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Housing costs leading to exodus

A news item in Sunday's Washington Post by John Pomfret caught my eye. Subtitled, “In San Francisco and Other Big Cities, Costs Drive Out Middle-Class Families”, the article describes housing cost and exodus issues similar to those facing Bermuda.

One huge difference is that US big cities have suburbs and smaller towns where lower costs can attract and accommodate those fleeing big city expenses. Bermuda is becoming a city with no countryside and the only refuge for outpriced families may be to leave the island. This is a highly unacceptable population dynamic. The ones leaving may well be the ones we need to keep most — upwardly mobile professionals.

People … have been leaving U.S. cities because of high-priced housing for some time. But according to researchers and urban leaders, the trend has accelerated in recent years and is threatening to reshape many of the nation's major cities. Between 2000 and 2004, all eight metropolitan regions from Seattle to San Diego lost middle-class families.

On the East Coast, a similar trend is underway, with middle-class families fleeing the New York region and Boston for the South. The District has been in the buffer zone, losing middle-class families with children to the Sun Belt but gaining some from the Northeast, said William Frey, a demographer at the Brookings Institution. Researchers, including Frey, say the skyrocketing cost of housing, … is the crucial factor.

The trend has city officials worried about what the loss of these middle-class families will do to the vitality of their communities, and they are trying to find ways to stem the flow. With median house prices in San Francisco hitting $780,000 and a similar profile in cities up and down the West Coast, the California Dream is no longer possible for most Americans, the report said.

Gavin Newsom, San Francisco's popular mayor, is eager to study such cities as Chicago and Vancouver, which have taken measures to stanch the flow. He established a council of leading San Franciscans to study the issue and is pushing city developers to include more family-friendly and affordable housing in their projects. Still, Newsom is not promising anything.

"We're going to have a housing boom in the next five years the likes of which San Francisco has not seen since the 1906 fire," he said, "and it still won't even be a drop in the bucket to what we need."

With limited space and the resultant constraints on housing construction, transport, waste disposal, noise and human congestion, what practicable options does Bermuda have?

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An interesting article. Who can really be certain what options there really are?

I've watched middle class families leave the island and know others who are planning to.

The younger promising generation look at the high cost of even affording a home in Bermuda and compare it to elsewhere. Sure it's possible, but really you've gotta be a couple where both individuals work, making better then avg wages and you can forget about having "a family".

When you look at the market and the sheer cost of living. It's easier to put what little savings you can into a mortgage off island in a developing area that is much cheaper and realistic and plan to migrate off island from the get-go.

Bermuda simply just isn't affordable to those who arn't already established.

Filling our empty space with homes won't do it. Many people don't even care to live the "dream" of a cottage and mostly just want somewhere to call their own, anywhere.

The only option I can see is to start allowing condo based high rises in town. Perhaps even raising the island wide planning restrictions on residential heights. It's the only way I can see affording even a starter home in Bermuda and taking some of the strain off the market.

We have to go up, thats the only option I see.


Denis Pitcher writes:
"It's the only way I can see affording even a starter home in Bermuda and taking some of the strain off the market.

We have to go up, thats the only option I see"

This is an option only if it indeed allows housing prices to drop enough to become truly "affordable" for the middle classes. I have my doubts. I also am cautious about the social/cultural problems that attend high density housing communities.

Stuart

I also am cautious about the social/cultural problems that attend high density housing communities.

Are the problems you talk about inherent to high density housing, or are they related to the people who live there?

As I've said before, I'm an advocate of high-density housing in Hamilton, but targeted at young, single professionals (expats and upwardly mobile young Bermudians). I wouldn't forsee too many social and cultural problems there.

Stuart - I'm with Limey on this one, it really depends on who you put in the high rise...

What the story doesn't describe is the real estate problems caused by the push outwards from cities. First, there's the massive problem of commuting as public transportation cannot keep up with the sprawl. Second, there's a trend of real estate devaluation even in the recent "new rings" of development, as they are constantly being upstarted by new communities further out.

I think it would make a great deal of sense to develop the back of town area.

This will have to happen eventually but apart from John Swan no one seems interested.

