Housing crash and its effects on public policy, by gimleteye

The all-important advertising section in the Friday edition of The Miami Herald, called “Home Guide”, keeps getting thinner and thinner. It is extraordinary to watch the disappearing act of production homebuilders and condo developers in South Florida, that dominated and muscled local government for decades and exerted ham-fisted influence on newspaper content through ad revenues.

Century Homebuilders “welcomes buyers to new sales center” but the gibberish feels desultory and forlorn in the miniscule section. “Owning a home here will be a once-in-a-lifetime chance,” crows Sergio Pino, founder of Century Homebuilders and US Century Bank, that in only a few short years rode Miami's housing market bubble from nothing to more than a billion dollars in deposits.

Two thirds of the rest of the page on which Century makes its mark is given to Lennar’s “Shortsale: every home must be sold. This weekend only.”

“This weekend only” has turned into every weekend, amidst the worst housing market decline in a century.

The Lennar ad features its 11 developments in South Florida, including the development that Lennar pushed outside the Urban Development Boundary, within shouting distance of Everglades National Park and a flat, featureless landscape zoned for one house on five acres.

On March 27th, Lennar Corp. the Miami-based production homebuilder, posted a 73 percent drop in profits and took the unprecedented step of withdrawing its earnings forecast for the rest of the year. Its bleak and unremittingly bad news follows on the heels of a third quarter loss, of $1.2 billion.

Under such conditions, including the dwindling real estate revenues of newspapers, one would think that prudence and fiscal restraint would begin to gain some sort of foothold in public policy discussions including those related to zoning and taxation.

That is not the case, at least not yet. This week, Lennar announced that it was pushing forward on its Parkland project in the far western suburbs, renamed “Parkland 2012”.

What is Lennar up to, given that the corporation has been taking hundreds of millions of losses to write down the cost of land under option or that it does not intend to purchase.

The plans for the 960 acre development include “a hospital with 200 beds”. Hospitals are good for getting a favorable spin for zoning officials: a hospital is exactly what Homestead land speculators used, only a dozen miles away from Parkland, as if by sprinkling pixie dust to get zoning for many thousands of single-family homes in platted subdivisions that are mostly going begging for residents. Many of those vacant homes belong to Lennar.

Parkland 2012 will also include a high school “with capacity of up to 1,600 students”. Schools are also good for getting a favorable spin in front of local zoning councils. Who can be against schools?

That’s what Lowe’s Home Improvement proposed in 2007. Its lobbyists offered that the company would sell adjacent to its proposed development outside the urban boundary for a school that the Miami Dade School Board says it has no need for—in order to generate public sympathy from nearby residents and give local county commissioners the political cover they needed to vote in favor.

Dutifully, before the county commission, Lowe’s paid for local residents to take a bus downtown and sit patiently for their opportunity to claim their “need” for a new school, a new place to buy light bulbs, never mind that the county’s own professional planning staff had raised numerous objections to the proposal. The lobbyists pulled out their prepared speeches.

Local county commissioners fell all over themselves, loving the Lowe’s application like a crack addict loves the little glass vial—as though the policy thresholds of the state and water management district would somehow just melt away like Greenland's glaciers.

So why, then, if Lennar is announcing massive losses and contracting its business, The Miami Herald reports, “the developer is proposing 1,257 single-family homes, 2,436 townhomes, 3,248 condos” and 100,000 square feet of medical office space, 550,000 square feet of warehouse and office space and 200,000 square feet of retail space?

As if to answer the incredulous, Jose Cancela, a lobbyist for the project, qualifies the new project application by seeking to “quell fears about the project’s size and request to move the UDB”—“Parkland 2012 is about the future. We need to be ready for the future.”

Funny. That is not the flea in the ear of the National Association of Homebuilders, the uber umbrella of the Growth Machine that trumpets sustainable green building at the same time as it clamors for the privileges of unsustainable sprawl on behalf of top Growth Machine predators like Miami’s US Century Bank, where Mr. Cancela is a board director.

This week the NAHB, one of the top contributors to political campaigns in the nation, announced in a fit of pique that it was halting all contributions to federal elected officials “until further notice.” Kind of like a cease and desist order from a county building department.

In a terse statement, NAHB president Brian Catalde explained, “This extraordinary action was taken because the NAHB BUILD-PAC Board of Trustees felt that over the past six months Congress and the Administration have not adequately addressed the underlying economic issues that would help to stabilize the housing sector and keep the economy moving forward.”

But is it really all about “moving forward” and “about the future”? No.

To be perfectly clear, the Washington Post reports (Feb 14th, “Home Builders Halt Campaign Funds After Setback”) that the NAHB took the unprecedented step after failing to get what it wanted from Congress. And what would that be?

“The association had unsuccessfully pressed lawmakers to adopt a provision to reduce the tax liability of home builders by allowing them to offset their past profits with future losses.”

Usually, I only have to read something once to understand what is behind the Growth Machine’s thinking. It is obvious, for instance, that its tired, bedraggled logic of sprawl is fraudulent at its core: all growth is good, development expands the tax base to fund infrastructure, growth is inevitable in wetlands and farmland and so forth, or, that common voters don’t have the skills to make decisions on the shape and form of their communities, like empowering citizens through constitutional amendments at the ballot in order to circumvent the hostile gate keepers of “representative democracy”.

But I’ve been reading this canard from the National Association of Home Builders for more than a day, and I have to keep re-reading it in the context of all the other information I have shared with you: that Lennar is planning “for the future” a mega development pushing towards the Everglades, where environmentalists and regulators and Congress and the Legislature are wrestling with billions of dollars of unfunded costs for “restoration”, at the same time Lennar is announcing “every home must be sold. This weekend only!”, frantically writing down the cost of options and other assets like a cargo plane jettisoning pallets in order to keep itself aloft.

What the builders want is to keep losing money and make the rest of us pay for it.

Mr. Cancela says that Miami’s Urban Development Boundary “is not a line in the sand”, and why? Because in this particular sector of the American economy--relating to construction and development-- accountability has always been a constantly shifting line.

From my point of view, what the NAHB wants is for tax policy on behalf of the American public to forgive past profits generated from destroying the landscape in order to fund losses from destroying the landscape.

I can take it even further: the Growth Machine wants us to pay for their wrecking the economy, through advocacy of the mortgage based financial derivatives crucial for their success and throttling regulation of banks, their products, the environment, —that made them rich a few years ago when they strong-armed every legislator within earshot and scared the hell out of newspapers and their managers convinced that stock prices and options and retirement plans were built on the foundation of advertising revenue from production home builders and condo developers.

I don’t doubt for a second that Mr. Cancela, the local spinmaster for Lennar, (his speaker’s bureau breathlessly lists his accomplishments including, “being inducted into the Hispanic Business Magazine National Hall of Fame in 1998 for his contributions in developing the National Hispanic Media Sector.”) and the Growth Machine that US Century Bank represents has had the conversation with Lennar and every other production home builder: we made the housing boom work, once, in Florida and we can make it work, again starting right here, in Miami at the edge of the Everglades. We will get our way.

So far, the main cost to be paid is being born by newspapers like The Miami Herald and its readers, who still don’t get a sharp-eyed view of this mess.