Rethink Real Estate. For Good.

Zoning

One year. 41 more conversations.

41 amazing people. 41 inspiring conversations.

Cynthia Muller. Richard Rothstein. Andre Perry. Charmaine Curtis. Lyneir Richardson. Darryl Scipio. Libby Seifel. Beth Silverman. Patrick Quinton. Daniel Parolek. Charles Durrett. Heather Hood. Diana Lind. Scott Flynn. Atticus LeBlanc. Sam Ruben. Andrew Luong. Stephanie Gripne. Shannon Mudd. Ken Weinstein. Garry Gilliam. Andy Williams. Daniel Dus. Patrice Frey. Bruce Katz. Christopher Leinberger. David Peter Alan. Annie Donovan. Michael Shuman. Dan Miller. Scott Ehlert. Katie Faulkner. A-P Hurd. Max Levine. Brian Dally. Jonny Price. Michael Lee. Kevin Cavenaugh.

These are the rockstars of my show.

Season Three starts soon …

Read the podcast transcript here

Eve Picker: [00:00:14] Hi there. Thanks so much for joining me today for the final episode of Rethink Real Estate. For Good, season 2.

My name is Eve Picker and I’m on a mission to make real estate work for everyone. Real estate can help to solve climate change, can house people affordably, can create beautiful streetscapes, unify neighborhoods and enliven cities. 

You can learn more about me at my website, rethinkrealestateforgood.co, or visit my real estate crowdfunding platform, SmallChange.co. Our projects offer impact, solve housing problems, invest in neighborhoods and give everyone the opportunity to invest and build wealth for as little as $500.

[00:01:12] Today marks the second anniversary of this podcast. Two years ago, I didn’t know that our audience would grow as it has. In fact, two years ago I wasn’t sure we would have an audience at all. Now 10,000 people download episodes every month. That’s 10,000 people who care about thoughtful and impactful real estate solutions.  Wow!  I am humbled that all of you want to listen in.

This second year has been an opportunity to learn from yet another class of extraordinary leaders and innovators in real estate. My guests are working on housing solutions, policy issues, manufacturing, in fintech, on preservation, on developing new technologies and on providing real estate metrics, on mobility issues, as architects, on sustainable development, on community capital, on equity for women and equity for minorities and in many other niches, pushing the boundaries of the built environment to be better for everyone. 

The range of work that is being accomplished is quite awe-inspiring.

[00:02:25] Perhaps the most important theme this year was equity.

Cynthia Muller, director of Mission Driven Investments at the Kellogg Foundation. has been described as a “thought leader of the impact investing ecosystem and a trailblazer in the field.” In No guilt. Just Action. she reminds us that every time there has been an opportunity for black and brown people to build an asset, to build wealth, it’s been taken away from them. Let’s change that. 

Richard Rothstein and Andre Perry have written about these inequities.In The Color of Law Richard argues for a national civil rights movement to ensure that we all get to reap the economic benefits of living in this rich and diverse country. And In Know your price, Andre share findings that homes are underpriced by 23 percent, or $48,000 per home, in majority black neighborhoods. That’s $156 billion in lost equity.

[00:03:31] Charmain Curtis, Lyneir Richardson and Darryl Scipio are a new breed of black developers. Charmain has built a successful career as a developer despite being a black woman. She didn’t realize what she was up against until she was in her 30s. In Spread the Wealth she ponders how wealth could be distributed equitably to everyone.

In Building Generational Wealth, Lyneir describes his plan to buy 100 community shopping centers with 100 community members, all focused in majority black neighborhoods. He provided the first opportunity to 140 investors on Small Change early this year.

[00:04:17] Justice runs deep with Darryl.  In Turning renters into homeowners he describes his latest passion project, Savers Village.  He aims to help every tenant save enough for a down payment on a home.

And Libby Seifel is focused on women.  In Women building collective muscle, she describes the network of women leaders in real estate she has built. After more than 30 years in the industry, she is no longer the only woman in the room, and that some of the biggest new projects in the Bay Area are being driven by women.

[00:04:56] Housing solutions are importantly getting a lot of attention.

Perhaps the boldest of these is Beth Silverman’s Lotus Project. In Radical in its Simplicity she tells us how ,for just $800, her organization can successfully house a homeless family and change the trajectory of their lives forever.

We learn about accessory dwelling units as an affordable housing solution in Yes! In My Backyard! Patrick Quinton has developed a manufactured solution that drops a 32×14 foot ADU into a typical 50-by-100-foot lot in Portland, Oregon without hitting the setbacks and without requiring city design review. And he’s raising money for this project on Smallchange.co

[00:05:48] On the west coast, Daniel Parolek, architect, coined the phrase, The Missing Middle just as the critical absence of affordable housing was becoming a major planning issue for cities nationwide. He explains what the missing middle is, why it is important and how we can build more of it. 

Charles Durrett brought co-housing from Copenhagen to the US many years ago and wrote a book about it. He explains why he’s spent a career in co-housing and how it can make people’s lives better in It takes a Village.

[00:06:27] In Northern California, Heather Hood oversees efforts for the Enterprise Community Partners that ensure low- and moderate-income residents have access to affordable, quality housing. We talk about the enormous size of this problem in The elephant in the region.

And Diana Lind wraps it up for us in Lets be Brave. She’s written a book called Brave New Home in which she argues that the single-family home is at least partly to blame for our current housing woes.

[00:07:01] Technology is rapidly transforming the real estate industry in many different ways as well.

Some of my guests, like Patrick Quinton and Scott Flynn in Manufacturing change, are focused on manufacturing affordable homes in factories. Scott’s company, IndieDwell, manufactures smaller, sustainable and affordable homes at the pace of 10 homes per week and growing.

But others are pursuing new ideas.  Atticus LeBlanc tells us about PadSplit in One Room at a time.. He wants to dramatically change how we address affordable housing by using space that is now under-used in everyday homes.

[00:07:46] Or Sam Ruben in 3D-printing, robotics and automation, oh my! His company is printing buildings and hopes to create affordable and sustainable homes with their new technology.

And finally, Andrew Luoung who has deconstructed the often lengthy and confusing process of small scale real estate investment, making it accessible to everyone.  In Andrew loves real estate he describes the online turnkey service that he has developed into Doorvest.

[00:08:20] Some guests are focused on fertilizing tranches of future impact investors and leaders.

None is more passionate than Dr. Stephanie Gripne. In The impact accelerator, she tells us about founding the Impact Finance Center with a mission to identify, train and activate philanthropists and investors to become impact investors. Her big, hairy audacious goal is to move a trillion dollars into impact investing.

Dr. Shannon Mudd is right behind her, teaching students how to invest $50,000 of real money for maximum social impact. His Young Angels are carrying this knowledge into their professional careers.

[00:09:09] Others want to pay it forward.

Like Ken Weinstein, a highly successful Philly developer whose career was inspired by his landlady in Germantown. He’s created a boot-camp for aspiring developers called Jumpstart Germantown and describes the program in Jumpstarting a community.

[00:09:32] Garry Gilliam may be best known for playing in the NFL. Today he has a second career as an impact real estate developer. He tells about his first project in The Bridge. It came about as a joint effort with Garry’s friends from the Hershey School, a philanthropic school for low-income children. That school gave them all a leg up and now they want to give back to their community. 

Or Andy Williams, a former Marine who was determined to secure his future through real estate. He’s built a substantial portfolio of homes, a real estate development business focused on larger projects, and now, a program that seeks to turn veterans into entrepreneurs just like himself.  

[00:10:23] Some guests, like Daniel Dus and Patrice Frey, are focused on building on what’s already there. Learn how Daniel is planning to redevelop the dramatically underutilized historic luxury estates of the Berkshires for the shared economy in Everything old is new again.  And in Saving Places, Patrice explains the role of the National Main Street Center in servicing the revitalization of commercial main streets in big cities and small towns alike.

Bruce Katz moves the focus back to metro areas in Cities are networks. As a foremost policy expert, Bruce argues that cities must knit together solutions. It’s an imperative. And he calls this the new localism.

Christopher Leinberger is thinking along the same lines in Back to the Future. As a renowned urban strategist, teacher, developer, researcher and author Chris thinks “Back to the Future” got it right.

[00:11:30] While David Peter Alan enchanted me in I’ve been working on the railroad with his singular passion for the country’s railway system. He has ridden the entire Amtrak system and about 300 transit providers in the U.S. and in Canada.

