Swarms at the trough

The once-in-a-generation opportunity to repair and rebuild infrastructure across the country is also a once-in-a-not-soon-enough siren call to private equity to interrupt, disrupt and corrupt:

Legislation with the size and scope of the $4 trillion “Build Back Better” agenda is like a Bat-Signal for lobbyists, urging them to swarm Capitol Hill without delay. Literally thousands of companies, organizations, and trade groups have lobbied on one or more of the bills in this package. But one industry’s representatives keep showing up over and over again, whether in formal lobbying sessions in Congress or more informal meetings: private equity.

“At every point, private equity lines up at the trough,” said one observer close to the discussions. “There’s just somebody in every fucking meeting.”

Private equity lobbyists have multiple interests in the bills being discussed. They obviously want to keep any tax increases away from their industries, and successfully fought to keep tax hikes out of the $550 billion bipartisan infrastructure bill, which is slated for a House vote on September 27. Those tax hikes got shifted to the reconciliation package known in Washington as the Build Back Better Act, and private equity has kept up the pressure there.

But the industry has another reason to be involved in the reconciliation bill. The blueprint includes hundreds of billions of dollars in investments to expand home and community-based services for elderly and disabled people under Medicaid (initially set at $400 billion over ten years), and to provide subsidies for high-quality child care programs (set at $225 billion). Private equity happens to be deeply invested in both of these industries, with dozens of home care and child care companies in their portfolios.

So, people should just be aware. Like accounting gimmicks from the political opposition and in the media that will make $3.5T over ten years sound like too much in an +$20T per year country (narrator: it’s Not), also be advised about all the beaks dipping toward the puddle as it gets sliced and diced. Let’s not get distracted about who is doing what – or why they might be whining about it.

Like we say, a country that can drop a small SUV on Mars from a helicopter and watch it drive around in real time can afford to fix any problem – except where stupidity and corruption won’t allow it.

Housing Stops

I’ve heard and read several variations on this theme today, that new residential construction is down.

New residential construction dropped in June, another indication that the U.S. housing market is struggling.

But that’s a new kind of sentence fragment – you know, where they leave off the important part. The rest of the sentence should read: to admit to itself that the last thing the housing market needs is a bunch of new houses.

“The housing industry remains stuck in a rut, with both sales and construction activity moribund,” said Michael D. Larson, an interest rate analyst with Weiss Research. “Builders simply lack the confidence — or in some cases, the financing — to ramp up construction, especially in the wake of the home buyer tax credit’s expiration.”

The poor report for housing starts follows news Monday that builder confidence in the new home market sank to its lowest level in more than a year, according to an industry index. Home sales plunged 33% in May, the latest sales figures released, and many economists expect a difficult year for builders now that the federal tax credit for buyers has expired.

This is news? That’s what’s holding them/us back, the expiration of the homebuyers tax credit? Sorry, guess again.

As a result, builders have cut back on home construction. “Builders remain very cautious in light of the sluggish pace of the economic recovery and the hesitancy they are seeing among potential home buyers,” National Association of Home Builders Chairman Bob Jones said in a statement.

What’s more, builders who can work up the confidence to take on new projects are finding it increasingly difficult to get financing. “If you think it is hard to get a mortgage to buy a house, put yourself in the shoes of a developer trying to throw up a subdivision,” Larson said in an interview. “It is really tough to get that kind of financing.

Does anyone ever think to ask why would they want to throw up a subdivision? Because that’s just what they do is no longer operative, developers. Wake up. We don’t need a lot of new houses and condos right now or for the next 12 1/3 years (random). This is again, one of the definitions of insanity – doing the same things over and over but expecting different results. Put on some different shoes, developers. Those have worn holes all the way through to the top. It’s tough to get the financing because we don’t need any more (single family) houses in (far flung) places where we don’t already have too many of these. You can look it up.

Developers: keep your careers if you must but change your MO. Walkable, to work and for provisions, proximity to transit, high density. That kind of building comes back, someday. The other kind, not so much.

Your Permanent Record

And I’m not talking about News Of the World glued B side up on your turntable. This is more of a …And you’ll know us by the trail of dead kind of thing, only crappier.

