How Many Yoga Studios Are Too Many?

South Lake Union, known to some as “Amazonland,” has every amenity a tech employee could ask for. Bars, sit-down restaurants, take out restaurants, organic grocery stores, retail of all types, yoga, barre, float spas – you name it. However, upon googling “South Lake Union Retail”, most of the hits are retail spaces available for rent.

Though South Lake Union has just been approved for an upzone (according to Partnership for Sustainable Communities), which would allow for towers dedicating a large portion of units to affordable housing, the current density of the neighborhood is 8.66k people per square mile, ranking 28th on Statistical Atlas’s list of density of Seattle neighborhoods. The problem the area faces currently is that the ratio of offices to residential units is high, creating dead zones on weekends and evenings. The retail spaces that are successful provide amenities to daytime workers or people living in specified vicinities to market-rate residential buildings.

Though the purpose of retail space minimum requirements is deeply rooted in theories of effective urban planning and design based on user patterns, a market saturation is not the solution. If affordable housing is to increase in the area, high-end grocery stores, restaurants, and bars will serve to divide classes further. Instead, more creative solutions to a post-retail street space need to be a focus of developers and designers in order to enrich the community, integrate demographics and serve as an activated public environment.


Driven by Animal Spirits

“We are not primarily the products of our conscious thinking. We are primarily the products of thinking that happens below the level of awareness.”

                                                                                     – George A. Akerlof & Robert J. Shiller

It is interesting to learn from the Animal Spirits that human mind is actually influence by a series of internal logic, dynamic events and stories, while the facts that people remember is arranged and attached to the story.

It sounds bit absurd at the first glance. But I look at the posts on micro blog (an online Application like tweeter) recently and how it affects Chinese stock market. Just few weeks ago, on a Friday night, a child abuse scandal was revealed in a U.S.-listed kindergarten. Immediately, this news was on the headlines for the entire weekend and everyone is irritated. The next Monday morning, investor use their own money shorted the company’s stock in order to punish this company. Another story happen last year is: a stock fell after a groundbreaking scandal about a social celebrity was published online the other day, merely because this stock has the same name as the celebrity. Investors assume that stock shared the same name with the celebrity would be as bad like them. This is ridiculous and irrational, however, it happened more than one time.

In this era of rapid network development and rapid information dissemination, people’s emotions also change quickly and are reflected in economic behavior. A piece of online message could immediately form influence, and a direct response to changes in stock data. This phenomenon can be considered as a product of irrational factor/stories, in other word a product of animal spirits.

Transit Taxes: A Two-Way Street

Rail and Highway

One question on a Sound Transit FAQ reads as follows:

I don’t use transit service. Do I still have to pay these [transit] taxes?

The short answer is yes, but the real question is: are transit taxes fair to everyone?

Many would argue that they should not have to pay for a system they do not use, but tax payers are reaping “hidden use” from public transit regardless of whether they physically interact with the public transit system. “Hidden use” is defined in this post as an unseen benefit from a system that aligns with the desire(s) of a user of a separate, interdependent system. An example of a “hidden use” a tax payer may derive from public transit is decongestion on Interstate 5. Improvements to public transit, including improved operation quality and service area, increase ridership which removes vehicles from roadways. Therefore, anyone who drives or bikes within the right-of-way is extracting beneficial, or “hidden,” use from public transit systems.

Furthermore, a brief inspection of Seattle Department of Transportation (DOT) and Sound Transit’s budgets show that this issue is a two-way street. According to Curbed, an American real-estate blog, in 2016 approximately 47 percent of commuters to Downtown Seattle used public transit, and only 30 percent used a single occupancy vehicle (SOV). This suggests that most commuters in the Seattle area are using public transport, but does the distribution of taxes accurately reflect this breakdown of ridership?

