1. home and garden

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| MONDAY, JUNE 9, 2014
INTERNATIONAL NEW YORK TIMES
business
A DEVICE TO HELP FARMERS
TEND CROPS FROM AFAR
PAGE 14 | BUSINESS FRONT
How to fix Britain’s housing crunch
Hugo
Dixon
POLITICAL ECONOMY
Britain’s main economic problem is
that the supply of homes is not rising
nearly as fast as demand. This does not
just create the risk of a new housing
bubble; young people are finding it increasingly hard to find places to live,
especially in London and southeast
England. So I make no apologies for returning to the topic after only three
weeks.
The solution is not mainly to build
new homes on greenfield sites. It is understandable that Britons don’t want to
pour concrete over green and pleasant
land. Rather, the thrust of policy should
be to use existing housing stock much
more effectively, while building new
homes in cities.
Look first at the existing stock. It’s
not quite as tight as people think, but a
lot of it is underoccupied or even unoccupied. Rich people, including foreigners who buy houses and sometimes
leave them empty for large chunks of
time, have lots of spare space. So do
many old people, who are often living
in homes that suited them when they
had large young families.
There is nothing wrong with people
wanting to have big houses. But the
government shouldn’t be encouraging
them to do so. That is precisely what
the current tax system does. Not only
is housing woefully undertaxed; expensive homes are taxed much less as
a proportion of their value than cheap
homes. Effectively, the poor are subsidizing the well off.
This is why the highly regressive
Council Tax should be reformed so it is
a flat percentage of the value of each
home. About 1 percent a year would
probably be the economically sensible
rate — meaning somebody with a 1 million pound, or $1.68 million, house
would pay £10,000. This would give
people who are rattling around in big
houses a powerful incentive to move
ANDREW WINNING/REUTERS
Homes under construction in south London. Both the International Monetary Fund
and the European Commission recently highlighted Britain’s housing problems.
Use existing housing stock
much more effectively, while
building new homes in cities.
somewhere smaller. The extra money
raised from this tax, and it would be a
lot, could be recycled to the economy
via lower income taxes.
There is no chance of such a radical
change, even if it was phased in over
several years, as it should be. The politics would be horrendous. That said,
something more modest on these lines
may be politically feasible.
By contrast, the politics of another
tax idea — imposing an extra annual
levy, of say 2 percent, on homes owned
by ‘‘non-doms’’ — is attractive. Nondoms are people who live in Britain but
are not domiciled there for tax pur-
poses. There is a widespread feeling
that London, in particular, has become
a playground for the rich and famous
from abroad.
Again there is nothing wrong with
this, so long as non-doms pay a fair
chunk of tax. At present, they can pay
£50,000 a year to avoid tax on their nonBritish wealth and income. With a levy
of 2 percent, an oligarch with a £50 million home would instead be paying £1
million. That would not just be popular.
It would raise some money and take
the heat out of the top end of the London market.
A third idea, which also might be
popular, would be to tax empty properties more. At present, they enjoy a
Council Tax discount. Taxes could also
be imposed on undeveloped land. That
would encourage developers to get a
move on and build homes rather than
sitting on land and waiting for prices to
rise.
So much for using the existing housing stock and land more effectively.
What can be done to build more homes
in cities, especially London?
One big idea is to build upward, with
more skyscrapers and extra floors on
existing buildings. At the moment, this
is difficult because of a cat’s cradle of
planning constraints. Why not give the
mayor of London the right to determine the height limits allowable in the
nation’s capital? The mayor is in a
good position to trade off the costs and
benefits.
Another radical idea, which some
government officials like, would be to
make more efficient use of state property. Nobody has done a comprehensive survey. But there is thought to be
hundreds of billions of pounds’ worth
of real estate owned by the army,
health service and so forth. Much of
this is underutilized.
The solution would be to take away
the ownership of this property from the
current occupants and charge them a
market rent for using it. They would
obviously have to receive an extra
budget to pay that rent so there would
be no benefit in the short run. But, over
time, the occupants would have an incentive to release property they did not
need — which could then be redeployed for housing development.
The state could even privatize its
property holdings. That would have a
further benefit: cutting the national
debt.
Yet another idea would be to encourage industry to clean up brownfield
sites — plots of land that used to contain factories, gasoline stations and the
like. It is partly because such land is
contaminated that developers prefer to
build new homes on greenfield sites.
Industry should pay the cost of
cleaning up its own mess. The government could impose a general duty to do
this, dealing with future contamination.
Meanwhile, it could impose a tax on industry to pay for cleaning up existing
brownfield sites.
