Rebuilding After Riots

…Appears on the Robert Schalkenbach Foundation’s blog. A quote:

Rebuilding the destroyed neighborhoods of Minneapolis requires visibly building community solidarity, something land-value tax districts and a community currency would promote.

Read the full article here.

Disclosure: I sit on the Robert Schalkenbach Foundation’s board.

Minor editorial: The destruction and authorities’ response reminded me of tropical storm Sandy. Everything is fine for me, though, so I am grateful. I hope all you readers are well too through this daily dark age.

Solving the ‘Affordable Housing’ Problem with Land Value Taxes

…Appears on the Robert Schalkenbach Foundation’s blog. Here’s a snippet.

Land value taxation should, in theory, raise total wages and greatly increase the housing supply; but people should be mobile too, even including nonresidents who come in to elbow out poorer ones for the benefits the system provides. In Minneapolis where I live, we have seen significant growth in high-end housing in recent years but very little for the poor.

So what can a local government do to ensure that land value taxes help the people who need help the most, rather than high-income newcomers?

Read more here.

Disclosure: I sit on the foundation’s board.

The Minneapolis 2040 Plan Is Unlikely to Provide Affordable Housing

…Appears on the Robert Schalkenbach Foundation’s Web blog.

I argue that the residential upzoning policies in the Minneapolis 2040 comprehensive plan won’t really lead to more affordable housing. Here’s a quote:

[The] Minneapolis 2040 plan does something that no other major American city has ever attempted: it shifts zoning practice away from real-estate parcels for single-family use. No, it doesn’t abolish them altogether, thus forcing homeowners to build condos or apartment buildings. Rather, the plan permits homeowners in the least developed parts of Minneapolis to upgrade their lots into duplexes or triplexes. Landowners living along transit corridors will have even greater development options. This policy, referred to as “upzoning,” is popular among urban advocates, and until now cities have only implemented it piecemeal. The plan’s purpose for these ambitious changes includes increasing the availability of affordable housing, reducing rents, and helping realize the mayor’s goal of racial justice.

You can read the rest here.

[Edit: Oh, gosh! Where are my manners? I must add for full disclosure and transparency that I sit on the board of the Robert Schalkenbach Foundation.]

UK Media: Adam Smith Was a Marxist

Before the UK parliamentary election a few weeks ago, the Internet kept directing me to what I surmise was mostly conservative media reporting on the Labour Party’s proposed *horrors* land-value tax, aka “garden tax.” I’m not sure if “garden” here is the Anglo version of what I would think of as a grassy backyard, but it’s very surprising that collecting location rents for public finance was both a significant issue in the days before the election and didn’t result in a loss for for the party advocating it. That’s probably the best news I’ll report on all year.

Labour’s platform included a position in favor of “considering” replacing some taxes with a land-value tax. “We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term,” reported the Mirror.

Yet the Conservative opposition treated “consider new options” as though Labour had a bill in hand, and the sputtering from Boris Johnson and Chancellor of the Exchequer Philip Hammond was illuminating. Articles published by The Telegraph and the Daily Mail quoted these men as saying that the tax would:

• “Bring misery to every single family in Britain”
• “Wreck the economy”
• “Devastate farmers”
• “Increase food costs”
• “Attack land on Marxist principles”

A good chunk of this is politicized anti-tax paranoia. “They talked about taxes in their manifesto. That must mean they’re coming for you!” It’s interesting in itself, however, that the Tories’ audience must be yeomen landowners as opposed to renters or condo dwellers. Then there’s the Marxism stuff, which just demonstrates their ignorance. If they were familiar with capitalism’s talisman, Adam Smith’s Wealth of Nations, they would have come across book V, chapter 2, in which the author advocates taxes on the ground-rent of houses. So yes, Tories think Adam Smith was a Marxist.

More bizarre is the obsession with farmers. Supposing that a land tax did raise food-production costs, which it would not, why would it be somehow worse than the other taxes farmers pay? Is it because farmers are really connected to the land? Does that mean I work at a floating desk? Why don’t we hear about overtaxed urbanites who are really connected to commerce? Don’t taxes on their incomes raise their labor costs? (Hint: They do.)

Oh, and did I mention that Labour’s not advocating a tax on gardens but on the locational value of the space occupied by gardens?

Anyhow, the articles mistakenly cite 3 percent of the value of people’s property as the tax’s rate. Rather, the foundation for this statement originates with the Labour Land Campaign, which explicitly recommends beginning with a 0.85 percent rate on owner-occupied real estate—not 3 percent. (More here.) Neither of the articles’ factual errors have been corrected.

