A denser suburbia in California and the rest of the United States

The single-family home is the most important feature of American suburbs. What happens when conditions change and pressures lead to more multifamily housing units and denser housing in suburbia? From California:

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In June, as Ms. Coats told me about the house and the neighborhood from the doorstep of her bungalow, she gazed toward a fresh foundation that had entombed the back half of Lot 118 in concrete. Over the next few weeks, a construction crew erected a two-story building that filled in a green rectangle from the Clairemont Villas brochure. A few feet away, the original four-bedroom house was loudly gut-renovated into a pair of apartments.

When the workers head to their next job this month, they will leave what amounts to a triplex rental complex on the type of lot that in the seven decades since Ms. Coats’s family moved in had been reserved for single-family houses. It’s part of a push across California and the nation to encourage density in suburban neighborhoods by allowing people to subdivide single-family houses and build new units in their backyards…

In the vast zone between those poles lie existing single-family neighborhoods like Clairemont, which account for most of the urban landscape yet remain conspicuously untouched. The omission is the product of a political bargain that says sprawl can sprawl and downtowns can rise but single-family neighborhoods are sealed off from growth by the cudgel of zoning rules that dictate what can be built where. The deal is almost never stated so plainly, but it is the foundation of local politics in virtually every U.S. city and cuts to the core of the country’s deepest class and racial conflicts…

“It doesn’t fit.” “It’s adding people.” “We don’t want that here.” “There’s other places for that.” “We just want to keep our neighborhood like it is.” “They want to push us out and tear our houses down.” “Parking.” “Parking.” “Parking.”

Several quick thoughts on these changes in many suburban communities:

  1. Where exactly this density will happen will be fascinating to watch. Will it happen in wealthier suburban communities or will they be able to keep it at bay? Inner-ring suburbs are often already more familiar with such density but this is less common in suburbs further from the big city.
  2. The housing pressure is acute in California but is not so clear or as well publicized in many other locations. If this works in California, where else does it show up?
  3. The NIMBY concerns cited above will be vocally shared again and again. The appeal for many single-family home owners is the space between neighbors, relatively lots of room for parking, and not feeling like the neighborhood is crowded.
  4. How much are #1-3 above linked to another long-term pattern in suburbia: race and exclusion? Homeowners will say it is about protecting their properties – particularly their property values, which single-family home zoning is intended to do – but it is also about who is able to live in the neighborhood and community.
  5. The addition of units and people to existing single-family home neighborhoods is a different approach to denser suburbia than creating larger-scale “surban” projects that some would find desirable near suburban downtowns or in large-scale redevelopment.

A growing number of US suburbs contain a majority of renters

A new analysis suggests the number of suburbs with a majority of renters is increasing:

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Renters now make up the majority of residents in more than 100 suburbs around the U.S., according to a new analysis of Census Bureau data from Rent Cafe. Another 57 suburbs are on their way to becoming predominately renter territory over the next five years, the apartment search website also found…

Overall, roughly a quarter of the more than 1,100 suburbs near the nation’s 50 largest metro areas are renter-dominated, according to Rent Cafe. Some 21 million people rented their homes in the suburbs as of 2019, up from 17 million a decade ago.

Millennials and members of Generation Z account for most suburban renters, Census data show. Rent Cafe notes that 55% of suburban renters are younger than 45, with median household earnings of around $50,000.

Meanwhile, the pandemic is expected to further fuel the shift away from suburban homeownership in favor of renting. Remote work opportunities have generated more interest in suburban areas within striking distance of cities.

If this is indeed the case, it would be interesting to know if these suburbs share characteristics. Do they tend to be close to the city or further out? Do they have particular hosing stocks compared to other suburbs? Are middle-class and up suburbs still devoted to residents owning single-family homes as a status marker?

My guess is that a majority of suburban residents would still say that they desire to home at some point. But, if more suburbanites are now renters, is the pathway to homeownership in their own community or other suburbs much more restrictive? This is part of the larger affordable housing conversation; people need any decent housing to live in but because many Americans aspire to own a home, having affordable ownership options is important as well.

An interesting middle path in some communities could be having significant numbers of single-family homes with long-term renters. The appearance and status of homes is maintained while renting adjusting for current conditions. On the other hand, many have argued that renters do not care for their properties or communities in the same way and communities may not like this trend.

