Sunday, January 31, 2010

Co-Housing, Part 10: Sustainability for Future Generations

A container-built house defines sustainability, since its essential building block is a recycled cargo storage container; there’s an affordable inventory of hundreds of thousands of these unfinished “blocks” filling lots in American port cities today. With a likely survival rate of 100 or more years, the container-based house is an asset that can be paid off in full by its original owner and, if desired, passed down to survivors. It requires relatively little maintenance of a non-decorative sort, since its “insole” is made of steel. It is suitably financed by companies experienced in lending against personal property like manufactured housing (of a historically – flimsier sort). Such housing stock, especially if mobile, may eventually become the dwelling of choice for an elderly but able population wishing to take their established residences to their place of retirement (whether full time or seasonally) choosing among the physical locations for their seasonal moorings. The frailty of many elderly persons, however, reminds me of the central challenge to early implementation of container-based housing: Climate control. After all, steel is a conductor of heat and cold. Some readers may even be wondering about who’s figuring out this heating and cooling problem.

My response, albeit borrowed, is this: “The most common use of ISO containers has been to protect goods in transit either by truck, railroad or aircraft; however, such containers have found use as temporary shelters for personnel located in remote regions such as often experienced in military scenarios. While the containers provide a structurally robust shelter for humans, the environmental conditions inside the containers are often far from desirable for human occupancy, mainly due to lack of internal temperature control. Containers located in direct sunlight can easily experience internal temperatures well above 100 degrees Fahrenheit if no thermal abatement means are implemented such as air conditioning, active ventilation, or passive shading.” This text is from US Patent Application 7464504 – “Thermal protection apparatus and method for ISO containers.” Actually, I’ve seen steel panels in dark colors reach surface temperatures in the desert of 170 degrees Fahrenheit. Of course much thought has been, and continues to be, directed toward figuring out how to make ISO boxes livable from the interior temperature standpoint; and lately, the thought is directed to sustainable means of cooling and heating such as by implementing solar technologies.

Floors of container boxes typically, if not usually, are made of wood, insulating one’s feet from burning or freezing; so indoors, the climate control main issue is insulating the interior walls so as to trap-in the air circulating at the desired temperature for the season. Solutions that are even more sustainable and affordable to the owner than panelized insulation are not distant. Consider, for example, framing and inside covering made of ‘Forroplac’, an ecological product that substitutes wood and is made of recycled plastic packs. It´s 100% recyclable and impermeable and has high mechanical resistance. It´s mold and fungus free, auto-extinguishable and paintable, and it´s actually cheaper than wood.

. . .

I’ve seldom seen myself as a pessimist. But going forward we must think differently about our shelters and how we sustain ourselves as planetary stewards and as economic (family) units. I fully expect a near-complete recovery from the economic mess that “Main Street” now finds itself in. Naturally, many Americans at the first opportunity will resume “full consumption, no savings” mode, trying to balance earnings with their burning need for myriad consumer goods. So, when the economic cycle rotates another 360 degrees, many of these splendid consumers will be ruined anew. One of the unique qualities of Americans, perhaps, is that we are such optimists that lessons about financial accountability aren’t sticky for numbers of us; hope trumps sounder judgment. For the rest of us, feeling fully accountable for enduring family housing, we may never again view home ownership as an entitlement or a retirement-savings vehicle powered by a perpetual-appreciation engine. Indeed, I suspect many will stop thinking altogether of their primary residences as part of their investment portfolios. And another slice of the population of homeowners may be “nouveau poor” - sufficiently ruined by the present financial debacle that credit will not support their future appetite for the latest, “upscale” housing.

In any event, I believe that living within one’s financial and environmental means requires a re-examination of the home and lot – ownership paradigm. Housing without land ownership, and without individually-owned frills, may not necessarily be “downscale.” It may be that we should let ourselves view that type of accommodation as a new definition of “to scale.” Recall the early cave-dwellers. There were only so many safe caves of sufficient depth to keep out the blistering wind and torrential rains and ice in one neighborhood. Peaceable sharing of space “within” became a requirement of communal stability. Land can be shared without compromising privacy or individuality to an undesirable degree – and without being carved up into little chunks of ownership. Residences can be simpler while being comfortable and addressing the basic family unit’s needs without exceeding the 30-35% of after – tax income “rule of thumb” familiar to our grandparents. It will be interesting to observe whether the 90% of this century remaining will see the over-developed world’s shedding its conventional cocoons in favor of sensible housing alternatives that gradually heal the Earth and liberate us from economic-doomsday scenarios. For the majority of the planet, populations of the under – developed nations, I hope their resources will not be stripped, but flourish through implementing solutions for sustainable housing, ending the desperation and homelessness ravaging their societies.


