Last week I had the pleasure of attending at least one day of the National Multi-Housing Council Conference in La Quinta, California. You know what? I have to tell you: I’m certainly glad that developers, as a rule, are optimists. Well, maybe not the numbers guys, but certainly the visionary guys.

It provided some comfort to hear many of the seasoned veterans remind us that, thought this particular downturn had a unique brutality, they had all been through it before, and knew that if, rather, as they survived they could look forward to making a lot of money in the initial throes of the eventual recovery. Hallelujah!

As many of us have the opportunity to take at least somewhat of a breather after the pandemonium of the housing boom that has now come crashing down around us, to what shall we turn our attention? (Other than finding ways to support the bottom line, of course.)

I am challenged and perplexed by a very simple question that came to me from a young member of our staff who happens to have a background in anthropology. “If there is such a tremendous demand for ‘workforce housing’, why aren’t the developers building more of it?” Essentially, this is the price point versus perceived quality issue, isn’t it? Why aren’t more developers planning and designing communities that offer rental and ownership opportunities for folks in the middle of the middle class?

Well, gee, there are a lot of reasons. Market-driven developers obviously need to make a profit from the work they do, or those of us who own shares in their businesses (through our 401Ks or other investments.) will come screaming back to them. But it’s tough to make these projects “pencil”, especially in the “free” market.

Maybe that’s the issue—the freedom of the market. Absent constraints, for-profit developers will gravitate toward the market where the highest potential return exists—we (as shareholders) demand this from them. So we are left with a dilemma; how do we produce, to wide-ranging satisfaction, housing affordable to the folks in the 120 – 150% AMI range? It is simple to default to the position that all “affordable” housing can and will be produced only through private-public partnerships. Are we willing to accept that as the de facto reality?

What will it take, exactly, for profit-driven developers to tap into that bottomless middle market? What can we design and build that lowers costs sufficiently to make “entry” accessible to broad swaths of our community? Can it be done without partnering with government?

Let’s look together, shall we? Let’s question the established norms, ask big questions, throw jello against the wall . . . whatever it takes. In this (hopefully) temporary lull from the chaotic pace we’ve all known for the last few years, let’s focus on new, inventive solutions. Is it pre-fab? Reliance on transportation? Better understanding of our customer base?

I constantly strive to conjure an interesting, non-self-centered answer to the question, “How are you?” Maybe we should change the question. Perhaps all of us could benefit if the conversation starter we prefer were, “What’s the big idea?” It’s time to dig deep. Let’s spur each other on to true 21st Century thinking.

(Daniel Gehman, AIA, LEED AP, is a Principal in the Los Angeles office of TCA (Thomas P. Cox: Architects), and has led in the design of thousands of multifamily dwellings throughout the United States.)

It’s a remarkable thing when, twice in one week, I hear news stories about apartment rental rates dropping in Los Angeles. Seriously, what does it take in the cultural context for a piece about falling rents to become a lead story?

There’s no question that rents went up in conjunction with the condo housing bubble, though I’m not really sure what the connection was, exactly. Were there enough people priced out of ownership opportunities who nevertheless could afford luxury-level rents?

In the interest of full disclosure, my livelihood is derived from the design and construction of apartment communities. It is in the interest of my firm, and me personally, that these developments thrive. I remember back in the “salad days” of the condo boom that our Apartment REIT clients watched incredulously, nearly helplessly, as condo developments drove up the price of land available for multi-family communities based on an ever-increasing price per square foot that buyers would pay for digs in the emerging city center, particularly in Los Angeles.

I’ll never forget the day when a 300-unit condominium tower in downtown sold out in one day—leaving the agents to wonder what they’d do on the second day of a weekend sales event.

Then we passed the tipping point, and the REITS, who had been waiting on the sidelines, were able to re-enter the market, taking “broken deals” off the hands of the for-sale developers, who were left standing when the escalation music stopped. Many properties planned as condominiums would be built as apartments after all, which was great news for folks who couldn’t quite step up to home ownership yet, especially at $600 a square foot.

