Planning for more micro-apartments in NYC

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New York City may change its regulations to allow more micro-apartments:

Planning officials are proposing to end a limit on how small apartments can be, opening the door for more “micro-apartments” that advocates see as affordable adaptations to a growing population of single people. Critics fear a turn back toward the city’s tenement past and question whether less space will really mean less expensive…

As an experimental project, Carmel Place got city land and a waiver from New York’s 400-square-foot minimum on new apartments, set in 1987. A proposed elimination of that minimum would allow smaller studios in buildings with a mix of apartment sizes, but entire micro-unit buildings would continue to need waivers...

Forty percent of the units have rents set by affordable-housing programs topping out at around $1,500 a month, but market-rate ones rent for $2,650 to $3,150, roughly on par with many studios in the nearby Murray Hill neighborhood. About 20 people have applied and hundreds requested information for eight market-rate units so far, while over 60,000 have entered a lottery for the affordable ones…

But critics see micro-units as a step backward in the city’s affordable housing crunch – still pricey, just smaller.

The demand for any new housing is high in New York City and a number of other major cities like San Francisco. It seems like the trick with the micro-apartments is that there needs to be thousands of them available in a relatively short amount of time to really address affordable housing otherwise. In contrast, if the units just trickle out (whether from regulatory issues or opposition from nearby residents or apathy from developers), the smaller units will barely make a dent and the prices will stay sky high. It is either all in for micro-apartments or they simply become a unique housing option in one of the world’s most expensive cities.

Shadowy McMansion owners

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A letter to the editor in the New York Times suggests McMansions owned by shell companies are a big problem:

Your article on shell companies and real estate highlights a phenomenon not unique to ultra-wealthy areas of Los Angeles. Real estate purchases using the cover of limited liability companies are a significant issue in the San Gabriel Valley in eastern Los Angeles County, where McMansions owned by L.L.C.s sit empty as middle-class home buyers are priced out, unable to compete against those flush with foreign money from unknown and undisclosed sources.

New York, San Francisco, London and Vancouver are also experiencing this influx. In the United States, real estate brokers and agents are not required to comply with customer due diligence and know your customer mandates that banks and many non-bank institutions must follow.

This kind of argument makes McMansions seem even worse then they are typically depicted: they are owned by shadowy wealthy people who don’t care about the normal resident who just needs somewhere to live. The problem with this letter is that it doesn’t provide good data on how many homes actually fall into this category. Wealthy, culturally significant cities like the ones listed above – LA, NYC, San Francisco, London, Vancouver – do attract foreign investors (particularly Chinese investors recently in Vancouver and the LA area) but major cities tend to like this: it keeps new capital flowing into local coffers and it fuels the high-end construction industry (see Miami or London or New York).

In contrast, it is pretty clear that most major American cities don’t really want to talk about affordable housing and/or aren’t willing to do much about it. Affordable housing is needed in many major cities, particularly those along the coasts. Part of the reason McMansions exist in the first place is that Americans were willing to move further out from the city to buy a bigger house (and this has to with state policies and residential preferences to avoid urban life and non-whites). The resources that it takes to construct McMansions in the suburbs could be harnessed to build smaller urban units or at least denser suburban units (see these recent ideas to use the materials from McMansions or to subdivide McMansions into multiple units) but few governments want to mess with the single-family home market and few builders or developers want to limit their profits.

Postwar suburban houses reviewed

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A review of two new books on postwar suburban homes points out some of the idiosyncrasies of the houses:

The one-story ranch loosened its belt and spread out, and the Split Level, that most American hippogriff of house hybrids, took flight. The origins of the split level are murky: it originally offered a small footprint and a means to make better use of sloped northeastern sites. But it soon spread to locations where neither item was a real concern. It was an easy means to reintroduce functional separations that residents soon realized were valuable: locating bedrooms a stairway away from living rooms wasn’t merely Victorian prudishness—it made good sense. Split levels also fueled the rise of that most suburban setting, the rec room, which was usually located in basements or lower levels and almost invariably a more informal children-oriented social space, frequently enabling the relative re-formalization of the main living room.That suburban building sited homes on big lots is not news, but what is worth noting, as Lane points out, is how the houses were designed in relation to those lots. The formal and inward-oriented facades of pre-war homes gave way to houses whose facades were dominated by the living room picture window, affording a glimpse not merely of one’s own yard but those of your neighbors. As Lane comments, “The windows looked out on the new landscapes that formed around them and also enhanced the perception of spaciousness so much desired by this generation.” The scenography was often repetitive, but it was open: As John Updike commented in Rabbit Redux, “now the view from any window is as into a fragmented mirror, of houses like this, telephone wires and television aerials showing where the glass cracked.”…

