Tag Archives: real estate

Buildings replaced quickly, so built badly

In a fast-growing city, many buildings will be replaced by larger ones in a decade or two. Property developers probably take this into account, thus do not hesitate to build low-quality non-durable housing. If the city growth stops at some point and buildings are no longer quickly replaced, then the owners of such housing will get an unpleasant surprise.
People buying or building detached houses do not seem to take city growth into account, because at least in Canberra, I see the erection of large expensive mansions in districts where the house will in 20-30 years be surrounded by high apartment buildings. Tall structures around a mansion tend to reduce its value, and certainly make the garden less private. The investment in fancy gardens, backyard swimming pools, etc, seems a bit short-sighted in locations close to the centre of a growing city.
The mansions also fill most of the plot of land on which they stand, so from an energy efficiency point of view, they might as well join walls with neighbours, as I have written before.

Joining together detached houses saves energy

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Suburbs in many countries consist of detached houses that very close to each other – I have seen neighbours’ walls half a metre apart. Both houses could save energy by joining their adjacent walls together, which reduces heat loss in cold weather and heat entry (thus the need for air conditioning) in hot temperatures. Ideally, the joining should happen at the construction stage, but it is not difficult to do after the houses are built. Just enclose the space between the sides of two houses by extending the front and back wall and the roof of each house. It is not a load-bearing construction, it just has to keep the wind out from the space between the houses and provide some insulation to the space.
An added bonus is the creation of a covered storage area (a door to the space between houses should be created if the houses don’t already have a door on that side). A possible downside is that to get from the front of the house to the back, now one has to pass through the house or the storage area. But given the narrowness of the typical walkway between suburban detached houses, passing through the house may be the best route anyway. Also, when enclosing the walkway, a door can be made in each end to keep it open for passage.
Another downside is that windows on the side of the house now look into a covered storage area, not outside. But if the houses are so close together, then the only view from the window is the wall or window of the neighbour. After enclosing the side, this view becomes darker, but that does not seem a great loss. If it is, then energy-efficient lights can be installed in the enclosed area and kept on during waking hours, so people can admire their neighbour’s wall or window. Really, windows with such views can be replaced by a poster-size print-out of a photo of the view, because if the window looks into the neighbour’s window, then the neighbour probably keeps the curtains closed to prevent spying. And a wall through a window looks pretty similar to a photo of the wall stuck over the window.
The real reason to not join the houses is probably marketing and the desire to show off that it targets. People want to boast of owning a detached house, even if it is less than two metres from the neighbour’s. Knowing this, property developers construct such dwellings and market them as detached (“own your own house”, really owned by the mortgage issuer for 25 years). This is similar to the reason why McMansions are built, only the income of the buyers differs. Also similar are the pride and marketing that make people buy large SUVs, pickups and all-terrain vehicles for driving solely on paved roads.

Silly balconies

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Everywhere in Australia, I have seen buildings with balconies that overlook busy roads. The view from the balcony often only includes other buildings. These balconies seem useless, because not many people want to sit in the street noise and car exhaust. I have rarely seen anyone on these balconies, and then only moving around for a practical purpose, not enjoying the air and view. Mostly the balconies are used for storing unwanted furniture and sports equipment, or growing potted plants. This makes sense, because even drying laundry over a busy road is problematic – everything gets covered in fine black soot. What does not make sense is adding these balconies to the buildings in the first place. A more practical use of the space would be to close the open parts of the balcony and thus add an extra room to the apartment. It is used as a storage room anyway.

In some cases, the building might have been constructed before the street became too busy or the views blocked by other buildings, but most of the buildings with balconies are new, so this explanation does not apply.

The reason the developers add balconies to their buildings is probably to market the apartments to impractical people. An included balcony makes the apartment sound more luxurious, and usually the view and relaxation opportunities of the balcony are touted in the advertisement. But people inspect the apartment before buying, so they should see the uselessness of the balcony for anything but storage. Inspections are usually scheduled on Saturdays when there is less traffic, and the inspecting buyers don’t sit on the balcony for long enough to become annoyed by the noise and the car exhaust.

There may be rules against the owner of an apartment closing up the balcony to create a room, because this makes the building facade uneven. Coordination problems between apartment owners may prevent them from closing up all the balconies of the building simultaneously.

When to permit new construction

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In places with zoning laws (restrictions on what kind of buildings are allowed at a given address), there is often debate on whether to relax the restrictions. This would allow new construction or enlargement of existing buildings. The renters are generally in favour of more buildings, because the increased supply of housing lowers prices at a given demand. The landlords oppose construction, because it reduces the rents they can charge. These economic arguments are already part of the debate.

Much lobbying effort (that costs time and money and may create corruption) could be avoided if the market price of housing (rents or house transactions) was used directly in the regulations. New construction is allowed if the average rent is above a cutoff and denied below. Zoning laws may be a bad thing overall, but if they are to remain, they could be made more resistant to manipulation by basing restrictions on objective indicators, not lobbying.

The good incentives created by this require interest groups to put their money where their mouth is: if landlords want to prevent new construction, they should lower the rents they charge. Only with average rents low would building be blocked. Similarly, if tenants want more housing, they should pay the landlords more. They may of course decide to pool their money and found a property development firm instead.

Property developers want to get construction permits for themselves, but deny them to other property developers (their competition). The motivation to get a permit by fair means or foul is stronger when property prices are higher. In this case, the above reliance on the market price to regulate permits does not create good incentives. If new housing is allowed when prices are high, developers are motivated to form a cartel and raise the price. Permits reward high prices. A good price-based regulation of property development would require the opposite of the rental market mechanism – a low selling price of new housing should lead to more construction permits.

Raising the efficiency of the housing market

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Empty housing is wasteful from society’s point of view. Both landlords and renters would benefit from finding a suitable counterparty to contract with faster. There are already online systems for listing housing for rent and sale, and also notice boards for people seeking housing. This is a good start, but a predictive system would be better. Given enough data, computers could forecast who is a good tenant or landlord and which apartment or house suits a given person’s preferences. Less searching would be needed by all involved.

Rental agencies already have a tenant database where they exchange references for renters. A similar online system should be created for landlords and housing (distinguishing the two). Also, the rental agency or real estate bureau should be rated separately from the people working in it, otherwise bad agents may move from one employer to another and escape their reputation. A bad notoriety may even motivate a person to change their name. For good agents, the loss of a reputation not tied to their person may make it difficult to change jobs.

Instead of chancing on complaints or praise in forums, a renter could see a summary rating of many rental agencies, agents and buildings in one place. The building database should include objective measures like the distance of a building to the city centre and the nearest supermarket, the yearly electricity and heating bills, the outdoors noise level in decibels, some average air pollution measure, school catchment areas, floor plan and area, etc. This saves labour for prospective tenants, so each of them does not have to search for the same data from various sources. Information entered by past renters is hopefully objective and protects novice tenants like students from being misled by advertisements like “five minute drive to the city centre” (only at 3 am when the roads are empty, in a Formula 1 car), “short walk to the supermarket” (short compared to the Shackleton Solo expedition), “safe neighbourhood” (compared to a war zone), “quiet” (relative to a rock concert), “spacious” (roomier than a shoebox), “close to nature” (insects and rodents inside). Distances to various landmarks could be automatically downloaded from Google Maps when the building address is known. Crime, pollution and traffic density statistics could similarly be autocompleted.

Renters should be able to select the measures they consider important in the data and get a ranking of the housing on offer according to these. Once someone has rated several apartments, the system could potentially predict the housing that would please that person.