Co-Housing, Part 9: Matters of Affordability

A few moments of skepticism in hypothetical discussions of issues like the viability of co-housing schemes must arise. Let me relate a story that may address questions pertaining to the financial realities of one such ownership paradigm. Visualize 10 friends in a college dorm, enjoying one another’s company during their senior year at the university; call them Annette, Tommy, Darlene, Cheryl, Bobby, Doreen, Cubby, Karen, Lonnie and Sharon. They have different majors, and new jobs with a range of starting incomes, but on the average their salaries will be $30,500 a year. Karen is graduating in environmental engineering, and believes the group, with their significant others in a newly-proposed 10-unit community, can realize some economies in living costs in a co-housing arrangement. So, why end a good group dynamic, runs the conversation. Doreen, a real estate agent, finds a 44 thousand square foot infill parcel in central Phoenix that is zoned for multi-family development sufficient to build 10, 2-story container housing units in a community. Bobby, a construction management major, gets some bids from his internship mentors who estimate that using 40-foot long ISO containers, fabricated from boxes arranged three wide and 2 high, the residential builder can install the infrastructure for the common amenities and build 10-1,920 square foot dwellings for an average of $60,000 each. Encouraged, the friends meet and devise a charter for their community and regulations for living in community, and charge Doreen with getting a deal made for the acre + parcel for an affordable price. They also engage a surveyor to draw a boundary survey and identify easements in gross (personal to each pending dweller) for 10 building sites and non-exclusive easements for access across the tract to parking and the common amenities like the community garden and bicycle-parking shed.

Doreen negotiates a price for the parcel for $360,000; in a down market, the owner is willing to accept $60,000 down in return for a promise to take a second position, carry-back lien against the tract for the $300,000, interest only for two years. Annette uses her considerable persuasion learned from her broadcast journalism studies to coax a $600 thousand development loan from a construction lender at 5% interest under a first lien. Cubby, a paralegal, drafts a land trust under which the construction lender is the first beneficiary and the seller is the second beneficiary. The seller deeds the tract to the Trustee, the community’s elected president, concurrently with the 10 unit owners-to-be delivering the land trust’s trust agreement to the construction lender and seller. The roughly 20 incoming dwellers scrape together from their parents and their student loans to cover the $60 thousand down payment, close the loan and sign away their lives through personal guarantees. (Or, do they?) Anyway, the off and on-site infrastructure takes about 3 months to complete, and the containers, fabricated off-premises while the infrastructure is underway, are delivered within 10 days of the final inspection certificate for the site work and connected to the conduits and water and sewer piping and the solar-powered central generating unit that produces enough wattage to power the exterior building and parking lot/driveway lights within 48 hours after the units have been delivered. The dwellers have moved in, fewer than 120 days after the closing of the sale for the tract.

Cheryl, the accounting graduate, is appointed as the CFO of the community. She calculates the following expenses of the community:

$45,000 in annual interest cost/12 =

$3,750 interest expense monthly

Water, sewer, cable, internet, gas and electricity =

$3,250 utilities expense monthly

Liability coverage for common-use amenities =

$ 500 insurance premiums monthly.

Reserves for repair and maintenance =

$ 250 segregated account monthly

Real property taxes on property =

$ 750 impounded monthly

The total expense estimate for the community is $8,500 monthly. In addition, Cheryl advises the group to set aside $500 per month as a hedge against the need for additional contributions to the Trustee to cover a shortfall in unanticipated costs, such as escalating property taxes or a major breakdown in some system like the solar “power-grid.” The total expense on a per-dwelling unit basis is $900 monthly, or $10,800 per year. The ten classmates must spend 35.4% of their annual earnings ($30,500, on average) on housing and associated dwelling costs in the community for the first year of their joint occupancy.

This surely is not an ideal percentage of gross income to expend for housing, but given their probable tax brackets, if these mortgages are fixed as to interest rates, this is affordable, even if the unit owners’ significant others cannot make any contribution toward the community expenses. If the costs increase for the community, they should not grossly outstrip the increases in the dwellers’ annual compensation, unless rampant inflation in recurring expense categories outstrip gains in salary. Maintenance costs for the individual dwelling units should remain static, given the fundamental material – steel - from which the container housing is made.

Now, if your container housing unit has a “shelf-life” longer than your likely life span, one obvious advantage is that you will only be obligated to purchase your shelter once, with one loan, hopefully featuring affordable payments in better and worse economic conditions. Of course, the container dweller has the election to “upgrade” or “downsize,” depending on her needs or wants. Therefore let’s address this: Who will finance a dwelling built, indestructibly, out of steel? It’s likely lots of lenders will be attracted to the idea of not having to worry about relying on recovery of insurance proceeds to recoup their loan costs! One fundamental issue to lenders is where to file a security instrument, if the container units will be transient. A solution is to amend the loan documents to say that a failure to inform the lender promptly after the dwelling leaves the state of domicile at the date of the loan funding is a default that entitles the lender to commence foreclosure proceedings in any state in which evidence of property ownership by the borrower can be found. The most sensible approach, however, would be to require the management of a co-housing community to transmit a written notice to the lender of the location of the unit as a prerequisite to the relocating unit owner’s commencing occupancy within the community. Another solution to the lender anxiety over the transience of a container dwelling unit would be to have a central filing registry for mortgages and titles to such housing types, like the FAA maintains for aircraft or the Coast Guard, for seaworthy boats. These changes in procedure for financers are not insurmountably complicated; there have been personal property lenders in the manufactured housing field making loans against these types of semi-mobile improvements for decades. They’ll figure out how to adapt in due course, if they see a lending opportunity that guarantees reasonable returns on their investments.