Bringing a South Side Chicago home to the middle of an entertainment spectacle

The listening party Kanye West hosted at Chicago’s Soldier Field last week featured at the center of the set a replica of the home of his mother on the city’s South Side:

As noted in the review, the addition of the cross to the front of the home helped it look like a church. However, outside of that, it looks like a fairly standard house: long and skinny to fit a city lot, a bay window in the front, a second story with pitched roofs all the way back, nondescript siding.

That the single-family house was at the center of a spectacle – slow moving vehicles, other music stars, people in masks and costumes on the front steps, thousands of people listening in the stands – hints at the role of the home in the creative process. How many important American cultural works emerge from such dwellings? Once stars are established, we do not associate them with such humble dwellings but rather with large Hollywood mansions or opulent condos in the biggest cities. Or, we might think of artists as connected to particular places, whether specific neighborhoods or cities or suburbia at large. Kanye has noted connections to Chicago but this home says less about Chicago as a place than it does about more private activity, home life, and the importance of West’s mother. Even as we are not invited to see inside the important home – imagine it being constructed in such a way to open for the audience with emphasis on certain rooms, activities, or symbols – we get the sense that the home mattered.

iBuyers look to ramp up home purchases

Several tech companies are looking to purchase more American homes:

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“Our financial goal is to drive rapid growth at scale with sustained improvement in our profitability,” Opendoor, the industry pioneer, wrote in its letter to shareholders this week. After going public last year, Opendoor has now expanded into more than 40 markets and purchased 8,500 homes in the second quarter, more than any other quarter by almost 50%. The company, which is reportedly searching out a new $2 billion revolving credit facility, also announced this week that it is now willing to purchase the majority of homes in every one of its current markets.

Zillow announced similarly ambitious plans during its recent earnings call. While it bought only 3,800 homes in the second quarter, Zillow is gearing up to scale massively through the rest of 2021, saying that it expects its Homes division to bring in around $1.4-1.5 billion in revenue next quarter, roughly double what the division made this quarter…

iBuyers say that in exchange for money they offer convenience, quickly offering a number to homeowners who, if they accept, can then pick their exact move-out date, avoid showing their home, and use the money to immediately go house hunting. (Zillow says its goal is become a “housing market maker.”)…

Still, it’s difficult to deduce at this early moment whether adding high-tech firms to the real-estate market will be a net positive or negative for the typical American family, said Roberto G. Quercia, a professor of city and regional planning at the University of North Carolina at Chapel Hill. Residential real estate remains the dominant form of wealth for such families, making up roughly 70% of median household net worth, so the answer could have potentially enormous ramifications for the country.

The biggest factor seems to be the marriage of tech capabilities and money. There are other actors in the market who have plenty of cash to use. There are plenty of websites and apps for real estate. Does putting them together offer unparalleled convenience or particular knowledge through algorithms and real estate data?

There are multiple sets of consequences to figure out. As the article notes, it is not clear if these new home selling options benefit consumers. More options or more competition could be good. What do other actors like lenders, developers, and realtors think about this? Additionally, many communities might have concerns about institutional buyers who can leverage technology and scale but do not necessarily have local knowledge or concern about local markets. Could these actions drive up prices beyond what regular buyers could afford?

Get a house that is zero-carbon over its lifetime…for $32 million in Malibu

It will take a little money to acquire the first zero-carbon home in California:

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The roughly 14,400-square-foot modern ranch-style house has all electric appliances and mechanical systems, and comes with an organic vegetable garden, orchard and apiary, according to marketing materials. In addition, the develop said it reduced carbon emissions during construction by using alternative building materials.

“This home will have zero [carbon] emissions throughout its lifetime,” said Scott Morris of Crown Pointe Estates, developer of the home. The average U.S. home emits 8.3 metric tons of carbon dioxide a year, according to U.S. Environmental Protection Agency data…

Until recently, developers have focused on reducing energy use in homes, but attention is expanding to include cutting embodied carbon, the greenhouse gases that are emitted during the manufacturing, transportation and disposal of building materials, said Cliff Majersik, a senior adviser at the Institute for Market Transformation, a Washington, D.C., think tank with public and private funding that promotes investment in low-energy building. If the developers rigorously reduced and measured embodied carbon, and offset the remaining carbon, it would be a “very impressive achievement,” he said.

