III  OUR REAL ESTATE

 

 We now turn to that other major challenge we are going to have to meet.  This is the challenge of building not only new towns but a new kind of town around our new factories: towns that have been carefully designed to maximize the opportunities for happiness of their future inhabitants, in both their public and their private lives.

Let me begin with a simple observation.  Building a new town from scratch, even under the best of circumstances, is no easy task.  Most assuredly it is not a job for amateurs.  By its very nature it is an immensely complex undertaking, whose success requires extraordinary amounts of talent, energy, experience, organizational ability, and access to capital -- to say nothing of the shrewdness and drive necessary to navigate a maze of legal and political obstacles while complying with numerous county, state, and  federal regulations. In short, if we expect to see new Garden Cities springing up around our new factories in the countryside then we need to realize that we are going to need a lot of  help – the kind of help that  only the largest and most accomplished real estate developers in America can supply.

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Unsurprisingly this kind of help does not come cheap.  The relatively small number of businessmen (for they are nearly all men) who can supply it have historically been high-rollers: buccaneering types with thick skins and a high tolerance for risk, even failure, who expect to be rewarded in proportion to the gambles they take and the magnitude of the obstacles they are forced to overcome.
  To make matters worse, as a class, private developers have a somewhat unsavory reputation.  They are known for a certain unscrupulousness in their business dealings, for sometimes cutting corners, and for not always being guided by the highest ethical and legal standards.   Nor are they exactly famous for their appreciation of the finer points of good architectural and landscape design, the very qualities our new towns are going to need in abundance if they are to survive as permanently attractive places to live.

But as James Rouse, America’s foremost developer of the 20th century, used to say, "The answer to bad development is good development."  It was a truth Rouse was able to demonstrate over the course of a long and successful career in the American real estate industry.  For he was the guy who virtually invented the concept of the modern covered shopping mall; who undertook the famous Fanuel Hall restoration project in downtown Boston; and who built the first ‘festival marketplace’ in Baltimore’s harbor, a concept that has since been reduplicated on the waterfronts of countless cities across America.  Even more important for our purposes here, Rouse was one of the few private developers in American history to successfully plan and build a new town from scratch -- in his case the new town of Columbia, Maryland, which he situated in the open countryside midway between Baltimore, Md. and Washington D.C..

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It follows, therefore, that one of the most important tasks of the future leaders of our movement will be to go out and find some of the best developers in America -- those rare individuals of uncommon talent and integrity who, like Rouse, know what true excellence is – and to persuade them to work with us as their client in a long-term professional relationship: a relationship that will be based not on trust, let us be clear, but rather on mutual respect and a shared commitment to a common goal which we both understand.

And what, precisely, is that goal?  The goal is to design and build updated versions of Howard’s Garden City in such a way that not only can the developer be sure of being handsomely rewarded for the successful completion of a project, but that the town’s future citizens can be equally sure that two guiding principles of the Garden City concept will be fully implemented.  Nothing less, nothing more.

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This last part requires elaboration.  Unless great care is taken, the cumulative costs of assembling a large tract of real estate in the open countryside, adapting the local topography to the abstract plan of a Garden City, installing basic infrastructure, and then constructing some of the more essential architectural features that our new town will need to get started, can mount astronomically.  For two reasons; First, because the upfront costs of doing these things will be large and can easily become larger; and secondly, because the interval  in time between when the first purchases are made and  majority of  the town’s future inhabitants can move in and start working will be long and can easily grow longer. 

In other words, time being money, and compound interest being what it is, the debt that accumulates on large loans extended over long periods of time grows exponentially.  Before a town’s future residents even move into their new community they might discover that their town’s indebtedness had reached a total that was quite beyond its ability to retire out of their own modest future earnings.  What that would imply, of course, is the eventual bankruptcy of the township itself, which would inevitably be followed by the selling-off of the two municipal land trusts that had been set aside for the long-term physical survival as well as the financial benefit of the community as a whole.  In other words, it would mean the forced liquidation of the town's greenbelt and all of its commercial real estate.  At which point it is good-by Garden City, hello urban sprawl.