Distinctive design was rarest from the larger builders, but similar trends characterized a very wide swath of construction, despite an often complicated level of agency. Jacobs cites a National Association of Home Builders study in 1959 indicating that 38.3 percent of builders designed their own homes, 34 percent used a contract or in-house architect, 12 percent hired a designer of some sort, and 6 percent purchased blueprints through a commercial service. Countless independent and uncoordinated actors who end up producing a similar monotony is unfortunately often the story of America.

And my favorite part of this review:

Suburban building has long been reviled by sociologists and ignored by architects. As Lane comments, “scholarship has been delayed and disturbed by decades of neglect and dislike.” Some of that neglect and dislike is warranted: it’s hard to find all that much architectural distinction in the vast majority of suburban homes. Their general interchangeability discourages the kind of design interest that has given us many monographs on vernacular rowhouses and bungalows and only a handful on the ranch home. There are countless books on a dozen homes in New Canaan, Connecticut, but almost no books on the remaining thousands of homes there; that balance is mainly right—and yet.

Simply the sheer number of homes built in the decades after World War II meant that these design choices would be influential. With a massive housing shortage building up through the Great Depression and World War II, homes were needed quickly and the existing economic, political, social, and design forces led to these particular kinds of homes.

But, as a suburban scholar I agree that such homes have either gotten little attention or have been reviled. These homes were incredibly influential, even if they weren’t true Modernist structures or deviated too much from existing vernacular designs or weren’t designed by architects but rather were mass-produced. Much of the scholarship and commentary on these postwar homes is done from a critical, after-the-fact angle and with an implicit alternative vision of how an urbanized America might have turned out. There is some truth in all of these critiques: these suburban communities were racist (in that non-whites were typically not welcome), initially had particular visions of gender roles and family life, promoted consumerism and driving, and took up a lot of land without much thought of the consequences. At the same time, millions of Americans enjoyed their new homes and the opportunities that came with them.

When you spend $2 million to block a nearby McMansion

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The Washington Post profiles several neighbors who saved their neighborhood from a McMansion – but now may be on the hook for a big amount of money.

They had seen home after home in Bethesda, Md., torn down, replaced by behemoths boasting high ceilings, multiple gables and soaring porticoes. So when a small 1940s Cape Colonial on Oldchester Road was about to go on the market last year — and already attracting the attention of a well-known McMansion developer — three neighbors designed a custom-built approach to save it.

They pooled $2 million to buy, modernize and resell the old house. They hope the updated brick Colonial, which they expanded from three to six bedrooms, will preserve the charm of their neighborhood and maybe even make them a modest profit.

But the group’s attempt to flip the house — on a street where a 1999 Harrison Ford movie was filmed — has yet to pay off. The now-renovated home at 7812 Oldchester Road in the Bradley Woods neighborhood of Bethesda has been on the market since late August, its price having dropped from nearly $2.4 million to $2.175 million…

But the Bradley Woods triumvirate — a senior Justice Department official, a real estate lawyer and a high-end home designer — remain confident they made the right decision, despite the property lingering on the market for 3 1/2  months, longer than the two-month average for a Bethesda home.

What is missing in this story is the amount of money and wealth that is needed to even make this move: most Americans opposed to McMansions or other changes to their neighborhood or community could not simply buy the property and then try to make some money off of it. Instead, they have to either convince their neighbors that this isn’t in their best interest (and this is a tough case to make when so much money is on the line on what typically is most people’s biggest single investment in life) or go through the regulatory and legal process to attempt to block the teardown. All of this might lead to negative interactions as it pits property rights versus what the neighbors or community feel might be in their own best interests (and it often is about collective property values). But, if you have resources, you can just take care of the problem yourself.

