Tuesday, April 15, 2014

Living in Your Mom's Basement


If you knew a deadly disease was slowly and unstoppably moving toward you, country to country, city to city, neighborhood to neighborhood, you and your community would try to do something to slow or stop its spread. Quarantines, walls with gates to control outsiders, a push, if possible to immunize, triage teams and hospital beds would be prepared. Some would even man the gates with weapons to protect its citizens from this dystopian scenario.

In many respects that is exactly what is happening within the current housing market in the United States. Everyone knows there is a problem, they know there is a massive imbalance, and they do not have a clue as to how to fix it, and many are manning the political barricades to fight it.

The Problem
Rents are now approaching 40% of income in many of the major cities. Historically it had been nominally pegged at 30%. This number varies from city to city and region to region. In Chicago the percentage has risen from 21% to 31%, and in New Orleans it doubled from 14% to 35%. The reasons are as varied as the communities themselves. But in every case from San Francisco to Miami, the increase is putting a profound impact on the region's ability to grow. If more is put into rent there is less for savings, food, transportation, medical care, and even entertainment. The region's soft economic underbelly is threatened.

The percent of income dedicated to housing continues to rise. Vacancies continue to drop to new lows in many regions and the pressure on rents continues to rise at rates much higher than inflation, as much as 4% this year (some cities such as San Francisco are double that). But then again who really believes that inflation is running just a tic above 1%; really, who believes that?

This is forcing many, especially in the middle and lower middle class, to stay home, double up, or find serious alternative housing (micro-apartments). These higher rents are pushing these classes out of the inner urban core to the community's periphery and then pay for transportation to get to their jobs. For the recent college graduate many are stuck where they grew up, in their old room, living like a teenager. Not what they had in mind when they went off to college, this right of passage and their dreams of independence are dashed. The social repercussions are many and worth studies in their own right.

Home ownership is surprisingly more affordable in many of these same communities but the banks are requiring higher down payments, less debt (i.e student loans, etc.), and more stringent financial qualifications. Even with parent's help, home ownership is still a dream for most people under thirty.

Solutions:
Build more housing both rental and ownership. Simple right? But there's a problem with the model. Because land and construction costs are rising across the board the soft costs to bring a unit to market are also rising and rising faster than incomes can keep up the builders are going upscale. And adding the long-drawn-out time to get approvals from municipalities (and their incredible high fees per unit) hasn't helped either. Many builders quickly jumped on the luxury rental market (the cost percentages of improvements and fees were more easily justified). This shift has actually forced rents down in these markets – but what average Joe or Josephine can afford $7,000 per month for an 1,200 s.f. apartment.

And the government isn't there anymore to subsidize housing. Go figure, at some point they will run out of money – and many municipalities have. And subsidized housing is dead-end housing. Once in the tenants never leave, why would you?

Here are some ideas:
Increase the land available for residential development in cities.
Change the zoning regulations to allow for more mixed-use developments
Develop a fee structure that targets middle class and lower middle class with lower development fees and extractions
Increase fees based on projected rents
Reduce the approval and entitlement timelines
Eliminate voter approvals of projects – support the work of city planning staffs and municipal agencies
Focus and expand on support for urban families – make three and four bedroom apartments affordable, support with schools and services.
As much as I hate to say it, densify, densify, densify.

None of this is new. We went through much of the same thing in the post World War II years from 1945 to 1955. Significant changes in where we build, how we build, and how we financed housing evolved out of this post-war decade. But these changes came out of the development community not the politicized, cover-my-butt government agencies and their reports and findings. My biggest fear is that the development industry itself can no longer step up to the plate and even bat for average.


Stay Tuned . . . . . . . . .

Tuesday, April 8, 2014

Gentrification

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One Sign of Gentrification - The Debris Box
San Francisco is reinventing itself, again. Back in the post-hippie days we lived in many neighborhoods of San Francisco, from the Marina to the hillier bits on the city's southern frontier. As with any city, San Francisco is more a collection of small towns interconnected with a gridded fabric of streets, parks, and retail blocks. And for the most part the city is also significantly single-family homes. Sure there are large apartment buildings (especially closer to downtown) and in some neighborhoods many of the homes are now rental, but overall, single-family homes dominate. And because of this, areas fall in and out of favor. Some San Francisco districts, like in other cities, fell in value and failed due to lack of care, changes in race, declining values, and fear. But these districts also turned around.

