I’m reading Bernie Sanders’ new book, ‘Our Revolution’, and it didn’t take him long to hit the nail right on the head. On pages 3-4 he says “real change never takes place from the top down. It always takes place from the bottom on up.” So if you want a free and fair housing market then we all will have to demand it. Bernie won’t. Elizabeth Warren won’t. Barack Obama had 8 years and didn’t. Bernie is acutely aware of housing. On page 10 he says “how much money your family had determined whether you lived in a rent-controlled apartment house or in a private house.” Bernie grew up in a 3 and a half room rent-controlled apartment. He said living in a ‘private house’ meant you were in the middle class. I’d like to point out that not all rents are controlled. They can be raised any time. That’s how gentrification takes place. If an area becomes desirable then the rents go up. The poor move out and the rich move in. That is what has happened in San Francisco and many places in California. You have a much better chance of not being forced out if you own your home and are not renting.
On page 32 he misses the mark a little when he talks about the “regressive property tax”. If you are allowed to live in a small home then the property taxes aren’t so bad because the property tax is the product of the property tax rate times the property’s assessed valuation. So everybody pays the same rate. So Bernie says that is regressive. But if you have a small valued home then you won’t pay as much as someone with an expensive home. But I applaud him for finding other ways to raise money instead of raising the property tax rate in Burlington, Vermont where he was elected as mayor. Too bad they weren’t successful in creating a municipally owned Cable TV system because that is what we need to stop the big internet service provider monopoly.
There shouldn’t be laws that say you have to live in an expensive home. Such laws exclude anyone who can’t afford an expensive home. That is why such laws are referred to as exclusionary zoning. And there are all kinds of schemes out there to make housing expensive. In my homeowner’s association there is a restriction that says a home has to have at least 1,200 square feet. A home builder will charge by the square foot. So a 600 square foot home would be half the cost of a 1,200 square foot home. In Farmington Hills, Michigan, they say a home has to be at least 24 feet wide and conform to existing housing. A builder may come in and start a subdivision and put in a few expensive homes. So if you buy a vacant lot in that new subdivision then any home you build must also be an expensive home conforming to the existing expensive homes. Again, you are excluding anyone who can’t afford an expensive home.
And some people on the margin will try to meet those expensive standards, take out a mortgage and buy something so expensive that it takes them 30 years to pay for it. I only had a good paying job for 22 years. Not getting sucked into a 30 year mortgage is what saved me and allowed me to just retire when I lost my job at 59 back in October of 2008. You shouldn’t have to sign up for 30 years of debt slavery to get shelter. If I had borrowed $100,000 at 5% and paid it back over 30 years then I would’ve had to pay back $193,000. Plus I would’ve had to carry property insurance over those 30 years and I would’ve had to pay ‘regressive property taxes’ on that expensive home. I just want that to sink in. You are paying for your home twice. You pay $100,000 to the builder and then you pay $93,000 to the lender. At least the builder did some work. All the lender did was screw you and god help you if you start missing payments. The lender will then happily take your house. And the property taxes are easily more than double.
My Dad’s property taxes were about $2,200 a year. My property taxes were $666 the first year after I moved my singlewide to a quarter acre lot about 55 miles NE of Cincinnati. I had been living in a trailer park approximately 17 miles from downtown Detroit. The lot rent was $3,720/year the last year I was there. I moved in June, 2009. The lot rent averaged just over a 5% increase per year over the 18 years I lived in the trailer park. So the lot rent there is probably about $5,000/year now in May of 2017. As I said, rents can always be increased. You are very financially insecure if you are paying any rent. And that was for a 26 foot wide by 60 foot long lot. So I could rent a lot but I couldn’t buy one. When you calculate what I was paying in rent per square foot for that 26 foot by 60 foot lot in the trailer park and apply that to a quarter acre lot then I’d have to pay $25,572/year to rent a quarter acre lot. Talk about financial injustice.
And they even wanted to zone out the trailer park but the then governor of Michigan, Jennifer Granholm, said even poor people need a place to live. Too bad she didn’t have the courage to say not only do poor people need a place to live but they have a right to live in a home of their own choosing and not someone else’s choosing. They have a right to spend their money as they see fit and not as someone else sees fit. In other words they have a constitutional right to life (shelter is a necessity of life), liberty and the pursuit of happiness. They should be free to be happy in a home of their own choosing. But you won’t see that in Bernie’s book. He apparently thinks the unfair housing market is just fine.
The housing market should be free and fair for all of us and not just the middle class and above. And I’m sure there are some in the middle class who would prefer not to have to spend so much on housing. Maybe they’d just like to live in a small home so they could afford to own a motor home and do some traveling. Perhaps they’d just like to live in their motor home full time and just own two lots with no permanent home. My Dad lived in his motor home for 3 months right after he sold his first retirement home and was waiting for his second retirement home to be built. He loved traveling in his motor home. His first home was on a lot of land and he couldn’t afford the increasing property taxes there. In retirement one lot could be for summer living and one lot could be for winter living. Or if you are still working then one lot could be close to work and another lot could be for recreation or where the schools are good and crime is low. It’s just nice to have choices instead of having to sink so much money into one large, expensive home.