Co-Housing, Part 8: Consolidated Ownership: Harbinger of Landed Gentry or Democracy?

In part 7 of this 10-part, more or less, series on co-housing, I described briefly the concept of fee title ownership in a land trust, with dwellers in a community paying periodic “occupancy fees” while being stripped of the direct burdens of ownership like payment of taxes and obtaining and maintaining homeowner’s insurance, mowing the lawn, trimming the green stuff and cleaning the swimming pool. Of course, there is no single “perfect” mechanism for a community’s co-housing land title ownership; the objective should be to choose a way for a community that may visually resembles today’s plain vanilla housing development but vests title in a single ownership. That’s not essentially a radical notion. Condominium ownership provides that a dweller owns “air space” residing between each coat of paint on the interior walls of the living structure, and an undivided interest in common elements; no individual condominium “owner” actually owns any building outright. Instead, these buildings belong to the condominium association. Cooperative apartments, popular along parts of the Eastern Seaboard, are multi-unit buildings whose residents own stock (as shareholders) in the fee-owning corporation but make a lease of their occupied units. Individual dwelling “pads” with utilities connections to a central service may be ground-leased by a single fee-title owner. I suppose that this most nearly resembles the familiar mobile – home park. Installment contracts for land transfer permit the gradual vesting of legal title (a device to secure the seller’s payment stream) but the immediate granting of equitable ownership to the purchaser.

What makes a land trust distinctive is two things. First, the process of forfeiting the interest of the Trustee by the control party is simplified by the terms of the contract. Second, the control party - the trust beneficiary that controls the actions of the fee title owner during the period of the payment of the acquisition price - can be anonymous in a fashion that few other fee ownership structures permit. That latter fact facilitates both absentee and corporate ownership of land. Of course, such mechanisms might encourage the gradual consolidation of land ownership in increasingly fewer hands. This leads to the question whether co-housing controlled by land trust beneficiaries would cause the resurgence of a “landed aristocracy?” A question of substantial weight, is this; after all, we’re living in a country built on the pioneering concept by immigrants for most of whom land-ownership was the impossible dream in the homeland and families they abandoned to move into America’s “interior.” Many Americans took the history courses in middle and upper school grades where this idea was drummed home (or that effort was made, anyhow). And Americans continue to be inspired by the idea of some day owning their own home, complete with a tranquil piece of land skirting the cement slab foundation. (They need to abandon the inspiration to own a second and third home that they can use as investment property and live from the cash flow. Mostly, Americans don’t know how to make that work successfully for themselves.)

The answer to the question is, yes, consolidated ownership among a class of wealthy landowning individuals is a possible outcome. But another possible outcome is the growth of land trusts (or other, similar cooperatives for joint land ownership) for conservation. Here, groups of individuals will pool individual fortunes to purchase and preserve the character of communities by limiting the amount of asphalt and concrete and “vegetation wastelands,” like the multicolored pea gravel yards with a token palm tree in full bloom in some arid, southwestern U.S. urbanized areas. I don’t believe that consolidation of ownership of development tracts requires a resulting increase in land prices rendering land unaffordable except to the very well-to-do. Land trusts are often controlled by groups of persons. In the instance of trusts formed to preserve, for example, scenic landscapes or properties of historic character, the trusts have more in mind than profit from leasing. No doubt tracts of substantial size will soon be of reach of some cash-rich persons. Land has become unaffordable, however, as a result of committing to more obligations than ordinary borrowers can manage to pay with their current earnings, which leads to insolvency. (National Public Radio broadcast a show on Thursday, January 14, where the reporter stated that more than 10 million households in the U.S. have underwater mortgages - that is, homes that are worth less in value that the mortgage payer owes.) Those insolvent (unable to pay the sum of their obligations as they become due) inevitably take a hit in their credit ratings, rendering debt for subsequent home purchases unavailable to them regardless of its price.

One fallout from consolidation of ownership in co-housing scenarios may be the death of power vested in homeowners’ and similar property owners’ associations presently governing most residential housing communities. When fee title to the land is controlled by an individual owner or handful of owners, the dwellers’ representation – or tyranny of the minority, as some regard it today – will be held in check by the power of the purse. There is little for the fee holder to gain from a high dweller-turnover rate (unless the fee owner imposes and collects some kind of breakage fee upon each departing dweller) or from vacancies occasioned by warring factions within a co-housing community. Vacancies either redistribute the common amenity and utility costs among those who remain in the community or compel the fee holder to shoulder those unreimbursed costs. It seems more likely, therefore, that a recurring investor’s property manager (or his/her staff) will collect assessments and enforce rules dispassionately and professionally, with an air of detachment that avoids intra-neighborhood hostilities.

