Op-Ed: As discussed in the first part of this series, the number of people who can actually afford to own property is quite low. Only a few select individuals have the capacity to sell, build, and operate large-scale housing in our cities. Consequently, they also have leverage over how cities should and could look like and who they should serve. It's time to change that. The resources mentioned below can not only reduce the costs of housing, but also help build strong and resilient communities.
1. Organize buyers to develop housing. By helping buyers organize and form groups, they can pool resources, such as money, access economies of scale, and reduce the risks with developing.
Create a real estate investment fund to develop housing. Under this model, local community members pool their money together to develop property that would otherwise be too cost-prohibitive for one or two people, often with the purpose of bettering the neighborhood. Each member (after they pay for their ownership share) gets a vote. This emerging model is the real estate investment cooperative. It's distinct from a real estate investment trust because it focuses on local control, often by future inhabitants or neighbors. The NorthEast Investment Cooperative and the Cooperative Capital, for example, have used their funds to purchase land, build developments, or remodel vacant storefronts. The Real Estate Investment Cooperative in New York City, New York, is another, having received pledges for over $750,000 from hundreds of members. And by forming a fund, everyday people become akin to real estate developers, an activity often limited to the wealthiest.
Help homeowners become developers. Also called "Baugruppen" (or building communities), future homeowners pool their funds and develop their own housing. Architects often lead this effort. Baugruppen in Germany are up to 20 percent cheaper than regular housing. These efforts build development at cost. Since homeowners are found upfront, it removes the need for marketing and real estate brokers. Bulk discounts are available due to economies of scale compared to smaller developments. Service providers such as Partnerships for Affordable Cohousing and Mietshauser Syndikat in help homeowners develop these projects.
Crowdsource development ideas and get buy-in. With Neighborland and CoUrbanize's online platform, you can systematically gather data on local needs, build responsively, and, according to some reports, gain approvals faster.
2. Reduce the cost to develop. The cost to build housing is decreasing. By using innovative construction and design techniques, more people can become developers. Development becomes closer to a product one can purchase off-the-shelf, rather than an obscure, expensive process.
Share space. Learn from the "affordability by design" movement. Smaller units that use space efficiently, like micro-units, means you can build more units on the same plot. Bumblebee Spaces and Ori Systems provide robotic furniture that doubles as a bed, kitchen, and closet, making living in smaller spaces better. Units that encourage residents to share space, all the way from kitchens and bathrooms to yards, parking lots, and walls (as in townhomes), also increase density and reduce construction materials. Starcity, for example, provides users with private rooms, but shared living rooms and kitchens. Unused space, such as your backyard, could hold accessory dwelling units using tools developed by companies like Cover Technologies and Kasita. By doing so, you can decrease costs and get more out of your land, ultimately increasing cash flow.
Buy directly from suppliers in bulk. Pre-selling property in bulk saves sellers and buyers money in multiple ways. First, sellers have greater certainty they can reach their goals in just one transaction, ultimately saving on marketing, brokerage, and other costs. Furthermore, they can get much needed cash to construct, reducing the amount of expensive or difficult-to-get financing.
Use prefabricated housing to make development seamless. By using standard designs and mass producing blocks of housing in factories, housing can be built more efficiently. By turning housing into a more economical product with fewer, but better, choices, homeowners reduce ambiguity around construction costs. Companies championing these approaches include Kasita and Blokable. Cover Technologies uses software to design zoning-compliant housing. In the future, 3-D printed houses by the likes of New Story may become more prevalent.
Other tools reduce the cost of housing. More broadly, I cover six major tool chests that reduce costs from acquisition and financing to permitting in The Multifamily Executive, in Shelterforce, and Hackernoon.
Let's not repeat past mistakes to further ownership. In the pursuit of more ownership, "innovative" subprime loans were allowed, which often targeted lower-income, African-American residents. By not having to require an income or a job, lenders received high interest rates and balloon payments to make up for their risk. After the Great Recession, African American households lost 40 percent of their wealth, even as white households recovered, according to a report by the American Civil Liberties Union. Instead, let's build housing to be affordable from the ground-up. The ownership and production structures discussed above and in the first piece reduce costs and promote community-building. More generally, these new cooperative structures put more power in the hands of everyday people, who can be a new force to be reckoned with.