March 22, 2018

Weekly Book Scan

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Updated: 22 min 54 sec ago

How to Build Housing More Affordably

Mon, 03/05/2018 - 16:59

While many real estate professionals see robots as helpful assistants who can make showing homes, maintaining buildings, and connecting with prospects easier, economists aren’t as upbeat about the impact of artificial intelligence on business life. In fact, many worry about a future where robots take over many of our jobs, and in response, some suggest governments examine the idea of a universal basic income. That would basically mean that everyone gets a certain sum of money to ensure their most pressing needs are taken care of.

It’s an interesting idea, but it’s not without its detractors. As you might imagine, such a system could be extremely expensive. Another issue critics often mention is the difficulty of ensuring people spend the money on basic needs, particularly on housing.

Photo: Ian Schneider (Unsplash)

Julie Hyman offers a possible solution to this (maybe far-off, maybe not-so-distant) threat in her self-published book, Universal Housing: How to Revitalize Cities and Rebuild the American Dream. Hyman comes from a real estate background, and learned a lot watching her father develop affordable housing units in Allentown, Pa. She posits that, instead of providing universal basic income, why not universal basic housing? It’s an interesting argument, and if you want to learn more, I suggest you take a look at her book.

But since I’m speaking chiefly to an audience of real estate professionals and not policy analysts, I thought I’d share a more practical section of the book (though I’d love to hear your thoughts on universal basic housing and how it might impact the industry, for good or bad). Recognizing that cost is a major factor in the dearth of affordable housing, Hyman offers a list of five techniques gleaned from her father that developers can employ today to create housing units on a smaller budget:

  • Repurpose existing buildings: Hyman gives one example of a 60,000 square-foot building her father bought for $200,000 that would have cost some $3,000,000 to build from scratch: “Of course there are parts of the building which cost money to bring up to code, to fix, or to eliminate. But these costs do not compare to the enormous amount you save when you purchase a pre-existing building, as there is a huge creation of value there.”
  • Create smaller units: This isn’t for the reason I first assumed, which is that you can fit more units in a building if they’re smaller. Hyman’s father figured out early on that if he was going to rent to lower-income people, the utilities would have to be cheaper too. “If the rent is going to be affordable, everything has to be affordable,” she writes.
  • Leverage mass transit: This goes along with the previous tip. If tenants don’t have to pay for parking, gas, or upkeep on a car, this also makes rent easier to come by.
  • Splurge on windows: Again, this one comes down to utility costs. While new, energy-efficient windows can be a big expense, they will pay off in the long run in the form of lower heating and cooling bills.
  • Ditch the carpeting: Tile or hardwood floors might not be especially cheap compared to industrial carpet, but they can go many years without needing to be replaced. Furthermore, avoiding carpeting allows for less down-time between tenants. “When tenants move out… you are able to go in and turn an apartment around in a few hours by cleaning the hardwood, tile or ceramic floors, cleaning up the appliances and cabinets, and touching up the painting.”

No Sunset on Housing History

Fri, 02/23/2018 - 15:09

Edina, Minn. is one of the few suburbs I could see myself living in. It has decent public transportation, boutique storefronts, independent restaurants—and for an extra dose of kitsch—the first indoor shopping mall in America. It’s one of those old-growth ‘burbs, where the houses have character and the streets have sidewalks.

Alas, it also has a dark past. Though it’s one of the few places where I could see myself living outside a city, it’s also one of the many places where certain people couldn’t see themselves living at all. It’s a sundown town.

Sundown towns are places where founders, law enforcement officials, and residents used a combination of violence, coercion, and unconstitutional ordinances to exclude black people (and sometimes other minorities). In Edina, they employed restrictive covenants stating that “no lot shall ever be sold, conveyed, leased, or rented to any person other than one of the white or Caucasian race,” an illegal statement that was still on the books into the 1970s. 

I grew up in a neighborhood everyone called called “Nordeast” in nearby Minneapolis, where a white kid like me was happily in the minority. Later, attending high school in a Twin Cities suburb and college in Boulder, Colo., I was struck by how white the populations were, but I never questioned why. I just accepted the dominant paradigm that cities were naturally diverse, and suburbs and towns were not. But my assumption—while a common one—was incorrect. As James W. Loewen demonstrates in Sundown Towns: A Hidden Dimension of American Racism (Simon & Schuster, 2006), white places are almost always homogenous on purpose.

Perhaps most chilling were the signs. The reason these towns and suburbs were known as “sundown” was because black people (and sometimes Jews, Chinese, and Mexicans, among others) were forbidden from even being present in them after dark. At the city limits, signs were often posted to tell these supposed interlopers that they shouldn’t let the sun go down on them in the town, or else. Loewen has confirmed some 184 towns in 32 states as having displayed sundown signs, but this wasn’t the only way of reinforcing white-only population centers. Often police officers were expected to pass along the message at the train station, or to pull over cars containing black people to ensure they knew what might happen if they hung around. Certain towns would even sound special sirens each night telling black people it was time to leave, with at least one continuing the tradition into the late 1990s.

