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Confronting NIMBY-ism.

Confronting NIMBY-ism with community-oriented development strategies

If you’ve been paying even the slightest attention to the housing market, you know that we are in the midst of a housing crisis. Cities across the country are experiencing heightened levels of homelessness and housing insecurity, with the problem being most severe in West Coast cities like Los Angeles, Seattle, Portland, and San Francisco. There is no single reason for the housing crisis, but a major contributing factor is the rampant NIMBY-ism that affects our communities, from the soaring heights of Billionaire’s Row in San Francisco to suburban bedroom communities outside of Tampa.

How can developers avoid the roadblocks created by “Not in My Backyard” local stakeholders?

Share your vision

It is critical that you show local stakeholders how your vision can improve their neighborhood and their lives. For example, in many housing crisis-afflicted cities, there is a push to rezone neighborhoods to permit ADUs or accessory dwelling units. ADUs allow for the construction of additional residences on lots zoned for single-family residences. Think a small home on a lot that already has an existing structure.

For many years these developments were opposed by neighborhood groups and other interested parties. Concerns about traffic, quality of new residents and overcrowding prevented any serious headway from being made. However, housing pressures, alongside coordinated education and outreach efforts with local communities, allowed developers, many of them socially-conscious, to begin constructing ADUs. This has led to an increase in ADU construction in LA County from about 150 a year, to 5,000 a year in 2018, with expectations to hit 10,000 or more in 2019.

Embrace alternative transportation

Even ten years ago, building a new urban development without a designated parking area, or resident-available on-street parking, would have been unthinkable in most of the country. Many projects were and still are built for the car economy. Many of the concerns local groups have with new development are in some way related to cars, traffic and not enough parking. By building in ways that minimize the impact of cars on local neighborhoods, developers can alleviate residents’ concerns about the project in question.

Work with local businesses whenever possible

A study by the private thinktank Civic Economics found that for every 100 dollars spent at local businesses, 48% of that money stayed within the community, compared to 14% for chain stores. This study, and countless other pieces of research, show what most of us have known for a while- keeping capital within a community leads to more sustainable, healthier, economic growth in that region. You can help the local community and build goodwill with existing stakeholders by patronizing or pledging to patronize local businesses. Fewer people will oppose your project if they see a direct financial incentive to them and their community.

Involve locals in the process

People need to be seen and heard. Much of the opposition to development projects comes from a place of fear. People are afraid they are being left behind or that their lives will change for the worse. If you clearly outline your plans, involve the current residents in decisions, and keep your word, people will feel included and be much less likely to oppose your project. You can set up community outreach meetings, maintain an information email letter about the project, or work with nonprofits and other groups to connect with the local community.

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You won’t be able to alleviate every NIMBY neighbor concern- particularly if those concerns are driven by concrete financial factors, like property values. However, if you use your head and consider how your project will impact others, you will be able to reduce their numbers or the vociferousness of their demands.

Image from pxhere / CC0

Attacking homelessness.

The homeless crisis in the United States is reaching epic proportions. Despite continued economic growth across almost all sectors, more than half a million Americans are homeless, and millions more suffer from housing insecurity along with other issues stemming from the high cost of housing. According to CityLab, there is not a single major metro area in the United States where one can rent a two-bedroom apartment on minimum wage and many others where you cannot even rent a one-bedroom or studio.

The inability to find affordable housing does not only affect low-income Americans- it contributes to numerous social ills, like environmental pollution from longer commutes, drug and alcohol addiction, crime and the blighting of our downtowns and urban cores. However, there is hope on the horizon. A new generation of developers are devising strategies to alleviate the homelessness crisis in the United States, including alternative development and funding models, micro-homes, and new techniques to expedite housing development that benefits everyone- not just top earners.

The real estate development industry’s role in the crisis

There is a multitude of reasons why we are in this mess. Zoning laws and NIMBYism have caused moderately priced construction to plummet. Social service programs throughout the United States have been consistently gutted since the late 1970s, and despite roaring economic growth, real wages and purchasing power for workers remains stagnant.

Developers have also contributed to the problem in a not insignificant way, by fostering a situation where the majority of new housing in many urban areas consists of Class-A luxury housing. This is out of reach for low-income earners and even middle-class workers. Many developers are also guilty of not embracing mixed-use residential and commercial districts, which can be more affordable and often can be built on non-traditional lots.

How some developers are facing the crisis head-on

While the industry as a whole is largely responsible for the crisis we face, many positive actors are working in new and innovative ways to solve the issue.