According to Mr. Morris, Crown Pointe reduced the embodied carbon in this home’s construction by replacing 80,000 pounds of steel in the original home design for sustainable timber. It says it slashed its concrete usage by 14% by replacing a concrete-slab foundation with a crawl-space foundation. And rather than place a concrete subfloor beneath the wood and stone floors, it used a rubber underlay made from recycled tires. Around 25% of the concrete used is recycled, the developer said.

This is a cool feat and yet it is not exactly anything close to an average home. The irony here is that this zero-carbon home both costs so much – it is a luxury in a premium location to be zero-carbon – and it is such a big house – a reduced environmental footprint yet still taking up a lot of land and having a quintessentially American square footage. Does this make being zero-carbon a status symbol?

How long until this kind of home is within reach of more homeowners? Some of this technology would be possible in much smaller homes but it could still be costly to eliminate carbon from all the other materials.

The importance of a house’s roof to its longevity

In thinking of houses in light of both recent tornado activity in the Chicago area and reading the book The World Without Us, I was reminded of the importance of the roof for a building. Here is how author Alan Weisman puts it when discussing an abandoned home:

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The resin in your cost-conscious choice of a woodchip roof, a waterproof goo of formaldehyde and phenol polymer, was also applied along the board’s exposed edges, but it fails anyway because moisture enters around the nails. Soon they’re rusting, and their grip begins to loosen. That presently leads not only to interior leaks, but to structural mayhem. Besides underlying the roofing, the wooden sheathing secures trusses to each other. The trusses – premanufactured braces held together with metal connection plates – are there to keep the roof from splaying. But when the sheathing goes, structural integrity goes with it.

As gravity increases tension on the trusses, the 1/4-inch pins securing their now-rusting connector plates pull free from the wet wood, which now sports a fuzzy coating of greenish mold. Beneath the mold, threadlike filaments called hyphae are secreting enzymes that break cellulose and lingin down into fungi food. The same thing is happening to the floors inside. When the heat went off, pipes burst if you lived where it freezes, and rain is blowing in where windows have cracked from bird collisions and the stress of sagging walls. Even where the glass is still intact, rain and snow mysteriously, inexorably work their way under sills. As the wood continues to rot, trusses start to collapse against each other. Eventually the walls lean to one side, and finally the roof falls in. That bard roof with the 18-by-18-inch hole was likely gone inside of 10 years. Your house’s lasts maybe 50 years; 100, tops. (19)

The roof helps connect all of the walls and hold the house together and it also serves to keep the elements out from above. Once a hole begins and air, sun, rain, snow, and creatures can get in through the roof, it is just a matter of time before it all starts falling apart. Without a functioning roof, a house may not last long.

Granted, the scenario above discusses when homes are abandoned, an unlikely outcome in many communities. At the same time, this provides a reminder of the need to stay vigilant about roofs. For many homeowners, this is not an easy task: it might be hard to view all of the roof from the ground or from inside the house, accessing the roof might be difficult, and not everyone regularly looks at the underside of the roof depending on the layout of the home and the access.

So when people complain about the build quality of homes or McMansions, I wonder how much they consider the roof. If a mass produced McMansion truly is inferior in quality, would the roof go first or the siding or the walls or the foundation or something else? All could be problematic for the longevity of a home but the roof in particular presents important problems.

Large actors in the US housing market and building more homes

Derek Thompson argues those interested in more housing in the United States should be more concerned with local NIMBY activity than private investment firms buying up homes to rent:

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Far worse than corporations taking a few thousand units off the market for owners are the governments and noisy NIMBYish residents taking millions of units off the market for owners and renters alike—by blocking construction projects in the past few decades. (California alone has an estimated shortage of 3 million housing units.) From New York to California, deep-blue cities and states have amassed a pitiful record of blocking housing construction and failing to meet rising demand with adequate supply. Many of the people tweeting about BlackRock are represented by city councils and state governments, or are surrounded by zoning laws and local ordinances that make home construction something between onerous and impossible.

One of the issues at play here is a numbers one: who exactly is acting within the US housing market and how much sway do they have. Concerns about corporations and housing can be placed in the larger context of how many housing units there are and how many are being built. Here are the numbers Thompson provides:

The U.S. has roughly 140 million housing units, a broad category that includes mansions, tiny townhouses, and apartments of all sizes. Of those 140 million units, about 80 million are stand-alone single-family homes. Of those 80 million, about 15 million are rental properties. Of those 15 million single-family rentals, institutional investors own about 300,000; most of the rest are owned by individual landlords. Of that 300,000, BlackRock—largely through its investment in the real-estate rental company Invitation Homes—owns about 80,000. (To clear up a common confusion: The investment firm Blackstone established Invitation Homes, in which BlackRock, a separate investment firm, is now an investor. Don’t yell at me; I didn’t name them.)