Annie Donovan and Michael Shuman are focused on alternative finance. Michael thinks we have it Totally backwards. Local owned businesses make up 60 to 80 percent of the private marketplace in the average U.S. community. But economic developers and subsidies almost always overlook them. And Annie believes that disruptive capital is critical for solving thorny problems. She describes her pursuit of fairness in economics and finance in The world beyond banks.

[00:12:27] A handful of guests are diversely focussed on sustainability in the built environment.  Perhaps the most interesting is Dan Miller, who has launched a platform that connects everyday investors with farmers who need loans. He’s Stewarding the Future of Farming with investments as low as $100.

Scott Ehlert and Katie Faulkner are mass timber experts.  Katie as an architect with an eye on sustainability in From here to there.  In Mass timber for the masses, Scott tells us about the installation and cost benefits of a proprietary hollow core mass timber system he is designing that uses 50% less wood fiber. And, as if that is not enough, Scott is also designing a robotic fabrication facility to anchor a new wood product innovation campus, in California.

While A-P Hurd remains focused on building Livable and delightful communities.

[00:13:28] This class of guests would not be complete without my colleagues in the crowdfunding industry.

Some like Max Levine and Brian Dally are focused on real estate.

In Hello, Neighbor we learn about Max’s Neighborhood Investment Company, which has a mission “to localize wealth creation and broaden access to neighborhood equity.”  While in Get in on the ground floor,  Brian describes the platform that he has built into the go-to funding platform if you want to fix’n flip property.

Jonny Price, previously with Kiva and now with Wefunder, is focused on Filling the “crazy” gap. There’s a common theme for Johnny – financially excluded and socially impactful businesses.And Michael Lee is Building Virtual Communities using blockchain. Instead of using blockchain for crypto, he’s using it as an organizing tool to democratize the power of data.

[00:14:31] Finally, what better way to end than with Kevin Cavenaugh a developer in a class of his own. In I do a bunch of weird stuff, you can tap into this unique developer. Left brain, right brain, head and heart all come to bear on his wildly creative buildings. “I’m tired of mocha-colored, vinyl-windowed boring. I can’t change the fact that the streets are gray, and the sky is gray. But the buildings?” says Kevin.

Phew. That’s a lot of podcasts.  I’ve enjoyed every interview with every person.  I’m in awe of them all.   But it’s time to take some time off to recharge and get ready for Season Three. We’ll be back refreshed in September with many more amazing people for you to listen to and for me to learn from.

Thank you so much for joining me.  Now go forth, invest a little in your community and make some change!

Housing in the middle.

Zoning in America. It’s a vast set of regulations which determines where and what you can build, how high and how close to your property line your building can be, how much of your land you can occupy, how much parking you need to provide and what type of tenant can occupy your property.

Once upon a time nuisance laws were the only way to regulate building disputes, with a judge deciding the outcome. In the early 20th century as cities grew and buildings became larger and taller, this process became unwieldy. The Equitable Building in New York changed all that. Completed in 1915 it was said to cast a 7-acre shadow over surrounding buildings and became the catalyst for the first comprehensive zoning code passed by the city of New York in 1916.

Skip forward one hundred years and we might just be back to where we were in the early 20th century. Zoning has become a behemoth. Many cities are using 50-year-old zoning codes which have had many bandaids applied to them over time, making them out-dated, complicated and far too long. Most importantly, over the last 50 years for the most part zoning has not changed sufficiently to reflect the sometimes rapid changes in our cities. There’s a shift in how people want to live. Sprawling suburbs no longer offer the kind of lifestyle that many Americans are looking for. They want a more sustainable lifestyle in a walkable urban context. And what’s missing is the housing typology, in between single-family detached and large apartment complexes, that’s required to fulfil this need. 

The idea of this ‘missing middle housing’ was framed by Daniel Parolek, architect, urbanist and the founder of Opticos Design. Missing middle housing was born just as the critical absence of affordable housing was becoming a major planning issue for cities nationwide. As a result, Daniel has become a high-profile advocate for zoning reforms that would allow for ‘the right kind of density.’ More people, less parking, walkable neighborhoods and broader demographics.

Listen in to my conversation with Daniel.

Image from Pixabay

Let’s be brave.

Diana Lind is a writer, editor, critic and urban advocate. Now heading the Arts and Business Council for Greater Philadelphia, Diana made her mark at Next City, a nonprofit, online news organization focused on urban issues and stories about creating equitable cities. Diana moved to Philadelphia, in 2008, from her hometown of NYC to take over as editor in chief, and she later became the executive director. After Next City she was the founding managing director of the Fels Policy Research Initiative at The University of Pennsylvania, where she worked until joining the Arts and Business Council in 2019. Previously, Diana worked at the Philadelphia Media Network, which owns the Philadelphia Inquirer, and was both a freelance editor for Rizzoli and editor/critic for Architectural Record.

In October, Diana published a new book on the history of and alternatives to the single-family home in the United States, called Brave New Home. Meant as a way to introduce laypeople to the rich (and sometimes troubled) history of housing in the U.S., her book also confronts the housing disparities we must bravely face today. Diana is a frequent public speaker, and has given keynotes or participated in panels at more than 100 events, including major conventions like the World Urban Forum and Smart City Expo. In 2008, she published Brooklyn Modern: Architecture, Interiors & Design, and she has received honors such as the TED City 2.0 prize, the ACLU Stand Up for Freedom award, and a funded residency at Blue Mountain Center. She serves on the boards of Next City and The Philadelphia Citizen.

Insights and Inspirations

  • Let’s be brave, Diana says. And brave we must be to solve the housing crisis.  
  • Governments must bravely tweak their zoning regulations, so that new and affordable housing types can easily be built.  
  • Developers must bravely experiment with their next housing project.  
  • Banks must bravely finance new housing products.  
  • And NIMBYS must bravely accept some change.

Information and Links

  • Be sure to check out Diana’s new book!
  • And she wants to point people to Next City, “the best source of national news about urban innovations.”
  • And, The Philadelphia Citizen, the local solutions journalism website where she is also a board member. It’s a fantastic window into the “good things in Philly” that are happening, and the leaders who are making it so.
Read the podcast transcript here

Eve Picker: [00:00:15] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Diana Lind. She’s written a book called Brave New Home. In it, she explores the history of and alternatives to the single family home in the United States. Her interest in this subject was kindled by her own experiences as a young mother living in a typical single family home which didn’t quite meet her needs. Diana’s past experiences come into full focus with this book. Professionally, she started life as a writer at Architectural Record, kindling an interest in architecture, and her tenure at Next City cemented her interest in urban advocacy. If you’d like to know more about Diana once you’ve listened in, be sure to go to EvePicker.com to find out more on the show notes page for this episode. And be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:42] Hi, Diana. I’m really delighted to have you here with me today.

Diana Lind: [00:01:46] Thanks so much for having me.

Eve: [00:01:47] So, you’re a writer and you’ve spent your career deeply immersed in urban issues. And I’m wondering how you became an urban advocate?

Diana : [00:01:57] Sure, I grew up in New York City. So, living in a city and just adoring all of its creativity, its vibrancy, its density, all of these kinds of things, just as part of who I am. But I originally thought I was going to be a novelist or just a journalist. And when I graduated from college, my first job was working at a magazine, but it was working at an architecture magazine. And I didn’t really know very much about architecture, but it was a fantastic experience. I was working for Architectural Record and I still write for them and it’s a fantastic publication. And really from that experience, that was in the early 2000s, it was a period when there was a big focus on kind of the ‘Bilbao effect.’ How could cities use amazing architecture to spark a downtown revitalization in cities around the country? And so, I really went from architecture into becoming very interested in cities and started working at Next City, which was then known as the Next American City Magazine, in Philadelphia. And that’s really when I transitioned from being focused on architecture, to cities and urban policy issues. And I’ve been in that place ever since.

Eve: [00:03:21] So, did you ever get to Bilbao?

Diana : [00:03:23] I did not, no.

Eve: [00:03:25] I did, it’s a really fantastic city. It’s a really interesting city.

Diana : [00:03:32] Yeah. I mean, what is one of the problems with the Bilbao effect’s translation into the U.S. is that I think a lot of people thought, well, you just need an awesome museum by a brand name architect and you need so much more than that.

Eve: [00:03:45] Oh, no. I think the remarkable thing about Bilbao that I really, was burned into my brain, is the use of public squares and how just the culture is very different in American culture. So, in the evening, you know, families would come out into these little urban courtyards and squares and join other families and the kids would be playing and it was fantastic. That’s really what Bilbao is about.