If HSBC had been smarter and they are smart, they should have aquired a long lease on property in that area a few acres and built a large modern banking complex with plenty of parking a pleasant park area etc and it would have stimulated a rush of investors to build apartment complexes in a variety of price ranges.

With all the associated service related businesses this would ease to a large extent some of our traffic problems I would think.

An interesting footnote about Vancouver (since SF is studying them) which may be relevant to Bermuda is that their high rise buildings are required to devote a certain number of units towards low cost housing.

The idea is that rather than concentrate poverty leading to urban blight it is dispersed so that the "cultural" pressure on the poor kids is to study in school, achieve, etc. because that's what their neighbors are doing.

As far as I know this includes units in expensive buildings as well, but there might be an opt out if you pay. Things like this tends to have that option.

I'm not sure if this is a good idea. I certainly wouldn't want to reward a wall-sitter with a waterfront condo on the south shore, but the potential long term effects are intriguing.

"If HSBC had been smarter and they are smart,"

Bill - sometimes egos and selfishness make people do some very dumb and stupid things.

We can't keep building out for much longer and I would argue we should be more strongly curtailing it immediately. We are going to have to start building up soon anyway so we had better figure out how we are going to do it very quickly. I'm not sure this neccessarily needs to rely heavily on high-rise apartment complexes. Careful revision of our planning laws and regulations and the application of a city-planning type approach to the whole country must be part of the answer. We need to introduce more planning districts than the Hamilton, St. Georges and "Everywhere Else" we have now. We have plenty of space to house our people and businesses while preserving the remaining green space, preserving our architecture and feel, and promoting cultural and artistic development. In the end we are going to need to let go of a bit of our past in order to preserve the best of it that is still with us.

One part of the plan could be to allow 3-level city brownstone style homes in certain districts. The concept would be reinvented Bermuda style or better yet modelled after old St. Georges. I am currently living in Montreal which has successfully utilised this kind of housing in well-planned districts which include small business elements. Artisans thrive, culture abounds and crime is low. I feel much safer here than I did on White Hill.

Silencedogood,

The Vancouver high-rise model sounds like a great starting point for any high rise housing we do employ, particularly outside the city. Do you know if this type of planning was employed reactionarily after the city's crime problems became apparent? Vancouver has the highest crime rate in Canada at the moment, and is pretty high up there in North America too.

Michael,

I'm not sure, but I agree that it would be a great thing to look at. I have nothing to base my opinion on, but it seems logical that this approach could work if adapted to the unique characteristics of Bermuda.

I have heard on good authority that there is a new plan in the works, but that Planning is being pressured to cram 5 years of work into 1 so it is completed by the 2008 election so I won't speculate on the quality or completeness.

I go to Queen's which has a similar law to height restrictions as Bermuda. No buildings can be higher than the original Grant Hall. The wiley Queen's board came up with two ingenious solutions, a) attach a very large flag pole to the top of the Hall and b) build buildings with 5 levels of basements so you can have class in windowless bomb shelters.
This seems like a perfect solution to all those naysayers of building up. Your beautiful Hamilton is not marred by pragmatic necessities, and young poor students just beginning on a career path have a place to live! Its perfect!

"b) build buildings with 5 levels of basements so you can have class in windowless bomb shelters."

tilti - we've got 1 foot of soil and a thousand miles of rock. Going down in Bermuda is unfortunately a very expensive exercise. But in this day and age a few good bomb shelters might be useful.

tilti,

Love that flagpole solution! Fortunately for the poor folks, we can't get more than one or two levels of basement in Hamilton because you quickly end up underwater. Also, a big chunk of the basement is taken up by tank which robs us of more space.

"I have heard on good authority that there is a new plan in the works, but that Planning is being pressured to cram 5 years of work into 1 so it is completed by the 2008 election so I won't speculate on the quality or completeness." - Silencedogood

Hmmmm... let's put two and two together. A certain well established construction company get's bought out and the new owners immediately want to go private and have the company de-listed from the Bermuda Stock Exchange. Wonder who's getting a bonanza deal shortly thereafter?

I know where I'm placing my bet.....

