One of our favorite co-living/housing/whatever operators, HubHaus, raised a $10M series A lead by Social Capital the other day. Whereas most coliving operators focus on multifamily housing in super pricey cities, HubHaus takes on shared living in single-family housing in Bay Area/SV and LA suburbs. While these areas have an abundance of jobs for single, techy types, their suburban housing is decidedly family-friendly.
HubHaus rents out rooms in normal, old suburban houses at very approachable price points (~$1k/month). And the shares give residents a built-in community, which is more important in sleepy, low-density burbs than cities that abound with social opportunity. And given that 76% or so of American housing is single-family, the market potential is huge, something this latest investment attests to.
NIMBYs objections tend to run something like, they want to: protect the character of their neighborhoods, prevent gentrification and maintain affordable housing for existing populations, prevent overcrowding, and so on. But underneath the protests is a more base—if unconscious—financial concern. Often, a large share of the NIMBYs wealth is tied up in their home’s value. Suggestions of easing housing scarcity—the big driver of their personal wealth—can strike them as an existential threat.
But most people have a price. What if the NIMBY could see—and benefit from—the real development potential of their property? That’s the idea behind CityBldr. The Seattle-based startup is using “machine learning on dozens of disparate data sources” to find the “highest and best use” of a property (read: milking the most money from it). They claim their system can help fetch as much as 89% more than conventional valuations. They will help you shop your property to builders and developers and they also have tools that will keep you apprised of potential upzoning—an issue that could be a big deal in California in the next year.
“The machines will never replace the human,” Jeff Buczkiewicz, president of the Mason Contractors Association of America, told the NY Times regarding the role of robotics and masonry. Jeff was speaking to the Times at the Spec Mix Bricklayer 500 bricklaying competition (who knew, right?), where fast-handed masons race to build high-quality walls in the least amount of time.
Also at the competition was SAM, a $400k bricklaying robot by Construction Robotics. SAM was slower than the humans (who could lay 7-9 bricks/minute) and didn’t have the “human element” Buczkiewicz claims is necessary to lay down bricks—elements like opioid addiction and onsite deaths, we assume. Nevertheless, the Times wasn’t so convinced the masons are safe from the robots.
A recent report projected that “nearly 2.7 million [American] construction workers could be displaced or replaced by 2057, including 435,000 carpenters, 411,000 laborers, and 404,000 operating engineers.”
The ramp-up to a fully automated construction future is slow going in the U.S., with only a handful of smallish companies like Construction Robotics and Blueprint Robotics doing anything (the latter of whom seems to be using Euro tech). And both the Times and McKinsey suggest robots will have an assistive role for human workers in construction…for now.
The “I” in the RFI is a brain-dump from “market participants,” explicating how modular will work in a variety of multifamily settings throughout the boroughs. The RFEI “invites expressions of interest for modular affordable housing construction on private sites within the five boroughs,” with the aim of expediting “the pre-development process” for successful RFEI respondents. These preliminary steps will be shortly followed by an RFP for a project built on city lands.
The promise of streamlining the pre-development phase is a big deal. While improving construction is a necessary element for providing affordable housing, most signs point to land-use restrictions as the driving force behind the stratospheric housing costs that affect so many cities. So if the city could help minimize the time/financial impact of those restrictions, wedding a standardized, uniform, and expedient approval process for modular, a standardized, uniform, and expedient housing product—that could be a big deal.
The micro-apartment topic tends to be framed around micro-studios. But the hefty development costs of building an NYC micro studio result in a rent which is 115% of the AMI (area median income).
The problem is studios require the same plumbing and electric work as larger units (which is why shared kitchen/bath SROs make so much sense). So developers default to building two and three bedroom units, where plumbing and electric costs can be distributed across more beds. Larger units are also seen as a more reliable unit type by lenders, probably because they can be adapted to roommates, couples, and families.
Cheaper development costs and cheaper debt mean two and three beds can be offered at cheaper price points…to an extent.
Square feet still cost money. A luxury square foot rents for around $6/month in Manhattan, which means a 900 sf two bedroom will set you back $5400. This is a good chunk of change for most.
Ranger Properties might onto to something with “The Lanes.” Their Long Island City building features 57 micro two and three bedroom apartments—490 and 735 sf, respectively (compared to 900 and 1,200 sf for more conventional units). By shrinking unit sizes, Ranger presumably achieves the economy of scale that keeps development costs low on larger units. But because units are small, they can charge a solid $/sf without elevating rents too much, especially when compared to market comps. Continue reading “Sky’s the limit with biggie smalls apartment”
When big cities gutted their single room occupancy (SRO) inventory in the mid-to-late 20th century—and failed to replace them with Section 8 or anything else—it left a big gap in the market for cheap and flexible housing. The vanishing SRO can be blamed for the birth of the roommate and its consequent squeeze on family-friendly urban housing and—more critically—the birth of the modern homeless crisis. One poll from 1980 found that half of NYC’s homeless population had once lived in SROs. Moreover, what SROs survived the purge became de facto bastions for the uber-poor, reinforcing negative stereotypes about the housing type.
A recent report by NYU’s Furman Center is renewing interest in the SRO as a viable market-rate housing typology. They argue that small efficiency apartments with shared kitchens and baths (i.e. SRO units) can achieve development and operating costs far lower than conventional apartments; for example, per unit hard costs on SROs are 67% less than normal studio apartments.
Homeownership rates are near historic lows. Some try to spin this as liberation from the shackles of geography and home maintenance. But others see it as the road to a new form of feudalism. In this fiefdom, the landed rental conglomerates consolidate their wealth. Meanwhile, the renting peasants see their fortunes diminish having been stripped of the one appreciating investment still accessible to commoners. Their chances of breaking free of this cycle become slimmer as the 20% downpayment and securitization of a loan become out of reach due to endemic student loan debt and stagnant wages.
A few new ventures are offering novel ways for would-be homeowners to break this cycle. Companies like Unison, Landed, and Patch Homes are offering homeowners “shared-equity” in home purchases. Consumers get cash toward down payments in exchange for skin in a home’s appreciation (or depreciation). The added funds are being touted as leading to smaller, easier-to-secure mortgages to boot.
Newark. Yes, it’s impoverished and crime-ridden. Like most failing cities, it has crappy schools, a crumbling infrastructure, and inadequate public transit. But it’s also got an international airport, a walkable downtown with cool old buildings, and it’s less than a half-hour to NYC’s Penn Station.
The importance of this last point cannot be understated. One by one, never-going-to-turn places near Manhattan—the Bronx, Mt. Vernon, Jersey City, Hoboken, and others—are or have been gentrified by middle and upper middle refugees in search of bigger homes and cheaper costs of living. Why not Newark? (Yes, we know about the murders.)
The great YIMBY-NIMBY War rages on and what’s at stake is density. The YIMBYs want to add it by lifting land-use restrictions, particularly in transit-friendly urban areas—thus allowing housing supply to meet demand and lowering artificially high housing prices. NIMBYs want to prevent adding density, thereby preserving property values, personal wealth, and their ability to grow veggies in their backyards.
California is the war’s frontline. According to McKinsey, the state ranks 49th for housing units per capita, its real estate prices are rising 3x faster than household incomes, and it loses $140 billion per year in revenue due to the housing crisis. Much of the shortage flows from land use restrictions, which make it impossible to build in many areas and tags an additional $75k in various impact fees for every new housing unit built.
But if the YIMBYs get their way, State Senator Scott Weiner’s California SB 827 might prove to be the war’s D-Day (YIMBYs are the Allies and Weiner is their Ike, in case you were wondering).