Micro-housing developments

The size of the average American home grew from 1,660 square feet in the early 1970s to more than 2,700 square feet today. This trend towards larger and larger homes meant that neighborhoods became less dense by definition. More dense areas can house more people, more efficiently, not just in terms of house size, but in terms of utility and resource delivery.

Micro-homes and micro-home developments seek to reverse this trend by providing low-income and homeless citizens with an accessible way to get a roof over their heads. Right now, micro-home projects go against zoning laws in many areas of the country, but as the housing crisis grows more intense, there is a growing call to change zoning regulations to allow smaller homes. Cities like San Francisco, Los Angeles, Portland, and others have experimented with the use of these developments to increase the total number of homes available to the homeless in their cities.

City low-income housing subsidies

City officials across the country are desperate for a solution to this problem. And this presents an opportunity for civic-minded developers. In many areas, like Los Angeles, the city provides numerous tax and capital investment benefits to developers working in the low-income housing space. Traditionally, the Department of Housing and Urban Development was responsible for funding marginal and low-income housing, but as the federal government has stepped back, municipalities have picked up much of the slack.

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These are just a few of the ways that developers are adapting to the challenge presented by the housing affordability crisis. Other approaches include seeking out alternative funding from crowdsourcing platforms, rehabbing older buildings, and developing on non-traditional lots. A plethora of factors created this crisis and determined developers will need to take multiple approaches to end it.

Image by Levi Clancy / CC BY-SA 4.0

Fighting gentrification.

Fighting gentrification with socially conscious capital investments

Anyone paying even cursory attention to the real estate markets over the past ten years would think that things are going pretty well. Many metro areas, from San Jose to Tampa, are seeing substantial home value growth with many parts of the country hitting double-digits. However, with growth comes growing pains, and one particular issue is garnering a lot of attention: gentrification.

Is gentrification too big to solve?

There’s no sugar-coating it. People are being priced out of their homes in cities across the country. The reasons for this phenomenon are diverse and debatable. Urbanization and lack of economic opportunities have driven many talented workers from the suburbs and exurbs into cities, which has driven up demand for housing, and thus prices.

Wall Street and investment firms also hold much of the blame. Seeing growth opportunities, many institutional investors have scooped up vacant land and old properties and gone on a development spree. Unfortunately, much of the development in cities like San Francisco and New York city has been targeted at high-end luxury condominiums and is out of reach of most prospective homeowners. Despite substantial construction and even with many developments coming online, lower to middle end buyers in the housing market cannot find affordable, quality housing in many major metros.

This problem is expected to get worse, partially due to new legislation passed as a result of the Tax Cuts and Jobs Act of 2017. That bill created “Opportunity Zones” which are federally-designated census tracts that lag in economic development. Investors will be eligible for significant tax breaks by investing in these zones- the kinds of areas that gentrification is hitting the hardest.  Now, we can throw our hands up in the air or we can blame the government- but what can we do, as investors and businesspeople, to actually solve the problem?

Developing bridges and opening doors

An inclusive process is key to meeting gentrification head-on. By including minority and female developers and investors in development opportunities, the same populations most impacted by lack of affordability, we may stand a better chance of meeting community needs.  Empathetic developers are critical to the future success of gentrification-opposed development. We can do this by bringing more powerful financial tools into underserved communities.

Neighborhood trusts

One solution might be a neighborhood trust, an idea being experimented with in a number of cities in Texas, Massachusetts, California, and New York, with some success. These trusts are usually run by local nonprofits who acquire parcels of land and pledge to use them for projects that benefit the local community. Typical uses range from affordable housing to community-owned businesses.

Government solutions

Paradoxically, despite the government being the cause of many gentrification-related problems, it can also be a part of the solution. Cities like Washington D.C. and San Francisco are exploring ways in which to help homeowners, threatened by soaring neighborhood and property values, to stay in their homes. Changing the way that municipalities collect property taxes is one strategy being adopted in a few different cities.

When property values rise, the corresponding increase in property taxes often leads to long-term, low-income residents losing their homes. If cities offer tax credits or reduced tax rates for community residents, that could go a long way toward solving gentrification-related flight.

Real estate accelerators

Another strategy involves the creation of a “Real Estate Accelerator” by local nonprofits or other interested parties. An accelerator can provide community members with the tools to become real estate developers and investors themselves, by providing educational workshops and classes. Mentoring those that want to pursue real estate opportunities in their own neighborhood can be especially beneficial. Programs like these act as a steppingstone for low-income and underserved community residents to achieve careers in real estate development.