I maybe should have put the irony point to better use. The point is that Queen's architecture like Bermuda's in Hamilton is dominated by an outdated set of rule. Queen's has simply found dumb ways around the rules rather than actually change with the times. It really is depressing having 6 hours of class underground - you come out feeling like an albino. Bermuda is much the same with the Cathedral eaves law. We just have dumb solutions - to most young people the reality involves, living in tiny lower level apartments (with no car allowance), with your parents, or splitting a 5 bedroom rental among strangers.

Silencedogood,

Yeah I remember hearing about that too. I hope they do a good job and hire the right amount of people with a lot more expertise and talent than myself. Election in 2008 or not we need a plan and fast because 2008 will still be about 15 years late in my opinion.

Don't sell yourself short tilti! I love the humor.

Tell it like it is, tilti... and it doesn't apply to just the college-grad types. It's either live with your folks, get four of your buddies and share a house or squeeze into some tiny studio apt with no perks whatsoever.

I really don't know what's wrong with Limey's suggestion. Small one-bed units to rent to single people, should free up the rented cottages/apartments for families etc...

"It really is depressing having 6 hours of class underground"

tilti - I know the problem. Living in a basement in Bermuda is sometimes like being a toad in the hole....

tilti:

if you haven't been, you NEED to go to Grecko's on Princess street - that place is phenomenal

I know at least 2 people who went to school in Canada and didn't come back with part of the reason being housing. Their main reason seemed to be that after living in a city of a few hundred thousand within an hour's drive of a city of a few million this place just seemed to small - I heard that from a lot of people... there's just more opportunity abroad. The ones I'm thinking of also mentioned that they'd been on their own since high school and if they moved back home they'd have to go back in with their parents which just wasn't appealing at all - thus, they're still off the island for the forseeable future. The cost of housing isn't the main factor, but it's for sure a factor.

canuck, I have Grecko's on speed dial.
i've been in Canada since grade 9, and it will be hard to go back to bermuda. No Hockey, no changin seasons, lakes, canoes and a real lack of great food. Bermuda might end up being a p0it stop for my career. A great place to start, make a salary several times what I would get in Canada, but then move away after a few years. I really love a lot about Bermuda, but I there are a lot of sacrifices to staying there, and not having your own place until your middle aged.

I've posted along these lines before and nobody seems to agree or disagree with me on it.

The way I see it is that Bermuda can't afford to bring the price of housing down.

example....Wee Jamahl saves up his $150,000 for his deposit, borrows the rest of his 2 to 3 million mortgage from the bank, for a house that is worth around $500,000 anywhere else in the world.

If the housing stock in BDA grows and the rental and buying prices come down, then how does your bye pay his mortgage when the rent doesn't match the mortgage....so he defaults....the bank take the house....and can't recoup it's cash through a sale.

Somehow I don't see that happening.

"With limited space and the resultant constraints on housing construction, transport, waste disposal, noise and human congestion, what practicable options does Bermuda have?"

We simply have to tackle these constraints.

Housing construction
Develop north Hamilton, ease the height restriction in the city (already discussed). Import foreign construction workers and house them in defunct cruise ships if necessary.

Transport
Sidewalks on all roads, a viable bike path going in and out of Hamilton, and if we really get crazy a commuter train/tourist attraction (basically an on-land Rockaway deal with ample parking for commuters, minibuses transporting people to/from etc.)
The west end could also see a huge improvement if all three lanes on East Broadway were used for the same direction of traffic flow and Front Street became one-way, the direction changing before afternoon rush hour. The two lanes on the short stretch of Harbour Rd between the roundabout and Stowe Hill would also need to be one-way in the morning.

Waste Disposal
The concept of a stenchless and noiseless waste treatment facility that doesn't look all that bad has been realized (in Boston I believe) but it's expensive.

Noise and Human Congestion
Free iPods for all to block out the noise. And perhaps the govenment can suggest that we simply not look at each other.
Honestly, noise pollution isn't much of an issue as long as the traffic issue is sufficiently tackled. People older than me probably disagree. Human congestion... well hey, at least we're not Gibraltar. A properly managed infrastructure on an island this size can cope with many times our current population (like Manhattan).