Diana : [00:04:10] Yeah. And also like an economic development strategy, not just an expensive museum. So, I think you need a fuller package. Yeah, for sure.

Eve: [00:04:20] So, tell me about your latest book, Brave New Home.

Diana : [00:04:23] Sure. Brave New Home just came out in October 2020. And the book is really a history of single family housing in the United States and an exploration of how we went from a country that had many more diverse housing options to one dominated by single family homes. And then a forward looking view at what are some alternatives to the single family home and why they’ve become so compelling. And swirling all around this is issues of demographic change, cultural change, ways in which just society has changed and housing has not kept pace. So, the conclusion looks also at how can we address some of the social, economic and environmental issues that we’re facing as a country through better housing policies.

Eve: [00:05:17] So, why did you write the book? What prompted you to write it?

Diana : [00:05:20] I was inspired to write the book first from a personal level. So, I was one of these people in my 20’s and early 30’s who spent very little time at home. And I was always kind of out working or I was going out with friends or going to different cities, things like that. And then when I had my first child, I just started spending so much more time at home and I really started to question how I had come to assume that a certain style of living, the single family row home that we lived in, was the right choice for our family. And also wondered about why it was, being a first-time mother, very difficult in terms of not having connections to people to kind of learn from and talk to, and other families to have dinner with where it wouldn’t matter if your child was screaming or crying. And I’ve found that we have created all of these sort of workarounds to that, like Mommy and Me classes that you pay 20 dollars to participate in. But that, you know, actually housing, multigenerational housing, neighborhoods that were purposefully built to be, you know, more closely knit as communities. These were ways in which we had raised generations in the past, and that was really no longer the case anymore. So, it started with a kind of personal questioning of how housing affects our lives in the way that we just raise families and exist in the world.

Eve: [00:06:55] Right.

Diana : [00:06:56] And then, this was a number of years ago, when really the price appreciation in Philadelphia where I live, and in many other cities, was picking up at a really fast pace. So, I think in 2016, prices went up by about 20 percent in Philadelphia in just one year alone. And so just witnessing…

Eve: [00:07:18] Wow…

Diana : [00:07:18] Yeah, and, you know, and that was not even the most extreme example. I mean, Seattle was probably the leader that year. And so, recognizing that housing was so expensive and there was such a great need for more affordable housing and just absolutely no way that we were going to be able to just sort of subsidize our way out of that, through whether it was new taxes or new government programs, that there had to be some other ways of addressing some of this affordability issue. And then finally, also in the past couple years, obviously, people had been thinking about climate change forever. But, you know, in the past couple of years, it’s become very evident, especially with wildfires in California, that the ways in which we have built into nature and kind of further expanded development has really had an impact on our ability to bring climate change under control. So, the social, economic and environmental issues had been swirling. And really, I wanted to put it together in a book and write about it in a way that would be accessible to people who knew a little bit about housing, but not a ton, perhaps. And also just sort of like a general person who was very curious about some of these issues and needed a bit of like a foundation of understanding the history of housing in the country.

Eve: [00:08:41] Right. You must have learned a lot researching it. What was the most surprising thing you learned?

Diana : [00:08:48] You know, that’s a good question. I don’t know that I was entirely surprised, but I had, of course, imagined that in the past there were more diverse housing options, like obviously knew about boarding houses or single room occupancy type buildings, or inns and taverns and the very beginning of colonial cities and whatnot. What I didn’t realize was that there were just so many variations upon things like apartment hotels that were built to give people a certain amount of privacy in their own apartment. But to have these kind of communal dining rooms where you could connect with your neighbors. And also how, you know, some of these types of communities were not seen as the way that I think they’re portrayed today, as kind of just bourgeois, you know, laziness, but rather a way to address some of the domestic inequality of women always having to take on the laundry, the cleaning of the house, et cetera. And so, some of these kinds of communities where there were amenities built in, were actually seen as feminist projects.

Eve: [00:10:00] That’s amazing.

Diana : [00:10:01] Yeah. And, you know, gender segregated housing that had a mission to provide for professional opportunities and colleagueship among women or men, over and over, and I couldn’t include it all in the book, but just found really interesting examples of, like, housing set aside for sailors that came in the city. Or, you know, just like so many different types. And we think, you know, pretty much today of just like single family housing and senior housing and maybe student housing. And that’s kind of it, you know?

Eve: [00:10:33] I interviewed someone a few months back who built a project, specifically housing for teachers. So, again, a community like that could kind of really lean on each other in a variety of ways. Interesting. You must have learned some troubling things as well. I read a quote. You said, “The housing that we built is built on a model that was created, frankly, with a lot of classist and racist exclusivity and privacy in mind.” So, you know, tell me about them.

Diana : [00:11:03] Sure, yeah, well, when you look at the growth of single family homes, it really started in the early 20th century at a time when there was an influx of immigrants in cities and a lot of the immigrants were not wealthy people living in crowded situations, in tenements and other housing types. And when both a combination of a bunch of different things happened, housing became more affordable to build through some standardizations of technologies and materials and the proliferation of private cars and trolleys and transit systems that would get people out of cities. You know, the real push for these initial suburbs in the beginning of the 20th century were really opportunities for the wealthiest and the whitest to move out of cities.

Eve: [00:12:02] That was catastrophic. Places like Pittsburgh. Right?

Diana : [00:12:06] Um hum, yeah. And that started, you know, really before what we think of as the baby boom period, which really led to suburbanization and very much car oriented suburbs, which then were communities that were built explicitly to exclude people of color, Jewish people and other minority groups. And that was done both legally, first through redlining and then sort of extra legally continued through restrictive covenants that could determine who was able to own a home or not able to own a home. You know, I think a lot of people in the history that has been talked about of this have really thought about the suburbs as being this great opportunity for people to access affordable housing and improve their quality of life. But it was not an opportunity that was available to all people. And many people have read Richard Rothstein’s Color of Law, but that is a whole book on that particular topic and certainly worth reading for that.

Eve: [00:13:12] Ok, so what does housing reform look like to you after writing this book and doing this research?

Diana : [00:13:18] The key thing is recognizing that there are a lot of different demographics in the country that want different styles of housing and we’ve really tried a sort of one size fits all approach to housing through the single family home and pursued that too. I think in some cases boost property values for people to continue to provide the kind of privacy and seclusion that we associate with the American dream, but which is really benefiting a kind of smaller and smaller group of homeowners. And in fact, as more corporate entities come into the single family home investment space, buying up tens of thousands of properties to use them as rental properties or even as flipping options as Zillow and other companies have done, it’s not even homeowners anymore who are pursuing this dream. So recognizing that we need to provide options for people who are in different economic circumstances and have different cultural and social needs is going to be really important. The reform part of it would really be to ensure that there is the zoning that allows for different types of housing, that there are incentives that provide for different types of housing, and that we’re not really only incentivizing the single family home through things like the mortgage interest deduction, through homeownership oriented programs, but that we’re thinking about ways to say legalize and encourage duplexes, because that might be a style of housing particularly suited for multigenerational households or households where someone needs an in-home caretaker or people need access to rental income or all of these various different things. And it’s really not legal in many neighborhoods, residential communities across the country. So I think step one would certainly be reforming the zoning and reforming what kinds of incentives we provide for housing.

Eve: [00:15:28] Yeah, okay, I suppose that was my next question. What is the impact of zoning on building a more equitable housing landscape is huge.

Diana : [00:15:37] Absolutely. Just yesterday, I was talking with a group of people interested in trying to encourage Philadelphia to reword some of its zoning to allow for accessory dwelling units across the city or in more neighborhoods and make the zoning less restrictive for it. And hearing from developers that were part of the group talking about how it costs time and money to have to deal with zoning variances or the uncertainty about whether a project is going to get it approved, you realize just how these kinds of zoning issues affect the whole pipeline of housing.

Eve: [00:16:19] Enormously. So, we actually have an offering live on Small Change for aiding a developer in Oregon. And there they put an overlay district, I think it statewide, which makes them use by right as long as they conform to a certain size. And he’s built the business around that zoning regulation.

Diana : [00:16:40] Yeah.

Eve: [00:16:40] So that he can move really quickly and create a manufactured unit that is actually half the price, a regular one bedroom unit to build. It’s one hundred and fifteen thousand instead of two hundred and fifty. So they have that in place. But the next problem is that financing them. I mean, you cannot find a bank, a CDFI fund or anyone who really finance these projects.