This sort of co-housing organization argues for a thoughtful conceptualization of the co-housing community and the adoption of regulations for its dwellers that avoid conflicts in obvious areas (e.g., sport court lights illuminated after a certain hour of night) without impinging unnecessarily upon individual occupant freedoms (e.g., dictating a narrowly - confined color palette for exterior wall coverings or the hours during which certain vehicle types may be parked in plain view). I doubt the latter sort of “democracy” will be sorely missed if the POA becomes a dinosaur. Thoughtful dispute – resolution rules of engagement among dwellers, if enforced, will minimizing “pining for the good old days” of hostile POA board or annual owners’ meetings, where fights over a fine levied because a dweller’s basketball hoop was seen in the wrong place on his lot constituted an evening’s entertainment.


Wednesday, January 13, 2010

Co-Housing, Part 7: Residential Vision for a Wireless Generation

I suspect that cloud computing – where the technology infrastructure resides “in the cloud” that supports computing and liberates businesses from the shackles of servers and other bulky equipment – and co-housing are headed for a delicious collision. This will be a paradigm shift of significant magnitude for Generation Wireless. Typical cloud computing providers deliver common business applications online, accessed from a web browser, while the required software and data are stored on servers; but they are someone else’s servers, in my vision of the near future. Not only will cloud computing users avoid capital cost on hardware, software and services; they will pay providers only for what they use on a “utility-bill” (resources consumed, like kilowatts) or subscription (like a year’s subscription to Newsweek Magazine) model. So, freed of “stuff” other than their laptops, mobiles and brain-pans, when users can access systems using Web browsers regardless of their location or device employed, Gen Wireless members will be free to play in any sandbox they can afford.

This implicates permanent-housing paradigms. At the beginning of the 21st century, more developments in single-family housing began to shed large yards in favor of interior amenities. The ‘great indoors’ began to supplant the emphasis on wide-open spaces for many American purchasers of homes – including in areas of the nation where land was fairly cheap for first-time residential buyers. In short, the U.S. housing paradigm is beginning to resemble the rest of the industrialized world, where land is too costly (in dollars, inconvenience and otherwise) to factor importantly into decisions of dwellers about what to purchase. Or whether to purchase at all; although in America, a different way of thinking developed – here, renting a dwelling historically was deemed only a transitional phase. Accordingly, land for garages, yards and so on was coupled with the main dwelling unit in owner-occupied developments. (Even in condominium projects, the owner owns an “undivided interest in the common elements,” where the community pool and swing sets are located.)

Here, I predict a complete uncoupling, for significant parts of the U.S. population, of land and dwelling ownership in this century. Clearly the next generation of home-buyers will include significant numbers of persons freed from the moorings of rented offices and bulky computer equipment. If affordable and sustainable housing with sufficient design appeal and transportability (containers!) becomes available in large enough quantities, and if debt for residential leveraged purchases remains scarce for large numbers of the population, there will be a palpable transition away from conventional subdivisions. Perhaps in favor of this - opening curtain:

A park-like setting with vegetation, a swimming pool or other appealing body of water, a community garden using grey-water and other common use amenities like barbeque pits, workout facilities and congregate rooms. You and your family unit, fresh from somewhere distant, visit the environment and decide it suits your needs. You speak to the Trustee of the parcel and discuss the minimum occupancy term, the community regulations and the monthly occupancy fee. Satisfied with these matters, your application is reviewed and approved by the Trustee, and in comes your existing dwelling on an 18-wheeler’s trailer to your space. The Trustee’s trusty contractor connects your dry utilities to the conduit provided at ground level, and your piping for plumbing and sewer lines. (Your solar panels already are imbedded in your rooftop, naturally.)

There’s no lease; just installments of occupancy fees due monthly. Those payments offset the community’s cost of maintenance, repair and replacement of the common amenities and buildings. You pay your cable and Internet fees directly to the providers, according to your particular requirements. Water, sewer and trash/recycling are included in your monthly fees, reduced on the basis of recycling and other community economies of scale. Your monthly fees are, of course, tied to the space you occupy and the length of your tenure in the community, with discounting for the longer-term residents. No mortgage payments, naturally. Of course, if you don’t remain for the minimum term you agreed upon, there is the specter of the “breakage fee,” but that’s a cost you’re willing to accept for the privilege of hitting the road if you find the environment not gelling with your personal style.

You use all the amenities of your choice, but you don’t maintain them, because you don’t own the land. You have a voice in community decisions, but you don’t run the place, nor do you have the freedom to “run wild.” If you don’t like the lay of the land or your fellow community members, you’re free to leave without worrying about brokers, commissions (man! Sorry Patrick!) or waits for the buyer market to hits your target home sales price. You pull up your stakes (wiring and plumbing connections), hire another 18-wheeler, settle up with the Trustee, and you’re on your way to your next dwelling place, with your residence you’ve long since paid for in tow.

