Two new options for those aspiring to a mortgage: take on an investor or list on Airbnb

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Axios highlights two businesses trying out some models that could help potential homeowners acquire a home:

James Riccitelli, CEO of Unison Home Ownership Investors, says in an interview with Axios that he is consistently surprised that nobody in the decades-long history of U.S. housing finance had thought of the company’s business model. Unison co-invests with prospective homebuyers—typically putting 10% down along with a bidder’s own 10%, helping them qualify for a standard 20%-down home loan. Depending on the lender Unison partners with, a homebuyer can end up putting as little as 5%:

  • Unison’s investors—who Riccitelli says are typically large pension funds with long investment time horizons—realize a profit only when the home is sold. The product is attractive to such investors because they need assets that match their liabilities, i.e. pension payments sometimes 30 or 40 years away.
  • Other than a few private equity funds that bought up cheap single family homes at the housing market’s bottom between 2010-2012, there are few ways for investors to own a diversified pool of residential real estate, a market that at $30 trillion is more valuable than the U.S. stock market
  • A homeowner can buy Unison out at any point after three years—as long it recoups its original investment. A homeowner can sell the home to another party at any point, however, even if it results in Unison taking a loss.
Loftium has an alternative strategy. It will will contribute $50,000 for a down payment, as long as the owner will continuously list an extra bedroom on Airbnb for one to three years and share most of the income with Loftium.

This strategy might be particularly appealing in booming markets like Seattle, where rent prices are rising even faster than home values themselves, and which are popular tourist destinations.

These present alternatives to the traditional mortgage market with one emphasizing long-term payoffs (and assuming that housing values continue to rise at investment-level rates) and the other trying to capitalize on rental opportunities in the next few years. It will be interesting to see if such options (1) become popular (and if so, how traditional lenders fight back) and (2) whether there are negative consequences to such alternatives (and reactions to them including regulation).

Millennials seek suburban homes and SUVs

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Recent data shows several consumption patterns among Millennials:

Generationally speaking, the stereotype of millennials as urbanites falls flat when it comes to homeownership. The Zillow 2016 Consumer Housing Trends Report found that 47 percent of millennial homeowners live in the suburbs, with 33 percent settling in an urban setting and 20 percent opting for a rural area.

Millennial homebuyers do wait longer to buy a first home than did previous generations. But they are skipping the traditional “starter home” and buying larger homes that were previously considered the norm for “move up” buyers…

Erich Merkle, an economist with Ford, says that as millennials cross the threshold into family life, they’re buying large SUVs.

“We expect them to carry on as they age with three-row SUVs and likely go larger simply because they need the space to accommodate children that are now teenagers or preteenagers,” he said.

That combination so emblematic of 2000s consumption – the suburban big home (a McMansion?) and SUV – may be back. On one hand, perhaps this is what millennials are used to or they think they should aspire to. On the other side, consuming these objects can draw criticism. Did Americans learn anything (housing bubble, reliance on cheap oil)? Do they understand the consequences of these purchases (a commitment to sprawl and consuming more than they need)? How could they make such uncool choices (compared to dwellings in hot urban neighborhoods or acquiring cooler vehicles)?

Perhaps this suburban driving culture will continue for a long time…

Counting the number of churches in the US

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Determining how many churches are in the United States is not a simple task:

According to a recent paper published by sociologist Simon Brauer in the Journal for the Scientific Study of Religion, the number of religious congregations in the United States has increased by almost 50,000 since 1998. A key reason: growth in nondenominational churches.

Using the National Congregations Study (NCS) conducted in 2006 and 2012, he estimates the number of congregations in the US increased from 336,000 in 1998 to a peak of 414,000 in 2006, but then leveled off at 384,000 in 2012.

Brauer’s estimate is more reliable—statistically speaking—than previous estimates that used other methodology; however, his model “relies on samples of individuals and not the organizations themselves,” so there is still a range of variation around the “best bets,” he told CT. Thus, the loss of 30,000 churches is not statistically significant (as it falls within the model’s confidence interval of 95%)…

Brauer’s study corroborates an earlier finding from a team of sociologists led by Shawna Anderson at Duke University, who estimated the average annual death rate of congregations between 1998 and 2005 to be only 1 percent, among the lowest of any type of organization.

Organizations come and organizations go but the number of churches remains large.

The National Congregations Study made a breakthrough in studying congregations by sampling individuals about their congregations and finding that this was a reliable measure of religious organizations. In contrast, trying to find every church can be very difficult. For the 2011 book The Place of Religion in Chicago, the researchers spent years driving all over Cook County to find all the religious congregations and discovered over 4,000. Other researchers have used public sources like websites and white pages/yellow pages to uncover all the churches (though such sources may miss congregations that don’t last long as well as small ethnic congregations).