Over the years one of the rally calls of social critics and urbanists was "Stop Gentrification," a somewhat pejorative term meaning that some "other" group was taking over a neighborhood and, OMG, fixing up derelict properties and moving in. Try as many of these people-of-conscience might to vilify this activity, most of the locals in the area were thrilled to finally see a positive change to a declining district. I saw this forty years ago in the Western Addition, then on Polk, then the Castro, and so on and so on. For San Francisco this was often the work of the expanding gay community in a city that accepts everyone.

All these improvements are a result of seeking value. Every neighborhood of most large cities will experience it; it is evolutionary and is not necessarily driven by racial change. Some are driven by fashion, life style, and aging in place until the need for wholesale replacement by the next generation. During the era of freeways and expressways bifurcating American cities it was not unusual to find isolated neighborhoods that suffered. Today many of these are being reborn.

Currently San Francisco is facing another round of gentrification, this time financially driven. It can be seen in the Goggle buses and other high-tech charters that prowl the neighborhoods picking up employees for the one hour drive to their jobs in Silicon Valley. Nice work if you can get it. It's pushed protestors to stand in front of the buses demanding some type of social justice. It escapes me how or what that would be. I do recall a great cry during the past twenty years for more transit use and less auto traffic, but I guess that if it's one of the tech firms it doesn't count.

But what does count is the impact that these very affluent employees have on the city. The neighborhood and cities around the core of Silicon Valley and north San Jose are now too expensive for the everyday employee and besides who wants to live in a tacky suburban tract home that costs 2 million. San Francisco, as it did for us more than forty years ago, draws young people, it has for one hundred and fifty years; nothing has changed – other than it too is becoming very expensive, again. Dodgier neighborhoods are being rehabbed, new shops are appearing, and rents are rising. And even though the pols downtown wring their hands over these changes (to appease their cultural/political supporters), down in their dark hearts they are thrilled. Higher values mean more tax revenue, higher values mean a less problematic population, and higher values mean advancement not decline.

Now the Bay Area is experiencing the classic spill-over effect. Oakland, while definitely NOT San Francisco is also experiencing some uptick, especially along the estuary and neighborhoods with views of San Francisco and the Bay (now if they could only get their political house in order). Alameda and Berkeley are also feeling the love. Unfortunately many who live there are on the wrong end of the ox and are also feeling the pinch, especially when it comes to rising rents.

Gentrification is a more passive, grassroots if you will, form of urban renewal, a nasty term from the fifties and sixties. But gentrification is purely American in its form and process, and entrepreneurial in its core. Without it a city could devolve into a Detroit or other troubled big city with decaying streets and neighborhoods. Without gentrification and renewal, houses wouldn't be improved or "fixed-up," neighborhoods would be lost and not retaken. Every effort should be made by the city to help these people, through timely permits and approvals, to make it happen. Economic cycles come and go, cities need to understand and seize the moment and help, not hinder, these urban entrepreneurs.

Stay Tuned . . . . . . . . . . .

Tuesday, April 1, 2014

Stephen King and Under The Dome


A Concept from More than Fifty Years Ago
I saw this article, Why Urban Domes Are Bad For Society, posted on the emag ARCHITECT about large or even mega-sized urban domes and pondered the strange conclusions that the author, Blaine Brownell, came to about cultural and the environment. His basic objection being that those who can will be inside and those that can't, won't be. His other arguments drag a lot of social debris into the conversation as well. My first thought was April Fools – I was wrong.

Mr. Brownell uses grand words such as socioecolological acquiescence, dystopian, environmental justice, privileged insiders, etc. all to just muck up the conversation. The most extreme, 'selective sanctuary,' being the most foolish.

Are these structures any less democratic than say the Freedom Tower in New York (try getting inside that building without a pass), or the massive underground subway systems of any major city? Huge new constructions with millions of square feet are under development in San Francisco, New York, and elsewhere – is there a social injustice with these mega constructions?

Buckminster Fuller's Concept
I think a lot of this who-ha has to do with Mr. King's book and TV series, Under the Dome. That book and show was like the Hindenburg tragedy, both set back technological advances in architecture and air travel.

Step back from the overriding social concerns of Mr. Brownell and look at what these types of buildings might actually accomplish, and there are many.