The Telegraph article also says, “Opponents of the tax say it would cause house prices to plummet, putting homeowners at risk of negative equity and forcing families to sell off their gardens to developers to lessen their tax burden.” First, it’s not a tax on houses—just where they happen to be. Second, why are housing shortages caused by undeveloped real estate a good thing? Third, why are the opponents against affordable housing? Notwithstanding the possibility of negative consequences to some homeowners, the Telegraph doesn’t find anyone to answer these questions.

And you thought American media was bad.

The good news is that Labour won (and no, I’m not a Corbynite), and the Labour Land Campaign’s thankless work resulted in positive coverage when anyone bothered to check their facts. It’s well earned.

Let’s Shift St. Paul, Minnesota’s, Property Taxes Onto Land!

At last, I’ve found time to write! This will be the first in a while for a while. A few months back I threatened readers with posts on real-estate mapping and assessment, and I make good on my threats.

Background: When I moved to the Twin Cities, I joined Minnesota’s Common Ground chapter, and this year its intern introduced some of us to the black arts of geographic information system/science (GIS) software. GIS is a discipline full of jargon, like “vectors” and “table joins,” that I find silly, but they’re certainly more sensible than “JD Advantage.”

The purpose of our inculcation is to help Common Ground advocate for land-value tax districts in Minnesota cities as a pilot program toward enabling municipalities to adopt split-rate taxation like Pennsylvania’s. The goal is to observe the effects of removing taxes on improvements and replacing them on locations to encourage development. Connecticut enabled a pilot program like this in 2014 (and it’s being extended), so LVT of a kind is in the policy air. So far, Common Ground’s efforts have successfully resulted in the introduction of a bill in the Minnesota House of Representatives.

Oh, and I claim zero credit for any of this.

But I do have newfound technical skills to unleash on readers (actually, a lot of the work is done in MS Excel, which is old hat around here), so with the open source QGIS and the state’s wonderful MetroGIS’s database in hand, here’s how a property tax shift would affect St. Paul, Minn.—because I was born there, and it’s the city we started our training with.

Boom:

Click to enlarge.

What you’re seeing is the distribution of the percent changes in property taxes for each parcel, divided into negative changes (blue, decreased charges) and positive changes (red, increased charges), and excluding tax-exempt properties. Because more parcels’ property taxes would be cut by the shift (yay!) than raised, the number of blue/red parcels isn’t equal.

Here’s a histogram of the percent changes of property taxes by percentile for single-unit residential lots claimed as homesteads, which dominate the city’s land use by nearly two-thirds of all properties and are probably the most salient politically.

The results for these properties is inauspicious. A bare majority, 52 percent, would get breaks, and the remaining homeowners would pay more by comparison.

I’ve included a macro table for reference below, but generally, the tax shift would move the property tax to residential parcels and off commercial lots. Vacant lots would pay more—as they should—but there aren’t many of them in St. Paul.

One of the biggest conceptual problems with estimating the effects of a land-tax shift is that the current property-tax system discriminates among property classes. Residential lots on average pay less than commercial lots—by design. Single-unit homesteaders pay on average 1.52 percent of their assessed values in property taxes, and commercial owners pay 4.24 percent. Meanwhile, vacant residential lots pay 8.08 percent, illustrating existing progressivity in the property-tax system.

Consequently, much of the effect of a property-tax shift is really just equalizing the tax rate on all parcels, eliminating discrimination among property classes. In fact, a land-value tax shift starting from a hypothetical flat property-tax rate that includes buildings is better for single-unit residential landowners. Unsurprisingly, Common Ground Minnesota explores what happens when residential parcels are treated differently than other types in its advocacy.

Let’s return to the map above. Comparing the top 10 percent of property-tax reductions to the top 10 percent of increases, the property-tax burden is lifted most from the northeast part of St. Paul and downtown, and moved to the southwest part of the city, which is mostly residential.

These results don’t fill me with warm fuzzies, but the underlying issue is not who would pay but who isn’t currently paying, i.e. it’s the land-value assessments. Minnesota requires properties to be assessed at their fair-market values. These estimates are fed into multiple formulae to arrive at properties’ tax capacities, and then tax authorities apportion levies against all properties based on these tax capacities. When properties are under-assessed, they receive a hidden tax break; when they’re over-assessed, they opposite is true. Between commercial landowners and homeowners, guess who gets the hidden breaks?