Diana : [00:17:07] Yeah, I think that’s an interesting issue and something that I talk a little bit about in the book. I give an example of an innovative project in Los Angeles through a nonprofit there, called LA Más. And they were really exploring, along with the city of Los Angeles, how to provide accessory dwelling units that would be both affordable to construct, and affordable to finance and all these kinds of issues. And what they were trying to do was to essentially line up all the parts for the homeowner to make it kind of one stop shopping so that they could have the contractor, the architect, the financing, all as part of a package that you buy into. Because I think one of the other issues is just for so many people, the idea of building an accessory dwelling unit is it’s very difficult. And if you’re not real estate savvy…

Eve: [00:18:02] Oh, it’s impossible. So, this guy actually builds it, installs it, finances it, and then gives them a ground lease. So, the opportunity to buy it at any time, you know, within a 10 year period, I think.

Diana : [00:18:19] Right. So that’s definitely a model that is gaining popularity and with good reason.

Eve: [00:18:24] Yeah, except he can’t finance it. I mean, it’s really difficult like we are with this huge housing need. And while I think people are being extremely creative, developing new models, getting banks and financial institutions to catch up is the next part of the story, right?

Diana : [00:18:46] Yes, absolutely. You know, just today, I got an invite to a webinar about accessory dwelling units with someone from Fannie Mae participating in it. So I think that there is kind of an increasing awareness among our governmental institutions that are financing housing that we need to be more nimble in what types of housing we’re financing and that there’s a I think, a growing awareness among a lot of banks as well. To your point about that statewide overlay in Oregon and some of the reform in California, these are huge markets and there’s a real opportunity there for these banks. So it’s going to become a question of them figuring out sooner rather than later that this is going to be a business opportunity for them. And they would be silly to not participate in that.

Eve: [00:19:38] Yeah, I think what I love most, about ADUs, backyard units, Grandma, in-law units, whatever you want to call them, is that they slip into an existing infrastructure in the neighborhood which has transit options and the grocery store and the school, they just slip in as extra housing without much fuss at all. If you can provide an affordable unit to someone in a great neighborhood that already exists, it’s just a fabulous option and we ought to all be on it.

Diana : [00:20:09] Yeah, yeah, absolutely. You know, something I try to stress in the book is that I don’t think there is a single housing option that’s going to solve the housing crisis. And so, you know, accessory dwelling units, they sort of have their limits. And before this call, you and I were talking a little bit about covid. And it kind of reminds me in some sense of what is increasingly called sort of like the Swiss cheese model, which is the idea that you have to wear a mask, you have to do social distancing, you have to limit the time you’re spending in certain places and that none of these various different safeguards is going to be enough to prevent covid. But when you do them all together, then you actually are able to prevent it relatively well.

Eve: [00:20:49] Make some impact. Yeah, yeah.

Diana : [00:20:51] So I think that’s sort of the same thing with housing, which is like, you know, these accessory dwelling units, they’re not going to solve everything, nor are duplexes, nor multifamily because they’re not going to work in every kind of context, but we have to think about what works in a given context and think about how we might be able to update housing to better provide affordability or some of the kind of needs that people have today.

Eve: [00:21:17] So what about co-living or co-housing, which is an emerging affordable housing trend? And I’ve talked to a variety of developers and I worked with a variety of developers just tackling this in so many different ways. It’s really fascinating.

Diana : [00:21:32] Yeah, so co-living was really picking up a lot of steam before the pandemic. And I have heard that there’s continuing to be some expansion and kind of merging of co-living companies. And I think it is still continuing to be a viable product and will be certainly post pandemic. But co-living, you know, is this idea of people having their own private bedrooms but larger shared spaces with programming and a sort of intentional community aspect to the building or the house, what have you, behind it. And certainly there are a lot of advantages of it and ways in which co-living really responds to demographic needs. And that, again, is sort of one of the thrust of the book is that, you know, there are young people who are not interested in acquiring furniture, are not interested in long leases. They want experiences. They want, you know, an Instagram worthy meal. They want, you know, just different types of things. And this is not to say it’s all people. And certainly it is a wealthier demographic of young people that tend to be living in these kind of traditional co-living spaces. That said, co-living has also, I think, de-stigmatized, shared living in a way in which we haven’t seen in a long time. So the kind of idea that living in a small apartment but having a small studio but having access to all of these amenities and other people, that kind of makes it seem cool. But we’ve seen some developers like Common, for example, which has then now partnered with cities like New York and Atlanta to build shared living and co-living spaces for people who are lower income or who are formerly homeless. So it can transcend one market into another. And I think it’s a really interesting housing type to get to address both some of the social needs that people have for actually connecting with people. You know, young people are like the loneliest generation, especially as more people spend time online. I think really value time in person as well. And so it’s a great way to address some of that social need and also provide some of that density that is going to have economic and environmental benefits too.

Eve: [00:24:01] In markets, like New York City it provides an opportunity for someone to live there. I suppose if you want to call affordably, you know, in a place that really could not afford to live.

Diana : [00:24:11] Right. Yes, that is definitely I think part of the whole idea is that for decades now, people have lived in little shoeboxes in New York and San Francisco, you know, sharing a, say, two bedroom apartment among six young people or what have you. And it’s kind of taking a little bit of that same idea. But but doing it in a more thoughtful way. And, yeah, like people are going to be spending a lot of money on rent anyways to live in a prime neighborhood. This is a way to do that and do it and actually sometimes like a more legal and friendly fashion.

Eve: [00:24:49] Right, right. Right. So are there any other housing trends that you believe are kind of really important for our future?

Diana : [00:24:55] Definitely think that multigenerational housing is one of the sleeper issues in housing that has not really gotten the attention of both the marketplace solutions and government policies. Multigenerational housing, so three or more generations under a roof, was on the rise in the U.S. and at the highest level since the 1950’s, I think in 2018. When the next data dump comes out, I’m very interested to see. I’m sure that it is even higher now. Also, people living with kin has also increased. So not just multiple generations, but living with an aunt and uncle or brother or sister or cousin, that kind of thing. People can, of course, live all in a single family home together in a multigenerational fashion. But, you know, there are a lot of housing types that were traditionally available, like duplexes, like multifamily townhouses that worked quite well for this type of demographic that we could see the renewal of that being very important to support in multigenerational housing. So I think that’s going to be a huge trend in the future.

Eve: [00:26:13] That’s kind of ‘the missing middle,’ right?

Diana : [00:26:15] Mm hmm. Right. Yeah.

Eve: [00:26:17] We’ve touched on this, but what role should developers or communities or city government or even federal government play in building an equitable housing landscape?

Diana : [00:26:28] Well, I think it requires certainly all of these different stakeholders. And the role that developers can play is being willing to experiment with housing types, being willing to test out housing that might work for a niche demographic that actually is quite huge. You know, I think that’s one of the things that we found with co-living, for example. Like, you don’t need all young people to live this way because the millennial generation is the largest generation that exists. But even just a fraction of it is a huge market. So a willingness to look beyond the status quo is going to be important from developers. I think from the government side of things, a willingness to accept that we’re not going to be able to simply create all the affordable housing that we need through the old standard measures of old government programs. It would be great if, as President elect Biden has proposed, that of making Section eight an entitlement that will do a lot to create more affordable housing. But I also think that government needs to recognize that there is a role here to play in changing zoning to adjust. Yes. What might actually flourish more naturally in their city if they adjusted the zoning.

Eve: [00:27:47] I mean, it’s so expensive to change zoning regulations. I was part of a zoning regulation rewrite a couple of decades ago, and it was a huge project.

Diana : [00:27:58] Right.

Eve: [00:27:59] You have all these small places that where did they get the funds from?

Diana : [00:28:05] Right, and that’s where I think some of the state reform is really powerful because then you don’t have the same kinds of issues of small municipalities having to figure out how to change their zoning. I’m thinking more along the lines of larger cities that could adjust their zoning and have processes to look at their planning documents every few years. So I think that’s definitely a way to adjust some of it.

Eve: [00:28:34] Right back to you. What are you currently working on?

Diana : [00:28:39] I sometimes marvel at the fact that I was able to write the book because I have two young kids and I have a full time job. And then there’s been this pandemic which has made everything…

Eve: [00:28:50] Three jobs.

Diana : [00:28:51] Yeah, right. So, I think at the moment I’m really just trying to get the word out about the book and kind of get those ideas out there a bit more. I do have some ideas of what some potential next book could be. Very interested in the discussion about how cities are going to transform as a result of the pandemic and more rather than just the pandemic, the increase in online working and how that is going to change cities and the sort of ways in which retail had been troubled pre pandemic. But that has just been accelerated. So, something about that future of the city question and something I’ve written about a little bit lately, and I could imagine looking at that in a larger format.

