iconic institutions, and slapping his name all over their buildings–like at the New York Public Library, Yale, Harvard, and more.
But like so many like him, Schwarzman will continue to exploit tax law, exploit economic tax returns, and continue to get richer while the rest of us suffer.
Effective legislation hitting Schwarzman’s main sources of income–like carried interest–would make it harder for his entire industry to profit off working Americans’ losses.
Is Private Equity Firm, Blackstone Group, Taking Over San Diego's Rental Market?
by John Lawrence
In a deal with the Conrad Prebys Foundation, Blackstone Group, CEO'd by Steven Schwarzman, is buying 5800 rental units in San Diego. According to the San Diego Union, "The deal makes Blackstone one of the biggest real estate holders in San Diego County. It already owns $4.5 billion in assets here — including Legoland and the Hotel del Coronado. The transaction, which also includes Los Angeles-based investment firm TruAmerica as a partner, is expected to close in the next few weeks. The sale of the apartments was praised by Dan Yates, the president of the Conrad Prebys Foundation, who said the portfolio was assembled by Conrad Prebys — a San Diego developer — himself. Yates said the money from the deal will be used for grants primarily in San Diego."
“Conrad Prebys was a sharp businessman who found true joy in the act of giving, and I believe he would be honored to see the result of his life’s work dedicated to continuing his philanthropic legacy,” Yates wrote in an email." Billionaire Conrad Prebys died in 2016 so it's very unlikely he "assembled the deal himself." But, even if he did, and the money will be used for philanthropic grants, Conrad Prebys has his name on half he buildings in San Diego already. It seems that billionaires can't get enough of charitable giving when it gets their names on buildings even though it will probably mean that relatively affordable rental units will become unaffordable after Blackstone Group "fixes them up" and raises the rent and that the true beneficiaries will be the investors in the Blackstone Group. It is to be noted that California sanctions on evictions, put in place during the pandemic, will expire this June 30.
San Diego real estate analyst Gary London said, “To my knowledge, this is the largest real estate transaction in San Diego County history.” So the process goes like this: the tenants in Blackstone's newly acquired rental units will be given 30 day notices to leave so that Blackstone can do badly needed renovations. This is all perfectly legal. There is no need to "evict" unless the tenants refuse to leave even after given proper notice. The Union article goes on,"All the apartments are market-rate but Blackstone says it plans to partner with nonprofit Pacific Housing to provide services for residents, including after-school tutoring, financial literacy classes, and health and wellness initiatives at no cost. It did not address it directly, but the move seems to counteract earlier concern with the foundation’s sale of these holdings." The key word here is "market-rate." This means that once Blackstone puts in its "improvements," they can charge whatever rent they can get even if it's 50% more than what tenants were previously paying. This is how the game is played, and this is why there are fewer and fewer affordable apartments in San Diego. Investors buy up apartments with affordable rents and convert them into apartments at "market-rate." Ironically, Blackstone intends to provide new tenants with "financial literacy classes." Presumably this would mean tutoring them to the advisability of investing in the Blackstone Group. And what were the "earlier concerns with the foundation’s sale of these holdings." Could it be that the newly converted "market-rate" apartments would reduce the stock of affordable rental units in San Diego?
The most pathetic aspect of this deal was this: "A letter was sent to the foundation in early February from San Diego Mayor Todd Gloria, San Diego County Supervisors chair Nathan Fletcher and California Senate President Pro Tem Toni Atkins to urge them to take into account future affordability of the apartments when considering a sale." I'm sure they'll do that even if it means their investors will take a slight hit to their profuts. Get real, politicians! Your letter is a fig leaf and is worse than useless. The letter went on: “A substantial number of these units are home to working individuals and families,” they wrote, “and are some of the limited inventory in the region of non-deed restricted, naturally occurring affordable housing options for San Diegans.” And the most egregious oxymoron of the letter: "non-deed restricted, naturally occurring affordable housing options." There is no such thing as "natyrally occurring affordable housing" at least not when private equity firms like Blackstone see a profit-making opportunity. The fact that they are "non-deed restricted" means that they are fair game. In any event affordable housing is in the eye of the beholder. It means absolutely nothing unless it is deed restricted or publicly owned.