Sound impractical? A cloud computing business owner can choose to live anywhere she/he chooses today; it’s only complicated by finding the right combination of location and housing stock. But if you control your “stock” for as long as you require one type of dwelling, then all you need is a patch of terra firma known as a “footprint” and connections to hook up your wires, pipes and cables. I predict that shortly there will be quasi-transient communities available where your “crib” will be of your own invention but your immediate surroundings will become a menu-choice instead of a commitment (or a bankruptcy or short sale/credit hit, under the current model of much residential ownership).

I predict that communities will be owned by individual, often anonymous, investors who hold the land essentially for long-term investment. These investments may be held through a myriad of ownership devices, but let’s identify one for ease of explanation. The land trust was a device invented for Chicago downtown development that became universal. In Arizona, my domicile, it primarily has been used as a residential development financing mechanism, so it’s largely known here as a “subdivision trust.” Essentially, land is deeded to a Trustee (the fee owner) of the trust, who answers to the instructions of the beneficiary/investor(s); and there may be more than one beneficiary (but tiers of beneficiaries are not for today’s post). The Trustee, likely an enterprise, will (i) pay taxes and common amenity utilities and insurance premiums out of the collected dwellers’ monthly fees, (ii) negotiate terms of occupancy with successive new community dwellers, (iii) pay a certain amount of the collected fees to the beneficiary(ies) but plow some back into the community, and (iv) deal with the community agency.

By “the community agency,” I refer to the dwellers in the community through their elected/appointed/self-proclaimed representatives. The final authority for expelling a miscreant dweller is vested, however, in the Trustee (see my earlier post on this site on the means to quell community hate-fests through dispute resolution mechanisms). Some communities surely will feature owner-occupancy; I’ll predict most will be mixtures of permanent residents and quasi-transients. By the term “quasi-transients,” I mean persons intending to stay in a community, initially, for a protracted period but who depart. How’s that sound, futurists?


Monday, January 11, 2010

Real Estate Market Update, January 2010

I attended a market update seminar recently given by Bill Gray of the Arizona School of Real Estate and Business. It is always a real pleasure to hear Bill speak, and if you ever have the chance, go! Here are some excerpts from what he brought up:

Numbers recently released by a department of Arizona State University show that the market for less expensive homes continues to be strong, while the luxury market is poor. The conventional loan limit is around $417,000 while the FHA limit is around $350,000 so this defines the cutoff point.

Further, most sales are FHA or cash. It looks like around 40% of the market is investors, buying at the auction. Most of the rest is FHA (the new subprime).

So what are the rumblings? Some bad news for FHA buyers, maybe. There is talk of a 5% down requirement, and the mortgage insurance is likely to double, from 1.5% to 3%. Further, there is talk of a minimum credit score for FHA in the 620-640 area. None of this is written in stone, so don't panic yet.

For those of you who are not licensees, you might not think that residential real estate brokerage is a low margin business, but it is. The only people doing really well are the few agents who have high volume -- agents listing 100 bank owned properties at a time, for example. So the news that the State is broke and looking for new tax revenues is bad for us -- they want to add a state income tax on services. This includes real estate commissions, carpet cleaning, lawyer fees, you name it. The action of implementing this tax, in my opinion, will be a net loss in revenue.

2010 may be a year for more market declines for another reason: at some point, the "shadow inventory" of lender-owned homes has to come to the market. They will likely be released slowly, but the supply is so large that it is likely to strongly impact home prices.

Finally, interest rates are likely to start rising at some point. Personally, I'm thinking that treasury rates will rise because no one will want to buy them anymore. When this happens, rates will rise and fewer homes will sell. More downward pressure.

It is interesting to note that on the NAR website where they show the pricing and sales trends in major metro areas, they show Detroit as "NA". It was recently reported that the median home price in Detroit was around $7,500. I personally think that you can make data show anything you want -- and the NAR has a vested interest in showing better news. The Detroit info will skew the numbers for the rest of the country -- so leave it out!

Apartments are still suffering, if looking at the eviction notices means anything. When times are bad, apartments don't like to evict people, so they will tolerate late rent payments. When the market is good, it is easy to get another renter, so late payers get evicted. People can afford to rent single family homes right now -- because prices are low. So why rent an apartment?
You can also watch all the webinars about how to buy apartment complexes cheaply. Amazing!

My take on 2010? I think we will see falling asset prices, including real estate, and especially things like gold and oil. I think the dollar will strengthen. Right now there are people having gold parties -- someone organizes it, and you sell your gold earrings and such at the parties for cash. When something is THAT popular, it is probably at a price inflection point, or near it. I'm bearish on gold.