If I am calculating correctly, institutional investors currently own 2% of the single-family rentals. Of course, this number could grow if these firms find this to be a good investment.

Also of interest is the number of new homes being constructed. Thompson links to figures from the National Association of Home Builders that shows 6.8 million new single-family units were created in the 2010s. So, concerns about big investors buying homes could be considered alongside housing construction: if the investors are buying more quickly than new homes are being built, this could be an issue.

Thompson settles on local actors – governments and residents – as holding back housing construction. In this numbers game, restrictions on a local level collectively are holding back the construction of single-family housing. If these restrictions were lifted or lessened, concerns about institutional investors would presumably diminish because there is a larger supply of houses to choose from.

One problem I see with this among the larger numbers: while local actors might in the aggregate have oversight over millions of units, they individually have control over relatively few units. Let’s say a particular suburb in the Bay Area (and this NIMBY argument often comes back to California) is against building new single-family homes. Depending on the size of the community and the availability of land, this might affect just a few homes to several thousand. This is not many. Zoom out to the whole region and many suburbs doing this adds up to tens of thousands of potential homes. Do this across all of California’s metro areas and the numbers add up. Similarly, you could do this across all the metro areas in the United States.

However, convincing all these municipalities to act in the interests of the region, state, or country as a whole regarding housing is a difficult task. Housing is local and this makes legislation at the state or federal level very difficult. California’s recent efforts with SB 50 did not go through. Illinois just recently gave some teeth – but not all the teeth – to affordable housing guidelines for communities set almost two decades ago. Federal guidelines are met with the suggestions that the suburbs are going to be abolished. One reason Americans like suburbs in the first place is that local government, presumably more responsive to the needs of residents, has the power to exclude (particularly on race and social class) and protect the existing single-family homes.

All of this does not necessarily mean Thompson is wrong. Yet, to get to the numbers of new homes constructed that would make a significant difference – whether in reducing the need many metro areas have for more affordable housing or outweighing the actions of investment firms – would require a lot of change across many communities. State or federal legislation may or may not be successful and would be unpopular in many places without a significant public groundswell of support that this is an issue that all or even most communities need to address.

Together, municipal changes regarding zoning and NIMBY could add up. But, changes would need to come across communities to make a big difference.

In the past year, Americans moved to less expensive but bigger homes

A new report from Zillow shows what kinds of homes Americans chose in the last year:

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By and large, Americans chose bigger — and less expensive — homes, particularly if they moved across state lines. Zillow’s analysis looked at data from North American Van Lines, a trucking company based in Ft. Wayne, Indiana. This was “a notable reversal of trends from prior years,” Zillow economist Jeff Tucker said in the report.

The average home value in the ZIP codes that movers left was $419,344, versus $392,381 for the ZIP codes they relocated to. That represents a difference of roughly $27,000.

But a cheaper home doesn’t mean a smaller one. While the average size of the homes movers left behind was the largest since Zillow began tracking this data in 2016, the average size of the new homes people chose was even larger. The average difference in size, according to the analysis, was 33 square feet…

This is allowing Americans to get the most bang for their buck in the housing market, rather than needing to sacrifice affordability or space in the name of living closer to urban centers.

Is this a perfect distillation of the American Dream at this period of history? “The biggest house for the least amount of money.”

I wonder how this might affect broader patterns regarding the size of American homes. The size of new houses grew steadily from 1950 on but has leveled off in recent years. At the same time, I could imagine a scenario where small shifts as described above help keep inching up the size of American homes. Here is how this might work:

  • From the summary, it sounds like people moved, on average, to slightly bigger houses. Having 33 more square feet is not that much – imagine a 5.5 x 6 foot space (bathroom? mudroom? closet?) – but it is an increase.
  • There does seem to be some interest in not living in McMansions or extra-large houses (see a recent example). Some have suggested prior generations wanted crazy amounts of space while younger adults today want more reasonably sized homes.
  • So imagine the standard size of a “small house” keeps inching up – there are fewer starter homes so people go to bigger houses, new or old, to start – while there is less interest in homes 4,000 square feet and up (which relatively few Americans owned in the first place). In other words, the size of American homes move more because truly small homes are phased out and truly large homes fall more out of favor.