In the past week, both the International Monetary Fund and the European Commission have highlighted
Britain’s housing problems. There are
solutions. Politicians just need the guts
to grab them.
Hugo Dixon is editor at large of Reuters
News.
REUTERS BREAKINGVIEWS
SoftBank sees T-Mobile deal as a good bet
SoftBank may as well roll the dice on a
$32 billion American mobile deal. The
Japanese group’s subsidiary, Sprint, is
pushing ahead with plans to buy T-Mobile U.S., creating a strong No. 3 in the
American wireless sector. The odds are
high regulators will block the deal. But
$30 billion of synergies and the alternative prospect of a miserable future justify the risk of paying a big break fee.
The antitrust authorities have
signaled opposition to the deal. ‘‘The
mobile business is today, with four carriers, a competitive business, and it’s important it stays that way,’’ Tom Wheeler,
chairman of the Federal Communications Commission, said in December.
Regulators previously blocked AT&T’s
$39 billion offer for T-Mobile.
The expected value from a merger
may justify a long-shot bid. Joining
Sprint and T-Mobile would generate
savings worth up to $30 billion, Bernstein Research estimates.
Sprint would be paying a premium of
about $10 billion, based on T-Mobile’s
American market value before bid talk
heated up this year. If the transaction is
half stock and half cash, that would leave
Sprint, which has a market cap of about
$36 billion, with roughly 70 percent of the
combined company. In that scenario,
current Sprint shareholders would receive about $14 billion of the extra value.
If the termination fee is $1 billion —
typical for a deal of this size — it makes
sense for Sprint to proceed even if
there’s only a one in 10 chance regulators let it proceed. SoftBank thinks the
odds are better. The industry’s network
effects and capital intensity mean AT&T
and Verizon have a huge advantage over
smaller rivals. The two biggest players
generate 100 percent of the industry’s
free cash flow. The Japanese company
argues that there is only the illusion of
competition now. If Sprint and T-Mobile
merge, there will be real rivalry.
Although there is a gambler’s logic to
Sprint’s possible leap, there is a more
pressing reason. The cash the company
generates from its operations isn’t close
to covering its capital expenditure.
Sprint is losing subscribers, making it increasingly hard to compete with bigger
rivals. The prospect of a miserable
standalone future gives SoftBank all the
more reason to roll the dice. ROBERT CYRAN
A peek into Alibaba through a soccer team
Jack Ma’s decision to buy half of
China’s most popular soccer club has
done prospective investors in Alibaba a
favor. The $192 million investment in
Guangzhou Evergrande, which Mr. Ma,
Albaba’s founder, hatched over a drinking session this past week, will not affect Alibaba’s value when it goes public
later year. But it offers a priceless insight into how the company works.
If Alibaba has a good strategic reason
for owning a stake in Guangzhou Evergrande, the reigning Asian champions,
Mr. Ma is keeping quiet about it. He
joked at a news conference that he does
not know much about soccer. The investment is the latest example of
Alibaba’s scattershot approach to dealmaking, loosely designed to expand it
into new areas like entertainment and
health. In the last year it has bought
stakes in an appliance maker, an owner
of department stores, a mapping company, an online video service and a
Hong Kong-listed media group.
It is not unheard of for companies to
own sports clubs. Ted Turner used the
Atlanta Braves baseball team to build
his cable television business. The
Rupert Murdoch-owned News Corporation owned the Los Angeles Dodgers
baseball franchise and tried unsuccessfully to buy the British soccer team
Manchester United. The Chinese conglomerate Citic’s assets include a
Beijing soccer club. Yet such investments have generally been disappointing from a financial perspective. Control of sports broadcasting rights has
proved more lucrative.
The Guangzhou Evergrande investment will not change Alibaba’s valuation, which a Breakingviews calculator estimates at $113 billion. Yet it is
invaluable in demonstrating how the
company operates. After the initial public offering, a group of 28 senior executives led by Mr. Ma will nominate the
majority of Alibaba’s board of directors.
Would-be shareholders will be passive
spectators with little power.
The latest deal should leave them
with no illusions about exactly what to
expect. PETER THAL LARSEN
For more independent commentary and
analysis, visit www.breakingviews.com
Uber attains eye-popping new levels of funding at $17 billion valuation
BY MICHAEL J. DE LA MERCED
Only a few months ago, Silicon Valley
start-ups were celebrated for drawing
investors into paying for multibilliondollar valuations.
But Uber, the car ride service, has
climbed to an entirely new level.
The company announced on Friday
that it had raised $1.2 billion from investors at an eye-popping $17 billion
valuation.
It is the biggest haul so far by any
member of Silicon Valley’s ‘‘11-digit
club,’’ those companies that have
gained valuations of at least $10 billion.
