Parking Our Excess Construction
The housing bubble has left the U.S. with an excess supply of over 2 million homes; 19 million are vacant. With fewer households being formed due to the recession, demand for housing has dropped at the same time.
This imbalance of supply and demand has resulted in plunging home prices, destroying many homeowners' savings or pushing them out of their homes. Owning your own home – the prime solid, stable asset of the middle class for decades – became a volatile, speculative "investment" that ruined many families' lives.
Incentives in the housing market created overproduction, which still persists to some degree. Now the country needs incentives to correct housing overproduction.
Similarly, the U.S. built an excess supply of retail space – over 6 times that of any European country per capita. Now demand is down, due to reduced consumer spending (given the recession, the end of loose credit, and increased consumer saving) and competition from Internet commerce, so the equivalent of 25,000 big box stores is empty.
Retail oversupply combined with dropping demand is driving a downward spiral of property values that mirrors that of residential property. Businesses declare bankruptcy, and an excess of vacant space drives further declines.
We've addressed these kinds of problems before, not with residential or retail property, but with farmland.
The end of World War I brought strong exports and good times for farmers, but in the 1920’s overproduction and falling exports sent farmers and farm-dependent businesses and communities into a depression. Voluntary production limits failed to keep crop prices above the cost of production, and many farmers and suppliers failed. In the 1930’s, we began programs to moderate the agricultural market, so that farmers would not be driven out of business by volatile swings in the prices of crops. Prices were stabilized by payments to farmers who agreed to take excess farmland out of service.
In our present case, we have had an excess of construction. Leaving excess homes and stores standing prolongs the problem for neighboring properties while prices remain depressed. Today we need to take excess residential and retail property out of service.
We can turn the excess construction into parks. The values of neighboring properties would stabilize, both from reduced oversupply and from proximity to a new amenity. This conversion can be accomplished quickly – even the prospect of a new park would have an immediate positive effect – and at low cost.
Depending on local conditions as they evolved, some parks might be temporary and others might be permanent. But park conversion would be a quick, targeted stimulus to the regional property market.
One may object that farm programs have morphed and grown beyond their original purpose, under decades of lobbying from various interests. But we can learn from that experience. We can limit the size and duration of stabilizing actions, with a defined path to sunsetting as conditions stabilize. And those who most directly benefit from the program should not design its terms; for example, properties could be chosen through a reverse auction.
We have learned that we can benefit by moderating artificially generated speculative swings in agricultural markets. Today we are suffering the aftermath of a volatile swing in the property market. Park conversion would quickly and effectively address oversupply – the root cause.