Xmas gifts: America has socialized mortgages, free market health care

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The preface to Shaky Ground: The Strange Saga of the U.S. Mortgage Giants includes this fascinating section:

The big banks have at least superficially paid back the money the government gave them; General Motors and Chrysler are out of bankruptcy; but Fannie and Freddie are still in conservatorship. Even more significant, most of the mortgage market in this country is now supported by government agencies, more so that it was before the financial crisis. The former governor of the Bank of England, Mervyn King, told me this: “Most countries have socialized health care and a free market for mortgages. You in the United States do exactly the opposite.”

Americans of all political stripes have long supported the idea that residents deserve to own a home. This is reflected in government policy, as Bethany McLean argues, where politicians suggest they want Fannie Mae and Freddie Mac out of the mortgage business yet let them become a more and more integral part of the process.

It would be interesting to know how the money poured into the GSEs might be used elsewhere to support other things Americans like to have.

One wish: “Tiny House Trend Booming — McMansions Now Storage Units”

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One Oregon newspaper asked readers to submit headlines they would like to see come true in 2016. One involved McMansions:

“Tiny House Trend Booming — McMansions Now Storage Units”

The headline tries to juxtapose two very different sized houses and two unique visions. The first suggests people need less space and such homes can be more sustainable. The second suggests outrageous consumerism and living beyond your means. Yet, this headline/far-fetched prediction may just hint at how these two trends are linked: what would Americans do with all their stuff if a large number wanted to move to tiny houses? Americans may have bigger houses than they need – whether measured by the people in each household (which is declining) or the amount of space and energy they should take up (this would really help lower energy use) – but they do like their stuff. Here is a quote from an HGTV participant:

We have a very American problem. We have too much stuff. And we’re going to do the very American solution. Instead of getting rid of some of our stuff, we’re going to just get a bigger house.

And Americans are already using seven square feet per person of storage space. Perhaps all of those McMansions could simply become storage facilities? Think how much that 20 foot tall great room or that oversized three car garage might hold. Imagine a future where Americans live in 400 square feet or less units most of the time but have a 3,000 square foot storage facility several miles away.

Books that influenced sociologists to pursue sociology

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Sociologist and psychologist Sherry Turkle discusses some of the books that most influenced her:

BOOKS: Which books had the biggest effect on you?

TURKLE: Jean Piaget’s “The Child’s Conception of the World,” Freud’s “The Uncanny,” Claude Levi-Strauss’s “The Savage Mind.” Getting into those books got me into this notion that we love the objects we think with, and we think with the objects we love. That became my life’s work.

BOOKS: Any other pivotal book?

TURKLE: I think the most influential book for me was “The Lonely Crowd” by David Riesman. I read that in high school. I said to myself I want to be the sort of person who could write a book like that. So I decided to study sociology and psychology. In fact, he became my mentor.

Given that Turkle was trained as a sociologist and psychologist (she did both together: “Professor Turkle received a joint doctorate in sociology and personality psychology from Harvard University and is a licensed clinical psychologist.”), these books don’t look so surprising. But, would we have known this when Turkle was in college or younger? Or were these the books that she found at an academic level that then influenced her later research and writing? It would be interesting to see: (1) what books a number of other sociologists would cite as influential and (2) whether these texts line up with the books and articles cited the most in the discipline.

Additionally, The Lonely Crowd has had an outsized effect on studying the American suburbs. I admit that I have not read the whole thing though it sits on the shelf in my office. Its claims about conformity have been widely echoed by critics of the suburbs – while cities are often presented as the bastions of individuality and authenticity – even as the data behind the claims was somewhat thin.

Recession decimated construction workforce

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Here is another sign the construction industry has not fully recovered from the economic crisis: the number of construction workers is still low.

The new-construction housing market is slowly recovering from the turmoil of the recessionary years, but builders haven’t been able to pick up where they left off. More than 2 million skilled labor jobs were lost to the economy, and many of those workers are gone forever…

Nearly 30 percent of the construction workforce disappeared during the Great Recession, reports FMI Corp., a Raleigh, N.C., provider of management consulting, research and investment banking to the construction industry. Among its ranks are plumbers, electricians, roofers, bricklayers and carpenters.

The shortage seems to be worsening. According to FMI’s 2015 “Talent Development in the Construction Industry” survey, 86 percent of respondents reported shortages of skilled labor. That’s up from the 2013 survey, in which 53 percent of respondents reported such shortages.

It may take a long time before the housing industry approaches where it was in the early to mid-2000s. In the meantime, those workers have to do something and/or go elsewhere. Even with all the political talk about helping workers, I don’t remember anyone suggesting plans for helping construction workers in the same way that politicians have discussed manufacturing workers.