Thursday, January 7, 2010

Welcome to 2010: Digital Rights Management

This one is not about Real Estate. It is about HDTV. So skip it if you were hoping for the latest REO or foreclosure information. On that topic, there is a popular webinar going around about bulk REOs which I will write about later this week.


My home TV setup involves a bunch of stuff, but mainly it is a flat TV, an amp, a TiVo, and a Blu-Ray DVD player. To be able to see everything in stunning HD, you must connect the components together either with component video (which involves some 5 cables), or with HDMI.

Component video is an analog solution; this means that there might be some slight loss of quality. In practice, I haven't seen it. But it is a pain to run 5 cables between each piece of equipment.

HDMI is a digital connection. However, it is more than that; it is also a communications protocol, and it supports something called DRM, or digital rights management; in particular, it supports several copy protection schemes, including HDCP, a copy protection scheme made for high definition content, like HD programs and HD stuff from DVD players.

Why does this matter to me? I noticed that sometimes my TiVo records a blank screen, or a screen with an error message, something about HDMI Not Permitted. So I started looking into the problem. I also started noticing it more when I added a second TV connected to the TiVo, through the component connection.

See, what happens is that the TiVo is connected via the "good" HDMI connection to the amplifier, and a bunch of other things are also hooked up, like the cable box, the DVD player, a CD player ...

For HDMI to work with the copy protection scheme, when the "protect" information is turned on from the source (like the cable company, or the DVD player), then your TV or amplifier is supposed to negotiate with the source and say "I'm only talking to a TV, not a recorder" or something close to that, and so the source device continues to play. However if there is no one at the other end of the HDMI connection, because the amp is powered on but connected to the cable box or the DVD player, then when the TiVo tries to talk to the amp, it does not get an answer and so it blanks the screen or puts up an error message. If you unplug the HDMI cable, everything works fine, of course. And, it doesn't just shut down the HDMI output. It kills the TiVo recording and the component outputs.

For those of you who think this is only a problem for people with TiVos, and amps, and other home theater setups, think again: tens of millions of televisions have been shipped which have HDMI connections but are NOT HDCP (copy protection) compliant. And some of the new DVD players can only be connected with HDMI; or they will only play HD through HDMI. And when you hook them up to your older TV, guess what: It Won't Work.

What to do? Well, there are a few options. There are some HDCP "strippers" out there, which convert HDMI digital signals to the component video signals, and at the same time tell the copy protection gatekeeper that everything is ok -- of course, these devices are probably illegal since they circumvent a copy protection scheme (Digital Millennium Copyright Act, thanks so much), or you might be able to find an older Blu-Ray player with component outputs.

I'm pretty upset with the solution the industry has foisted upon the public. Almost as angry as what they did when they did away with the analog TV signals (so now only urban areas can get over the air TV). I wrote about that in a previous post.

Of course, most programming is going to be arriving at your house through digital means, like the internet, in the future, so maybe it doesn't matter. Except you might not be able to see it because you might try to copy it and that would destroy the entire entertainment industry.

And in case you were wondering, one of the reasons that Windows Vista was such a dog, is that it was designed, to a large extent, in support of protecting premium content; in other words, a large amount of the processing power of the computers running Vista is devoted to checking for copy protection. Vista is one of the best things to ever happen to Apple. New versions of Windows and the Mac OS are likely to devote huge resources to copy protection, as well. Linux, anyone? And there are inexpensive programs, readily available, that allow the copying of DVDs, and the Blu-Ray copy protection scheme has been broken; so why copy a DVD by playing it? There is no point to HDCP. It is a real disservice to the average consumer, and only a minor irritation to those that would make illegal copies of things.

Even today you can buy an older digital VCR that will copy from component inputs (I have one); so I could hook up my TiVo to the VCR and tape whatever I want, in HD 1080i.


Monday, January 4, 2010

Co-housing, Part 6: Matters of Condo, Federally-Insured, Owner Financing

My ambition this week was to discuss the variety of models of possible ownership of an interest in a co-housing project that did not entail the added expense of purchasing the land. One such ownership model is the condominium form. But the FHA is messing with the heads of condo developers who now are having some challenges in obtaining financing for their projects. The new regulations were supposed to go into effect on December 7, 2009, but now have been pushed back to implementation in February, 2010. These regulations may have profound ramifications for developers, condo associations, buyers and sellers.

Some of the highlights of these proposed changes are:

1. Any condo development approved prior to Oct. 1, 2008, loses its FHA approval and must formally reapply for approval for FHA endorsed mortgage financing.

2. No “on the spot” approvals for an end loan are available at the condo development site. All applications must go directly to FHA for processing. Instead,
a new system of project-wide approval by FHA Authorized Direct Endorsement Lenders will be implemented.

3. Existing condos, regardless of whether FHA-approved prior to Oct. 1, 2008 or not, must reapply for Department of Housing and Urban Development approval. This means that if a seller wants to sell his condo unit, even if he received a FHA loan in 2006, and he is a new borrower, he won't be able to get a FHA loan for his unit unless his condo has been re-approved by HUD.