To illustrate why I think St. Paul’s real estate isn’t properly assessed, here’s a map of St. Paul’s land values per square foot, including only the bottom 10 percent of parcels and top five percent.

Click to enlarge.

I’ve zoomed the map to the southwest part of St. Paul, and while you can see that the downtown cluster includes much real estate in the top 1 percent by value, some of it streaks west along Grand Ave. There are a few other peculiar concentrations of 1 percent real estate: a few blocks south of St. Catherine University (St. Kate’s to the locals), and a few blocks south of the University of St. Thomas’ divinity school (the law school’s campus occupies a surprisingly large chunk of land in nearby downtown Minneapolis). Slightly less valuable real estate lies along University Ave. (where the light rail connects the Twin Cities) and the L-shape along Cretin Ave. and Ford Parkway.

Most of the top .01 percent is downtown (~$56 per square foot), but some of it is still in these areas. Naturally, you may be wondering why property owners with the most valuable land aren’t demanding their properties be rezoned so they can build office towers in western St. Paul. The answer is that much commercial real estate is under-assessed, and many parcels’ values are malapportioned between buildings and land. (I have an acquaintance who recently bought a decades-old house on a plot of land valued at a mere $5,000.)

Although Minnesota’s tax authorities go to great lengths to ensure assessments are fair, notably sales-ratio equalization estimates of numerous parcels, these methods only include properties that were sold in arms-length transactions. One ongoing problem I’ve identified is that commercial real estate transactions differ substantially from those of owner-occupiers. The wealthy simply buy land differently from the rest of the populace.

For example, on November 10, 2015, the First National Bank building sold for $37.25 million but its assessed value as of January was only $25.5 million. Why? Because according to the Ramsey County Assessor’s Office, it was a “Not Typical Market” transaction, so it was disqualified from the sales-ratio equalization analysis.

Here’s another fun one: A Walgreens on Larpenteur Ave. (which might actually be in Roseville) sold for $11.2 million in April 2013, but was excluded from the sales-ratio equalization study because of “unusual financing.” The same goes for the Walgreens on Ford Parkway, which sold for $13.9 million but was assessed at $3.2 million.

Other times sales that qualify for the sales-ratio equalization analysis still result in assessments that are below their sales prices, e.g. the lot on 240 4th St. East, which sold for $800,000 in March 2015 but was assessed at only $286,300 in 2016. The biggest offender I’ve found in my casual search is ten vacant lots along Dunlap St. that sold for $7.5 million and have been assessed at about $3,200 per parcel. You’d think qualified sales of vacant real estate would be assessed at something close to their sale prices, but they’re simply not. This results in large property-tax breaks for wealthy landowners and an increased burden on everyone else.

If I were a St. Paul homeowner (and I know a bunch), I would grab my pitchfork and march on the Ramsey County Assessor’s Office and demand the city’s land values, especially its commercial land, be properly assessed according to law. I’m confident that would shift some of the property-tax burden away from homeowners and onto downtown landowners without affecting their property values. Municipalities should also rely more on mass building-residual assessments to arrive at more accurate land (and building) values, echoing the negative corporate land values in 2009 that I wrote about a few months back. I believe better assessments would make land-value-only property taxes more attractive to single-unit homesteaders than the current system illustrates.

Appendix:

Here’s the macro table of what the LVT change would do to the majority of the city’s parcels.

Click to enlarge, if you dare.

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How Much Is (Nonfinancial Corporate) Land in the U.S.A. Worth?

You wouldn’t know it from my writing, but I’ve been wading into real-estate mapping and assessment this year. For reasons I’ll discuss in future posts, I’m researching land-residual vs. building-residual assessment methodologies. Naturally, my initial Internet searches into building-residual assessments led to Georgist writings, and with good reason. Land-residual assessment, which subtracts land values from the total price, invariably leads to absurd results.

One source on the topic is Michael Hudson, whom long-time readers will recall as the economist who coined the phrase, “Debts that can’t be repaid won’t be.” Hudson gave a speech about the demerits of land-residual assessment in 2001, which he republished in 2010. He repeated a claim I first read in the superb collection The Losses of Nations: In 1993, the government valued nonfinancial corporate land at -$4 billion, and as a result, it stopped publishing economy-wide real-estate data.

1994 is the last year for which [the Fed] has estimated economy-wide land values. The problem was that the Fed discovered that its methodology produced nonsensical results – a negative value of $4 billion for all land owned by nonfinancial corporations for the year 1993. This number resulted from imputing land values by subtracting the estimated replacement cost of buildings from overall property market prices. This “land residual” method left little room for land value, for replacement values continue their rise even when overall market prices decline, as periodically occurs. In such downturns the replacement value absorbs nearly all the market value of corporately owned real estate.