"Honestly, noise pollution isn't much of an issue as long as the traffic issue is sufficiently tackled."

They've just come out with a "noise camera" to catch noisy offenders driving their cars at high decibels. It captures a ten second sound and video grab and drops it in your mailbox with the appropriate fine.

Steve Moffat,

"If the housing stock in BDA grows and the rental and buying prices come down, then how does your bye pay his mortgage when the rent doesn't match the mortgage....so he defaults....the bank take the house....and can't recoup it's cash through a sale."

I've often thought about that too. Particularly with relation to the property sales laws dealt with in the Golden Eye case. If we did manage to dramatically drop the housing prices, a big chunk of the island would end up being owned by a non-Bermudian Company. I think in reality if we do manage to push the prices down by means other than a crash of the economy, I am guessing it is going to take much longer than most of us would like anyway, and defaults on mortgages would not be widespread. I'm no economist though, thats just my guess. Hopefully an expert will weigh in on this one.
Also, if someone decides to invest in real estate when the market is sky-high, knowing that one of Government's biggest goals is or should be the reduction of housing costs, should I really feel that sorry for them if they fail? I know...a home is more than just an investment, but if you plan to help pay for it out of rental proceeds, then you are using it as an investment, and are thus assuming the associated risks. One of Alan Greenspan's parting bits of advice to the American people on his way out was not to assume their property values would always go up. Bermudians should take heed too.

Steve,

Anyone who considers rent received from a property as a fixed and guaranteed sum is playing a dangerous game. Property values are fairly sticky and tend not to go down in price, largely because most people are simply unwilling to believe that their biggest investment could ever be worth less than they think it should be. If a property market slows, the market goes into denial and instead of seeing property values slump, you see fewer purchases and sales (this means that the banks can probably get away with not writing down any repossessions on their books, but yes they will be holding a lot of property for longer than they’d prefer). Of course if the market gets super-speculative then you’ll see a repeat of Japan, where property values did in fact decrease considerably.

However, rents are different, especially here in Bermuda because so many people rely on rent for their day-to-day income. Many landlords can’t hold out too long for that high rent/perfect tenant because they’ve been living rent payment to rent payment. This is especially true for the so many Bermudians who have decided to leave the island and semi-retire on rental income.

Many may not realize it but the Bermuda rental market has some pretty major seasonal upswings and downswings. Anyone signing a lease for an up-market house in late summer will more than likely settle for less than its ‘ARV’, but those renting small units will see an upsurge in demand since this is usually when most expat accountants come in.

There are a lot of other factors that affect rents but these examples show how much more flexible rents are compared to real estate values. I fully agree with Michael – let this be a warning!

Did anyone think that the COL spiral - continuing upward unabated would produce any other feasible outcome?? Housing is THE most important factor in ANY job, position or propspective relocation issue. Its the same reason many have fled CA & NY
unless the prospect of renting in your 50s OR having a mortgage of 35 years is appealing to your sense of security.

At least the Gov't can get their wish to reduce foreigners this way...

"At least the Gov't can get their wish to reduce foreigners this way..."

And not just foreigners.

Housing isn't the problem. People are. The world's population is 7 billion. The US has had obscene growth (350mil) driven by economics which took it from being a land of pioneers and indian slaughters to become a super power. Who loses? Everyone else and the planet. Now China is following.

Look at little ol Canada - slow to moderate economic growth and much more conservative approach and it has all that land with only 30 million people.

Japan learned their leason and made child free lifestyles acceptable. They went from 120 million people to 90 million.

Bermuda's tourist industry has been declining in direct parallel with the density. People are going further afield to find quiet unspoiled places. I am considering leaving Bermuda soon because for me the Bermuda I fell in love with is almost history.

There was no housing problem 25 years ago, no traffic jams, less crime and it was in the sixties and seventies the most elegant and sophisticated destination in the world.

It still clings to its past and there are traces to be found of the old Bermuda but a different Bermuda is emerging that is in danger of becoming a parody of itself.

Just out of interest Andy, where are you considering going to try to find the Bermuda that you miss?

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