Additionally, I wonder what it takes to ramp up with a lot of new workers if the housing industry starts booming again. Businesses today tend to shed workers when times are bad, add when the economy picks up, and disregard training and upstart costs. However, it is not always simple to just hire large numbers of laborers.

No one wants your old, heavy, non flat screen TVs

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Thrift stores and recyclers in the Chicago area are not thrilled to get old TVs:

In 2012, an Illinois law took effect prohibiting residents from throwing televisions in the trash. But places that used to take them are either cutting back or no longer accepting them. Others are starting to charge to take old televisions…

The Salvation Army thrift stores have stopped taking them because used TVs don’t sell, said Ron McCormick, business manager for The Salvation Army’s greater Chicago area…

In Will County, e-recycling centers might stop taking televisions and other electronic waste entirely on Feb. 11 if a deal isn’t reached between the county and its recycling contractor, said Dean Olson, resource, recovery and energy director for Will County.

So, what is a consumer to do? THe solution proposed at the end of the article:

“We’re just being flooded, especially with those giant TVs,” Jarland said. “If they’re still working, keep using them.”

It would be interesting to see the overall numbers regarding how quickly Americans have replaced their old TVs. Given how much TV Americans watch and the technology (which dropped in price pretty quickly) of the last ten years that has led to a better TV viewing experience, this may not be a surprise. But, it makes recycling or being green tougher: people are simply buying a new television or two to replace the one that still works. They could still watch TV and save money with their old units but we refuse today to watch smaller, non-HD screens. (Though watching small screens isn’t necessarily on the way out – those who keep pushing TV on the smartphone, tablet, and computer are advocating for small TV but this is mostly about convenience, not preference.) Who should be responsible for disposing of these old televisions? Perhaps consumers should have to pay a fee to dispose of their old models.

For the record, I disposed of several older TVs at Best Buy in recent years. No resale shop wanted them. No relative wanted to use them. Would paying $5 each stopped me from properly disposing of the television? I’m sure there is some price point that would make sense.

Foreign investment in Chicago real estate reaches record high

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Chicago was an appealing city for international real estate investors in 2015:

Chicago’s continuing rise to prominence on the world stage was further boosted by the latest figures indicating that 2015 will not only be a banner year for new construction and hotel occupancy, but a record-breaking period for foreign real estate investment as well. 2015 saw $3.27 billion of new overseas capital flow into the Windy City, according to recently published report by Crain’s Chicago Business, a figure that shatters the previous record of $2.18 billion set in 2013. Citing data from New York-based Real Capital Analytics, Crain’s reports that foreign buyers accounted for roughly 16 percent of Chicago’s total $20.2 billion of real estate sales this year. Chicago now ranks as the fourth largest market in the nation for foreign investment — up from last year’s eighth place — and trails behind only New York, Los Angeles, and Washington D.C.

These positive figures are attributed to several factors. Oversaturation of traditionally stronger coastal markets has driven up prices to the point where commercial investors are often finding more lucrative opportunities in Chicago. Chicago is seen as a somewhat riskier choice for firms taking on commercial properties due to the relative ease at which new buildings can be added and tenants relocated — similar to CNA’s announcement earlier this week — but foreign buyers willing to take on this risk have enjoyed greater returns. In 2015, investment in Chicago saw first-year rates of return (“capitalization rates” for you finance-minded folks) averaging 5.1 percent, outperforming the 4.1 and 4.7 percent yearly yields of Manhattan and San Francisco, respectively.

While this sounds like good news (more capital flowing into the city and the potential for these investments to lead to other deals), I could imagine two downsides:

  1. This recently happened in Chicago, but it wasn’t the first city of choice for international investors. It is suggested here that investors are now turning to Chicago because the more desirable markets – NYC, LA – are oversaturated. So, this may confirm that Chicago is still the third city – or maybe even the fourth city if you include Washington, D.C. This may just feed the anxiety some in Chicago have of their place on the world stage.
  2. Even as investment from outsiders is viewed as good, would investment from foreigners be viewed as positive by all in Chicago? Americans occasionally have periods of fear that people from other countries are taking over and Chicago is a more parochial/less cosmopolitan market than some on the coasts. Foreign investment may be good but do Chicagoans like the idea that others are benefiting greatly off the Midwest?