Unusually successful experiment: the CTA Yellow Line

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The CTA Yellow Line to Skokie was constructed in the 1960s and quickly became a success:

The proposed transit test brought together a unique trio: a federal agency looking to improve transit, a city rail system experimenting with expansion, and a suburb grabbing at the chance to maintain a rail connection to the city. Funding for the concept was split between the three parties—$349,217 came from the Department of Housing and Development, $1,837,415 from the CTA, and $37,193 from the village of Skokie. At the conclusion of a two-year test, the parties would figure out next steps…

After one day, the CTA logged 3,959 riders, and almost immediately added weekend hours. By early 1965, 6,000 riders a day rode the Swift (the CTA estimated that the service removed 1,000 cars a day from the highway). The CTA logged more than 3.5 million rides during the two year test period, and by 1967, the passenger load had grown 170 percent from already-high 1964 numbers, hitting a record high that year of 8,150 riders a day. Chairman DeMent told the Chicago Tribune that it was “a perfect example of how good rapid transit can induce motorists to leave their cars at home.” Not only did the service prove itself, it made a profit of $216,717 on revenues of just under $800,000 in its first two years of operation. At one point, the Feds actually asked for $250,000 of their funding back.

This success didn’t necessarily lead to much change across metropolitan areas:

In short, the experiment wasn’t replicated. As some writers at the time noted, other Chicago suburbs could have set up similar lines, and even had the abandoned rail lines to do it; the Chicago, Aurora, and Elgin Railroad, which ran through western suburbs such as Wheaton and Glen Ellyn, lay dormant beginning in 1961 (to be fair, the line was eventually turned into the Prairie Path, a wildly successful rails-to-trails conversion). In the late ‘60s, Skokie voters rejected a bid to apply for a federal transportation improvement project.

Perhaps most importantly, during a period of highway expansion and urban renewal, the money wasn’t there, and additional capital for building such systems from scratch was hard to come by. Just look at the 1967 federal transportation budget. Of the $5.35 billion spent, only $160 million, or 3 percent, went to transit. As Joe Asher, a writer for Railway Age, wrote in 1968, “the streets and highways of U.S. cities suffer arteriosclerosis, the urban population chokes on auto exhaust, and one downtown after another gets chopped up to make room for new spaghetti-bowls of highways.”

It is hard to convince suburbanites to use mass transit unless it has significant advantages compared to driving. The Yellow Line to Skokie seems to offer such advantages: a relatively short ride with Skokie right outside the city, a big parking lot, and a fast train. But, could this work further out from the city? What if the train was a slower commuter train or a bus? Or, if parking was hard to find in the suburban lot?

Rather than seeing the Yellow Line as a model to follow, perhaps it is difficult to replicate. That does not mean cities shouldn’t attempt similar efforts – we have a good sense of what building more highways leads to – but they should be realistic about what is possible.

Urban high-rises can be “vertical suburbs”

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Chicago Tribune architectural critic Blair Kamin suggests again that some new urban high-rises are dull by comparing them to suburbs:

The most forward-looking of the bunch comes from the studio of Mexico City architect Tatiana Bilbao, who designed a model low-cost house for the first biennial. Her tower, done in cooperation with 14 other designers, would house apartments, a market, a workplace and other uses in a plug-in matrix enlivened by cantilevered parts. The design offers a persuasive alternative to the lifeless (and mindless) high-rises that are turning cities from Shanghai to Chicago into vertical suburbs.

Taking aim at the never-ending quest to erect the world’s tallest building, Bilbao asks a far more important question: “How do we create truly vertical communities?”

This comparison does two interesting things. First, it continues the suburban critique of blandness and conformity. While it was often applied to tract homes built on a mass scale, here it is applied to high-rises that are indistinguishable from others. Suburbs and their residents don’t take risks, nor do these new buildings.

Second, the architectural form of suburbs – single-family homes, strip malls and shopping malls, automobile-centric – may be a less important trait compared to its culture. The suggestion here is that a high-rise in the heart of the city can still be a suburb. Spatially, this makes little sense but if the suburbs are more about a particular community life and set of values – an emphasis on privacy, getting ahead, property values, family life – then it may not matter where this lifestyle is found.

It may be worth thinking more about this idea of a “vertical suburb.” Architects and others have spent decades thinking about how to create vertical communities but it often does not work as intended.

Apple: new Chicago store will “transform the riverfront”

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The claim that Apple stores can serve as town squares is questionable and another claim about the new Apple store on the Chicago River might be as well:

During the keynote address, Apple’s Angela Ahrendts claimed that the new store will “transform the riverfront.” And in typical Apple fashion, the new store combines form and function to deliver perhaps the most transformative retail offerings in years. Similar to designs for other Apple flagship retail stores, the new Michigan Avenue store boasts a glassy, transparent box shape. However, it is capped with a curved roofline that resembles the lid of its Macbook laptop computer.