These practices were disturbingly widespread from the 1890s through the 1970s; I highly recommend you look up the history of sundown towns in your state using Loewen’s database. While the abhorrent signs are long gone, many towns and suburbs remain mostly white because the mentality of segregation persists. “Residents in some Midwestern towns think their sundown ordinances are still in effect,” Loewen writes. Vestiges quietly survive in the names of towns, where founders and developers used words to subtly telegraph disinviting words to African Americans on the signs denoting their city limits. Sometimes it was obvious, such as employing the term “White,” as in Whitefish Bay, Wis.; Indiana used any color in town and county names to indicate its exclusive nature. Other times it was less so; Loewen writes that “In Florida… any town or city with the word ‘Palm’ in its name was thought to be especially likely to keep out African Americans.”

The most shocking thing about Loewen’s book is how much of this history has been papered over so that people like me can go on with their lives as if it never happened. Loewen exposes false narratives about black people living exclusively in urban areas, showing that between the end of slavery and 1890, they lived in pretty much all areas of the country until they were forcibly removed. He uses Census data to demonstrate how the story we tell ourselves about the Great Migration (when southern blacks moved into cities in the north in the nineteen-teens) masks the cruelty of a separate occurrence, what Loewen calls the Great Retreat, some 25 years prior. It unfolded in different ways and under different pretenses depending on the town, but in general the Great Retreat looked like this: Some incident sparked racial tensions, and then white residents rioted, burned blacks people’s houses to the ground, and chased established populations of their neighbors away with deadly violence.

It’s more likely than not that a town or suburb you love has a hidden history of segregation, even if you’ve never heard it. “In many states outside the south, a majority of all towns can probably be defined as sundown in 1968,” writes Loewen (emphasis mine). He adds that any community founded by a single developer between 1890 and 1960 “kept out African Americans from its beginnings.” Many of them used their all-white status in ads, listing “No Negroes” aside amenities such as “Beautiful Scenery” and “Pretty Homes.”  And even we city-dwellers can’t avoid this history, because in urban areas, officials simply sundowned neighborhoods and made black residents return to their prescribed areas before dark. The only place where sundown towns are scarce is in the traditional south, where the labor of black slaves and later sharecroppers was too valuable and commonplace to expel from white communities.

Loewen also details how this history affects our communities today and will continue to do so in the future. The book is an important read particularly for real estate professionals because of one word in the title: hidden. It’s part of the larger reason why we’re commemorating the anniversary of the Fair Housing Act in the first place: So many of us are unaware of how housing discrimination has shaped the development of our communities. I’d never heard of sundown towns until I picked up this book, but this is more than a vocabulary lesson. This book flies in the face of the narrative I (and most other Americans) accept about the layout of our towns, suburbs, and cities. And ignorance of the law—even if it’s a web of unconstitutional, outmoded local ordinances that never should have existed in the first place—is no excuse. This is American history everyone should know, especially those in the real estate industry.

The 50th Anniversary of the Fair Housing Act

This review is part of Books in Brief: Lighting the Path to Housing Equality, the Weekly Book Scan’s series commemorating the 50th anniversary of the Fair Housing Act. Learn more about how fair housing makes us stronger at

Wake Up Call for the Development Industry

Mon, 01/29/2018 - 12:13

When I’m working on stories for REALTOR® Magazine, it’s not uncommon for my interview subjects to offer supplemental reading that might help round out my reporting. But rarely am I told that a book could change my thinking entirely on a given subject. So when the Incremental Development Alliances’ John Anderson (whom I interviewed in preparation for this piece on how real estate pros can become small-scale developers) used that kind of language to recommend Arthur C. Nelson’s Reshaping Metropolitan America: Development Trends and Opportunities to 2030 (Island Press, 2013), I took notice.  “It’s a red pill book,” Anderson said, referencing the method Morpheus uses to eject Neo from his false reality in the 1999 movie, The Matrix. “Once you understand that, it changes everything.”

Looking at the short paperback, it seemed innocuous—more like an obvious choice for background on a story about real estate development trends than anything else. And the funny thing is, Nelson doesn’t use any data or sources that you and I don’t hear from all the time. The Census, Pew Research Center, the National Association of REALTORS®… these are all experts we’re comfortable with, saying things we’ve heard before. But then, his conclusion is pretty red-pill radical (emphasis mine):

“By 2030, one-quarter to one-third of America’s 143 million households will want the very kinds of options provided in mixed-use, amenity-rich, transit-accessible options that commercial corridors and nodes can provide. Because about 10 million households have those opportunities now, the nation will need to increase its supply by at least 25 million to meet demand in 2030. In effect, if all new homes built in America between 2010 and 2030 were built in those locations, demand for this option would still not be met.”

