Category Archives: Business

Two assessments of issues behind the housing crisis

A couple of interesting articles looking at the issues in our current housing markets.

From Mother Jones: “Is Your City Being Sold Off to Global Elites?

That’s certainly a question that goes directly to our situation in Hawaii. The article digs into the situation in Vancouver, British Columbia, with a history of urban diversity.

It’s midmorning on a Saturday in Richmond, a suburb of Vancouver, British Columbia, and this is maybe the 20th example we’ve seen of what locals call the “empty-house syndrome”—homes purchased by foreign nationals, many of them wealthy Chinese, and left to sit vacant. Some will eventually have occupants; Vancouver is a top destination for well-heeled emigrants. But often, the new owners treat the houses as little more than vehicles for spiriting capital out of China. By one recent estimate, 67,000 homes, condos, and apartments in the Vancouver metro area, or about 6.5 percent of the total, are either empty or “underused”—an appalling statistic, given a housing market so tight that rental vacancy rates are below 1 percent.

We certainly see those empty houses in Kahala when we walk on the beach in the mornings. Just in the stretch of houses we walk past daily, there are probably two dozen large empty luxury homes. And I’m sure there are many more empty units hidden in high-rise condominiums.

Anyway, Vancouver is experimenting with how to respond. We should be watching.

And the New York Times looked at another aspect of housing: “How Homeownership Became the Engine of American Inequality.”

The culprit here is the mortgage interest deduction, which lets home owners deduct the portion of their mortgage payments that go to interest on their loans. It’s a financial benefit that renters don’t enjoy.

A friend has proposed a homeowner’s surcharge dedicated to funding affordable homes, and calls existing homeowners perhaps the largest impediment to expanding the housing base.

Complicated issues here.

A fine bit of gerrymandering

It’s the kind of spectacular example that will leave future reapportionment commissions swooning in awe, even though it’s a case of economic rather than political gerrymandering.

And here it is! A new economically-challenged district officially determined to be plagued by stubbornly high unemployment, according to the Department of Business, Economic Development, and Tourism.

Fantasy Land

I’m indebted to an article in Civil Beat this week for bringing this excellent example to my attention, but I fear the fine reporters at CB failed to appreciate its true brilliance. This isn’t your everyday fudging of the numbers. No, this is real heavy lifting, a world-class bit of boundary bending!

It seems there are some smart cookies over in DBEDT which, among many other things, administers the federal government’s EB-5 “cash for green-card” program in Hawaii. This is the program that allows foreign investors to put money into “qualified” projects and, in exchange, earn a green card allowing them to come to the United States.

Along came developer Jay Fang (also known as Zhe Fang), who wants to qualify his proposed new high-rise project for the EB-5 program, and to tap special benefits which come from investing in an area suffering from high-unemployment.

Unfortunately for Fang, his proposed project is a stone’s throw from the Keeaumoku Walmart, and just down the street from Ala Moana Center. It’s also just mauka of Kakaako, where a high end construction boom has been underway for years. The local unemployment rate is rock bottom.

But, it seems, DBEDT took it as a challenge. How they could take a proposed project in an area with extremely low unemployment, and in a city with unemployment well under 3%, and make it appear to to be in an area with an unemployment rate of at least 150 percent of the U.S. national average, thereby qualifying for the especially lucrative benefits of the EB-5 program?

Those tricky folks at DBEDT finally found a way to make it come out right!

They carved out that strange, lizard-shaped district encompassing the large, high unemployment districts on the west side of the island, and sweeping down to small, affluent census tracts over by Ala Moana, where developer Fang hopes to build his project. Average out the unemployment rates across those diverse census tracts, and DBEDT could certify the newly created district as a “Targeted Employment Area for the purposes of the EB-5 program.”

It’s the kind of effort that would make Texas legislators, well known for their gerrymandering prowess, glow with pride! And this from our home town boys in DBEDT, who appear to be at the top of their game!

And who says Hawaii state government can’t get things done!

BOH to cut 14% of its ATM network

A story of the business section of yesterday’s Honolulu Star-Advertiser seems to be an early sign of a seismic shift in consumer banking.

S-A reporter Dave Segal reported yesterday that Bank of Hawaii is removing all of its ATMs from McDonald’s restaurants in Hawaii and Guam.

According to the story, the move is in response to changing market conditions.

“Today, consumer preference is trending toward the use of debit cards and mobile phones instead of cash to pay for food and drinks at McDonald’s.”

The 65 machines represent nearly 14 percent of Bankoh’s ATM network. It will still have 404 ATMs systemwide — the most of any local financial institution — after the removals.