The new store has taken over a large portion of Pioneer Court, an outdoor office plaza which had previously served as the location for large-scale art installations. Construction on the new store officially kicked off last March, and after a year, the store began to take shape as workers installed the store’s large glass walls.

Apple is known for its focus on design, and its big move and new location is notable for not just being on the river, but for adding more to Michigan Avenue south of the Magnificent Mile. Once a quiet stretch, the length of Michigan Avenue between the Mag Mile and Millennium Park has gained significant momentum with the delivery of a new apartment tower, a new hotel, and the planned overhaul of the Tribune Tower and its surrounding properties.

This one store has been talked about for months and certainly has a striking design. Yet, can it truly “transform the riverfront”? That remains to be seen. Part of the issue could be exactly how transformation is defined. Is it simply operating an iconic building? Does it involve attracting a lot of people? If it does bring in a lot of people, what if those people primarily stay inside the Apple store rather than lingering on the riverfront and frequenting other spaces and businesses? Is it bringing in big money (sales as well as tax revenues)? Is is transferring the high status of Apple to a development project – the Riverfront – that could use some status?

Let’s see what happens. My guess that this will be an iconic store for Apple but the Chicago Riverfront is going to need much more than this to truly be a destination in its own right.

Reading into a decreasing poverty rate, increasing median household income

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Here are a few notable trends in the new data that shows the poverty rate is down in the United States and median household incomes are up:

Regionally, economic growth was uneven.
The median household income in the Midwest grew just 0.9 percent from last year, which is not a statistically significant amount. In the South, by contrast, the median income grew 3.9 percent; in the West, it grew 3.3 percent. “The Midwest is the place where we should have the greatest worry in part because we didn’t see any significant growth,” said Mary Coleman, the senior vice president of Economic Mobility Pathways, a national nonprofit that tries to move people out of poverty. Median household income was also stagnant in rural areas, growing 13 percent, to $45,830. In contrast, it jumped significantly inside cities, by 5.4 percent, to $54,834, showing that cities are continuing to pull away from the rest of the country in terms of economic success…

African Americans and Hispanics experienced significant gains in income, but still trail far behind whites and Asians.
All ethnic groups saw incomes rise between 2015 and 2016, the second such annual increase in a row. The median income of black families jumped 5.7 percent between 2015 and 2016, to $39,490. Hispanic residents also saw a growth incomes, by 4.3 percent, to $47,675. Asians had the highest median household income in 2016, at $81,431. Whites saw a less significant increase than African Americans and Hispanics, of 1.6 percent, but their earning are still far higher, at $61,858.

The poverty rate for black residents also decreased last year, falling to 22 percent, from 24.1 percent the previous year. The poverty rate of Hispanics decreased to 19.4 percent, from 21.4 percent in 2015. In comparison, 8.8 of whites, or 17.3 million people, were in poverty in 2016, which was not a statistically significant change from the previous year, and 10.1 percent of Asians, or 1.9 million people were in poverty, which was also similar to 2015…

Income inequality isn’t disappearing anytime soon.
Despite the improvements in poverty and income across ethnic groups, the American economy is still characterized by significant income inequality; while the poor are finally finding more stable footing following the recession, the rich have been doing well for quite some time now. The average household income of the the top 20 percent of Americans grew $13,749 from a decade ago, while the average household income of the bottom 20 percent of Americans fell $571 over the same time period. The top 20 percent of earners made 51.5 percent of all income in the U.S. last year, while the bottom 20 percent made just 3.5 percent. Around 13 percent of households made more than $150,000 last year; a decade ago, by comparison, 8.5 percent did. While that’s something to cheer, without a solid middle class, it’s not indicative of an economy that is healthy and stable more broadly.

Both of these figures – the poverty rate and median household incomes – are important indicators of American social and economic life. Thus, that both are trending in the right direction is good.

Yet, we also have the impulse these days to (1) dig deeper into the data and (2) also highlight how these trends may not last, particularly in the era of Trump. The trends noted above (and there are others also discussed in the article) can be viewed as troubling as the gains made by some either were not shared by others or do not erase large gaps between groups. Our understandings of these income and poverty figures can change over time as measurements change and perceptions of what is important changes. For example, the median household income going up could suggest that more Americans have more income or we may now care less about absolute incomes and pay more attention to relative incomes (and particularly the gap between those at the top and bottom).

In other words, interpreting data is influenced by a variety of social forces. Numbers do not interpret themselves and our lenses consistently change. Two reasonable people could disagree on whether the latest data is good for America or suggests there are enduring issues that still need to be addressed.