The Eden Project - England
All construction inside the "Dome" would be less costly and with significant reductions in materials, energy, and maintenance. Even older buildings would benefit. I would even suggest a sizable reduction in pollutants and the affects that cities cause by being regional heat islands. These savings would reduce housing costs for all residents. And the problem of pollution is being reduced – China and India will fix their problems just like Pittsburgh, London, and even Los Angeles have.

There would be no fossil-fuel vehicles inside these domes, electrics and other non-polluting systems like bikes and walkways would dominate. And delivery and service systems would be underground.

There are architects even now, like the firms Orproject and Grimshaw, thoughtfully thinking outside the bubble (pun intended) and are looking at enclosed worlds with a broad range of different structures, systems, designs, and materials.

Look at the major structures built during the last twenty years: stadiums, high rise apartments and offices, huge malls, even ocean going cruise ships, all are fundamentally sealed systems – most are not technically different than what Buckminster Fuller and Paolo Soleri proposed during the last century – they are only a matter of scale.

My Idea for a Dome in the Desert
I even proposed a dome concept to a client building a retirement community in Arizona, the structure would have reduced their costs across the board – but it was too outlandish, at the time, to even consider it. Now, maybe not.

If the last century has shown us anything in architecture is that scale is relative, elevators made high-rise buildings doable, materials and engineering changed not only how buildings and strucures looked but how they were built. We put mass transit under San Francisco Bay, submerged freeways under cities, and for better or worse made trains that nearly fly. To discount fascinating architectural concepts based on an opinion about pollution and social justice is, well, silly.

More later . . . . . . . .

Tuesday, March 25, 2014

Housing and Government Stats


A Rare American Species
For the last few months I have been trying to figure out a pithy article on the current state of housing in the United States. But all I can see, based on news programs, news articles, and self-serving government reports is confusion and conflicting statistics.

Here is what we think we know: current 30 year fixed mortgage rates are in the very low 4's (4.13% to 4.20%). 15 year fixed loans are 3.17% and adjustables are in the 2.75% to 3.00%. And the trend over the last few weeks seems to be down or at least steady. Even equity-based loans are in the low 4s. From where I sit loan rates do not seem to be the reason for the lag in sales.

The weather? Potentially this is a big reason, anyone east of Reno, Nevada has seen a winter that blows through once every twenty or thirty years. People in the lower, middle, and upper Midwest stayed in and those in the east never left their fireplaces except to go to work. The last thought for everyone was house hunting. Most were trying to keep warm.

Employment? No one knows how many are really unemployed or underemployed. The government drops from the rolls and stats those unemployed after a period of time; the reason for this is lost to the world of stats and figures. But those are real people and are still living and breathing – but unfortunately they are also not in a position to participate in new homes. So until employment comes back to the historic norm, this will continue to be a drag on construction and sales.

Technology? Here's a thought: Businesses once moved employees to match job needs. This was a serious driver of home sales in suburban areas during the 1950s, 60s, and 70s. This promoted the old saw about home sales peeking in summer to prepare for families moving in before the next school season. This drove a lot of home sales. Now with technology these employees can often stay in place, communicate, and manage projects and employees long distance. The Internet and other protocols allow face-to-face meetings with Cisco and Skype systems. How much this affects new home sales is yet to be determined.

Home Prices: Home prices continue to rise in most parts of the country. But remember that ALL home pricing structures are local. Detroit? Buy a huge home needing some fixing up for less than $30,000. Same home in Pleasanton, California - $1 million plus. Think local! But it is the trends to look at for overall economic activity, for the past year average existing home prices are up almost 10%. Foreclosures and short sales are down 10% in the same period. An interesting figure is that 34% of homes were on the market for less than a month, this does show some velocity to the market. (Article )

Average new home median price is $261,800, down a tic over the last month. The current running annual new home sales estimate is 455,000, half what experts believe is the real demand in a healthier economy. What 500,000 additional new homes would do to average pricing, economic activity, and growth is something serious to ponder. In the years before the Great Recession we were building 1.2 million homes annually, but then again that did contribute to the problem.

Debt: Student debt for those under 33 is a serious drag on sales of first homes. Paying for college education loans severely limits the ability to accumulate down payments and afford monthly mortgages. This is a worsening problem and will continue to affect the first home, under 30, market for years.

My history teacher in high school told me that there are liars, damn liars, and government statisticians. Most of the housing numbers are generated through the Census Bureau and then churned through the media, so my readers consider the source then consider the reality. SOURCE  

Stay Tuned . . . . . .