The change was spurred by McDonald’s decision to modernize its restaurants and the incorporation of point-of-sale technology to accept electronic payments.

The story quotes senior executive in charge of “digital channels”:

“An important technological shift is happening,” Oyadomari said. “The role of the ATM as only a cash dispenser has changed to now include the ability to scan deposited checks, count bills of deposited cash and communicate with your mobile phone. As the role of the ATM continues to change, we’ll continue to assess where customers would find the most value in having an ATM.”

So banks themselves are having to adapt their services, and businesses also have to keep up with the increasing importance of digital phone technologies and software advances.

Where is this heading? How will it affect banks more generally? Merchants? Let’s hear your thoughts.

Repurposing dead malls?

A reader who uses the name “Compare Decide” shared this rather interesting compilation on the issue of failing malls in America. I’m sharing the email in full.

There was an interesting debate on your blog between a commenter who asserted that retail space can be repurposed into residential spaces, and a commenter who said that transforming retail space into residential is not really an option.

So I googled “repurposed malls”. ….

The future of malls

It seems that malls can be repurposed to new uses, in particular, office space, medical facilities and educational institutions (e.g., charter schools). But there is little mention of abandoned malls being turned into residences.

Online shopping, the recession and demographic shifts are some of the factors killing shopping malls. And as these changes leave behind huge concrete carcasses, they're being "reimagined" into everything from medical centers to hockey rinks. First of all, a 'dead mall' is not an abandoned mall. There is a specialized terminology that the mall business uses that is explained here. A 'sealed' or 'shuttered' mall is what we think of when we think of an empty, abandoned mall.

Dead Mall: A mall with a high vacancy rate, low consumer traffic level, or is dated or deteriorating in some manner. For purposes of inclusion on this site, defines a dead mall as one having a occupancy rate in slow or steady decline of 70% or less.

Mall Categories:

first class mall…. regular operating mall
second class mall… high vacancy, or non-traditional store occupancy
third class mall… areas or entire mall sealed from public
fourth class mall… shuttered or slated for demolition
fifth class mall… redevelopment has begun, or is completed

Here’s a list of dead malls.

It is interesting that Alabama has eight dead malls, and California has only 12 dead malls.

Also, New York has a ton of dead malls, but they don’t seem to be in New York City.

Maine has only one dead mall. Compare that to Ohio, which has 27 dead malls.

I am reminded of the pre-election maps of the US, which showed strong support for President Trump in the southeast and the midwestern and northeastern ‘rust belt’. But New England and the western US did not favor Trump. After the election, the maps showed that rural areas all over US, even places that did not like Trump, voted for Trump anyway.

The places with a plague of dead malls seem like a mirror image of Trump Land, even upstate New York.

What is going on?

From 2014, photographs and commentary by the artist Seph Lawless of defunct shopping malls.

“It’s a powerful symbol of America’s economic decline,” said Lawless. “I used to visit these malls often growing up. I remember eating cotton candy underneath the escalator and the sounds of people laughing and feet shuffling as the gentle sounds of falling water from one of the many fountains surrounded me. This was America.”

Two years later, Lawless has more photos, but with a change in perspective.

He said the story of Metro North is more about the change in American society than its economic demise. For one thing, the wrecking ball is sparing the Macy’s (M) anchor store. And rather than leaving the ruins to the rats, city developers are rebuilding the site as an open-air shopping center.

Lawless said the area around the mall is thriving with neighboring stores and businesses, and developers believe that shoppers want a retail space open to the elements, not the enclosed mall that used to be hallmark of American society.

“Their communal space is social media,” he said. “They don’t need to go to a mall where they can walk around, meet with people. There’s no need for that large enclosed space.”

But many of the other dead malls that Lawless has photographed are casualties of economic malaise in depressed regions of the Rust Belt that were once thriving.

“I’ve watched it grow. I’ve watched these large spaces become abandoned, he said. “It’s a depressing journey. It’s been a sober journey.”

He said that people who lived in those areas felt ignored and cut off from the rest of America, which is why many of them voted for Donald Trump for president: They felt he was listening to them.

“The country has definitely changed drastically in parts, and it’s an important thing for people to see,” Lawless said. “People see [dead malls] as America thriving at one point, and people what that kind of America back.”

The US is not in decline, rural areas are in decline.

But this has been going on for some time.

In the 19th century, Americans were farmers; by the 1930s, Americans were factory workers; by the 1970s, they were office workers; today, they are … truck drivers.

So today’s economy is reflected in TV shows like “The King of Queens”, where the husband is a FedEx deliveryman and his wife is an executive secretary. But they don’t live in a small town, they live in Queens, NY.

See also: “Is commercial real estate going to drive the next financial crisis?