Eve: [00:29:41] That would be really interesting.

Diana : [00:29:42] Yeah.

Eve: [00:29:43] I just wanted to go back to one other thing. You grew up in New York City and I think you live in Philly now, right?

Diana : [00:29:48] Yeah.

Eve: [00:29:49] What do you love about Philly and what do you think it needs to do better to become a 21st century metro area.

Diana : [00:29:56] Well, I think Philly is a fantastic city for so many different reasons. I think the reason that I love it currently, which is different than a couple of years ago, is just how amazing its cultural institutions are. I now run something called The Arts and Business Council. That’s my day job, if you will. And so I work with people in the creative sector and also businesses who are interested in getting involved in the creative community as well. So that just makes me really excited about the city seeing how that plays out. I live not too far from many of its big institutions, like the museums and the library, the central branch of the library and some of its great parks. So just all of that kind of like cultural infrastructure is built into, baked into Philly, and that is fantastic. The other thing that I really love about it is that it is a city that is changing, but not at such warp speed. That was definitely something I felt in New York in my early 20’s there. It just felt like the city was changing so fast and it was really disruptive. And so there’s like a nice pace of change here. Where it needs to go in the future? I think it just needs to be a more brave to take a word from the book.

Eve: [00:31:16] Yeah. Brave. I love that word. Everyone gets to be brave.

Diana : [00:31:20] Yes, totally. So that’s a little bit of a motto from the book is like, let’s be brave. And, you know, it’s amazing to see how we’ve closed down some streets for outdoor restaurants and taking up parking spaces for that and stuff like that. It’s just exposed how we could reorganize the city to be more pedestrian friendly, more bicycle friendly, all that kind of stuff. And we’ve not had the focus on that. I also think, you know, just a huge issue is the school system here is facing a huge deficit as a result of the pandemic and just a recognition that this is like the top priority for the city and we have to figure it out and do it right, at this point. There hasn’t been consensus around that, but I just don’t see a way forward for Philly if we don’t solve that. So that is going to need some bold action as well. You know, you can take these ideas and a bunch of different directions. I think we could do a lot more in terms of our transit, in terms of our housing, that would just be less about trying to recapture the status quo, but trying something new because we have no other option at this point.

Eve: [00:32:34] Yeah.

Diana : [00:32:35] Yeah.

Eve: [00:32:36] Well, thank you so much for joining me, Diana. I really enjoyed our conversation. And I want to learn more. And I think your book is now my reading list for the holidays, so I haven’t had time to read it yet, but it sounds really fascinating. I can’t wait to get into it. Thank you so much.

Diana : [00:32:53] Thanks so much. It was great talking with you as well.

Eve: [00:33:03] That was Diana Lind. “Let’s be brave,” she says, and brave we must be to solve this housing crisis. Governments must bravely tweak their zoning regulations so that new and affordable housing types can be easily built. Developers must bravely experiment with their next housing project. Banks must bravely finance new housing products, and NIMBY’s must bravely accept some change. Together, surely we can make a difference.Eve: [00:33:39] You can find out more about impact real estate investing and access the show notes for today’s episode at my website EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today. And thank you, Diana, for sharing your thoughts. We’ll talk again soon. But for now, this is Eve Picker signing off to go make some change.

Images courtesy of Diana Lind

The Missing Middle.

Daniel Parolek is an architect, urbanist and the founder of Opticos Design, which has been working in urban placemaking and master planning for two decades. Daniel is best known for framing the idea of ‘missing middle housing’ just as the critical absence of affordable housing was becoming a major planning issue for cities nationwide.

The ‘missing middle’ can be broadly defined as those housing types in between single-family detached and large apartment complexes. This means multi-unit housing types, such as duplexes and fourplexes, bungalow courts and mansion apartments, all of which were typically mixed in with single-family homes in pre-war city neighborhoods. Daniel has thus become a high-profile advocate for zoning reforms that would allow ‘the right kind of density.’ More people, less parking, walkable neighborhoods, broader demographics.

Daniel’s new book, Missing Middle Housing – Thinking Big and Building Small to Respond to Today’s Housing Crisis, is a how-to book exploring these issues, just came out this year. Daniel also co-authored the book, Form Based Codes (2007), and is a member of the founding team of the Form-Based Code Institute (2004), a nonprofit think tank working to bring back traditional urbanism through zoning reform. His firm, Opticos Design, has been a triple bottom line B-Corp since 2007.

Insights and Inspirations

  • There are some serious barriers to building the ‘missing middle housing’ types.
  • Antiquated zoning systems need to be reformed and NIMBY-ism needs to be controlled.
  • Communication is key in terms of over-coming misconceptions about up-zoning and increased density.

Information and Links

  • Opticos is currently working on the master plan and architecture for Culdesac Tempe (yes, it’s ironic), which will be the largest car free community in the United States when built next year.
  • Missingmiddlehousing.com is the web portal for all subjects on missing middle housing.
  • Daniel wanted to highlight B-Corp/B-Lab as a great community of triple-bottom line companies of which his firm is a part.
  • He also wanted to sing praise for Richard Rothstein’s, The Color of Law (stay tuned on this one, by the way), on real estate, segregation add government policy.
Read the podcast transcript here

Eve Picker: [00:00:12] Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Daniel Parolek. Daniel’s an architect and rising star urbanist. His firm, Opticos Design, has been working in urban placemaking and master planning for two decades now. But Daniel is best known for framing the idea of “missing middle housing.” Just delivering more housing is not enough, says Daniel. We need to think about how this housing reinforces a high quality built environment, and how to provide a range of housing for all segments of the market, including moderate- and low-income households. Daniel’s new book, “Missing Middle Housing: Thinking Big and Building Small to Respond to Today’s Housing Crisis,” is a how-to book exploring these issues. Please listen in to our fascinating conversation, and if that’s not enough, be sure to go to EvePicker.com to find out more about Daniel on the show notes page for this episode. You can sign up for my newsletter to access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.

Eve: [00:01:44] Hello, Daniel. I’m really excited to have you on my show.

Daniel Parolek: [00:01:48] Thank you, Eve. I’m really excited to be here.

Daniel: [00:01:50] Good. I wanted to dive right in and talk about what’s wrong with housing and housing choice in the U.S. today. And you coined a phrase that’s really widely used now, and that is “missing middle housing.” And I’d love to know what  that is. What is missing middle housing?

Daniel: [00:02:10] Yeah, it’s a great starting point. So, it’s a topic I’m obviously very passionate about. And the reason that I decided to emphasize, and and I coined this term back in 2011, is I wanted to help emphasize and frame a conversation about the broad range of housing choices that the market is wanting and needing, that the development industry is not delivering, in any market across the United States. And historically, right, we’ve done a really great job of defining policy, creating zoning, and creating development industries that can deliver single-family homes in large quantities. So, we’ve done a really great job with that over a series of five or six decades. I’d say over the course of the last couple of decades, starting in the early 2000s, really, in the United States, cities started figuring out how to plan for, and zone for, in the development industries and financial industries. Figured out how to deliver, the larger, you know, five, six, seven-plus story condos, a mixed-use or apartment buildings. What the missing middle is, is it’s all of these housing types in between those single-family homes, such as a duplex, a fourplex, a cottage court, a small courtyard apartment, that existed in neighborhoods prior to the 1940s and delivered a broad range of price points and types of housing. And, really since the 1940s, put barrier after barrier in place for the delivery of these. So, starting in the 1970s, based on some research we, I did for my book, an American Housing Survey, there has been a steady decline in the percentage of overall housing that is missing middle since the late 1970s. And I think, in 2013, the missing middle housing, which I define, and it sort of ties into the categories of an American Housing Survey, as 19 units or less per building. But typically it’s really kind of that eight-unit or less. Less than three percent of housing delivered in 2013 was missing middle housing. And so, what we’re seeing is that there’s a shift in demand in the markets and people want walkability. They want mobility choices. They want more compact living. They want access to goods and services around the corner from their households. But that sort of lifestyle in home is being delivered less and less.

Eve: [00:04:44] So, the question I have really is why is that? I mean, we, you know, I suspect some of it is financing, but …

Daniel: [00:04:53] Yeah.

Eve: [00:04:54] … why has it, you know, why has it declined so much?