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Without pretending that I know how to solve this dilemma in any definitive way, I would like to make several suggestions.  The first one concerns the character and location of the town's future site.  It would seem to me to be absolutely imperative that any site chosen be far enough away from any existing urban developments as to place it completely outside the orbit of urban real estate speculation.  In the case of some of our bigger cities this can mean 50 miles or more beyond the edge of exurban development.  In the case of some of our smaller cities and towns it may mean as few as ten or twelve miles. 

My point is that only in these thinly settled outlying areas -- of which we have an abundance in these United States, let us be thankful -- will we find the price of land to be a true reflection of its agricultural value.  Only there will it be possible to buy land at cheap enough prices that we can generate enough income by leasing it out for agriculture, to cover the interest on the money borrowed to make the purchase in the first place.  Which is but another way of saying that only in those areas will it be possible to acquire and carry large tracts of undeveloped real estate indefinitely into the future without running up debt. 

A second problem we are sure to encounter in the course of assembling a town site is the problem of holdouts.  No matter how far out we go, if there is a whiff in the air of a future town going in, we are going to encounter a few individuals who will refuse to sell.  For some it will be a matter of sentimental attachment to their farms, which is certainly understandable; and in those cases,  provided we are flexible and diplomatic in our approach, it might be possible to work out an accommodation that is mutually satisfactory via some form of long-term lease-back arrangement.  But in other cases it will be matter of greed.  The cussedness of human nature being what it is, there are sure to be a few local landowners who, the minute they smell what they think is an opportunity to make a killing, will decide to try to hold the whole project hostage to their own extortionate demands.

There are several ways we might get around this problem.  For instance, if there is only one landowner of an extraordinarily large tract of land, so that only a single purchase is necessary to acquire a town site, the problem would not arise, which argues in favor of our looking for large corporate farms to buy. 

Or we might conduct all our negotiations in such secrecy with each landowner that others in the neighborhood never find out.  But this is not an easy thing to pull off.  A better strategy would be to make all real estate purchase agreements contingent upon the willingness of other landowners in the neighborhood to sign similar agreements.  Not only would this put pressure on families in the area who might otherwise be inclined to hold out for better terms, but it would prevent us from buying land that we are subsequently unable to use.

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As a last resort, of course, there is always the possibility of invoking the principle of eminent domain.  This is the extraordinary yet well-established legal procedure by which governments can compel private individuals to sell property they own which is needed for public purposes, or for private purposes that are deemed to be in the public interest. The only constitutional requirement is that the original owners must compensated at the full market value, meaning what the property would be worth absent the purpose for which it is being taken.  In other words, eminent domain would make it possible for us to purchase farm lands at their true agricultural values, meaning that the moneys they would generate from farming should be enough to cover the interest on any loans taken out to finance the purchase.

However, since the invocation of the principle of eminent domain requires the active cooperation of state and federal government as well as the approval of the courts, it is unlikely to play a significant role in the early stages of our movement. On the other hand, should our new towns prove to be successful vehicles of social and economic development, and should enough people in America wish to live this way, all this could change.  In that case, our exercising the power of eminent domain – and not just in a few isolated instances, but on a large scale and as a matter of course – could turn out to be central to the large-scale success of our plans.

It is precisely for this reason that we need to begin thinking seriously ahead of time about the political dimensions of our cause, rather than waiting until the necessity is upon us.  I have devoted the last chapter of this book to a preliminary exploration of this topic.  In the meantime, and by way of justification, let us fortify ourselves with some words that Abraham Lincoln once jotted down in a moment of inspiration:

"The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do at all, or cannot do so well, for themselves, in their separate and individual capacities."