4. The rule that only as much as 30 percent of a building's units can be owned by FHA-backed mortgagors is increased to 50 percent of units, but only until December 31, 2010. Some already-completed buildings can qualify to be 100 percent FHA-backed; but the applicable regulations seem pretty stringent, constricting the universe of readily-qualifying projects.

5. For new-construction pre-sales today, only 30 percent of a building has to be sold conventionally (without FHA-insured loans) before a buyer can get an FHA-endorsed mortgage. The threshold will rise to 50 percent via conventional sales at the end of December, 2010. When a developer builds a new condo project after that, the FHA won't insure a loan until at least half of the units have been sold to uninsured mortgage borrowers. That threatens a closed-loop dilemma for some projects: People can't buy with FHA-insured loans because, well, other people couldn't buy with FHA-insured loans. The FHA instituted this requirement, we’re told, to reduce its exposure to potential losses and to fight fraud. Taxpayers should be comforted by this last thought, except those sporting only 3.5% of the purchase price in cash.

February seems only a short time away; let’s see if HUD/FHA holds the line on these regulations through the proposed current implementation date.


Sunday, January 3, 2010

The future of computers and air travel?

Each year about this time , I think about what developments in technology are moving the fastest, and try to imagine where the conclusion of this technology leads. Sometimes I also think about government trends, if they affect technology. I have no crystal ball, so this is just for fun.

1. Transportation.

Lots of interesting changes relating to automobiles. The government paid people to pitch out perfectly good cars and buy something new, which should theoretically be better. I might have supported the program more if they required the purchase of an LEV or some sort of hybrid. Don’t get me started on saving the planet and global warming. Solar output has more effect than we ever will. And the Kyoto protocols are just made to enrich a small class of people who know how to trade carbon credits, and will have no noticeable effect on actual emissions. [OK So now you know where I am on that topic].

Cars are getting better. I used to think I would drive my old Mustang forever, except that I bought a new Jeep and it was so much nicer to drive, and 3-4 Jeeps later I bought my wife A G35 … You never really become dissatisfied until you experience something dramatically better. Then you get hooked and life is never the same. I love the new tech toys in cars. If you recall, I predicted that car GPS systems would get internet tied, and indeed now your GPS can show you the closest gas station with the cheapest gas, because it can talk to the internet and find stuff.

Something I did not predict (and still am not sure why you would want it) is the wireless hotspot built into the car. I mean, good grief. If you really need the net, get a smart phone that pretty much will do what a laptop will (although painfully for now), or get a netbook with a modem in it that talks to the wireless network. A hotspot in the car???

In terms of car technology, I think we will see the government taking a larger role. In the name of protecting us, cars will eventually have “police override” systems where The Man can shut off your car, and know exactly where it is at all times (like LoJack but for tracking law abiding citizens). In the name of crime prevention, they will be able to track us and stop us anytime. They will also be able to limit our speed (though they will lose revenues when they can limit our max speed to the speed limit and so the photo cameras will become useless). It would be a simple thing, for the privilege of driving on taxpayer roads, all taxpayer cars must be licensed. A requirement of licensing is that the tracking and limiting devices be installed and working. Penalties for disabling the smoke detectors in the lavatories…

Gas mileage will improve further. Where we are today, we could have been 20 years ago. I saw prototypes of special carburetors on Cadillacs which enabled them to get 30 mpg. The technology was suppressed. If anyone wants details to see if I am full of beans, just ask.

Eventually we will have to move away from petroleum as a fuel. There is still lots of it, however the infrastructure costs are prohibitive. We had to move away from horses else we would spend all the tax revenues cleaning up manure. That technology just didn’t scale well, just as automotive technology does not scale well past a certain point.

The way cities grow is that there is a populated area of low density, and over time commerce centers appear and the cities become crowded. Then, over time, people move out of the city because they want more space and want to get away from all the crowds. They want to live in a quiet neighborhood. Then of course the trend reverses and people want to move back into the city. It is cyclical. During the Real Estate boom, we all drove away from the city until we could qualify for the loan. Now those areas are ghost towns, and people are downsizing and moving back in.

The transportation problem in the city can be solved with mass transit – I’m impressed with the systems in Portland, San Jose, and other cities. Maybe there should be some city limit where past that point you park and don’t drive except for commercial deliveries and such. Single persons in cars must park and use transit.

Outside the cities, cars are fine, even in the suburbs, and are sustainable. The biggest pollution and infrastructure problem is with people driving to work – this can be solved with telecommuting and mass transit, for the most part.