Daniel: [00:04:57] One of the things I really enjoyed about writing my book is I got to actually sit down and do some research and write a chapter on the many barriers that are in place for the delivery of missing middle. And, you know, we could talk for a couple of hours just about those barriers. But I think the real starting point for a good conversation about why they’re not being delivered really starts with antiquated zoning. We’re utilizing a zoning system that was created over, as an operating system, that was created over 100 years ago.

Eve: [00:05:29] You know, the more I do these podcasts, the more zoning seems to be the root of all evil.

Daniel: [00:05:37] Yeah. I sort of often ask the question when I’m talking to an audience of like how many operating systems that are 100 years old are we still using? And there’s very, very few of them. But zoning is one of them. So, actually, starting 20 years ago when I started my firm Opticos Design, one of our real focuses was pushing for zoning reform, because both with our developer clients as well with our clients that were cities, we were finding that everybody wanted the right kind of projects, but the zoning was in the way. Now, that’s just one of many barriers, as I mentioned before, right? That’s, there’s everything from, right, there’s construction defect liability that makes it really hard in many states, or risky, I will say, in many states for developers to build condos at the missing middle scale, just too much risk to sort of warrant taking that type of condo project on, right? It’s really hard for developers to finance condos, and for households to purchase condos. It’s just not an easy system that’s set up …

Eve: [00:06:45] Right.

Daniel: [00:06:45] … in the same way as you can buy a single-family detached house.

Eve: [00:06:49]  Yeh, I built a built an eight unit condo building years ago. And it was pretty miserable.

Daniel: [00:06:55] Yeah. And obviously there is, you know, community pushback from, you know, this whole NIMBY conversation that’s happening, that there’s just a lot of communities that are kind of afraid of anything that’s not in single-family detached. I think a big part of why the missing middle concept has spread so broadly is that it’s giving communities a way to talk about the need for a broader range of housing choices without using these intimidating and scary terms like density or multifamily or upzoning, but rather talking about a cottage court. Like how can a college court be that intimidating to somebody, and personalizing those stories. Because most people, when we’re talking about this in communities to try to build support, have either lived in one of these types, they have kids that have lived, or are living in these types, or a relative or a good friend. Or maybe there’s a duplex right around the corner on their block that some of their friends live in. So, that, we find that sort of shifting that conversation away from some of this terminology like density that brings really negative perceptions to people’s minds is a really important way to kind of remove that community pushback barrier.

Eve: [00:08:11] Right. So, you talked about a decline since the 1970s, but I mean, these zoning systems were already in place. So, what prompted that moment in time for people to stop building that way? Because zoning had already been pushing against it for a while, right?

Daniel: [00:08:31] Yes. Zoning in the United States really started in the late 20s, sort of through the 30s and early 40s in terms of its initial application. And what I would say is I don’t actually know and I don’t know of anybody that’s done the research to understand why there was such a specific threshold or turning point in the 70s to shift this. I mean, it must have had to do with federal funding or federal programs. But I don’t, I don’t actually know the answer to that. But it would be really, it’s a good sort of research project for a graduate student to take on for sure.

Eve: [00:09:06] It does align with, you know, suburban flight, which was happening around then. Certainly, the city I’m in, and many others, 70s and the 80s were kind of that moment in time where people left inner cities and went to the suburbs where there are many more single-family homes. And so, maybe the demand just increased then.

Daniel: [00:09:29] Yeh.

Eve: [00:09:29] They left the inner cities, which probably had more of the housing types that you’re talking about, the missing middle, right?

Daniel: [00:09:35] Yeah, absolutely. Many American cities by the, sort of, 1970s were in a pretty large state of decline or had seen several decades of decline and disinvestment. So, I’m sure that was part of that. And so, it was just a much more rational or easier choice for households to buy that single-family detached house in the suburbs. One of the things I like to talk about is that I feel that it’s really time, just based on the affordable housing crisis that we’re having across the country, this shift in demand and what households are looking for. Chris Nelson did a, some great research for my book and he wrote a chapter – he’s a, he teaches at the University of Arizona – that found that 60 percent of all housing built between now and 2040 would need to be missing middle in walkable urban context to meet the demand.

Eve: [00:10:34] That was my next question for you, actually …

Daniel: [00:10:36] Yeh.

Eve: [00:10:36] … that was actually, you know, how much can that address the deficit? That’s interesting.

Daniel: [00:10:41] Yeah. And we, you know, I think we can all acknowledge that the industry isn’t just going to all of a sudden shift and sort of shift in delivering 60 percent of housing and missing middle and in walkable urban context. But that’s what it would take. So, it’s a pretty, pretty dramatic number. And I think it’s just a really strong call to action for planners, for city decision makers, for federal housing policymakers, development industry, to just think very carefully and play their role in sort of this shift, this dramatic shift, that needs to happen. And really delivering what households across America want as home in the 21st century, which is very different than what households wanted in the 50s, 60s or 70s. And we’re still kind of hanging on to that single-family detached home mantra, which is not what households are looking for these days.

Eve: [00:11:41] So, I’m wondering, like, what’s the big fix? How does this shift really happen? I mean, you have a number of things that need to be addressed. How do you take that on so that you can start building these types of products again?

Daniel: [00:11:55] Yeah, I think that it’s a little bit intimidating. There is a tremendous amount of change that needs to happen, right? It’s not just a change in the development industry. It’s change in city policy, city zoning, development industry, financial industries, federal housing policy. But what I would say is that there has been some tremendous progress in the last year and a half, that because cities have failed to make the changes in their policy and zoning that are necessary, so, like the state of Oregon last year passed statewide legislation, it’s called HB2001, that allows up to three or four units on any lot, statewide, even those that are zoned for single-family. So, that was really a major milestone in sort of removing those barriers.

Eve: [00:12:45] Yeh, and I have been offering on my website that actually went live today that takes advantage of that zoning law.

Daniel: [00:12:53] Yeah, I think that’s a tremendous opportunity. The city of Minneapolis did something similar city-wide, allow up to three units …

Eve: [00:12:59] Yeah.

Daniel: [00:13:00] … per lot. And state of Nebraska, even, my home state, recently passed the Missing Middle Housing Act, which will allow multiple units on all lots, across the country. So, that’s happening, I would say that from the development industry standpoint, I see the most change from outside of kind of the typical players. I think it’s new players coming into the real estate industry, a lot of it tech-influenced. I guess this whole prop tech influence, I think is likely what’s going to have the most impact, because I see an inability or reluctance to change in a lot of the major development players, the reluctance or inability to change at a pace that is actually necessary. And, you know, there’s a lot of innovation happening on alternative construction delivery systems, whether it’s prefab or modular or, you know, like how do you deliver housing quicker, more cost effectively? And I think there’s a lot of change happening. It’s just a lot of it hasn’t been proven yet, and is kind of having a hard time to scale up. So, I think all of those are interesting shifts that are happening.

Eve: [00:14:09] Yes. So, I want to go back to the statewide legislation.

Daniel: [00:14:13] Um hmm.

Eve: [00:14:13] So, when the state legislates you can now put up to four units on a lot …

Daniel: [00:14:18] Um hmm.

Eve: [00:14:18] … but zoning doesn’t change. What does that look like? When you have typical single-family house setbacks and statewide legislation that now says you can squeeze more into the site? How does everyone manage that?

Daniel: [00:14:35] Yeh. So, as part of that legislation, as it requires the local jurisdictions to change their zoning by a specific time, in a specific time period. And so, like the state of Oregon right now is going through a large process where they’re providing grants to local jurisdictions to change that zoning and they’re creating a model code.

Eve: [00:14:54] That’s expensive.

Daniel: [00:14:56] Yeah, and it’s not simple.

Eve: [00:14:58] No.

Daniel: [00:14:58] It’s not simple. And what I see is, and I noticed that there was, I think it was a podcast or blog post on your site about the barriers of parking requirements …

[00:15:10] Yes.

[00:15:10] … you can have on housing and the cost of housing. And I think it’s going to be really interesting to see, because I don’t think it was specifically part of the legislation that local jurisdictions had to remove or reduce parking requirements, and based on our work, both with cities and with developers, we found that it’s absolutely necessary for cities to, ideally, remove and at least dramatically reduce their parking requirements to really make missing middle feasible.

Eve: [00:15:39] You know, I interviewed Donald Shoup.

Daniel: [00:15:41] Oh, yeah.

Eve: [00:15:42] Who basically says, you know, those thousands of pages of parking requirements and zoning laws should be replaced with one line. Parking not required.

