Zillow Reading List, September 11th
At Zillow Research, our days are fully consumed with bringing you the best, most interesting and most actionable real estate research around.
But to that end, we also find time to read a variety of reports, news stories and investigations, on any number of issues, from social justice, to economics, to real estate and sports. We read them for education, for entertainment and out of pure curiosity – and each one helps us discover new questions we want to answer and helps identify new trends worth following.
Zillow Reading List is a regular roundup of these interesting pieces we come across, with some thoughts about each and how it ties into our existing research and/or has spurred new questions. We’ll post these roundups regularly, and of course will continue to strive to publish research that is as enriching, thought-provoking and useful as these pieces have been to us.
Enjoy!
Is Using a Discount Brokerage Pennywise, but Pound Foolish?
Panle Jia Barwick, Parag Pathak, and Maisy Wong in The National Bureau of Economic Research
One of the recent changes in the real estate industry has been the proliferation of discount brokerages. Traditionally a home’s seller pays their agent, who in turn pays the buyer’s agent of the buyer. Discount brokerages offer their services for a smaller commission, both for them and also occasionally for the agent at the other side of the table. This paper looks at these discount brokerages and tries to see if paying less actually yields worse results, and finds that sellers retaining a discount broker are both less likely to sell their home and for that sale to take longer if it does happen. The results were interesting, but we were less convinced by their assertion that this was because of so-called “steering” by agents, whereby agents discourage their clients from buying homes represented by discount brokerages. There are a lot of factors involved in determining how long it takes a home to sell that could also explain this difference between traditional and discount brokerages.
Bill McGraw in MLive
With global demographic trends being what they are in many industrialized nations, the question of how to manage a city – not for growth, but for a shrinking population – is going to become increasingly relevant. Vacant, disused or blighted land means services like public transportation need to be spread out over a larger area. Homes sitting empty and unmaintained decrease the values of nearby occupied homes and discourage development. How can large cities downsize in a way that keeps them vibrant and minimizes urban blight? Detroit has come up with an aggressive plan, ignoring traditional neighborhood boundaries and thinking about ways to turn vacant acreage into productive acreage. And they are thinking broadly in terms of what constitutes productive acreage – considering everything from agriculture to air pollution, and engaging the local population every step of the way. We’ve been watching Detroit for a while now, and couldn’t be more encouraged by these developments.
CML in Gawker
It seems like a long time since that famous billboard that asked the last person leaving Seattle to turn out the lights. Seattle, Zillow’s hometown, is now squarely in the midst of a high tech boom. Given recent research on the impact of high-tech companies on home values, and the potential dangers of one-industry towns, this piece arguing that Amazon has already killed Seattle’s spirit caught our eye. While it is important for cities and citizens to think about the best way to manage growth, it seems excessively hyperbolic to claim that rising rents and shifting demographics are destroying the city. I often wonder if our nostalgia for how things used to be is misplaced, and if our view of the past is colored by rose-tinted glasses. Development needs to be smart. But do that many people really miss the seedy and unsafe old Times Square in New York? Or the industrial district that was Seattle’s South Lake Union, before it played host to Amazon’s campus and countless new restaurants and bars? Sometimes, efforts to preserve the character of certain areas feel more like attempts to keep newcomers out, or at least make them feel less welcome, rather than to keep certain elements in.
John McGinty, Benjamin Charoff, and Pamela Blumenthal in Urban Wire
Here is a visualization we liked that emphasizes an often under-appreciated fact in many housing policy debates: More of our housing policy dollars go towards subsidizing the rich than the poor. Most of what we spend on housing policy is through the mortgage interest deductions and other tax deductions, which overwhelmingly accrue to wealthy households with large mortgages who itemize their deductions. Other programs and housing subsidies are far less expensive, including vouchers and section 8 housing, costing the government only a third of what the tax deductions do. To be fair, those subsidies to less-affluent families are larger as a fraction of their income, but it is still important to remember who housing policy really supports when we talk about the national affordability crisis.
The Lives of the Rich and Famous in Public Housing
Lisa Rein in The Washington Post
And some of that money set aside to provide affordable housing to the less-affluent is actually going to wealthy families. The department of Housing and Urban Development (HUD) sets income restrictions on many affordable units, ensuring that they go to families who could not otherwise afford them. But those restrictions apply only when the family first applies to live in the unit – not afterwards. The result is that some of those units are currently being rented by families who could afford market-priced homes. This article documents some of the most egregious ‘abusers’ of the system – including a family in New York making almost $500,000 a year, but living in subsidized housing.
Their presence is controversial, but on the other hand, filling affordable housing complexes with a transient population who leave as soon as they achieve some measure of financial security doesn’t seem like the right solution, either. Moreover, there is evidence that mixed-income communities create better opportunities for low-income families. HUD could administer a sliding scale, where the amount of your subsidy decreases as your income rises. Or HUD could require that people who don’t meet the income requirements for, say, five years in row need to leave their units.
But the reality here is that given the huge waiting lists for these subsidized units, getting an affordable unit in expensive places like New York, Boston or Los Angeles is like winning the lottery. And people are going to do whatever they can to hold onto their golden tickets.