This brings us to the other transportation problem, air travel. I remember growing up that it was a privilege to ride on a plane. It was costly, and it was mostly very nice. Then the likes of People’s Express made it more like riding a bus – and mostly the bus model won. Today, for any airline trip, you must get to the airport (30 minutes) and be there 90 minutes ahead of the flight (because they want to see if there is a bomb in your shorts), so you have already donated a couple hours. Plus you have to get picked up or get a rental car at your destination (or use public transport), and you might have to wait for your luggage (another half hour and $20 for the first bag). Plus you have to spend time choosing the right flight, etc. etc. Let’s call it 2-3 hours for the convenience of that 45-minute flight. How far can you drive in 2-3 hours? 100-150 miles? So the trade off of whether to fly or drive is getting different. It isn’t just a cost thing, as there are cheap ways to fly; it is about having to take your shoes off, having a government employee with no legal accountability pick through your luggage, and then having to sit for a couple hours in a seat meant for a supermodel, next to someone who is supersized with a screaming kid.

I love air travel. Not. My impression is that the flying public is about to the breaking point, to where flying has become so inconvenient that people only fly the scheduled airlines because they have to. Like when I have to fly across the country to see my Mom, and driving is impractical. So what is the answer?

For shorter trips, one way around the rules is for a group of people headed the same place to charter a plane. The rules are different for charters of smaller planes. The TSA rules apply to larger planes. I expect small companies to appear which negotiate rates and schedules for charters, each plane holding at most 10-12 folks, no restrictions on what you can bring, no security inspections. You leave from the general aviation side of the airport, not the airline side. You can take a whole bottle of shampoo and keep your shoes on.

Of course, as soon as this starts, the TSA will decide that there are so many that they are missing out on another revenue opportunity and declare that charters of any size must also go through the screening. See, it isn’t about airline safety, never has been. It is about control. Nonetheless, I think we will see charter organizers grow dramatically in the coming months and years.

Ultimately, I think we will see personal aircraft. We haven’t already, because the technology hasn’t been there. Flying a plane is not like driving a car – there are problems if the engine quits. You better be on the stick and know what you are doing. Technology can change this. The days of the Jetsons are coming, where our cars will be able to make the 500 mile trips in a couple hours. To do this, a few things have to happen. One is the successor to ADS-B, a system letting air traffic control know exactly where you are all the time. But ATC will also want to have positive control of your vehicle during the enroute phase of your flight, so you are just along for the ride. This also means that if the engine quits, there needs to be a safe and reliable way to get you back on the ground without killing anyone. The ballistic parachutes are one possible solution (some planes have these now) but I think a breakthrough in propulsion or levitation or crash proofing will be needed.

The beginning and end of the journey would be simpler, you ask to be released from ATC and you tell them where you want to land, and they land you there and give you back the controls.

This won’t be happening this year, maybe in 10 or 15.

2. Computers

Interesting toys out this Christmas. I got a Star Wars Force Trainer. You wear this headset and think the right thoughts and you can raise or lower a ball in a tube (you control the speed of a fan). The device interprets your brain wave patterns and does what you think. I was amazed by it, I understand how it works but it is still amazing.

Look for this technology to solve the problem of typing on those agonizingly small keypads for texting. They should be able to replace most keyboards and mice, eventually. I’m waiting for the other direction: placing information into someone’s mind. I read that this was happening many years ago, but have not heard anything about it lately. Lots of SF books talk about it – and there is a device used on Stargate that has this capability (although it is not quite what I was expecting in terms of a computer interface).

There is an upsurge, lately, in research about the nature of consciousness. People are thinking pretty hard about it. I think it will be in the next 10-20 years that we see machines with emergent consciousness, or at least machines which pass the Turing test, machines that we won’t be able to tell that they are not conscious, whether they are or not.

There are already many “expert systems” which have all the knowledge of a specific problem area, and they regularly diagnose problems much more accurately and quickly than trained technicians. The best chess, checkers, and other non-deterministic games (where the problem space is so big that there is no way to solve it exactly from the first move – tic tac toe is deterministic; chess is not) are already being played by machines at levels at or exceeding the best human players. So in terms of being as good as people at specific tasks, computers are already there; where they lack is in spontaneity and creativity. There is some research in the quantum mechanics areas which may provide solutions. But it is coming. Our understanding of the nature of consciousness is far from complete, but we probably understand enough that we can build a machine that seems like it is conscious.

In the near term, we will continue to see a merger of machines in two areas. One, in the home television and computer where these devices will merge, and rather than having a cable connection and an internet connection, all content will be delivered over the net and the thing we call cable service and phone service will disappear. All Is data, and there is no reason to support two separate data services. Already, the cable boxes at our homes are live devices on the network; that is, they are networked on a data network similar to the internet and home networks. They have individual addresses and can send and receive data.

The other technology which is coming together is laptops and cellphones. Laptops are shrinking (see netbooks) and cellphones, which were once huge and have shrunk to almost nothing, are getting bigger again, bigger screens, more storage, longer battery life, keyboard, corkscrew, multitool, mp3 player, you get the idea. So the ultimate will be a netbook that fits in your pocket, you wear glasses to see the display, and it reads your brainwaves to get input. Well, not this year, but it is coming.