Daniel: [00:15:52] Yes. Yes. Yeah. And I know you you focus and talk a lot about sort of mobility choices. And I like that your change index, that you use to score projects, really focuses on sort of these walkable, urban mobility-rich contexts, which is fantastic. And I feel like the demand for that walkable urban living, and I think that’s a term Chris Leinberger coined, and I know he, you interviewed him …

Eve: [00:16:20] Yes.

Daniel: [00:16:20] … is, it’s like a third of baby boomers, which is the largest market segment, and two thirds of millennial households, want this walkable urban living and, right, it’s a really simple supply and demand equation that you have a really high demand and a low supply that’s not really growing. Like it’s a really, I’m not an economist, but it’s a pretty easy, basic economic equation that sort of is going to, the response, or the result is going to be really unaffordable, high-cost housing in those areas that are delivering that walkable urban living. And we’re working on a project right now called Culdesac Tempe, which will be the largest car-free community in the country when it’s built next year. And it’s in Tempe, Arizona. And the developers, our clients, their name is Culdesac, it’s obviously an ironic name.

Eve: [00:17:14] Yes, it is.

Daniel: [00:17:14] They believe very strongly that there is a demand for this car-free living and they have more deposits from interested renters than they have units in the first phase. And they have, I think …

Eve: [00:17:30] Wow.

Daniel: [00:17:30] … something like 3,000 interested renters signed up to lease future phases. And so, it’s proving that there’s a really strong demand for choice. I think it’s really about …

Eve: [00:17:43] Yes.

Daniel: [00:17:43] … providing a choice. And even in the Phoenix Metro, the one of the most auto-centric places in the country, that you can deliver this car-free living and people are super-interested in it, and it’s …

Eve: [00:17:55] Well, probably because the product they can afford to build is probably higher quality because they don’t have to add in parking spaces, and the cost of those. And the person renting those apartments also doesn’t have to pay for the cost of those. It seems like it’s a win-win, if you can locate living units close to transit …

Daniel: [00:18:16] Yeh.

Eve: [00:18:16] … it’s just better for everyone.

Daniel: [00:18:18] Yeah, it’s along the light rail line.

Eve: [00:18:21] Oh, that’s fabulous.

Daniel: [00:18:22] They’re, you know, being very thoughtful about bikeshare stations, electric scooter stations, you know, pick up and drop off from the, you know, Lyft and Ubers of the world. And they’re, you know, even getting funding from tech companies that are testing some of the technology within the project, things like delivery, you know, robot delivery, and, you know, delivery of groceries and things like that. So, it’s kind of a testing ground of sorts. And yeah, it’s, absolutely they’re not having, so, you know, if they’re having to build even one parking space per unit, right, you know, it would end up needing …

Eve: [00:19:03] A lot of land.

Daniel: [00:19:03] … a parking garage, a big expensive, at 30 or 40 grand per space, and a lot of land. And as the master planner of that project, you know, it just opened up so many opportunities to create the most high quality public spaces. 60 percent of the project is public space because, because cars are having to slice through the project or being parked on the project, and the housing types we were able to create our courtyard based. They’re very responsive, both the plan and the housing types are responsive to the desert climate. And so, it’s a really compact urban design …

Eve: [00:19:42] Interesting.

Daniel: [00:19:42] …and really narrow asseyos and courtyard housing that’s focused on, you know, comfort in the hot season, but also fostering a really strong sense of community as well …

Eve: [00:19:53] Wow.

Daniel: [00:19:53] … which is a big goal of the project.

Eve: [00:19:55] So, is this typical of the work you do it at Opticas?

Daniel: [00:19:58] Yeah. So, yeah, it’s, we’re, about half of our work is with cities. And so, with those cities we’re doing, usually doing urban revitalization, transit oriented projects, you know, downtown plan, corridor revitalization plan, new transit, sort of thinking about the impact of future transit and how a place might evolve. And that entails everything from, you know, the community participation process, the sort of visioning, sort of what’s the defining the future form of the physical environment, as well as rewriting the zoning. And then the other half of our projects are with developers. And the types of developers we work with are, tend to be the more innovative, forward thinking developers who really want to do something that’s not being delivered in a market.

Eve: [00:20:46] Um Hmm.

Daniel: [00:20:47] And so, the Culdesac Tempe project is a super exciting one. We’re, we’ve also delivered the country’s first missing middle neighborhood. It’s in the Omaha, Nebraska, Metro in a small town called Papillion, Nebraska. And it’s a 40-acre neighborhood created with buildings that are no more than eight units per building. And there’s now 132 units built and the market is responding super well. It’s performing financially very well for our client. And he is super excited. He can’t build fast enough to keep up with the demand for it.

Eve: [00:21:22] Wow.

Daniel: [00:21:23] So, it’s exciting to see that. And it’s transforming a somewhat suburban context into a more walkable context. And part of that is we introduced a small neighborhood main street that has flex spaces on the ground floor of the live/work units that have incubated a small pizza shop, small yoga studio, sounds like a coffee shop may be coming shortly, sort of got stalled due to Covid. But it’s just, we just get excited about those sorts of projects that can sort of move the bar. And that projects redefining what Class A multifamily can look and feel like. The Culdesac project is proving that car-free living, there’s demand for it and, you know, like our, we did a project in the Salt Lake City region for one of the largest builders in Salt Lake City that basically enabled them to deliver a high quality for sale housing choice to entry-level buyers that they couldn’t figure out how to deliver, and weren’t able to deliver, even with a fairly conventional tuck under townhouse product type. So, yeah, we’re having a lot of fun.

Eve: [00:22:37] It sounds like, it sounds like a lot of fun.

Daniel: [00:22:40] Yeah.

Eve: [00:22:41] So, what led you to this work?

Daniel: [00:22:44] Yeah, it’s really interesting and sort of looking back at it and I sort of wrote the foreword to my book that sort of talks about the evolution of missing middle and my interest in walkable urbanism, sort of over the course of my life. And it’s interesting because I do feel it really starts with growing up in a small town in the Midwest that was actually very walkable and very bikable and sort of kind of quintessential small town urbanism that functioned in a lot of ways, like neighborhoods function in larger cities …

[00:23:18] Um hmm.

[00:23:18] … a vibrant main street, you know, could bike across the town at the age of six or seven. And so, that planted the seeds. My grandmother,sorry, my great-grandmother, actually lived in a duplex, a block and a half from the small main street of my town. So, right, that was an introduction to sort of different housing types and housing choices. And I, you know, I have an undergraduate degree in architecture from the University of Notre Dame, and I was fortunate enough that it was one of the few programs in the country that, as part of the focus of the program, teaches urbanism and trains you in good urbanism just as much as architecture. And I’ve lived in a number of places across the country like Chicago, Park Slope in Brooklyn, that these neighborhoods that had a really great mix of these missing middle housing types …

Eve: [00:24:07] Um hmm.

Daniel: [00:24:07] … and ended up coming out to UC Berkeley to get a master’s degree in urban design and just had a really amazing faculty here that, a group of mentors that enabled me to explore this, this concept of these housing types. And as soon as I graduated from that program, I opened Opticos, which, you know, in 2000, we wrote our first zoning code that had the, we didn’t call them missing middle at the time, but it had cottage courts and courtyard apartments …

Eve: [00:24:38] Um hmm.

Daniel: [00:24:38] … that were embedded in that zoning code. And, at that time, the planners, you know, thought we were really crazy. They didn’t know what we were, they were like how can, you can’t do this. This isn’t the way we do this. And at this point, I would say that the approach which is, in what we call “form based coding,” is fairly common practice. A lot of cities are doing it. Cities are asking for it. Cities are realizing it’s a more progressive and thoughtful way …

Eve: [00:25:08] Yeh, yeh.

Daniel: [00:25:08] … to approach zoning. So, I think over the course of my life, it’s just that my understanding has evolved and it’s been part of my daily life and part of the, our, my architecture and urban design practice, and even the neighborhood I live in now in Berkeley, California, about 20 percent of the lots have missing middle types. And what that does, it allows my son’s first grade teacher to live in a triplex. Her mother lives in one of the other units and she’s also a teacher at that neighborhood school. And the third unit is occupied by my daughter’s middle school physical education teacher. So, right, it’s, it’s functioning and it’s delivering that attainable housing choice in my neighborhood.

Eve: [00:25:53] Right.

Daniel: [00:25:54] And this is, it is just good to personalize stories in that way.

Eve: [00:25:57] Yeh, it is. So you’ve been doing this for a while and there’s always things that work really well, better than you expect, and things that don’t work so well. You have any stories about those?