It’s a damning accusation, but it’s also untrue. The Fed never stopped tracking nonfinancial corporate real-estate data. Perhaps it changed its source, but in the age of FRED, all this information is readily available. In fact, one can find three releases of the supplemental tables to the Fed’s Financial Accounts of the United States between 1997 and 1998 that indicate a residual nonfinancial corporate land value of -$4.6 billion, which appears to be what Hudson discovered. Starting with the June 1998 release, however, the residual land value for 1993 rose to $21.1 billion and ultimately to $25.5 billion when 1993 last appears (June 2000 release).

You can chalk Hudson’s mistake up to the migration of data to the Internet, or any other reason really. I don’t think it’s bad faith on his part, just bad luck. Obviously, though, there isn’t a clear conspiracy by Fed statisticians to cease reporting data that made it look bad.

Indeed, if anything, the reported data vindicate Hudson and make the financial accounts look worse: In 1996 and 2009-2010 the final residual nonfinancial corporate land value fell below zero—far lower than -$4.6 billion. More disturbingly, it’s skyrocketed since 2010.

See for yourself.

(Source: Federal Reserve (NCBEMVQ027S, RCSNNWMVBSNNCB, RCVSRNWMVBSNNCB), BEA fixed-investment price indexes (Table 1.1.9.), my calculations)

(I deflated residential and nonresidential structures by their respective BEA price indexes and then estimated the land value by keeping it in proportion to assessed fair-market real-estate values. It’s crude but “accurate,” I think.)

So at the beginning of 2010, the entire species missed out on the best real-estate deal ever: $566.83 billion (current dollars) to anyone willing to take all nonfinancial corporate land along with it. Just last week the Fed valued it at $4 trillion. And here you thought you missed out on speculating on Bitcoin.

So what should we make of this?

Are the Fed’s estimates merely imprecise or inaccurate? Imprecision just means that the land value is off by about a few trillion dollars one direction or the other. When the land value is negative, that’s just fuzzy math that ought to be improved.

By contrast, inaccuracy suggests government estimates of either the total real-estate values or the structures is systemically flawed. These properties might be worth far more than their assessed values. For instance although it’s a nonprofit, Brooklyn Law School’s 2 Pierrepont Street dormitory was ridiculously under-assessed at $3.88 million when the school sold it for $35 million. Alternatively, as I think Hudson tends to argue, the overall real-estate prices are correct but too much of their price increases are imputed to structures. He comments persuasively that “Building prices seem to be responsible for the rise in real estate prices, while land prices are held responsible for their decline.” The implication is that commercial land owners can depreciate land value.

I tend to think both inaccurate assessments of fair-market and structure values are at work, but the former is the bigger culprit. Regardless, Hudson is correct that encouraging local governments to adopt building-residual assessment methodologies would prevent absurd numbers from appearing in the financial accounts of the United States.

Saudi Arabia Channels the Gracchi Brothers

Facing a housing shortage of 1.5 million homes, Saudi Arabia’s Shoura Council approved a 2.5 percent tax on undeveloped land in urban areas, according to Bloomberg. King Salman has the final say, but he gave initial approval in March.

Coincidentally, shares for development companies have fallen. It could be causation, and if so, it shows that even talking about land taxes wipes out speculation.

The article offers more than one assertion that the goal is overwhelmingly stimulative and not directly revenue-related. Oil prices have fallen substantially, and Saudi Arabia has no income tax, so it’s not getting the revenue it once did. It’s almost as though the government is being defensive about the whole thing.

Another goal is increasing “middle-class homeownership” over renting. In short, Saudi Arabia is facing the same problems the Roman Republic did after the Punic Wars: restless landless citizens. The populares, led by Tiberias, and later, Gaius Gracchus, tried to force land reforms, but they were murdered by the optimates. The optimates resisted later “land for loyalty” policies, but Roman generals embraced them, hence the empire. Land-for-loyalty a good strategy so long as the majority is mollified: Promise future rents to as many—but not all, and not equally—people as possible, and you can keep your superior cut.

As for the revenue the Saudi government can expect from the scheme, as always, remember three things:

(1) Gross rent is the independent variable,

(2) Gross rent is the independent variable, and

(3) Gross rent is the independent variable.

