Lead Story…. Wikipedia defines a Company Town as:
…a place where practically all stores and housing are owned by the one company that is also the main employer. Company towns are often planned with a suite of amenities such as stores, churches, schools, markets and recreation facilities.
The best examples of company towns have had high ideals; but many have been regarded as paternalistic or exploitative. Others developed more or less in unplanned fashion, such as Summit Hill, Pennsylvania, one of the oldest, which began as a LC&N Co. mining camp and mine site nine miles from the nearest outside road.
There was a time in American history where company towns were quite normal and that time was back before advent of the 30 year mortgage when most Americans couldn’t afford a home. These towns were typically built and managed by companies in extractive industries (coal, metal mines, lumber, etc) which were often located in rural areas. Building a town with living accommodations and amenities solved the issue of housing a large number of people in regions that had little infrastructure save for the large extraction companies themselves. It also had the ancillary benefit of giving a company more control over it’s workforce. Company towns were fairly commonplace in the 1800s but began to disappear in the early 1900s as growing affluence and the rise of the automobile allowed for more mobility.
The notion of the company town has become little more than an entry in the history books. However, it could be on it’s way back thanks to the nation’s most innovative but also most expensive and chronically under-supplied regions from a housing standpoint: the Bay Area. The average Alphabet (Google parent company) employee makes somewhere between $80k and $200k per year in annual salary (two important caveats: first this is nationwide – not just the Bay Area which is likely higher, second there are typically benefits and stock compensation on top of this). However, even Google’s highly paid, highly educated workforce is struggling to find housing in the Bay Area. Laura Kusisto of the Wall Street Journal wrote a story earlier this week about how the tech giant is looking to a creative solution – modular homes – to address it’s employees housing woes. From the WSJ (emphasis mine):
The Mountain View, Calif., company is finalizing an order to buy 300 apartment units from Factory OS, a modular-home startup, in a building likely to serve as short-term housing for Google employees, according to executives from both companies.
The expected value of the deal is $25 million to $30 million, according to Rick Holliday, founder and chief executive of Factory OS. It would be the first order for the company.
Modular-building technology, essentially factory-built homes that are pieced together onsite, could help reduce the cost of construction in the Bay Area by 20% to 50%, experts said.
“Anything that can help us to move forward with a greater knowledge of how we can produce housing more effectively is something we’re interested in,” said John Igoe, director of design and construction at Google. “We absolutely are confident that it will work. Hopefully it doesn’t become false bravado.”
To be sure, modular-building companies in places like California and New York have failed over the years, and the approval process can be just as difficult if not more so, because the technology is still developing. And so far, the cost savings haven’t been as big as developers have hoped, though experts predict costs will come down sharply as the industry evolves.
I find it rather interesting that a modern day tech juggernaut is turning back the clock to employer-owned housing to solve a shortage that is now plaguing highly compensated employees. For those of you who don’t reside in a crazy, supply constrained market things really have gotten this bad. There is no small irony that some of the best paid employees on earth are going to be relying on a housing arrangement that was initially created as a means to shelter (and potentially take advantage of) poor laborers.
I’ve pointed out several times recently how the construction industry in the US is woefully inefficient and has failed to incorporate modern technology. Modular construction is one potential solution and this is hopefully a step in the right direction. I have serious doubts that Google’s company town model is the way to go but I am encouraged to see that a tech giant is investing a substantial amount of money that could help to bring the still-developing technology into the mainstream.
Disconnect: The Federal Reserve raised rates another quarter point this week despite slowing inflation and sluggish economic data, calling the slowdown transitory. See Also: Either the Federal Reserve is wrong or the bond market is wrong because they both can’t be right.
Disincentives: America is the land opportunity but are we encouraging the wrong kind of entrepreneurship?
Meh: How minimal corporate pricing power, lackluster productivity growth and an aging workforce undercut employers’ ability to increase wages, complicating the Fed’s plans.
Slowing: Commercial real estate owners paid off maturing loans at a slower rate in May as they found it harder to refinance their buildings
This Ends in Tears: Subprime is making a comeback but not many brokers are still around who remember how to put together a subprime loan. IMO, regulations have over-corrected and there is definitely a place for lending to people with less than stellar credit. That being said, if you don’t see the problem with the passage below, kindly remove your head from your ass and come back to read the rest later:
“I knew a mortgage was a loan for a house,” said Mr. Boyd, who was recruited by his boss, Jon Maddux, after selling him a Calvin Klein suit at a local outdoor mall. “I came in just a blank slate.”
Before he co-founded Drop Mortgage, the parent company of FundLoans, in 2014, Mr. Maddux ran the website YouWalkAway.com between 2008 and 2012. The site charged homeowners on the brink of foreclosure $995 to learn how to leave their debt behind.
Bargain Basement: Amazon is pushing into Walmart’s turf by slashing the price of Prime membership by almost 50% for people on federal welfare.
Rise of the Machines: Human stock investors are going extinct as stock picking by people drops to only 10% of trading volume.
Pop: Last summer, Pokemon go was the fad that peaked hard and then vanished. This summer, it looks like it’s going to be fidget spinners.
Drama: This story about the Big Short War between Bill Ackman, Dan Loeb and Carl Icahn over Herbalife makes hedge fund titans sound like a bunch of vindictive teenagers.
Chart of the Day
How is This Possible? A brawl at a Waffle House led to the arrest of five female relatives and it didn’t happen in Florida.
Aspiring Cereal Killer: A northern California man was arrested after shooting another man with a flare gun shell stuffed with Rice Krispies.
I Give Up: A new survey from The Innovation Center for U.S. Dairy found that 48% of respondents aren’t sure where chocolate milk comes from and 7% of respondents think that it only comes from brown cows. These were adults.
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