Monday, March 17, 2014

NIMBYS AND BANANAS


It seems that at some point in an urban blogger's career they must list the essential acronyms that plague the development process. Most have become overused and as such have lost their required impact of derision and ridicule. And yet others have been sown onto flags and banners and waved at public hearings.

Now I enjoy a good acronym as much as the next person. With texting, we get all sorts with OMG, LOL, BYW, WTF and so many others it would take a SNERT to know them all (see below).

So here are most of the current faves, though some are a bit old. If you have others, please comment.

Anti-Development:
BANANA - Build Absolutely Nothing Anywhere Near Anyone/Anything, this is the omnibus phrase that takes everything in.

CAVE People - Citizens Against Virtually Everything, this of course has a double meaning as in against and where many live.

LULU - Locally Unwanted Land Use, things like massage parlors, marijuana dispensaries, cigarette stores, porn shops, fast food drive throughs (In-and-Out Burger comes to mind).

The Anti-Development Nots:
NIMBY - Not In My Back Yard, this is the oldest acronym and has become the primary phrase used to depict those against any project.

NIMFYE - Not In My Front Yard Either, obvious expansion of NIMBY, though a stretch I think.

NIABY - Not In Anyone's Backyard, this is the all inclusion form of the above.

NIMEY - Not In My Election Year, the current fall back within communities with tough choices, tells all about the political process.

NACTAE - Not A Chance Till After Elections, see above.

NITL - Not In This Lifetime, I have worked on projects like these.

NOPE - Not On Planet Earth, as we move off planet I am sure this will morph into NOTM (Not On The Moon/Mars).

NOTE - Not Over There Either, cute but why not over there, or there, or even there!

PIGINIMBY – Phew I'm Glad It's Not In My Backyard, whatever.

IKWIWWISI - I'll Know What I Want When I See It, this is the normal planning and approval process as done in California – this process continues until either the developer pulls the proposal, goes bankrupt, or dies. (I have had clients fall into all these categories).


Pro-Development:
BANY's - Builders Against NIMBYs, also includes chambers of commerce and other pro-growth groups, often these have little real standing in the process and the club meetings are secret.

CEQA - Consultants Employment Quantity Act (was California Environmental Quality Act), this is a new one to me and has been a significant profit center over the years – doing work that does absolutely nothing to move the project forward except to give political cover.

DUDE - Developer Under Delusions of Entitlement, every client I know has fallen into this category at some point in the process. They learn quickly or die.

SIMBY - Start In My Backyard, this is a group that is usually formed at the developer's request. This includes unions (jobs), schools (jobs), and often politicians who want a pet project in their district.

YIMBY - Yes in My Backyard, variant of SIMBY.

WIIFM - What's In It For Me? The logical extension of the last two.

WYGIWYD - What You Get Is What You Deserve, this often is the result of the planning process when every part of the project that gives it life and soul is extinguished. Color this beige.

IAMS - It's About Me Stupid, this can apply to all participants in the process.

Citizens Involved In The Process:
DINKY – Duel Income, No kids, Yet. The apartment demographic follows these people closely.

MUPPIE - Middle-aged Urban Professional. They were previously a Yuppie – yes, we all are getting older.

GLAM - Greying, Leisured, Affluent, Married – is the GLAMMIE the obvious evolution of the MUPPIE?

NINJA – No Income, No Job, or Assets. Often found living in parent's basements – never seen at planning meetings.

RUB - Rich Urban Biker, often seen in spandex and silly helmets at planning meetings for streets and developments, scary bunch, want everything to be paid for by others.

SINBAD - Single Income No Boyfriend and Desperate, major leader of many movements within the community, cats hair often present on the sweater.

SNERT - Snot-nosed Egotistical Rude Teenager, only shows when there is a skateboard park being planned (or marijuana dispensary as well).

SITCOM - Single Income Two Children Oppressive Mortgage, the result of our government and banks attempts at making housing more available and affordable, these were DINKs three years earlier.

WOOF - Well Off Older Folk (or other similar sounding term), the sweet spot for travel agencies, nice restaurants and luxury car dealers.

WOOP - Well Off Older Person, variant of the above.

Check this SITE out for more. http://www.businessballs.com/acronyms.htm


Stay Tuned . . . . . . . . . .