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Returning to the question of how best to preserve the financial solvency of our future townships, let me add a second suggestion. In addition to not paying too much for the land, we must resist the temptation of building too much too soon.  For there is going to be a natural impulse on our part to do just that, the same impulse that sometimes causes new home buyers to get carried away in their dreams of what the ideal should look like, and order up more house than they can actually afford.  To make matters worse, this natural impulse from within is likely to be abetted and encouraged by an unspoken conflict of interest that may exist between ourselves and the outside financiers who are investing in our towns.  Let me explain.

The desire to “bet big on a sure thing” is a natural part of the gambler’s makeup.  Furthermore, in order to succeed our first ventures are going to need a lot of capital, capital that will have to be supplied by banks and other private institutions, given the nature of a capitalist society. Naturally the institutions and individuals who supply this capital – including the developers themselves, who will be advancing their time and effort -- are going to expect to a relatively high rate of return on their investment in such a speculative venture.  In addition, they are going to want some assurance that they will eventually be paid.

In the absence federal loan guarantees, this means they will demand some form of collateral.  But, of course, the only two forms of collateral our town will possess will be, first, its down-town commercial district, and secondly, the broad swath of farmland that will have been set aside for a greenbelt, which, its original purpose notwithstanding, will always have the potential to be subdivided and developed.  In other words the only possible collateral the town can offer will be the very prizes that private urban developers have traditionally relied upon to lure outside investors.
Now of course putting these lands up for collateral needn’t be calamitous so long as the outside investors are not placed in a position to foreclose on the town.   But this is just another way of saying that our Garden Cities will be safe so long as each town is able to service its debts out of its own future revenues -- the latter being derived entirely from direct or indirect taxes on the wages of the local populace, among which we should include all rental income generated by leases on the town’s commercial real estate.

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This brings me back to what Ebeneezer Howard originally described as “a private board of overseers, ” “persons of unquestionable integrity,” who would be charged with a fiduciary responsibility to look out for the interests of the town’s future inhabitants.  It will be essential, in my judgment, that some such representative body be fully in place from day one with all the necessary authority required to discharge its responsibilities.    Among these responsibilities, of course,  would be the one I have just described: a responsibility to resist the temptation to build something a little too grand a little too soon -- no matter how alluring the prospects or how seductive the blandishments that might be laid before them.  It follows that this body must have the legal right to approve or disapprove each stage of construction as the project proceeds, including the right to nix all expenditures that it deems unnecessary for the time being.  

Austerity must be our ever-guiding policy in the development of these new little republics which we are building for our futures: austerity justified by a simple wish to insure their independence as on-going political institutions.

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Let me give some concrete examples of what I mean by austerity, starting with the downtown commercial district.  The reader will recall that this district was to combine the charms of an old-fashioned town-square with the comforts and convenience of a covered shopping mall, and that it would be surrounded by a large central park filled with various amenities.  This is indeed our goal.  But initially this downtown area is going to have to be something far more modest, something closer (as I envision it) to a frontier mining camp than a modern shopping mall.  It will have, at most, one church, a small hotel for visitors, and a single bar and grill for entertainment.  Much more prominent will be a large general store for groceries and hardware, a cement plant, a lumber yard, and no doubt some sort of tent city of a decidedly temporary nature.   Moreover, the town's earliest inhabitants are going to be in the construction trades overwhelmingly, not in manufacturing, and their numbers will be small, maybe only a few hundred in the beginning.

Only gradually, over a period of years, maybe even a decade, will this center of town begin to assume the form of the picturesque townscape we have pictured in our minds.  These new Garden Cities, like all genuine communities, must develop organically over time, gradually adding new citizens and new places of employment in a carefully coordinated sequence of stages.  Only in this way will it be possible to prevent the town's superstructure -- including all of its numerous secondary and tertiary sources of employment: its neighborhood stores, schools, and the like -- from outgrowing the population base which it is intended to serve, and upon which it will depend for its financial sustenance.

