Posts Tagged ‘housing bubble’

Preservation Wins in Edgewater

August 30, 2010

POST DATE: August 30, 2010 – Exactly five years and 296 posts since this blog began.

Last week a lawsuit against the Edgewater Historical Society (EHS) was dropped, marking a significant victory for preservationists in the north side Chicago community, and indeed, for all Chicago preservationists, since another lawsuit against the city landmarks ordinance is still out there.

The suit argued against community activists who sought to landmark the neighborhood following plans announced to tear down an historic house. They claimed over a million dollars in damages, even though the district never was created.

The Edgewater lawsuit was particularly obnoxious, because the plaintiffs sued not only the Historical Society but several individuals on the society board. It was an attempt to chill the ardor of community activists by suing them PERSONALLY for what they were trying to do for their COMMUNITY. There are actually laws against these SLAPP lawsuits – Strategic Lawsuit Against Public Participation – because they are specifically intended to intimidate and inhibit public speech and action. It seems some think community organizations should have the same legal protection that corporations do.

Historical fact: the corporation was invented to limit the personal liability of those who undertook business ventures for profit. It seems only fair that not-for-profits get similar protection, hence the wave of Anti-SLAPP legislation being passed worldwide.

The Edgewater ruling was cheered by Preservation Chicago “as a great relief to preservationists, who are closely watching a similar lawsuit filed by Albert Hanna against the creation of the Arlington-Deming District and the East Village District.”

I have previously commented on that case. The big irony in all this is that people oppose landmarking because they don’t want to limit the value of their real estate, but people have ALWAYS supported landmarking because they want to preserve the value of their real estate. The opposition always heats up with the real estate market, while the conservation option arises either during periods of down markets like the 1970s or in areas that have experienced long-term disinvestment.

We are reading a lot nowadays about the end of the hot real estate market, the death of homeownership and the decline of the McMansion (Bob Bruegmann suggested as much two years ago – see my post on real estate economics) now that the 30-year housing bubble has burst.

The right and left wings are arguing about who caused the housing bubble (if you are on the right, blame Fannies for giving mortgages to lowlifes who couldn’t make payments; if on the left, blame the banks who purchased, repurchased, rebundled and kept buying those toxic assets.) but the simple fact is that when the value of a house doubles in five years, as they started to do in the 1990s, and wages don’t, there will be a correction. This bubble started a quarter of a century ago, and it got really big.

Over historical time, real estate values also go down. Here is a house that cost $8,000 to build in the 1860s and sold in the 1920s for less than half of that.

In my 2008 blog post mentioned above I also related the story about buying two Frank Lloyd Wright houses for a dollar, which was tens of thousands of dollars TOO MUCH, because the properties had a negative value thanks to their location. According to the newspaper this morning, two Frank Lloyd Wright houses in California may be lost, thanks to their inflated values in that most inflated of markets. The Ennis house was listed at $15 million and now can be had for half of that, while La Miniatura dropped from $7.7 to $5 million and may be bought by art collectors, disassembled, and shipped overseas.

The point is, the market was psychotically overheated and overvalued. It reminds me of the Marshall Bennett quote about real estate development after World War II:

“It didn’t take vision because the market was fantastic. You had to be an idiot not to make lots of money. Really. I’m not kidding.”

Oh, I can’t resist. Here is what Bennett – a big real estate developer – said about the crash of the commercial real estate market at the end of the 1980s:

“A developer is like an alcoholic before he joins AA. If you give him money, he builds. He doesn’t care if there is any demand for the space: he knows that someone is giving him money and he can go out and build. Again, there was no vision – there are very few of us who are smart enough to listen to ourselves.”

“America does things completely differently from anyone else. We overbuild and we overcontract.”

Footnote for Bennett quotes: “Seized the Day: Chicago chronicles from seven who helped shape the city”, Rob Mier and Laurel A. Lipkin, Chicago Enterprise, October 1992, p. 18.