Questions on Escaping the Housing Trap
Hi-, I'm not sure if this is the right forum, but I just read (and re-read) Escaping the Housing Trap. What a fascinating read! While I understand and agree with most of the book, I still had a few questions, which I've listed out below. I'd appreciate any help to reconcile these, as I'm passionate about working to fix our housing crisis in California, but I want to make sure I understand the message first.
Questions:
- If traditional petri-dish development is good (see p 17) but requires growth in land value for re-development, are we at the mercy of a system that needs constant growth in order to thrive? In many ways this seems to mimic the housing "trap"
- There is a chapter called "No Neighborhood Should Experience Radical Change" (p 158) - in which the book argues that distorting leaps in development hurt a neighborhood. However, in the Yes! In my Backyard chapter, the book also shows that even if it's a luxury apartment, the effect of adding new housing (adding new chairs to the game of musical chairs), ultimately cycles through and makes all housing more affordable. It also seems a bit Top-Down to stipulate which form of development is "radical", and which is incremental. How do you reconcile these seemingly conflicting views? Put more simply, why is a 5/1 bad, but a triplex good? I understand the argument that leaps in development increases land values, and disincentives landlords to invest in keeping houses maintained as they are going to be torn down anyway. Wouldn't the same be true for traditional "petri dish" development that the book argues is good? Land values increase, so someone is incentivized to come in and tear down the shanty structure that existed prior, or to at least make necessary repairs because the value is going up.
- On page 169 it talks about how Keen and his partners bought up 20 vacant lots, and worked to cultivate them. Where did they get the capital to get started?
- On page 173, the book states that the development industry is housing monoculture - a handful of ubiquitous products that are replicated in city after city. I actually don't think replicability like this is a bad thing. In "How Big Things get Done", a book that studies how to build a project on time and on budget, the author Bent Flyvbjerg makes a compelling case that modular scaling like this is the most effective way to complete projects reliably. I think the issue is that the "missing middle" is not as replicable due to zoning restrictions, and the fact that it costs more to finance a small project (same fees over less units). I understand the principal that resiliency is more important than efficiency of execution, but if you want to tackle a big problem like the housing shortage, you need a solution that can scale. So my question is, how can we enable companies to finance these smaller transactions more cheaply, and enable the same kind of replicability for this "missing middle"? I'm not convinced the answer is for everyone in the neighborhood to do 1-2 developments, unless we equip them with really good tools. Once again, in "How Big Things Get Done", the authors show that experience is crucial to development. You don't want each development to be every person's first development, or they will not be on time and on budget. So what tools can we create to make this process of missing middle development as simple as securing a 30 year mortgage? Apologies for the very long question
- The book argues for more restrictions on 5/1s than other forms of incremental development (p 177). It also praises South Bend for introducing pre-approved building templates. However, on the page prior (p. 176), and even on the same page (p. 177) the book shows that regulatory barriers interact in complex and unforeseen ways, and that you need to unlock all of them (all of the bolts) to allow for missing middle growth. How do we trust cities and local governments to choose the "right" kind of incremental development (i.e. yes duplexes, no 5/1s), without creating the kind of regulatory mess that prevented development of the missing middle in the first place? Said another way, how can we trust that pre-approved building templates in South Bend won't create their own kind of monoculture? Do we really trust the government to design the best buildings?
- The book says that large multistory apartment/condo buildings already receive massive subsidies through the financial system (p. 191), and don't need further subsidies. But what about in San Francisco right now where construction costs make it prohibitive to build large buildings, and the city is already full of duplexes and triplexes. Wouldn't large buildings be the next step for most if not all of San Francisco? Perhaps the answer in San Francisco is just that we need easier permitting, not subsidies.
Comments
7 comments
Lets explore these one by one:
Question 1:
You've made a very astute observation. Traditional development, particularly the kind that relies on constant growth in land value, does indeed mirror the housing trap in many ways.
The current system of development is often predicated on the idea of continuous growth. This means that for a development to be considered successful, it must continually increase in value. This can create a cycle where developers are incentivized to pursue projects that will yield the highest immediate returns, often at the expense of long-term sustainability and community resilience.
This constant pursuit of growth can lead to a number of problems. It can result in overdevelopment, where too much construction occurs too quickly, leading to a glut of supply and potentially a crash in property values. It can also result in underdevelopment, where valuable urban land is left vacant or underutilized because the potential returns from development are not deemed high enough.
The Strong Towns approach advocates for a different kind of development, one that is incremental and adaptable, and that prioritizes long-term community wealth over short-term gains. This approach recognizes that constant growth is not sustainable, and that we need to build our towns and cities in a way that is resilient to changes in the economy and the environment.
So, while the current system may seem to require constant growth, it's important to remember that there are alternatives. And these alternatives can lead to more sustainable, resilient, and prosperous communities.
Question 2:
The seeming contradiction you've pointed out is really about the scale and pace of change.
When we talk about "radical" change, we're referring to large-scale, rapid transformations that can disrupt the existing fabric of a neighborhood. This could be something like a massive apartment complex suddenly appearing in a low-density residential area. These kinds of changes can lead to displacement, gentrification, and a loss of community character.
On the other hand, incremental development, like adding a triplex in a neighborhood of single-family homes, is a more gradual process. It allows a neighborhood to evolve over time, rather than being drastically altered all at once. This kind of development can increase housing supply and affordability without causing the same level of disruption.
