A CASE FOR BRINGING INNOVATION TO THE HOUSING MARKET

Jan 19, 2016 by

In Manhattan, the average cost of a studio apartment is $2,418 (non doorman). In San Francisco, it’s $2650. Crazy as it sounds, you might not have the privilege of paying those sums as both cities have low single digit vacancy rates. Other major cities like Boston and DC have similarly high rents and low inventory. And while some of this expense is offset by higher per capita incomes, many find themselves unable to afford housing. A study by NYU’s Furman Center found that 50% of New Yorkers were “cost-burdened” by their rent, paying more than 30% of their income on housing; 60% of that segment (600K people) were “extremely cost burdened,” forking over more than 50%. So it’s not a stretch to say that housing is a big problem in many major cities (we’ll save the suburbs for another day). In fact, it’s one of the most far reaching problems you could think of, striking at one of our most fundamental needs. It’s a problem that, theoretically speaking, deserves more attention than an app for ordering dog food on your smartphone. Yet, if we are to believe Jon Dishotsky essay on Medium, the app is going to get a disproportionate percentage of the world’s brainpower and creative thinking.

The reason for this disparity of intellectual resources, Dishotsky convincingly contends, is simple economics: with relatively little money, a tech developer is able to create a product in a short amount of time. In fact, using the minimum value product (MVP) model, the product doesn’t even need to be fully fleshed out in order to be sold. Release the product, get customer feedback, improve on the fly. It’s a model that favors innovation through experimentation because errors and design flaws can be corrected while bringing in revenue.

Real estate development is a whole other story. Dishotsky writes, “In order to experiment with new ways of building housing you would have to…build housing.” And building houses is a resource intensive affair, one that favors getting things right the first time.

To illustrate the dilemma, let’s say you’re a hotshot thinker, contemplating making your mark–and fortune–in tech or housing. You weigh the two industries. With tech, you raise a reasonable amount of money, create a product that should work and serve a need (even if that need isn’t particularly important), but you don’t have to worry, because you can always change and improve that idea over time. Or you could go into housing (development, architecture, services, etc), where you must raise a ton of money, face innumerable engineering, labor and bureaucratic roadblocks, where you must be sure that you have a marketable, inhabitable, code-compliant structure, because you cannot change your product after the fact. And once you’ve surmounted these innumerable roadblocks, you might have built something that a handful of people can call home–you’ve satisfied an important need for a very small constituency with lots of costs and risks. Considering these alternatives, the smart money’s on tech.

In order to make housing more attractive, Dishotsky suggests, we must “find ways to acquire land cheaply, build cheaply, limit soft costs and increase the speed at which healthy buildings get approved”–a suggestion we would tend to agree with, as most innovative housing never sees the light of day because of economic and bureaucratic barriers. This is why we often look at the margins: in Portland OR or Providence RI or Walsenburg CO–places that aren’t besieged by insane property values, places whose ebbing fortunes make them more receptive to trying out new ideas.

The person who turned us onto Dishotsky’s article was Jeff Wilson, aka Professor Dumpster and the man behind Kasita prefab, plug-and-play housing. He and many others we cover here testify that there’s not a complete void of intellect and resources devoted to innovative housing. But for many of these players, it’s still an uphill battle: fighting development, financial and government institutions that favor market tested models over actual market needs and smart design.

So you might be asking, what can I do? Well, you can buy or rent innovative housing if it exists in your area. Create demand. You can write letters to your congressperson, petitioning for regulation reform that might be more hospitable for innovative types of housing. You can encourage your children to go into real estate development with an eye on innovative design. You can change your Facebook picture to a Nakagin Capsule. We’re not entirely sure, really. All we want to say is making housing that works–functionally, financially, environmentally–is one of the most important things we can do and it deserves our attention.

Leave a Reply

Your email address will not be published.