Apple stores are not new town squares

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American communities often lack vibrant public spaces but Apple stores may not be the answer:

The stores have good vibes. Everything is clean. There are no sounds of commerce. No clanging till. No specials on an aisle. No mechanical belt sliding products toward a beeping scanner. People will tell you they like your new shoes. I love Apple Stores.

But there is one problem with calling an Apple Store an Apple “Town Square”—which the company announced it’s now doing at Tuesday’s iPhone event. Namely, the Apple Store is a store and not a town square…

And most surreally, a dominant problem for democracy at this moment is that truly public space doesn’t exist on the internet you access through your phone.

Internet platforms, as John Herrman has argued, merely masquerade as democratic spaces. But they are not. They are private, as private as an Apple Store.

This is a regular issue that pops up: private retail or office space that often functions as public space is not truly public space. If you conduct activities that are not conducive to business, whether in an Apple store, a McDonald’s, the cavernous lobby of a hotel, a shopping mall, or even a landscaped area outside a business but that it is on private land, you can be removed from that space. These private spaces that allow people of different backgrounds to gather and interact can still be very valuable – see the concept of “third places,” an idea that Starbucks CEO Howard Schultz has discussed. Granted, there are restrictions on what you can do in public spaces as well but your activities are much more limited in private spaces.

Sociologists and others have asked for decades how American communities might develop more public spaces. The Internet was one space that offered new opportunities for democracy and public interaction. Alas, much of that early fervor has decreased as the Internet is dominated by major corporations and online discourse is often not very enlightening or civil.

Dissolving governments in DuPage County proceeding at a slow pace

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Reducing the number of governments and taxing bodies in Illinois can take a bit of time:

County board members on Tuesday approved a plan to dissolve the Highland Hills Sanitary District and provide Lake Michigan water to customers served by the Lombard-area agency…

The agreement paves the way for Highland Hills to be disbanded within 18 months, officials said…

Cronin said Highland Hills will be the fifth unit of local government dissolved in DuPage. He said it’s more proof that the county’s “accountability, consolidation and transparency model for local government is working.”

In 2013, state lawmakers gave DuPage the power to eliminate Highland Hills and a dozen other local government entities.

If consolidation is working, it is working slowly. A reminder: Illinois leads the way among states with nearly 7,000 local governments. Even when it may look like there are obvious ways to combine government units or get rid of other units, it often requires the approval of residents. Although many would like their taxes to stabilize or go down, giving up local control is also difficult as many then fear a decline in services or that they will have less input to processes that can affect daily life.

Not so fast: turning suburbs into cities

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One way to revive America’s cities may be to adapt to increasing densities in Americans suburbs:

But this analysis also misses something important. These trends don’t just represent people’s moving decisions — they also represent changes in the places themselves. If enough people move to a low-density area, it becomes a high-density area.

People are pouring into Dallas and San Diego. So unless those cities continue to sprawl ever farther out across the countryside, the new arrivals will increase density. People will want to live close to their jobs instead of enduring hour-long commutes. Apartment blocks will spring up where once-empty fields or single-family homes stood. Today’s fast-growing suburb is tomorrow’s urban area.

In other words, the great urban revival might not be ending, it might just be relocating. Instead of piling into existing cores, Americans might simply be creating new ones across the country. And if each of these new cities creates the productivity advantages enjoyed by places like San Francisco and New York City, this could be a good thing for the economy.

This is an intriguing concept: some suburbs, because of their popularity, willingness to build taller structures, and population size, might become like cities. This has already happened to some degree in a number of suburbs across the country.

Yet, just because a location has a certain number of people or reaches certain population densities does not necessarily mean that it feels or operates like a city. We also already have some denser urban areas – see the Los Angeles suburbs which are pretty dense compared to many metropolitan areas – but that does not automatically make them cities or urban. What is required? Most American cities have: a core or multiple cores that are multi-use and include a good number of businesses or offices; a walkability that extends for a good distance (beyond just a suburban downtown or large shopping center) and mass transit options to extend beyond the core(s) – in other words, good options beyond operating a car; a vibrancy and diversity that could range from thriving economic activity to restaurants and bars to filled public spaces; and an identity among residents and others that the area is a city.

Imagine Naperville, Illinois really wanted to become a city. It starts approving dense residential and commercial projects throughout the community. (Just to note: the local government has rejected these in the past.) The population ticks upward past 200,000 or even 300,000. There are still some pockets of single-family homes and vestiges of small-town life. How long would it take for the conditions of a city as discussed above arise? How would the community adapt to having so many businesses along I-88 rather than downtown? Would this limit the number of people who ride into Chicago on the Metra each day? (Naperville right now has the busiest stops in the whole system.) How would a city atmosphere develop? This all would take significant time and effort and perhaps decades before Naperville would be considered from both the inside and outside a city.