18 .. | 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 R ......................... Rain 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 ˚C ˚F 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. 25 AIRPORT PROVIDES NEW ACCESS TO A NICARAGUAN ISLAND 25 20 35 35 35 Meteorology by AccuWeather. Weather shown as expected at noon on Monday. WARM COLD 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 ˚C ˚F 43/32 109/90 S 29/22 84/72 PC 31/24 88/75 PC 33/21 91/70 PC 33/27 91/81 T 29/19 84/66 R 35/20 95/68 S 23/12 73/54 PC 18/13 64/55 S 36/29 97/84 PC 30/21 86/70 R 23/17 73/63 R 36/29 97/84 T 32/19 90/66 T 29/14 84/57 T 33/27 91/81 R 23/12 73/54 PC 32/28 90/82 T 37/25 99/77 T 44/26 111/79 S 29/21 84/70 S 33/25 91/77 T 17/4 63/39 S 34/28 93/82 S 23/14 73/57 PC 33/26 91/79 C 30/23 86/73 T 21/11 70/52 PC 27/16 81/61 PC 32/18 90/64 PC 34/27 93/81 T 31/24 88/75 T 21/12 70/54 R 34/29 93/84 PC 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 35 Sh ................. Showers S .......................... Sun Sn ...................... Snow SS....... Snow showers T ........ Thunderstorms W ...................... Windy 42/30 108/86 S 29/21 84/70 T 32/24 90/75 S 31/21 88/70 C 33/27 91/81 T 29/17 84/63 PC 35/21 95/70 S 31/19 88/66 T 17/8 63/46 S 37/29 99/84 C 24/23 75/73 R 22/12 72/54 PC 36/30 97/86 C 34/19 93/66 S 31/15 88/59 S 31/26 88/79 T 24/12 75/54 Sh 32/29 90/84 PC 35/25 95/77 C 43/26 109/79 C 27/21 81/70 PC 33/25 91/77 T 17/4 63/39 S 35/28 95/82 S 25/13 77/55 S 33/25 91/77 PC 31/24 88/75 T 26/14 79/57 Sh 29/17 84/63 PC 30/17 86/63 PC 34/26 93/79 T 31/24 88/75 T 21/11 70/52 R 34/30 93/86 C 20 30 High/low temperatures, in degrees Celsius and degrees Fahrenheit, and expected conditions. 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 47/33 117/91 C 26/18 79/64 T 28/21 82/70 T 26/18 79/64 C 31/16 88/61 T 42/29 108/84 S 31/18 88/64 S 24/14 75/57 PC 29/19 84/66 T STATIONARY ICE FLURRIES 26/15 79/59 C 46/32 115/90 H 27/17 81/63 Sh 28/21 82/70 S 26/19 79/66 Sh 24/15 75/59 PC 43/29 109/84 S 31/18 88/64 S 20/13 68/55 PC 27/17 81/63 T COMPLEX SNOW Shanghai Singapore Sydney Taipei Tel Aviv Tokyo Vancouver Vienna Vladivostok Washington TYPHOON HIGH LOW MOSTLY CLOUDY TROPICAL STORM 28/21 32/26 20/10 28/25 28/18 26/20 19/11 31/19 17/13 27/20 PC T R T S Sh PC S R T 82/68 88/79 68/50 84/75 82/64 77/68 63/48 91/70 63/55 88/68 82/70 90/79 68/50 82/77 82/64 79/68 66/52 88/66 63/55 81/68 28/20 31/26 20/10 29/24 28/18 25/20 17/9 33/21 17/13 31/20 C T PC R S C C S PC PC 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.