As for the 5/1 (five over one) development, it's not inherently bad. It's more about where and how it's implemented. If it's dropped into a neighborhood without any consideration for the existing context, it can be disruptive. But if it's part of a thoughtful, incremental approach to development, it can contribute positively to the community.
Regarding the "petri dish" development, the key difference is that it's a more organic, bottom-up process. It's driven by the needs and desires of the community, rather than top-down planning decisions. This kind of development can indeed lead to increases in land values, but it's typically a slower, more manageable process that allows for adaptation and resilience.
In essence, it's not about categorically labeling certain types of development as good or bad. It's about promoting a more nuanced, context-sensitive approach to development that respects the existing community and allows for gradual, sustainable growth.
Question 3:
Funding for incremental development can come from a variety of sources, depending on the scale and nature of the project. Mike Keen is not shy about sharing his experiences, I would encourage you to connect.
Here are the various funding sources incremental developers leverage:
Traditional bank loans are one option, although they can sometimes be challenging to secure for smaller, less conventional projects. Credit unions or local community banks may be more open to funding these types of developments.
Private investors are another potential source of funding. This could be individuals or groups who are interested in supporting local development and see potential in your project.
Crowdfunding is a more recent option that has been used successfully by some incremental developers. Platforms like Kickstarter or GoFundMe allow you to raise small amounts of money from a large number of people, which can be particularly effective for community-oriented projects.
There are also various grants and funding programs available at the local, state, and federal level that can support different types of development projects. It's worth researching what's available in your area.
Finally, self-funding is an option for some developers. This could involve using personal savings, or gradually reinvesting the profits from one project into the next.
Remember, every project and every community is unique, so what works best will depend on your specific circumstances. It's important to explore all your options and find the approach that fits best with your project and your community.
Question 4:
One approach could be to create financial products specifically designed for smaller-scale developments. These could include loans with lower minimum amounts, more flexible terms, or reduced fees for smaller projects. This would require collaboration between financial institutions, regulators, and potentially government agencies. We recently shared how Muskegon, MI, is using Tax Increment Finance (TIF) in this regard.
Another approach could be to streamline the development process for smaller projects. This could involve simplifying zoning and permitting processes, providing pre-approved design templates, or offering technical assistance to first-time developers.
Finally, regarding the need for experience in development, I agree that it's crucial. However, I also believe that with the right tools and support, more people can become successful developers. This could involve providing training and mentorship programs, creating online resources and tools, or fostering a community of practice where developers can learn from each other.
We meet a lot of developers that learn on the job by starting with small projects first. They may start with a basement renovation or garage conversion first. These are projects with a lower learning curve. Once they learn how to manage these projects, they can graduate to more complex projects.
In essence, addressing the "missing middle" of housing requires both systemic changes and innovative solutions. It's a complex challenge, but one that I believe we can overcome with creativity, collaboration, and a commitment to building stronger, more resilient communities.
Question 5:
Your question hits at the heart of a complex issue. It's about finding the right balance between providing regulatory guidance and allowing for organic, diverse development.
When we talk about restrictions on certain types of development, like 5/1s, it's not about picking winners and losers. Rather, it's about ensuring that the scale and character of new development is in line with the existing community. This is to prevent the kind of rapid, disruptive change that can harm neighborhoods.
Pre-approved building templates, like those introduced in South Bend, are a tool to streamline the development process and reduce barriers to entry. They're not meant to stifle creativity or diversity, but to provide a starting point that developers can work from.
That being said, you're absolutely right that there's a risk of creating a new kind of monoculture if these templates are used too rigidly. The key is to ensure that they're flexible and adaptable, and that they're just one option among many. In South Bend, the pre-approved plans include areas that the builders can modify the plans to allow variety and adaptation in the field.
As for trusting local governments to choose the "right" kind of development, I think it's less about trust and more about collaboration. Local governments should be working closely with their communities, listening to their needs and desires, and making decisions based on that input. It's not about the government designing the best buildings, but about creating a regulatory environment that allows the best buildings to be built.
In essence, the goal is not to replace one set of rigid regulations with another, but to create a more flexible, responsive system that encourages diverse, incremental development. This is a challenging task, but one that I believe is crucial to building stronger, more resilient towns and cities.
Question 6:
You've hit on a key point. In high-cost cities like San Francisco, the housing issue is particularly complex. While it's true that large multi-story apartment buildings often receive significant subsidies through the financial system, the high cost of construction in these areas can still make such projects prohibitive.
In these cases, easing permitting processes could indeed be a significant part of the solution. Reducing regulatory barriers can make it easier and more cost-effective to build, which in turn can help increase the supply of housing and potentially bring down costs.
However, it's also important to consider the context. While larger buildings might seem like the next logical step in a city that's already full of duplexes and triplexes, we need to be mindful of the potential impacts on the existing community. Large-scale developments can lead to displacement and gentrification, and can disrupt the existing character of a neighborhood.
That's not to say that larger buildings should never be built. Rather, it's about ensuring that such developments are done in a way that respects the existing community and contributes to the overall strength and resilience of the city.
In essence, there's no one-size-fits-all solution to the housing issue. Each city, and indeed each neighborhood, has its own unique challenges and opportunities. It's about finding the right balance of policies and approaches that can help create a more diverse, affordable, and sustainable housing market.
Thank you for the thoughtful responses Edward, very helpful. Appreciate you taking the time to give your thoughts
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