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Maybe they haven't got it exactly right, but this shoe seems to fit rather well: https://www.strongtowns.org/journal/2017/11/27/the-paradox-of-persistent-vacanc
by ip26 7y ago
Maybe they haven't got it exactly right, but this shoe seems to fit rather well: https://www.strongtowns.org/journal/2017/11/27/the-paradox-of-persistent-vacancies-and-high-prices https://www.strongtowns.org/journal/2017/11/27/the-paradox-o...
In summary, lowering rents to market price lowers the value of the building and makes the project insolvent.
- TheOtherHobbes 7y agoYou can't "make something insolvent". A project is either solvent or it isn't. You can make a mistake about estimating solvency, but that's the fault of your poor estimation skills and your inability to read the situation accurately, not the situation itself. If a project isn't objectively solvent and banks are still lending on it, then the problem is higher up the food chain - a lending "market" based on moral hazard which encourages poor decisions that blow up later. This is one of those situations where the people on the ground - shopkeepers, small restaurant entrepreneurs, and their customers - are being punished for policy errors in the financial and real estate industries.
- ip26 7y agoA project is either solvent or it isn't If you read the link, the point is the project is able to pretend it is still solvent when it isn't anymore.