How commuters get to downtown

Breakdown of Commuters’ Methods of Travel to Downtown Seattle (copied from Curbed)

Looking at the Seattle City Budget Office’s online budget breakdown, transportation capital expenditures were distributed such that “Corridor & Intersection Improvements” received 34 percent of the budget while “Transit and HOV” received only 18 percent. Considering that the largest single revenue source for Seattle DOT is from taxes (34 percent in 2017) and that nearly half of Seattle commuters use public transport, there appears to be a misallocation between tax revenue and transportation expenditures which in fact favors SOV commuters.

Of course, this is a simplified view of the matter, but the main takeaway is that everyone pays for each transportation system to some extent. Whether you commute via bicycle, rail, bus, rideshare, ferry or SOV, the system is “fair” in that each citizen is paying for a mode of transit they do not regularly use.

Therefore, non-users of the transit system benefit from both the transit system and its users more than they may believe. Perhaps greater tax-distribution transparency and feedback is needed to show them just how much?


Some reflections about subway

According to the article, there are three main problems that cause the situation in New York’s subway. They are the financial problem, maintaining problem, and system problem. Among those three, I think the key factor to solve all problem is the money. I was shocked by the article that I never know it needs to spend so much money to run and maintain subway. I think subway as a public service should serve people and should have a low price in order to be affordable for everyone in the city. So it is impossible to earn money from raising ticket’s price. But the existence of subway bring development to the area surrounding to the subway station, it is reasonable to charge that area to get money to maintain subway. For example, the commercial building which near subway station has higher tax or buildings near subway station should pay additional money for the subway service. The subway company itself could create money too. Subway station could open stores and develop subway commercial to earn more money.

I also thinking about the maintaining problem. I do not familiar with the subway in the USA, but I do familiar with the subway in China. The development which brought by subway currently happened in my hometown Nanjing. Nanjing starts its first subway construction decade ago around 2006. The relevant flourishing of residential and commercial happened along the way of subway line rapidly within past 10 years. It conveys more than 2 million people every day and always on time. I will owe parts of its success to its newly built. I’m not sure how it will look like in 2050. In my opinion, the subway system in New York was the date to 100 years ago. At that time, no one could imagine the great increase of population and the expansion of the city. On the contrary, there are 8.27 million people now living in Nanjing. The system was burned for such a huge number of people, so does the subway in Hongkong. The refreshing of subway cannot be avoided, everyone in the city should take the responsibility. Because the development which brought by subway benefit not only the person who use it or who lived near it but also the whole city.

Are we behaving towards a burst?

In 2010, When I was at my senior year in college, the sale price of a 900 sf one-bedroom unit for a second tier satellite city in China was $100/sf; in three years by 2013, it escalated to $350/sf. Many jumped for joy and many lamented for missing the “gold rush” opportunity. I was one of the latter. What else could I have done? Being a fresh undergraduate, I did not have the capital or the mind to invest. Even as I looked back then, I found myself priced out of that area, precisely what Seattleites have undergone in recent years.

I had a wow moment when I watched that satellite city grow from a rural rea into a master-planned suburban city with booming development activities in residential and commercial high-rise buildings. Pedestrian-friendly neighborhoods, public parks, retails and museums. But when street lights were on, buildings went dark, with only a handful lighted windows scattered across building elevations. It is a ghost city at night.

I thought people made the purchase because they needed a place to live; yet many bought the house because someone else did it and they would continue doing this if they find themselves make profit. I thought the market worked really well as the “invisible hand”; yet many developers were simply waiting for the right price to sell. I realized that it was unfair. I was angry.

I later learned how human beings can act irrationally just like a herd of sheep, with too much uncertainty as to what happens next; real estate is essentially inefficient after all.

I also learnt that in 2014,  China’s investment in real estate accounted for more than 25% of total national investment, a powerful driver for national GDP. It is far-fetched to consider real estate a component of gross domestic product; still, as a way of expression, real estate investment took up 14.2% of total GDP in 20151. Some provincial-level governments simply enjoy seeing real estate speeding as long as it doesn’t kill.

What if renters can be incentivized to rent and rent towards owning the house? What if the property tax is so high that owning a second home simply doesn’t make financial sense? Or a third home should be banned for a certain period after purchasing a second home and any presale unit should be banned from resale before delivery and inspection.

