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Unsanitized: The COVID-19 Report for Oct. 19, 2020

Commercial Real Estate and the American Lifestyle Shift

Plus, our special report on universal family care

 

An empty store in a mall being used as a voting center in Overland Park,
Kansas. What will this store become in a couple weeks? (Charlie
Riedel/AP Photo)

First Response

**** All week long, we are rolling out our
special issue on family care : the
crisis that exists today, and how it can be fixed. We have seen family
care exacerbated in the pandemic, between child care deserts, the lack
of paid family and medical leave, and nursing home facilities turned
into death traps. But I started talking with advocates about a family
care issue before the pandemic, because the needs were so great. The
current system hurts families, who cannot access or afford care; hurts
care workers, who paradoxically make up one of the fastest-growing and
lowest-paid professions in our society; hurts care providers, who are on
the verge of going extinct

(at least the ones that aren't nursing homes owned by private-equity
financiers which exploit workers and patients).

We can fix this for all generations across the life cycle, and we can do
it through social insurance that spreads costs so they don't hit
families at their most vulnerable. We know it would work: millions of
workers got a paid sick leave benefit through one of the early
coronavirus response bills and it's worked to reduce case counts by
tens of thousands
.
But at the end of the year it's going to go away, for no reason. We
can instead identify this moment as the time we recognized that families
and workers need support, to fill in this neglected part of the safety
net. It's time for universal family care.

Click to Support The American Prospect

First we have to identify the problem, which we will do today and
tomorrow. The rest of the week we'll be running stories on solutions.
Here's today's lineup:

* An introductory piece by me
,
with some biographical background, on why we need universal family care.

* Janelle Jones of Groundwork Collaborative on the failed economics of
care work
.

* Kimberly Morgan of George Washington University on the missed
opportunities to fix this system

throughout U.S. history.

* Bryce Covert on the small businesses that provide child care
, and how they
struggle to survive.

* Marcia Brown on care worker organizing
,
which has made marginal gains through force of will.

* Tasmiha Khan on family care and the pandemic
, and
the impossible choices facing families.

You can see all of the stories throughout the week at
prospect.org/familycare . I'll be
listing the stories here too.

Support Independent, Fact-Checked Journalism

The End of Commercial Real Estate

Here at Unsanitized we've seen the crash in commercial real estate

coming for some time, both in retail and office space. It doesn't take
every business to go under, or every office to go virtual, to create a
sustained problem. Because in a connected economy, a permanent shift,
even a modest one, has ripple effects.

What does it mean when offices no longer function? All of the businesses
that support office workers-lunch counters, drugstores, dry cleaners
near the office (dry cleaning itself is in crisis, I'd suspect, since
not as many people are wearing business attire)-struggle. When anchor
stores in malls go away, so does the foot traffic, hurting all the other
stores in the area. The demise of hotels, made worse by the elimination
of business travel (which is probably a long-term trend), makes it that
much harder to sustain tourism.
All of these properties pay taxes, so the local tax base erodes. To the
extent that commercial property mortgages are tied up in securities, or
just because the loans default, you have this leak out to the financial
sector. This is already clear in big cities like New York, where debt
prices are falling
.
One-quarter of all hotel loans are in "special servicing" (a sign of
financial stress), and nearly as many retail property loans.
Foreclosures and defaults can spread from the landlord of one property
that has a mall, let's say, to another in their portfolio that's a
block of apartments. It's a vicious cycle downward.

To many it's an inevitable cycle. We have been overbuilt on retail for
a number of years in America, especially compared to other
industrialized countries. We don't actually need quite this much
retail. If offices can function virtually-though I think there are
some hardships to that-it's more sustainable for their businesses.
It's worth being skeptical of bailing out the commercial real estate
sector for a host of reasons. The market has been largely frozen in
place, on the expectation that things will bounce back to normal. But
what if it would be illogical and unnatural for that to happen?

**Read all of our Unsanitized reports here**

We Depend on Your Donations

I got at this back in June with a commentary about stranded assets
.
Malls have lost value, office buildings have lost value, business travel
has lost value, and so on. People have changed their habits during the
pandemic and may not change them back. What does that mean to an economy
reliant on those old habits? Something as simple as a small shift from
restaurants (which charge sales tax) to groceries for in-home meals
(which don't) can devastate municipalities if nothing is done to
compensate.

As I wrote in June: "Our economy is so dependent on a particular type
of consumer culture, and that will have to change. One of the reasons we
won't snap back so quickly economically is due to the wrenching steps
it will take to get to that change."

There's kind of a "Wile E. Coyote hovering above the chasm" act
going on, with property transactions nearly non-existent. That's
because making a sale would actually set a market price, and reveal the
worst. It's not sustainable to just have commercial real estate float
along. If all these loans were bank-owned, well the banks are flush from
trading revenue, they can afford to give breaks. It's the
investor-owned loans where you will see the stresses.

This is not a 2008-level event. The entire commercial mortgage-backed
securities market is about one-tenth (maybe less, I have to go back and
check the numbers) of the residential mortgage-backed securities market
during the housing bubble. But it will overlay financial stress on top
of existing economic stress. And it's about more than subprime
securities trading back and forth: it's about a permanent change to
how we live, and how that disrupts the economic course.

Days Without a Bailout Oversight Chair

207
.

We Can't Do This Without You

Today I Learned

* The "biggest wave
"
of the virus is staring right at us. (CBS News)

* China's economy is breaking free of the rest of the world

because their coronavirus crisis is over. (New York Times)

* It's not going to be a great holiday shopping season
.
(Wall Street Journal)

* Israel's second lockdown is being routinely ignored
.
(Washington Post)

* Horrors: if elected, the next president might "listen to the
scientists
."
(HuffPost)

* 110,000 Californians have bought a gun

since the pandemic began. (Los Angeles Times)

* Who knows 10,000 people

that they would invite to a wedding? (New York Times)

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