Among them are Airbnb, the home-rental site; Dropbox, the online file-storage
provider; and Xiaomi, a Chinese handset maker.
But Uber’s new net worth, which excludes the latest round of money, is one of
the highest ever attained by a start-up.
And it is much higher than it was just
10 months ago, when the company
raised money at a roughly $3.5 billion
level.
At its new valuation, the four-year-old
service commands a higher worth than
traditional car rental companies like
Hertz Global Holdings and Avis Budget
and almost equal to those of the celebrated tech ventures Twitter and
LinkedIn.
Behind the soaring numbers is the
hunger of investors with money to burn
who are eager for a piece of fast-growing companies. About $10.7 billion was
invested into start-ups in the first three
months of the year, the most in at least
three years, according to Dow Jones
VentureSource.
Much of that money has gone into the
biggest businesses in their markets,
with investors betting that they will continue to post enormous growth. But
some second-place players are cashing
in, too: Lyft, a smaller car service provider, raised money from investors like
the Chinese e-commerce giant Alibaba
Group at a roughly $700 million valuation earlier this year.
Still, few companies have proved as
alluring to would-be financial backers
as Uber, which four years ago pioneered
a new kind of business model, one in
which a start-up replaced a part of
users’ daily lives. Its service allows
users to call up cars from their smartphones, a category that has swelled
with imitators and competitors like Lyft, which operates in dozens of cities.
Rare now is the on-demand services
start-up that doesn’t bill itself as ‘‘the
Uber of’’ housecleaning or landscaping
or even dental work.
But Uber, co-founded by its chief executive, Travis Kalanick, remains the
king of the hill it created. It now runs in
128 cities in 37 countries around the
Traveler’s forecast
C ..................... Clouds
F .......................... Fog
H ........................ Haze
I.............................. Ice
PC.......... Partly cloudy
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Abu Dhabi
Athens
Bali
Bangalore
Bangkok
Beijing
Berlin
Brussels
Buenos Aires
Kolkata
Chengdu
Chicago
Dhaka
Frankfurt
Geneva
Hanoi
Helsinki
Hong Kong
Hyderabad
Islamabad
Istanbul
Jakarta
Johannesburg
Karachi
Kiev
Kuala Lumpur
Lagos
London
Los Angeles
Madrid
Manila
Miami
Moscow
Mumbai
Monday
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Mr. Kalanick himself has hit pay dirt
with Uber. His first venture, a search
engine created while he was still in college, filed for bankruptcy within three
years. Akamai Technologies bought his
second for $19 million.
The new money Uber has raised could
come in handy as it battles competitors.
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AIRPORT PROVIDES NEW ACCESS
TO A NICARAGUAN ISLAND
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Meteorology by AccuWeather.
Weather shown as expected
at noon on Monday.
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The company and Lyft are dueling for
dominance in more than a dozen cities,
with each dropping prices to woo customers.
But the oversize new funding round
goes hand in hand with Mr. Kalanick’s
ambitions for the company. Not content
to stick with arranging car rides, the 37-
INTERNATIONAL TRAVELER
15
Tuesday
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43/32 109/90 S
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RICHARD PERRY/THE NEW YORK TIMES
A New York City cab driver using the Uber app on his smartphone. The software, which
connects drivers with passengers, is shaking up the taxi industry in dozens of cities.
year-old entrepreneur has talked about
creating a logistics network where its
drivers ferry goods around cities. One of
its nascent experiments is running a
courier service in New York City known
as Uber Rush.
By setting up shop in the real world,
however, Uber has bumped up against
tenacious interest groups determined to
defend their turf. The service notoriously has battled the taxi commission in
Washington, with Mr. Kalanick deriding
one set of rule changes as ‘‘taxi protection at its finest.’’ And taxi drivers in
Chicago and other cities are seeking to
form a national union, in part to battle
the success of Uber and other services.
Mr. Kalanick said at ReCode’s Code
Conference two weeks ago that his company was in a political campaign, and
called the taxi industry his opponent.
In a potential recognition that it had
many more battles to fight, the company hired a top official from New York
City’s Taxi and Limousine Commission
last month as its first head of policy development and community creation.
But the company said it had more
work to do. In his blog post, Mr. Kalanick wrote: ‘‘This ‘Uber’ way of life is
really a reflection of our mission to turn
ground transportation into a seamless
service and to enable a transportation
alternative in cities that makes car ownership a thing of the past.’’
20
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SS....... Snow showers
T ........ Thunderstorms
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High/low temperatures, in degrees Celsius and
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world. And though it began as a dispatch network for professional chauffeurs in Town Cars and sport utility vehicles, its most prominent offering is
UberX, where drivers use their own
cars.