Land use. Really good s.f.streetsblog piece on this Transportation Research Board report on Driving and the Built Environment. Among the nuggets:

Finding No. 2 is: “The literature suggests that doubling residential density across a metropolitan area might lower household VMT (Vehicle Miles Traveled) by about 5 to 12 percent, and perhaps by as much as 25 percent, if coupled with higher employment concentrations, significant public transit improvements, mixed uses, and other supportive demand management measures.”

They note that were you to move the residents of Atlanta to an area built like Boston, you’d lower the Atlantans’ VMT per household by perhaps 25 percent.

Better land use results in reductions in energy use and carbon emissions, the authors report, from both direct and indirect causes. (Direct causes would be a reduction in VMT; indirect include things like longer vehicle lifetimes from reduced use and the greater efficiency of smaller or multi-family housing units.)

Not only that, but were you to move the residents of ATL to a Massachusetts-like locale, you’d have one hell of a lot of pissed off, not to mention cold, white people. Which could do wonders to re-invigorate the hypothetical Boston-like area punk scene. But really, these are the kinds of shake-ups that people (researchers) can actually quantify with models that make sense of the implications of changing things like where we build the new houses, in-fill vs exurbia, that will create the density that will in turn make mass transit a more realistic necessity – rather than the mere wish for better transportation options. There’s also the side benefit of helping us decouple the concepts of person liberty and freedom that have become so defined by isolation, three-car garages and the God-given right to front and back patches of personal lawn of minimum dimensions.

&%$#!… that’s not at all where I was going with this. Oh well.

Two Things

We’ve solidly on the cusp of Gemini, school’s getting out most everywhere and the Administration makes some hardly recognizable sounds about raising CAFE standards. Coincidence? I think not.

But really, when you consider things that ordinarily do not go together, new CAFE requirements and the drop in new home starts should not be among them.

New home construction fell to its lowest pace on record in April, the government reported on Tuesday, disappointing forecasters, who had hoped for a modest increase. Building permits fell to record lows and construction on new multi-family units plunged.


“The writing’s on the wall in the construction industry,” said Joseph Brusuelas, director at Moody’s Economy.com. “This is a function of the oversupply in the market. There’s just simply too much supply on the market, and construction starts will have to continue to contract.”

Aw. Everyone hates disappointment, especially so close to summer. But it remains the case that there was an extensive boom in housing construction over the last nineteen-plus years and most of it was the wrong kind of houses built in the wrong kinds of places.

And surely, even the non-trivial rise in CAFE standards has its limits, mainly as it does nothing about used cars and leaves the price of gas untouched. But the CAFE rules are just one tool among many; they were too low for too long and the automakers screamed every time they were even mentioned. Now that the automakers don’t really exist as such any longer, the screams will be the same, but we should hear them differently. And the longer new homes starts lag, maybe that stat begins to serve as a different kind of indicator to home builders, developers, planning commissions and the like. The age of driving fuel inefficient cars to far-flung suburban houses is mercifully taking a pause. We can take the time to re-think the entire fancy that led to both as if it’s deliberate and not at the point of pain. Like wer’e doing it for our own green future good.

Appreciation appreciation – thanks for the memories

Whoever thought home prices would continue to rise forever, please raise your hand(s), we’re doing a head count and just need a round figure. Really, though, not to flog a deceased equine but sprawl-building was our last great industry/swindle and its grand finale is the soft focus of much consternation among the hoi polloi. Soft because we’re not really focussing on it much beyond the mortgage meltdown and the bailouts being processed at the top, not seeing how it might be woven into other problems and the fulcrum for the great transition to come.

There is a profound over-capacity of housing; speculation about how and when the housing market, meaning the building of far-flung subdivisions, will ‘bounce back’ is absurd. Its. Not. Going. To.

Sure we’re rather not think or speak about this kind of unpleasantness, and our remarkable powers of disassociation have been noted. But it doesn’t change the fact of so many people out of work: in the construction industry, real estate, banking, even sandwich flipping and all the tag-along support industries related to building, selling and living in suburbs. These folks will have to find something else to make. Whatever it is, it will be green in that it will be made and sold close to their homes, using materials that have been recycled likely several times and will be made by some post-industrial process that i s carbon neutral – so we should begin imagining what some of the things it might be.