The World is Flattened

Back in May of this year, 16 new or “under-construction” houses in Victorville, CA were bulldozed by the San Bernardino branch of Guaranty Bank in Austin, Texas. They were built to sell in the $300K range, modest by Los Angeles suburban (OK, way out from LA, actually!) standards. They were big, beautiful, empty, unsold and foreclosed. The city was about to levy fines, because many of the structures sat unfinished. It was determined that, notwithstanding a crisis of increasing homelessness, it was more economical to raze these structures to the ground.

As I’ve pointed out on several earlier blogs, when folks realize that a house may not be an investment – real estate appreciation has for many become an unsustainable myth – the notion of driving from a distant suburb using expensive gasoline and inflicting extensive wear and tear on the family car to get to work no longer makes economic sense. Not to mention that these “starter homes” relied heavily on unqualified “no down payment” buyers getting subprime loans. These are the houses least likely to find any “recovery of value” even in the not-so-near term.

I am reasonably certain that this will be a pattern that will either be applied by banks with their foreclosed land on similar such properties across the land or perhaps by local governments seeking to defend against mosquito-attracting pools, squatters creating drug houses or general decay inherent in such abandoned properties. Sure, we can picture new “green companies” building alternative energy plants (or other businesses spawned by the stimulus package) near these abandoned properties so that workers can take advantage of cheap housing, but this is by no means a universal solution for the problem.

Indeed, if you apply Google Earth to large areas in and around Detroit, Michigan, you can look down on some amazing residential real estate bargains – houses with three and four bedrooms and several baths selling for under $10K – surrounded by the bulldozed rubble of abandoned neighborhoods flattened by concerned municipalities. Is this the future for many American communities?

The July 23^rd FastCompany.com points out the possible direction of a number of American cities that face a relatively permanent and significant contraction: “Flint, Michigan, for, example, was once a thriving factory town with 79,000 locals employed by General Motors. Today it's one of the poorest cities in the country with 20% unemployment and block after block of abandoned closed homes.”

As city government examined the problem, the notion of a managed contraction, planned and implemented for a long-term change, becomes a new focus of many municipalities. “The plan has been backed by Dan Kildee …, the treasurer of Genesee County, which includes Flint. The goal would be to create a smaller, more manageable city with improved services. If the plan is adopted the city would bulldoze entire neighborhoods--as much as 40 percent of its area--and return the land to nature.” FastCompany.com

Unused factories, abandoned homes and vacant businesses would be absorbed by the city, country or state and “reconfigured” to reduce the demand on local services, eliminate venues for criminal activity and enhance the general environment. The Obama administration is watching the efforts in places like Flint as a possible general experiment for many other communities – perhaps deploying some of the federal government’s future infrastructure allocations to such new uses. Downsizing lifestyles, expectations and even the communities in which we live appear to be a part of our future for the foreseeable future.

I’m Peter Dekom, and I approve this message.