…Which means that the final assessed land value itself is an ephemeral number. It melts away as you tax it. The gross rental value is a real, periodic quantity, e.g. per year. (And if you complain it’s an imputed sum, I offer to buy the right to that flow value from you for $1.00 until death or transfer.) Thus, a parcel that rents at $100,000 annually will have a different land value depending on how much of it is taxed. This is not to say that capitalized land values are fictitious numbers or can’t be calculated. Rather, it just means that when the Saudi government says it’ll tax these vacant parcels at a 2.5 percent rate, you need to think it through more than if it were a just 2.5 percent tax on their gross rents.

For example:

Current assessed land value: $2,000,000

Capitalization rate, no taxes: 5.0%

Therefore, current annual rent: $2,000,000 x 0.05 = $100,000.

Now let’s add a 2.5% tax on the land value:

New assessed land value: $100,000 gross rent / (0.05 + 0.025) = $1,333,333.33 land value.

NOT: 2,000,000 x 0.0725. That’s wrong!

Land-value tax revenue (which will come out of gross rent!): $1,333,333.33 x 0.025 = $33,333.33.

Tax rate on the gross rent: $33,333.33 / $100,000 = 33.33%

The $666,666.67 in capitalized land value melts away because of the tax.

Consequently, although it sounds trivial, a 2.5 percent LVT turns out to be a huge amount, depending on the capitalization rate. The lower it is, the higher the tax revenue. I’m sure the Shoura Council knows this.

The other benefit of this arithmetic exercise is answering the question: How much building is necessary to escape the tax? Answer: Trick question. The answer has little to do with the numbers; it comes up even in U.S. cities when people talk about taxing vacant parcels. The easiest way to evade the tax, onerous though it is, is to put a small, halal hot-dog stand on the property. Okay, maybe you want to put a little more on there, but if real-estate speculation is your thing, expect minimal effort.

This explains why I favor full LVT over partial measures. Even if Saudi Arabia adopts the tax and the phase-in isn’t too long, it might not alleviate the housing crisis. But it sure beats being toppled by Gaius Marius or Julius Caesar.

Pew Research Center Discovers the Death of American Household Formation

The Pew Research Center announced that in 2014, the percentage of young women (18-34 years) living with their parents or other older relatives is at a record high level going back to 1940.

Oddly, Pew isn’t interested in the fact that young people in general appear to be living with family, especially since 2000. Why might that be? Perhaps widespread joblessness and low incomes for young people? Fifteen years later and this is still apparently a head-scratcher.

This topic—household formation—is important to me because it indicates the future direction of land rents. Single people rarely buy houses, so we’d expect land rents to stay flat. Flat land rents lead to flat construction, and hence, low growth.

At least, that’s my hypothesis. I discussed it earlier this year when the Congressional Budget Office assumed in its models that household formation would increase sharply because young people would suddenly find jobs and build families. Many of my Georgist peers by contrast stick with the 18-year land boom cycle, pioneered by Homer Hoyt’s One Hundred Years of Land Values in Chicago, which predicts a bust around 2026. I’m not so sure, but then again, I do see a lot of construction going on in Minneapolis. Maybe that’s regionally isolated.

The lurking comparison here is Japan: Fewer families lead to fewer children, which solidifies low expectations for future rent increases. None of this is to say that endlessly growing populations are a good thing, but if your definition of capitalism requires ransoming land rents to incumbent owners in exchange for future growth, then you might want to consider an alternative theory.

I will add two thoughts to the Pew Research Center’s findings.

One, It’s interesting that women are more likely to live with older relatives than men. Census Bureau data show that in fact men are more likely to live with their parents than women, so it appears many women don’t live with their parents but do live with other relatives.

Compare this with the above chart:

Two, excluded from both these charts are college students. I’d really like to see what that looks like. A smaller proportion of young Americans were living on college campuses in 1940 than now, and college students would probably live with their parents if it weren’t for school. Consequently, the percentage of young Americans who are effectively dependent on their parents is probably higher than in past decades.

Given that, as the Pew Center finds, marriage rates have fallen, especially since 2000, these are not trends that bode well for the future happiness of young Americans.

IfTashaYar’sRapeGangsHadaTransporter

…Is what I think about now whenever someone brings up the economics of Star Trek. For those unfamiliar, the title refers to a character from Star Trek: The Next Generation, Tasha Yar, who grew up on a politically collapsed colony populated by … rape gangs! Think Mad Max only ham-fisted. It’s also a reference to the 2007 combined tour of the bands Ifihadahifi and Replicator, “IfIHadARepliTour.” Yup, a show I never saw was so memorably named it stuck in my head for eight years.