Its prevalence has prompted some
users, including high-powered financial
executives, to give up their cars and rely
solely on the service for their driving
needs.
‘‘Uber is changing the fabric of these
cities,’’ Mr. Kalanick wrote in a company blog post. He added: ‘‘With our
growth and expansion, the company
has evolved from being a scrappy Silicon Valley tech start-up to being a way of
life for millions of people in cities around
the world.’’
Since it is still privately held, Uber
does not need to disclose its financials.
But Mr. Kalanick told The Wall Street
Journal on Friday that the service,
which collects a roughly 20 percent
commission from its drivers, doubled in
revenue every six months.
It is that extreme growth that has
drawn in financial firms with deep pockets. The latest fund-raising effort was
led by Fidelity Investments and included Wellington Management, Summit Partners, BlackRock and Kleiner
Perkins Caufield & Byers. Existing investors like Google Ventures and Menlo
Ventures also participated.
T-STORMS
RAIN
SHOWERS
Nairobi
New Delhi
New York
Nice
Osaka
Paris
Riyadh
Rome
San Francisco
Seoul
25/15 77/59 C
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STATIONARY
ICE
FLURRIES
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31/18 88/64 S
20/13 68/55 PC
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COMPLEX
SNOW
Shanghai
Singapore
Sydney
Taipei
Tel Aviv
Tokyo
Vancouver
Vienna
Vladivostok
Washington
TYPHOON
HIGH LOW
MOSTLY
CLOUDY
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STORM
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Nicaragua is betting that a new $10 million airport will increase tourism on
Ometepe Island, a Unesco Biosphere
Reserve known for its towering twin
volcanoes.
The island has had ferry service, but it
has never been particularly convenient
to get to. Nicaragua’s national carrier,
La Costeña, has begun flying round trip
from Managua to Ometepe on Thursdays and Sundays on 12-seat planes,
with fares starting at $50 each way. The
airport is essentially a 1,500-meter airstrip with a small customs building.
The program ‘‘Survivor’’ filmed its
‘‘Redemption Island’’ season on Ometepe, and in recent years it has become
an increasingly popular destination for
backpackers and hikers who come to
hike up the 5,200-foot Concepción and
4,500-foot Maderas volcanoes.
TOUR COMPANY OFFERS
A TASTE OF AMSTERDAM
Visit a snoepwinkel (candy shop) to
taste several varieties of Dutch liquorice,
sample smoked sausages at a slagerij
(butcher shop), and eat herring ‘‘the
Amsterdam way’’ (served with chopped
onions, a pickle and a Dutch flag on a
toothpick that doubles as your fork) during the just-launched Jordaan Food Tour
from Eating Amsterdam Tours.
The four-hour culinary crawl was introduced by the company that began
with Eating Italy Food Tours in Rome,
spread to London and is soon opening a
Prague outlet. The outing meanders
through the Jordaan neighborhood,
where guests will indulge in Dutch food
tastings at seven stops, chat with purveyors, and receive cultural and historical lessons.
The Jordaan Food Tour is capped at
12 people and costs $98 for adults, $78
for youth 13 to 18, and $59 for children
under 13.
MUSIC CAMP FOR KIDS,
AND A VACATION FOR PARENTS
For parents worried about sending their
kids away to camp, one option is to take
simultaneous vacations — in Jamaica.
New this summer, Jamaica Music
Camp promises a week (June 19 to July
5) of musical programming and immersion in nature for kids ages 9 to 16 ($895
per camper).
Musical training is not required, and
all participants will receive vocal and
ear training; take music appreciation,
music theory and world music; and
study some of the instruments taught including drums, piano, violin and others.
While the kids are at camp, parents
can take advantage of a discount from
Jewel Paradise Cove Resort & Spa in
Runaway Bay, about 35 miles away. The
all-inclusive adults-only resort is offering double rooms from $125 per person,
including meals, drinks, scuba diving
and more.
A WHALING SHIP GOES
ON TOUR IN NEW ENGLAND
Mystic Seaport in Connecticut is showing off maritime history this summer.
For the first time since 1941, the
Charles W. Morgan has left its home
waters, on a course that will bring the
National Historic Landmark vessel to
six New England ports.
The visits will include dockside exhibitions and self-guided tours of the
Morgan, the last wooden whaling ship
in the world. It will stop in Newport,
R.I.; Vineyard Haven, Mass.; New Bedford, Mass.; Boston; and Buzzards Bay,
Mass. It was in New London, Conn., on
May 31 and June 1.