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Or consider the new neighborhood “villages” we are intending to build.  As we prepare for their construction, we will probably decide that it makes sense to install a lot of the neighborhood infrastructure ahead of time, including the local road beds and main trunks of the various underground utilities we are going to need: water and gas mains, phone and electricity lines, etc.  But for that very reason it will be essential that these installations be done as quickly as possible and that they be completed “just in time” as the Japanese say, meaning as close in time as possible to the date when the future residents of the neighborhood are scheduled to move in and begin building their homes. 

Likewise all future neighborhood amenities and other non-essential improvements should be deferred.  Gravel roads instead of concrete or asphalt paving, for instance, can be made to suffice for the first few years. Sidewalks can wait, as can street lighting, even if the wiring for street lamps has already been stubbed in. As for the neighborhood “green” across the street with all its local charms, it is going to have to begin its existence in a more rudimentary state: a simple open field where the children can play ball, plus maybe a few sapling shade-trees sprinkled around the perimeter.   Future swing-sets, horse-shoe pits, basketball courts, water fountains, park benches, and covered pavilions will have to wait until the day that people in the neighborhood have the time and the money to afford them.

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Austerity must likewise be the rule when it comes to building our houses.  For instance, it is likely that a majority of families are going to need a certain amount of professional assistance in the initial phases of construction, which are in many ways the most difficult.  I am thinking of the initial layout of the building lines on the site, the digging and pouring of the footings and slabs, plus any block work or concrete form construction that is required in order to bring the foundations up to grade, which is where the first floor begins.  In addition, some families are going to need help with the rough framing. 

It will be very important, therefore, the professionals work closely with the amateurs, and that they be educated in and appreciate their needs.  This concerns not only the matter of timing – of not breaking ground too soon -- but also the importance of including the non-professionals in the process to the maximum degree feasible.  Amateurs can certainly be used as common laborers and helpers, for example, and in the process they can learn on the job.  

Above all it is essential that the professional respect every family's right to delay all non-essentials and to build its house in stages if that is what it chooses.  Some families may decide that their initial living quarters can be cramped, so that just one or two rooms will suffice for a start.   Others, young couples who are still without children for example, might even decide to begin their new lives in a tent.  Grandparents, on the other hand, especially if they have sufficient life savings and are getting on in years, may go to the opposite extreme by choosing to have their small retirement cottages constructed for them entirely, while at the same time using some of their money to help their children and grandchildren make a start on their own living quarters at the other end of the garden.

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Why is all this so important?  Because, again, time is money -- as it ever will be in the world of compound interest.  There is just an enormous amount of money to be made -- or, rather, saved -- by building one's house a room at a time.  When we add it all up it turns out that the amount of interest that has to be paid on a series of small loans taken over short periods of time is a small fraction of what it would be on a single large loan taken over one long period of time.  And since interest accounts for fully three-quarters of the total cost of owning a house (under a conventional 30 year mortgage) we are talking about a way to engineer a truly radical reduction in the cost of homeownership.  In the extreme case – i.e., when a family elects to borrow no money at all but instead to save up enough money ahead of time to pay for each stage of construction – this strategy saves the full three-quarters.  Not bad when you consider that we are talking about the single biggest item in the average family budget, typically consuming 30 percent of its income.
Of course, there will be trade-offs here.  Families who elect to build in stages will forgo the pleasure of moving into a house that is brand-spanking new and totally finished right down to the last piece of painted trim.  But do they really want to pay three or four times as much for what is after all the very same house?  And just how long does the thrill of the new last in reality, when compared to the pleasures and satisfactions -- to say nothing of the memories -- of building one's own house with the people you love?  If beauty is the promise of happiness – or is it the other way around? --which is the more beautiful?

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Let me end this part of our discussion by returning once more to the issue of the new family budget.  When we last looked at this topic I forecast that many workers would see a 20-to-40 percent increase in their hourly wages and productivity, depending upon the particular circumstances of their jobs.  I was talking about jobs in manufacturing, however, not work in general.   The trouble is, as everybody knows, we now live in what is described as a post-industrial economy.  At present fewer than 20 percent of all workers are employed in manufacturing.  Even if we add to this small number those who are employed  in industries where similar types of work incentives might be made to apply – in construction, agriculture, and so-called back office work -- we are still left with a situation in which more than two-thirds of the workforce would be left out in the cold.  What about them?