Today’s “Economics of Star Trek” adventure appears courtesy of The New York Times, “A ‘Star Trek’ Future Might Be Closer Than We Think.” Reporting on the upcoming book Trekonomics– I know, I know, I hear you groaning in agony at your screens.

Okay, so the Times interviewed one of the authors and claimed:

When everything is free, said Mr. Saadia, objects will no longer be status symbols. Success will be measured in achievements, not in money: “You need to build up your reputation, you need to be a fantastic person, you need to be the captain.” People will work hard to reach those goals, even though they don’t need a paycheck to live.

Wrong. When you have teleporters—and set aside the obvious philosophical issues of voluntarily walking into a disintegrator beam so a duplicate of yourself can be incarnated somewhere else—you will have crime, mass terrorism, mayhem, and social collapse. Come on folks, show a little realism about human motivation.

So, now that we’ve dismissed the subject on the merits, we can pick it for less entertaining reasons. Let’s look at Star Trek without transporters. Would objects no longer be status symbols? Would people live to work and not work to live? Would we have … “post-scarcity”?

Hardly. We’d squabble over all the stuff that we can’t replicate, just like today. That’s the rub with productivity: There isn’t a whole lot of difference between mass-producing stuff cheaply versus for free. However, stuff that can’t be produced or easily substituted, i.e. positional goods, won’t disappear. This is precisely why I believe the concept is so important and write about it so frequently. Indeed, Trekonomics‘ author’s assertion that everyone needs to be the captain proves my point and discredits his: We can’t all be the captain. Someone will need to clean up replicator spills, so the future looks more like Red Dwarf than Star Trek.

Consequently, you’re going to need to produce something more substantial than menial labor to afford the location costs to live in San Francisco, Star Trek‘s preferred Earth location. But if the landowners of Trek can get everything they want for free, then we’re back to the robots-substituting-for-workers problem that I’ve addressed before.

And don’t waste your time arguing that people can always leave Earth for more space. That’s just kicking the can forward and ignoring the fact that even when land is free, poverty still exists in urban centers. Henry George observed this in the 1870s (and he cut his chops in San Francisco). At some point, “post-scarcity” stories only work if you tap location values. Nothing less will do.

Ultimately, “Economics of Star Trek” discussions raise two questions. One is concerned with filling the gaps created by the showrunners’ (mis)understandings of political economy, and the other is applying existing social science knowledge to the show. The first question disserves the show. It’s aspiration, not social theory. The second question, going by the author’s quotations, still needs work. We’re a long way from the characters chatting about how in the 21st century people actually believed consumption taxes were a good idea.

Oh, and since I’m talking about Ifihadahifi, here’s its Scott Walker protest song:

Brooklyn Law School Building Might Sell for 7 Times Assessed Value

Readers might recall a year and a half ago the glee with which I reported that Brooklyn Law School sold a number of its buildings for triple their assessed values. It’s unusual that I can discuss legal education and land values at the same time, so when the opportunity presents, I pounce like a lion.

Yesterday, the New York Daily News contributed a sequel to the story: BLS plans to sell a “prime Brooklyn Heights” building, the 39-unit 2 Pierrepont Street. The sale hasn’t occurred yet, but the figure being thrown around behind the scenes, according to the article, is $30 million.

…Which shouldn’t be at all surprising. As former Brooklynite, I can tell you that Brooklyn Heights is absolutely gorgeous. Catastrophically under-built given its proximity to lower Manhattan, but absolutely gorgeous.

As one might expect, the assessed value of the 2 Pierrepont St. parcel is a laughable $3.88 million, even though BLS paid just $2.2 million to acquire it back in the 1980s. Thus, the alleged asking price is nearly 8 times the assessed value, strongly implying that the property is absurdly under-assessed. Given the location’s value, the article suggests the building will either be torn down or transformed into condos. Those BLS students never realized how good they had it, and they’ll probably never live in such an expensive neighborhood again.

As with last year’s post, the joke is on New York City. Because BLS is a nonprofit it can play land speculator while only being asked to pay $10,000 to the city after lopping off its full bill for “faculty and student housing.” Hopefully NYC will get more from 2 Pierrepont Street’s successors. The law school, though, is cashing in.

**********

Appendix: 2 Pierrepont Street’s assessment and tax bill:

Notice of Property Value–2 Pierrepont St

Property Tax Bill Quarterly Statement–2 Pierrepont St