Now, of course, the tables have turned once again with the liquidity crisis. Is anybody building anything, anywhere? Hello? Crickets?

The air has gone out of everything. So what does it mean if rents are falling in a market like Los Angeles? (I wonder if “falling” in this case parallels the government definition of “budget cuts,” which are often simply the lack of an increase over the previous year?) Well, being an optimist, I think along these lines: when things tightened up, some tenants were forced to double up (or more). How much, I wonder, would rates have to “fall” in order for some of those impromptu couplings to reverse themselves? If I were in that situation, what would it take for me to get back into a place of my own, without roommates? $200 a month? More? Less?

More and more rental properties in the design stage are including increasingly diminutive dwellings designed to capture renters first entering the market, with an “organically affordable” price point. Will they enter the market in time to capture some new households from roommates separating due to falling rents enabling them to have a place of their own?

I can only see this as a positive phenomenon in the long run, as more rental households are formed. Sadly, the (hopefully) short-term denouement in rents will yield a sweet harvest of more households, who, when things pick up, will be reluctant to “roommate-up” again, and will contribute to the economics of the next round of rent increases. This will make many of my clients very happy, and I hope to be there with them.

(Daniel Gehman is principal at Thomas Cox Architects)

Part 1 

This
weekend I had the opportunity to introduce to the public a family that had
worked very hard to gain equity in a property they were about to purchase—a
Habitat for Humanity home in Fullerton. In presenting the keys for the home to
this Mexican-American family of five, I was struck by the irony of the
situation; while something like one in ten of their peer group was either
behind in mortgage payments, or facing foreclosure outright, this clan was
about to enter the precious heart of the American dream—a home of their own.

But the
descriptor “their own” bears some scrutiny. Many, many people were involved in
bringing this particular dream to reality. The Vasquez family, or course, spent
substantial hours on site, where they learned to measure and cut, drive nails,
finish dry wall, and whatever else may have come across their path as they
literally labored to make their dream come true. I was there because my firm,
over the last decade, has staged golf tournaments to raise funds for Habitat. A
substantial portion went into the funding of these homes.

A
colleague, William Hezmalhalch, prepared the plans for the houses pro bono; all the engineering, from civil
to structural, was accomplished in a similar manner. Countless other volunteers
poured love and labor into this enterprise, all of them believing in the
ultimate vision of helping a struggling family achieve a home of their own.

Too bad
the Habitat phenomenon can’t be scaled up dramatically. Each iteration of a
family obtaining a place to call home is a wonderful accomplishment, but in the
overall picture of housing, it’s such a tiny fragment. We all wish the program
could be scaled up dramatically, but that would involve more than just a village—it would tiptoe to the threshold
of the “social contract,” and probably barge in the front door.

Like it
or not, we are all involved in housing those less able to accomplish this
significant milestone on their own. Some cases are obvious to see. The fully
civic supported SROs on Skid Row, for example. Everyone can agree on this need
and be at peace with a portion of their tax dollars going to make it possible.
Beyond question, the true “down-and-outers” need a hand to ease their
suffering.

But as we
climb the “ability” ladder, the choices grow progressively more difficult to
make. I’m already participating in providing at least some kind of shelter for the most
egregiously down and out, but at what income level does [the need for]
assistance become murkier? Should we aid folks earning 120% of AMI?  150%?  180%? There are colleagues in my office, college
graduates,
earning below 180% AMI. My instinctive reaction to them is [to recall] what I
experienced:  “Work long enough and
control your lifestyle so that you can save for a down payment on a modest
property.” Or, (and there’s no easy way to say this) get help from a
parent—either while living, or (less pleasantly) through an estate.

It’s a
sticky wicket. While the homes that Habitat orchestrates for deeply fortunate
owners attack one tiny aspect of the problem, and do it wonderfully, and with
integrity, it is clear that multifamily projects will be required to house the
vast backlog of working people who need shelter. In this place, at this time,
with these resources, how in heaven’s name are we going to do it?

(Daniel Gehman is principal at Thomas Cox Architects)