Daniel: [00:26:07] You know, we found that it’s actually a little bit hard for a lot of cities and their planners and sometimes their decision makers to make this mental shift to a conversation about form and scale and desired building types and away from density and FAR and these other metrics that zoning has been so reliant on. And it’s, the transition hasn’t been as smooth as I would have imagined when I wrote my book “Form Based Codes,” I think it was in 2009 it was released. I would have hoped by now that this would have become, there’d be, you know, hundreds of really highly-qualified practitioners and planners out there writing really high quality form based codes. But it really hasn’t. It’s happened very slowly and so, way more slowly than it needs to be happening. And I think the same is it’s, the level of change that’s necessary within the development industry, it’s hard, you know, we’ll get clients that that call us and say, you know, we really like this idea of missing middle, but when push comes to shove, we’re saying, well, you really need to be OK with only providing one off-street parking space per unit and letting the on street parking deliver that second space and they’re just, sort of, it’s just, takes them outside of their comfort zone to the point where it’s not going to really deliver the choice and the quality of living that we feel is necessary or the type of living that the market is demanding.

Eve: [00:27:29] I mean, I really have to wonder how much of that is driven by, you know, pretty traditional financial institutions, and I’ll probably sound a little bit like a broken record on this. But I know that, you know, when you go to a bank that hasn’t seen a product like the one you’re trying to build before, it’s, it can be sometimes almost impossible to get it financed. And without financing, you don’t have a project. So…

Daniel: [00:27:52] Yeah.

Eve: [00:27:53] … is that kind of the last frontier? Banks? I don’t know.

Daniel: [00:27:57] No, I think it is, because, right, you’re right. If there’s not a comparable project in the market, right, it’s it’s hard for a bank to go outside of their comfort zone to say we’re going to finance that project.

Eve: [00:28:11] Yeah, they need appraisals …

Daniel: [00:28:12] Yeah.

Eve: [00:28:12] … and the appraisals need three like-kind properties. And then they need to see that you, you know, you have all the approvals and entitlements that you need. It’s pretty complicated pieces.

Daniel: [00:28:25] Yeah. And I do feel that, you know, what you’re doing with the crowdfunding at Small Change can really benefit the application of missing middle housing, because, you know, what those innovative small builders/developers that are looking for that capital, I feel like, you’ve provided that platform.

Eve: [00:28:46] Yeh, so we did, you know, one in L.A. that might interest you, that is a bungalow court project. Eight units in courtyard style. It hadn’t been built, I think, since the 1950s and very much in line with this missing middle, except that they, they built it as homeless housing, which is also good.

Daniel: [00:29:05] Yeah, it’s, I noticed  that Bungalow Gardens project, and that’s really at the heart of missing middle housing types. It’s a really fantastic type that we delivered historically in neighborhoods that we, it’s almost impossible and illegal to build in most cities, that … it seems so basic. And, but there are so many barriers in place. And, you know, we launched missingmiddlehousing.com in 2016 because there was such a growing demand and interest on this topic. And, I can’t remember what the numbers, but there’s a large volume of visitors to that site, sort of on a weekly and a monthly basis. And it just shows that there’s really strong interest in …

Eve: [00:29:52] Yeah, yeah.

Daniel: [00:29:53] … in this idea of exploring, you know, what are some of the tools that cities and planners and developers can put in their toolbox to address this gap between the type of housing this market wants, and I feel like one of those tools, definitely, especially for the delivery of missing middle, is and, I think this crowdfunding you’re doing is great, so …

Eve: [00:30:14] I hope.

Daniel: [00:30:18] Yeh, it’s, and I think it’s just, it’s the type of innovation that, sort of rethinking the way we’re doing things that, you know, needs to be happening.

Eve: [00:30:27] Yeah.

Daniel: [00:30:28] Yeah.

Eve: [00:30:28] Just out of interest. Are there any other current trends in real estate development that you think are really important for either the future of housing choice or better cities, things that you’ve been watching?

Daniel: [00:30:42] There’s a couple of things. I think that we really need to figure out how to deliver walkable urbanism in new communities. And there, in addition to zoning, there’s a lot of other barriers, starting with street designs, infrastructure, or sort of utility requirements. So, there’s a long list of barriers. But I think that, you know, we’ve been talking about it for a while here in terms of more sustainable development patterns, but we haven’t made a lot of progress. I would say we’re still battling the same battles, project by project, that we were 20 years ago in terms of trying to remove some of these barriers – the zoning, the thoroughfare designs, push back from communities. So, we need to figure out a way to continue to make progress as more and more households either choose to rent or need to rent. I think we do need to figure out how to deliver a broader range of choices in rental housing. And like our Prairie Queen neighborhood in the Omaha Metro, I think it’s showing there is a strong demand for a more sophisticated renter that’s looking for a neighborhood, high quality living in a neighborhood, not just a multifamily project that’s clustering housing together. And I think that’s partly why the single family home rental market has taken off so broadly. And I think the primary reason is that renters aren’t being given a choice other than the conventional multifamily …

Eve: [00:32:06] Yeh.

Daniel: [00:32:06] … or sort of the urban product type. And I think that missing middle can slip in there and provide a type of living that they’re looking for. On the for sale side, I think we just need to figure out a way to deliver smaller scale condominium choices at this missing middle scale, and that fourplex, you know, eightplex, even cottage court scale, both in terms of financing, in terms of zoning, in terms of households getting mortgages. So, I think those are the things that I often, …

Eve: [00:32:36] Yeh.

Daniel: [00:32:36] … you know, reinforce as real needs out there to really respond to this, the growing need.

Eve: [00:32:42] Yes, yeah. Well, I hope I get to visit the car-free Culdesac project sometime soon. That would be a highlight for me.

Daniel: [00:32:50] Yeah.

Eve: [00:32:51] Sounds fabulous. And I can’t wait to hear what’s next for you. So, thank you very, very much for joining me.

Daniel: [00:32:58] Thank you. I’ve really enjoyed this conversation and I look forward to future conversations.

Eve: [00:33:23] That was Daniel Parolek. He’s taught us all about the missing middle, broadly defined as housing in between single-family detached and large apartment complexes. We’re talking about multiunit housing types such as duplexes and fourplexes, bungalow courts and mansion apartments, all of which were typically mixed in with single-family homes in pre-war city neighborhoods. Post-War developments, by contrast, focused on single-family zoning, driven by the growth of the suburbs and many cities ended up restricting the building of new multiunit structures. So, Daniel is a strong advocate for zoning reform to bring back that missing middle.

Eve: [00:34:19] You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today. And thank you, Daniel, for sharing your thoughts. We’ll talk again soon. But for now, this is Eve Picker, signing off to go make some change.

Image courtesy of Daniel Parolek

Urban economics.

Simply put, urban economics is the study of buildings and cities and why they develop the way they do. Urban economics help us to determine why certain places are so much more vital than others through the exploration of land-use, zoning, employment patterns, and the price of land.

Over the last century cities have experienced massive change. With the arrival of the automobile our cities transformed from the once walkable urban areas they were into soulless, car-centric cities surrounded by outlying suburbs. By the 1980s most of the real estate investment and development energy had shifted to business parks, malls and sub-divisions.

But now we’re back to wondering whether cars should be part of the equation. Cities and cars are an expensive mismatch and we can see that cars waste space. Several American cities are even considering demolishing highways to reclaim precious land.

One of the more recent additions to the toolbox for the urban economist is the measurement of walkability. Walkable neighborhoods are once again seeing a renaissance. They not only offer residents more convenience and character, but also a more active and environmentally friendly lifestyle. And we’re also discovering that walk scores can have serious economic consequences. Redfin, owners of the go-to application for measuring walkability Walk Score®, say that one Walk Score point can increase the value of a home by an average of $3,250. Hence an increasing number of new developments are being planned as mixed-use communities where residents can walk to all the amenities they need.

Christopher Leinberger’s fascination with cities started at an early age and evolved into an astounding career working on urban land issues as a strategist, teacher, developer, researcher and author. He was a member of the original board of Walk Score and continues to use the tool in his research at The Brookings Institute and George Washington University. With his latest endeavour, Places Platform, he’s building a “Sim City for real estate and place management and city management” by developing more tools and methodologies to measure economic, social equity and environmental conditions in cities and metropolitan areas.

If you’re a city lover, like I am, listen to my interview with Christopher Leinberger

Image courtesy of John D Norton

Learn some more …