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Cities Within Cities: A Spin on the Charter City Model

Posted in Development, Real Estate Markets by teslik on June 2, 2010

I had breakfast yesterday with an old friend who is interested in architecture and urban development (and redevelopment). We bounced around an idea related to charter cities, a topic I’ve written about here before (see here and here), but with a twist.

Specifically, we considered how preexisting cities could use something akin to the “charter city” model to promote redevelopment—given that local politics can be as much of a roadblock at the municipal level as at the sovereign level.

Think of it as extreme zoning: A city could charter a specific area (say, a space dominated by shuttered factories). The municipal government could then, essentially, give the area a clean slate from a regulatory perspective (low taxes, incentives to lure businesses and investment). A task force would then work directly with an architecture firm and with potential clients in order to craft a new, business-friendly charter area, perhaps in line with a road-map provided by the city (in terms of desired population density, industry preferences, etc.). In the long-run, such a project might well pay off several times over for the city, given that the boost to GDP and spending would not be confined to the economic zone.

To a degree, this model already exists. Some countries have accomplished a similar end through the construction of special economic zones, though typically the space appropriated for such projects does not come from urban areas. Countries with strict social laws have also formed business zones where those laws do not apply—on a recent trip to the U.A.E., I was impressed by one such zone, the Dubai International Financial Centre.

Could a twist on this model be applied in ailing American industrial cities?  Detroit?  Pittsburgh?

The State of Subprime

Posted in Charts, Debt Markets, Real Estate Markets by teslik on August 24, 2009

Both of the following are from the NY Fed. Here, first, is a state-by-state look, as of May 2009, at how many subprime mortgage loans have been made per 1,000 housing units. The darker the red, the more subprime loans (Florida is the highest at 27.0 loans per 1,000 homes).

subprimeoverall

Here, next, is a chart mapping the change in the same statistic over the past six months (through May). Darker green means a sharper reduction in the number of subprime loans per 1,000 homes.

subprime6mo

Mostly it tracks that the states with the highest percentage of subprime loans have had the highest pullbacks. But notice also the discrepancies. The subprime markets in California and Nevada, which are smaller than the market in Florida, are nonetheless receding at a faster rate. Virginia’s relatively modest subprime market is receding quite quickly. Same with Wyoming’s. And Texas’s relatively broad subprime market, like Florida’s, isn’t receding as fast as you might expect.

Commercial Real Estate Watch

Posted in Debt Markets, Real Estate Markets by teslik on August 13, 2009

M-Mth-Natl

The chart above, from MIT’s Center for Real Estate, traces the Moody’s/REAL commercial property index, or CPPI, an index of commercial investment property prices in the United States. As you can see, prices are falling quite sharply. The AP reports commercial property mortgage defaults are climbing at an “unparalleled pace” (and the Fed is feeling the pain alongside private investors). The AP piece adds that the delinquency rate on securitized debt backed by commercial property rose to roughly 3 percent in the second quarter, and that banks hold about $3.5 trillion of commercial real estate loans. Let’s hope this isn’t shades of U.S. housing markets circa 2007.