A purchased home does not need to be a McMansion to be a bigger home compared to past standards or even smaller units today.

Out with vacation McMansions but keep going with pricey, exclusive, luxurious homes

An article about a popular new development in Park City, Utah suggests millennials do not want McMansions but the rest of the text suggests they are not giving up on having nice homes:

https://www.benlochranch.com/

What Benloch Ranch represents is a collision of trends in real estate and demographics. Millennials of homebuying age are rejecting the sizes of their parents’ homes, so-called cookie-cutter McMansions. And the second-home market, hastened by COVID and the same millennial-buying population, is booming. The pandemic has forced buyers to value outdoor spaces and activities more than ever before. Benloch Ranch currently has a waitlist of 175 for its single-family lots…

The development’s amenities include more than 20 miles of trails, a ski hill, a skeet shooting range, an ice skating pond and 900 acres of open space…

A lot of millenials don’t want these big houses anymore. We’re redefining the size and scale of the house and altering the price point so it’s more affordable.”

According to data released by the Park City Board of REALTORS, the median price  single-family home rose roughly 26% year-over-year to $2.5 million. Benloch Ranch offers single-family homes starting at $695,000.

The pitch is an attractive one: lean into the terrain and the idea of sustainability, feature interesting architecture, provide amenities, be close to an exciting scene and in at the start of a new development. This is a shift to new preferences of millennial buyers. The vacation homes of today and the future may look different and there is money to be made.

At the same time, this is about vacation homes in a wealthy community. This development has potential because millennials with resources can afford a vacation home starting at $700k. Sure, there are no more McMansions with all of that wasted space and tacky design but this kind of life is only available to those who can buy into it. The price for these homes would be beyond the reach of many residents of the Salt Lake City region, let alone many residents of the United States.

Does this mean the McMansion vacation homes of an older generation will not find buyers? This will be worth watching, both for vacation homes and regular homes. If McMansions go out of style, this could be reflected in lower prices or modifications – imagine multiple units – or even redevelopment.

The one HGTV show that leans into the idea of community – but does so through the context of single-family homes

Home Town is one of the big shows on HGTV and it has a premise somewhat different from the other headliners: all of the renovations take place in or near Laurel, Mississippi. The couple in the show, Ben and Erin Napier, say they enjoy contributing to a town that they love:

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The town of Laurel (population 18,338) itself is a starring character in “Home Town,” and it’s a huge part of what keeps the Napiers grounded. “Everybody here knows us,” says Ben. “When we’re in places like New York, Atlanta, Nashville or (Los Angeles) and people stop us on the streets …” Finishing his thought, Erin says, “It’s very surprising.”

Laurel, located about 90 miles southeast of Jackson, was founded in 1882 and flourished thanks to the timber industry (the region is known as the state’s Pine Belt). Mills and factories followed, bringing economic prosperity. Even now, the town boasts the state’s largest collection of early 1900s residential architecture. But as companies moved their operations offshore seeking a cheaper bottom line, the town languished. When the Napiers planted roots in 2008, there was virtually nothing to draw visitors or locals, with vacant storefronts lining the brick streets. Still, they saw its potential and looked for ways to support it, with Ben volunteering with economic and preservation organization Laurel Main Street.

Now, thanks in no small part to the success of the show, “People come to visit Laurel every day, and that’s amazing. It’s incredible. It’s why we agreed to do the show,” says Ben. 

Even with the community focus and the history they provide for each property, the show still takes a classic HGTV approach to the bulk of the episode: it is all about the single-family home under renovation. There are limited shots of the street. There are limited views of the rest of the community. There are no neighbors in view. Most of what we see if of the interior rooms, the facade, and sometimes the rear yard. The new owners move in and presumably live a private happy life ever after.

Slowly rehabbing the housing stock of a community plus bringing visitors is a laudable thing. Many small towns in the United States need attention. Many HGTV shows focus on wealthier suburbs or urban neighborhoods where housing prices are already good and people have money to make the homes even better. The housing in Laurel is not what many would want in growing communities but it represents the housing that is found in many American communities.

Can a show truly be about community when the primary focus are interior private spaces? Home Town offers a variation of HGTV’s relatively anonymous single-family homes but it might only be a veneer of community and not a true transformation.