This demand is good news, but Nelson also points to “an oversupply by tens of millions of homes on conventional lots, mostly in the suburban fringe and exurbs” that might lead to breaking up McMansions into multifamily units and the transformation of less-connected housing developments into slums, if they are not carefully reimagined. That could spell disaster for real estate professionals working in suburbs where planners aren’t seriously considering the potential of this coming demographic shift.

Nelson offers pretty convincing evidence of why this will likely be the case, again backing up his assertions with well respected studies and solid numbers. I highly recommend you buy yourself a copy (or borrow it from the NAR library, as I did), if for no other reason than it’ll offer further convincing of the points my sources raise in the January/February magazine piece for why you yourself should get into the small development business. After all, most of today’s developers are not building the types of housing that will be in demand over the next 10 years of your career. Why not profit from that while also helping buyers get what they really want?

But aside from all that, I wanted to point out one passage that my self-indulgent, Gen Y brain couldn’t help but dwell on. Nelson kicks off an analysis about why we millennials want to live in the same “mixed-use, amenity-rich, transit-accessible options” that he predicts will be so scarce:

“…Gen Y will prefer downtowns, suburban centers, and mixed-use neighborhoods with housing options that are close to destinations. The irony, of course, is that Gen Y people mostly grew up in isolated, single-use suburban subdivisions.”

This was really the only place where I remember disagreeing with Nelson, though my argument doesn’t undermine his basic thesis. I believe my experience with the suburbs is a big part of why I live in a city now, and I think many of the people I know of the same age would agree with me. Across the board, younger generations tend to be pretty adept at pointing out the flaws of their predecessors. And as Nelson lays out the multitude of reasons why our baby boomer parents will have to leave the suburbs in their senior years (a lack of mobility, homes are too big for them to care for, etc.), he misses the most emotional reason for many millennials moving back into the city: Because we grew up in the suburbs, we’re uniquely positioned to see their long-term drawbacks as our parents age.

Uncovering the Government’s Role in the History of U.S. Segregation

Wed, 01/24/2018 - 11:45

I live in Chicago, a city that consistently ranks among the most segregated in the nation. This fact is starkly evident to anyone who makes their lives here – a city where black and white citizens live separately, learn separately, and move through the city separately. It is conceivable to spend the majority of one’s life almost exclusively among others of the same race, or to travel miles within the region before encountering a neighborhood where one’s race is in the minority.

One hundred and fifty-two years after the Civil Rights Act of 1866, which abolished slavery and prohibited discrimination based on race, how are we here? Chicago may be one of the most egregious examples, but it is far from unusual. This fact is clearly demonstrated in The Color of Law: A Forgotten History of How Our Government Segregated America, where author Richard Rothstein details how the U.S. government introduced and reinforced the patterns of racial segregation we see across the United States today.

While the abolition of slavery may seem like a sign of brighter times to come, the United States actually became increasingly less integrated than it had been previously from the late 19th through the mid-20th century, largely due to the actions of our own government. Rothstein’s book is full of stories of African Americans who wanted to live closer to work, apply for a mortgage, move to the suburbs, or simply achieve their dreams of homeownership, but could not due to government policies. Zoning ordinances decreed where African Americans were allowed to live, and permitted industrial and commercial development in black neighborhoods while protecting the residential-only character of white ones. Previously integrated communities were divided by segregated housing projects that were part of President Franklin Roosevelt’s New Deal initiatives. Strategic school redistricting and the construction of the federal interstate highway system exacerbated the problem. Meanwhile, those who tried to create new, integrated developments were unable to secure funding, faced sudden zoning reclassifications, and had proposals rejected outright by local communities and government entities alike.

While the Fair Housing Act—signed into law 50 years ago this April—prohibited racially-based housing discrimination, the patterns of segregation were already deeply entrenched by the time it was passed. We are still seeing these effects today. Rothstein concludes that segregation is the primary factor in the massive disparities in wealth, education, crime rates, health, and upward mobility between black and white citizens. By the same token, greater integration would provide enumerable benefits; a recent report on the cost of segregation in my city determined that an increase in integration would mean a 30 percent drop in the homicide rate, an $8 billion increase in the region’s gross domestic product, and $6 billion increase in residential property values in Chicago.

In order to remedy our high levels of segregation in the United States, Rothstein argues that it’s critical to understand the government’s large role in creating it. Attributing segregation to the actions of certain individuals absolves everyone else from taking responsibility. Instead, acknowledging our own government’s role makes the issue one of collective responsibility for all U.S. citizens.

There are no easy solutions for dismantling systems that have built up for more than 100 years. Rothstein proposes some remedies in the final chapters of his book, but acknowledges that it will take the actions of many to make a real difference. Those in the real estate industry are in a position to have a big impact as we work toward a more integrated society. Rothstein’s book is an excellent starting point for those who want to learn more about how we got here in the first place.

The 50th Anniversary of the Fair Housing Act

This review is part of Books in Brief: Lighting the Path to Housing Equality, the Weekly Book Scan’s series commemorating the 50th anniversary of the Fair Housing Act. Learn more about how fair housing makes us stronger at