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The housing affordability crisis is not going away anytime soon, but a multi-pronged attack on the problem, led by both the private and public sectors, may help to alleviate some of the issues associated with gentrification.

Image “Gentrification Writ Large” by Matt Brown is licensed under CC BY 2.0

Ripe for disruption.

For many years the dirtiest word in the real estate development lexicon was innovation. Industry players were set in their ways and approached community development in the same manner, over and over. Like many other industries- from automobiles to airplanes- reality hits at some point. The old ways of doing things become less and less effective and buyers, community groups and local governments start demanding more from those shaping their neighborhoods. The world of real estate development is ripe for disruption.

Adopting best practices from other sectors

One of the best ways to succeed in life is to emulate successful people. The same logic can be applied to business. Developers who study the successes of other industries and apply that knowledge to community development will gain a substantial edge over the competition. An excellent example of this cross-industry pollination is real estate crowdfunding.

This form of fundraising took off in the nonprofit and manufacturing sphere with the help of early platforms like Indiegogo and Kickstarter. But these platforms were purely donation based. Soon, a few forward-thinking business advocates and investment professionals saw an opportunity to move the crowdfunding industry from donation based to investor based. With the help of the US government, the JOBS Act of 2012 made it possible to crowdfund investment opportunities and the real estate industry soon jumped in. They saw an opportunity to use the new crowdfunding regulations not just for business raises, but also real estate deals. Soon numerous crowdfunding platforms emerged, forever changing how the industry raises capital.

Developing for people

Many of the worst mistakes in the real estate industry occur when companies take a short-term view such as building endless rows of homes without thinking about how to make the community sustainable (with shops, community centers, restaurants and the like). Developers can avoid this pitfall by engaging with the community and creating vibrant spaces that take into account the needs and desires of residents, as well as the eventual return on investment for the company. Identifying customer needs is critical, which leads me to my next point:

Build for the market

It isn’t enough to build the ideal community. If most people can’t afford to live there, your efforts are for naught. We need to think about housing everyone. One of the major contributing factors to our current affordability crisis is that developers are building almost exclusively for the top end of the market. This focus on luxury developments leaves the vast majority of people, who are low and middle income, out in the cold. Developers need to create communities that are not just for the well-heeled. This will not only result in more sustainable communities, but it will also allow developers to generate income by working with traditionally underserved communities.

Take the environment into account

Environmental impacts have a dramatic effect on the livability of a given community. Think about the best neighborhoods in your city. Are they located next to industrial sites or garbage dumps? Probably not. The industry as a whole has made significant progress in green development over the past decade or so, but still has a long way to go. Incorporating solar, advanced insulation, power and water-saving appliances, along with other environmentally beneficial attributes is integral to making a community viable for the long-term.

Explore secondary cities

Every developer dreams of building a gleaming tower in the heart of Manhattan or Chicago. Secondary cities like Tampa or Cleveland? Not so much. By staying focused exclusively on high-dollar markets like Manhattan and San Francisco, developers are leaving money on the table. No one can tell you when the market will slow down. When it does slow down, developers will find that selling $3 million condos in San Francisco’s Financial District might not be as easy as it is now. Secondary cities provide a terrific opportunity for developers to get in on the ground floor. And many secondary cities need investment. Find a city you love, and nurture it as an investment opportunity.  Be in it for the long haul and bring value to the people that live there as well as for yourself.

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In any business, if you fail to adapt- you die. Just ask the shareholders of Eastman-Kodak and Pets.com. To compete on a high level, developers should keep an eye on the future and always be on the lookout to improve their process, and the communities they work in.

Emergency Arts in downtown Las Vegas, image by Eve Picker

Wealthy Wellthy.

The Wealthy Wellthy podcast series is the latest venture of Krisstina Wise who has been named one of the 100 Most Influential Real Estate Leaders in the country, been featured in USA TODAY and lauded by Apple for creative leadership with emerging technologies.

Krisstina is a real estate mogul and founder of several businesses, but after coming close to death she realized that wealth is not so important if you don’t have good health. So she embarked on a search of the real truth behind wealth and health in her podcast series, Wealthy Wellthy.

In this episode, #144 – Fund Your Next Project Faster, Krisstina talks with Eve Picker about Eve’s take on real estate. Find out how myths get busted and impact gets made through investing and real estate.

Image courtesy of the Wealthy Wellthy podcast