Or does it always take a boom bursting for us to go back to rationality?


The Wage and Inflation Mismatch

Benchmarks are used to measure performance, and to set allocations and prices in a wide variety of fields. For example, indices like the National Council of Real Estate Fiduciaries (NCREIF) Property Index help portfolio managers measure the performance of their real estate portfolios. Additionally, the Consumer Price Index (CPI) is used as a benchmark to understand how much purchasing power wages can garner.

Theoretically the CPI should give an indication of what wages should be, considering inflationary pressure. Cost of Living Adjustments (COLAs) based on changes to the CPI are applied to Social Security and Supplemental Security Income benefits to prevent them from becoming worn down by inflation. However, this is not the case in a typical worker’s wage contract and setting the federal minimum wage. The CPI is derived from increases/decreases in average prices of goods and services – resulting from increases in nominal wages of consumers. Wages only somewhat reflect changes in inflation at the date of contract, and don’t reflect changes in inflation as inflation is actually occurring.

The issue is that most workers only understand their income and purchasing power in nominal terms. Additionally, the federal minimum wage has not kept pace with inflationary pressure creating significantly weaker purchasing power, particularly for lower income workers. CPI is not used to benchmark typical worker’s wages and therefore their strategic decisions and performance tracking are inherently illusionary. According to the Bureau of Labor Statistics, inflation-adjusted wages have steadily declined since the late 1960’s. This trend creates disparity between the goods and services provided and the consumer. The CPI should be used as a benchmark for both the federal minimum wage and individual wage contracts, and COLAs should be applied in real time for each. After all, a benchmark is only a benchmark if you use it.

Are our memories really that short?

“Those who do not learn from history are doomed to repeat it,” is an oft-said quote attributed to writer and philosopher George Santayana.  This is what comes to mind when I read that Congress is in the process of an effort to repeal the Dodd-Frank Act.  The Dodd-Frank Act was passed in 2010 in response to the industry abuses and corruption that eventually led to the Global Financial Crisis.  The Act had two primary goals: prevent another collapse of the “too-big-to-fail” financial institutions, and protect consumers from predatory mortgage lending practices.

It is widely understood that abuses in sub-prime lending and over-investment in mortgage-backed securities–which packaged risky loans into securities that were then rated low-risk and purchased by large financial institutions—led to speculative price growth in real estate. When the housing market bubble burst, and the foreclosure rate climbed, many investments became worthless and took homeowners and banks down with the ship.  The public bore the personal cost of foreclosure, as well as the cost of bailing out the banks that had made the risky investments.

The House passed a bill repealing the Dodd-Frank rule preventing government-insured banks from making risky investments and scaling back the authority of the Consumer Financial Protection Bureau to regulate large banks and payday lenders.  These are the two provisions key to protecting consumers and the public from predatory lending and from the cost of bailing out banks that make risky investment choices.  The Senate is bringing a bill to the floor to do the same soon. This is a dangerous path.

What explains this rush to repeal a bill that has added safety measures to an industry that so recently caused so much damage to our economy through corrupt practices?  Financial conservatives view the Act as a regulatory burden that slows economic growth and the House moved to repeal it in June of 2017.  It is a traditional capitalist principle that leaving the market unregulated will be best for efficient operation of the economy.  But this fails to account for the detrimental effect of ill-intent, self-interested actions, and outright corruption.  If we insure a bank making risky investment decisions, then the bank has no incentive to make safer choices.  If we allow banks to use misleading practices in marketing complex mortgage instruments to consumers, then we all bear the cost of the foreclosure crisis that follows.  We need only look at our own history to see examples of the damage unregulated corruption and speculation can do to our economy (the Depression, the Technology Crash, the Global Financial Crisis).  As a nation, our natural optimism and faith in our capitalist economy leads us to collectively short memories.  However, if we don’t take the time to examine and learn from the mistakes of the past, we are doomed to repeat them.