The article concludes with: "The Conrad Prebys Foundation gave more than $71 million to 112 organizations across San Diego County in March to bolster the arts, health care, medical research, animal conservation, education, and the welfare of young people. The biggest grant — $15 million — went to the San Diego Symphony." Of course! The symphony will always profit as long as billionaires want their names on more buildings and symphony programs. Meanwhile working class tenants lose.
One of the great things that Biden has done is to take the tax issue away from Republicans. Remember when George H R Bush said, "Read my lips. No new taxes." The conventional wisdom at that time was that if taxes were raised, they would be raised on everyone from Joe Six Pack to Warren Buffet. It was also conventional wisdom that tax cuts would apply to everyone from the very rich to the very poor. The American public was not sophisticated enough to know that Republican tax cuts, although they would apply to everyone, were much more favorable to the rich than they were to the poor. Now Joe Biden has completely altered that narrative. In Joe Biden's world tax increases apply only to the rich and tax cuts apply only to the poor. What a major paradigm shift! Biden has repeated his mantra so many times that he wouldn't raise taxes on anyone making less than $400,000 that now that scenario is starting to take hold in the American mind.
It's about time. The American public is starting to wake up to the reality that the very rich pay taxes at a lower rate than a nurse or a teacher or a fireman. If you're a hedge fund manager, you can take advantage of the 'carried interest' loophole to pay less than your fair share. As economic inequality has soared in the era of easy money, the very rich could take advantage of all sorts of games to make themselves even richer while most working people are living paycheck to paycheck. One way to restore some measure of equality is to increase taxes on the rich while cutting them on the poor. This idea was unheard of even a few years ago. Republicans rue the day when it was heard of thanks to Joe Biden, Elizabeth Warren and Bernie Sanders among others. Another way to restore some semblance of equality would be to tax wealth in addition to taxing income. People with assets, say, more than $50 million should pay a tax on their wealth while middle class and poor should be given help to start creating wealth for themselves. That would probably be something to do with home ownership since this is the way most middle class people have been able to create wealth for themselves.
However, it is becoming increasingly difficult for people of modest means to create wealth through home ownership because real estate prices have gone through the roof. It has become increasingly difficult for young people to come up with a down payment for a house, much less to make their monthly mortgage payments. The net result is that more and more people are forced into the situation of never owning property and being life time renters. This is the plan as private equity and hedge fund managers have accessed easy low interest money to buy up real estate and then rent it out so that the typical middle income young family is now renting a home from a hedge fund. NBC News reports: "The lack of supply of single-family homes has pushed up housing prices in many markets across the country — but would-be homebuyers find they are being outbid not just by other home seekers, but also by hedge funds." Hedge funds like the Blackstone group come in with all cash offers which are more attractive to sellers than the terms that average Joes and Janes can come up with. The Real Deal reports:
"Blackstone Group is planning to buy about 5,800 apartment units in San Diego for more than $1 billion.
"The New York-based private equity and investment firm has agreed to purchase 66 complexes across the city from the Conrad Prebys Foundation, according to the San Diego Union-Tribune. It also plans to make $100 million in improvements to the properties.
"With the deal, Blackstone will own 6,700 units in the Southern California city. It already owns $4.5 billion of assets in the city, including the Legoland theme park and the historic Hotel del Coronado.
"“We look forward to ensuring that these properties continue to provide the community with a high-quality rental option at a good value,” Blackstone Real Estate’s global co-head, Kathleen McCarthy told the Union-Tribune.""
According to the San Diego Union, "The deal makes Blackstone one of the biggest real estate holders in San Diego County." The writing on the wall is that, if you want to own a home, you have to move out of San Diego where the median home price is $855,000. For instance the median home price in Indianapolis is $229,900.
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