Affordable Housing Institute : US

What makes property valuable?  As this curious but illuminating Boston Globe story reports, it may be something of value only to a particular submarket:

 

SHARON — They are both 1950s-era ranch houses, snug dwellings with three bedrooms, hardwood floors, and each with a fireplace. They are within a block of one another. But it is a block that in Sharon can mean thousands of dollars difference in price. For these two homes, the difference is $25,000.

 

What makes one side of the street worth $25,000 more than the other?  The answer tells us something profound about markets and pricing:

 

In a convergence of real estate and religion, home values in Sharon are determined not only by school quality, waterfront views, and commuter rail proximity.  There is the added factor of a home’s positioning in or out of the symbolic enclosure known as an eruv, defined in Judaic religious law as an area where observant Jews are freed from the Sabbath prohibition on carrying items — whether a prayer book or a baby.

 

 

‘‘If we want to walk to synagogue or to a friend’s home, the eruv is crucial,’’ said Howard Goldfischer of Minneapolis, who is considering relocating to Sharon with his wife and three children. He took in the view of a backyard of a Sharon home he visited. (Globe Staff Photo / Barry Chin)

 

The theory behind the eruv, drawn from legal principles in the Talmud, or the codes of Jewish law, is that the poles and wires that surround it form abstract doorways to the outside world. Everything inside the eruv is considered an extension of the home, where carrying items on the Sabbath is permissible. In a sense, the eruv is a big backyard. The word ”eruv” means ”to mix” or ”to join together.”

 

The eruv is defined by a subgroup of the market, for a subgroup of the market:

 

In Sharon, the eruv is operated by the Sharon Eruv Society, a nonprofit organization whose members each week walk its boundaries to make sure strings are secure and telephone pole wires unobstructed. The society collects voluntary annual dues for upkeep from those living within the eruv.

 

The eruv, which is intrinsically religious, is almost entirely symbolic, with the wider market largely oblivious to its presence.  (Trouble could arise if the boundaries were not entirely symbolic, or if the space sought to secede from the civil laws of the wider community.)

 

In Sharon, the eruv has been a comparatively quiet matter. Town officials have heard no opposition since Jews in the area conceived the idea for it 15 years ago, said Town Administrator Benjamin Puritz. Indeed, Jews and non-Jews tout the eruv proudly as a symbol of the ecumenical character of Sharon, which in addition to seven synagogues counts nine Christian churches and one mosque.

 

However ecumenical, however symbolic, the eruv has tangible consequences in real estate terms — it changes market price.  In this it is not unique: I remember reviewing the appraisals for a very large affordable apartment complex in Williamsburg, a Brooklyn neighborhood that is the headquarters location of the Lubavitcher rebbe, a particular Jewish sect. 

 

Bridge for sale!

 

In that case, close proximity to the rebbe was a clear locational premium that reflected in higher rents, and in Sharon’s eruv, it translates to higher prices:

 

But in a heated real estate market, the eruv is a pocket-buster for some, adding as much as 10 percent to the price of a home, according to realtors, particularly if the home is close to the synagogue.

 

The premium arises partly because the supply is constrained.  In effect, the eruv designation is an unusual and private form of zoning (more on zoning here and here) that adds value because it is restricted:

 

Iris Blitstein, a Sharon resident who works at Young Israel of Sharon, has three young children and lives within the eruv. But her home is 1.3 miles from her synagogue, a distance she must walk on the Sabbath if she wants to attend services. She would love to find a house closer — but that, she said, is not financially feasible — within the eruv.

 

”You make a sacrifice for what’s important,” she said. ”As an Orthodox Jew, you know you are going to pay the price.”

 

What, the firmly secular reader may wonder, does this have to do with affordable housing?  Simply this — symbolic considerations can drive subgroups, and subgroups can drive market value.  Indeed, the definition of fair market value, drilled into every appraiser and set forth at the beginning of every appraisal, is:

 

Fair Market Value

 

The highest price, in terms of cash, between independent parties dealing at arm’s-length, both fully informed and neither under any undue compulsion to act.

 

Inherent in this definition is highest – and when a subgroup of consumers values something more than others do, up goes its price.

 

Here then is the paradox of markets.  Though one swallow does not make a summer, and one buyer does not make a market, the market is made by less than all the buyers.  Somewhere between one and everyone, the mass of buyers assumes criticality and becomes the market-defining behavior. 

 

But how many?  That’s still a conundrum.

 

 

How many horses does a market require?

Send post as PDF to