With one large expensive home you HAVE to have property insurance because you couldn’t take that loss. Otherwise you could self-insure and just replace a small home just like you could replace a car. The point is these exclusionary laws affect the entire country very dramatically. America should be about inclusion and not exclusion. Imagine what a difference it would make if you could buy a home as easily and as cheaply as you could buy a car. Isn’t America stronger and safer when we all have enough? So to all you racists out there worried about someone a little darker than you moving into your neighborhood, all I can say is that you are sticking it to yourselves too real good. And to all the black people in Detroit, why do you still have exclusionary zoning in Detroit? Bernie addresses that on page 59. He says “We lose when we are divided. We win when we are united.” But he can’t seem to apply that concept to housing.
But I disagree with his approach to affordable housing. In Burlington on page 37 he said they “developed some of the most innovative affordable housing concepts in the country.” On page 52-53 he said Elizabeth Warren “did a remarkable job in conveying complicated economic concepts in a language that everyone could understand.” There is nothing complicated about a free and fair housing market. People can and will decide on what they can afford and left to their own judgment that is what they will buy. And they will be able to save for retirement instead of flushing so much of their wealth down the 30 year mortgage toilet. On page 45 he says “seniors cannot live on $11,000 or $12,000 a year.” Well, Social Security should not be your only source of income.
Remember that $193,000 I would’ve had to pay back if I had borrowed $100,000 at 5% and paid it back over 30 years? Instead I put $186,000 into single premium immediate life annuities and I’m getting a little over $1000/month for life. Now I can wait until I’m 70 to start collecting Social Security. I didn’t buy one big annuity all at once. I bought 3 annuities spread out over 4 years. My first one was purchased from AAA Life for $65,000 in 2005 around age 56. I kept saving my wages and accumulating the return from that first annuity so I bought a second annuity, this time from New York Life, for another $65,000 in May of 2008. AAA Life would not sell me a second annuity, citing some Michigan law. My thought and strategy was that I have to stretch what little I have over the rest of my life. My lifetime income was $699,000. I got that figure just by adding up all the income on my social security statement that they mail to you. All my income was from wages. So I paid social security taxes on all of my income. So I don’t object to Sanders saying that we should raise the cap on social security to at least keep it secure. Why does the rich guy need a break?
I did not want to worry about how long I would live when I bought my annuities. If I died sooner rather than later then so what, you can’t take it with you and I didn’t need it then did I? I kept saving my wages and accumulating the first two annuities but lost my job five months later in Oct 2008. But Michigan wouldn’t even let me buy another annuity even if I wanted to. That’s because there is no guarantee AAA Life or New York Life won’t just go bankrupt someday so there’s a law that says you can’t put too much of your worth into those financial products. That is why we should never privatize Social Security. Anyway after I lost my job in Oct 2008 I only had to wait a few months until I was 59 and a half. I was able to then put all $56,000 of my 401K into a third single premium, immediate life annuity. The Michigan law did not apply to your retirement savings.
I did the best that I could at saving. But I’ve calculated that exclusionary zoning has easily cost me $100,000 during my lifetime. I rented one apartment or another for 17.5 years. I lived in the Navy barracks for 3.5 years of active duty. I lived in the trailer park for 18 years. Apartment rents are much higher than trailer park lot rents. I’m saving $3000/year paying property taxes of about $700/year compared to the trailer park lot rent of $3,720/year at June 2009. And, as I’ve said, the trailer park lot rent has surely increased since June 2009 while my property taxes have decreased because now that I’m over 65 I get the homestead property tax credit. Anyway 17.5 years plus 18 years equals 35.5 years and 35.5 years times $3000/year equals $106,500 that I could have in savings except for exclusionary zoning forcing me to rent apartments and pay trailer park lot rent all of those years.
So do you see how we are screwing ourselves with this exclusionary zoning? Obviously the banks are making out, the landlords are making out and the property tax collectors think they are making out. Detroit has over 10,000 acres of empty lots. They are not making out at all. You could easily put three singlewides on a quarter acre lot and get $800 in property taxes from each. That’s $2,400. Compare that to the $2,200 in property taxes that my Dad was paying. And he owned two lots. After he died my brother sold his home for $135,000. The point is we can maximize the probability that people can take care of themselves by ending exclusionary zoning. I’ll keep reading Sander’s book and will leave a comment if he even mentions exclusionary zoning. He seems to think the housing market is just fine and we just need to earn more.
There are two sides to poverty. One side is what you earn and one side is what you spend. I’m all for earning more but please let me spend it as I see fit. OK? A leader needs to lead and SAY we need to end exclusionary zoning. He can’t just TEST THE WATERS and see what voters will spontaneously support. Voters need to be educated, persuaded and convinced. That won’t happen if you don’t use your bully pulpit to talk about the wisdom of ending exclusionary zoning. Just one more dig at Sanders. He had four kids. No one should have more than two. The world is overpopulated. Immigration is not a solution to overpopulation. Securing our border should not be a partisan issue. Shame on him, Hillary and Obama for not doing comprehensive immigration reform. Shame on all of them in Washington.