This is a real problem and I am not going to deny it.  But even so it may not be quite as big of a problem as appears at first sight under the terms of the new arrangement we are proposing.  For one thing the ratio of primary production workers to service workers in our new Garden Cities will be nearly the reverse of what it is now.  In part this can be explained by the fact that our new factories will be employing roughly twice as many people proportionally as old factories today, albeit at half as many hours in the week.  But it also has to do with the fact that there will be many fewer service workers in a semi-informal economy such as we are proposing, in which the rule is for people to do things for themselves and each other rather then pay others to do them instead.  There are going to be many fewer fast food workers, nursing home workers, childcare workers, house cleaners, lawn care workers, and the like.

Then, too, I should like to point out that there is no reason why, for instance, ordinary office secretaries and janitors who just happen to work in a factory cannot share in the profits the same way the front-line production workers do.  No reason, in fact, why they cannot themselves respond to the same incentives to work more efficiently.  This would certainly be true if our new factories agree to use a “group incentive” plan along the lines I have already described, what I called a system of "net shares."  For as I pointed out in connection with my little landscaping company, in those circumstances all the workers would realize that they were, in effect, working for each other.  Higher standards of discipline could be more easily maintained, even in the case of janitors and secretaries.  Peer pressure, it turns out, is not always a bad thing.

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But even taking these considerations into account, we are still left with a world in which there will be numerous jobs that remain unaffected: positions such as bus driver, police officer, school teacher, town clerk, and ordinary sales clerk.  In other words, we are left with all the people in a community who are not directly engaged in the primary processes of production.  What about them?
I shall return to this question in the next chapter and, especially in Appendix III, where I propose an interconnected set of political reforms to address the very general problem of falling wages in America, affecting, as it does, the bottom 80 percent of the population.  For the moment let me simply say that two-thirds of the problem can be traced to the profoundly mistaken trade and immigration policies that have been foisted upon the American public by our cosmopolitan elites  (the other third being due to technological unemployment, as was illustrated in The Parable of the Truffle Diggers.)   Let hasten to add that the men and women who compose these cosmopolitan elites, graduates of our nation’s leading colleges and universities, are not advocating evil policy by design.  On the contrary, they consider themselves to be citizens of the world, motivated by the noblest of human intentions.  They wish nothing less than to do God’s work on earth, as they understand it: to maximize the sum total of human happiness around the globe.  The problem, rather, is that they have been indoctrinated – I am afraid that “indoctrinated is the only word for it -- in the erroneous idea that our current trade and immigration policies are roads to that end.
This is a vast subject, of course, and I have no room to go into it here.  Suffice that I state my two grand conclusions: first, that immigration from poor countries to rich countries is not calculated to increase the welfare of the majorities of people in either set of countries, and for this reason should be opposed on moral grounds as a matter of general principle; and, second, that America’s new regime of global trade and investment cannot be expected to endure long past the point it becomes manifestly injurious to the welfare of the majority of our voters,  at which point it will either be rejected outright as a matter of public policy, or else offset by a set of compensating reforms  that  are sufficient in scope to bring about a reversal in their fortunes, the latter being by far the better option.

In short, this is ultimately a political problem, not an economic one, and its solution will require the cooperation of the majority of America’s voting population.  It must therefore be part of our task to mobilize our fellow citizens in the common task of restoring the wages and working conditions of all working Americans, not just that portion who may choose to live the new way, no matter how numerous they turn out to be.  Let our goal be as clear as it is easy to state: to raise the real hourly take-home pay of the American worker to the level it would, and should, have reached by now, had his welfare been taken into account when America’s new trade and immigration policies were originally adopted.   It can be done, and it is our right to do it.  So let us be up and doing.