Design your life to include more money, health and happiness with less stuff, space and energy.

Design your life to include more money, health and happiness with less stuff, space and energy.

A Case for Bringing Innovation to the Housing Market

In Manhattan, the average cost of a studio apartment is $2,418 (non doorman). In San Francisco, it’s $2650. Crazy as it sounds, you might not have the privilege of paying those sums as both cities have low single digit vacancy rates. Other major cities like Boston and DC have similarly high rents and low inventory. And while some of this expense is offset by higher per capita incomes, many find themselves unable to afford housing. A study by NYU’s Furman Center found that 50% of New Yorkers were “cost-burdened” by their rent, paying more than 30% of their income on housing; 60% of that segment (600K people) were “extremely cost burdened,” forking over more than 50%. So it’s not a stretch to say that housing is a big problem in many major cities (we’ll save the suburbs for another day). In fact, it’s one of the most far reaching problems you could think of, striking at one of our most fundamental needs. It’s a problem that, theoretically speaking, deserves more attention than an app for ordering dog food on your smartphone. Yet, if we are to believe Jon Dishotsky essay on Medium, the app is going to get a disproportionate percentage of the world’s brainpower and creative thinking.

The reason for this disparity of intellectual resources, Dishotsky convincingly contends, is simple economics: with relatively little money, a tech developer is able to create a product in a short amount of time. In fact, using the minimum value product (MVP) model, the product doesn’t even need to be fully fleshed out in order to be sold. Release the product, get customer feedback, improve on the fly. It’s a model that favors innovation through experimentation because errors and design flaws can be corrected while bringing in revenue.

Real estate development is a whole other story. Dishotsky writes, “In order to experiment with new ways of building housing you would have to…build housing.” And building houses is a resource intensive affair, one that favors getting things right the first time.

To illustrate the dilemma, let’s say you’re a hotshot thinker, contemplating making your mark–and fortune–in tech or housing. You weigh the two industries. With tech, you raise a reasonable amount of money, create a product that should work and serve a need (even if that need isn’t particularly important), but you don’t have to worry, because you can always change and improve that idea over time. Or you could go into housing (development, architecture, services, etc), where you must raise a ton of money, face innumerable engineering, labor and bureaucratic roadblocks, where you must be sure that you have a marketable, inhabitable, code-compliant structure, because you cannot change your product after the fact. And once you’ve surmounted these innumerable roadblocks, you might have built something that a handful of people can call home–you’ve satisfied an important need for a very small constituency with lots of costs and risks. Considering these alternatives, the smart money’s on tech.

In order to make housing more attractive, Dishotsky suggests, we must “find ways to acquire land cheaply, build cheaply, limit soft costs and increase the speed at which healthy buildings get approved”–a suggestion we would tend to agree with, as most innovative housing never sees the light of day because of economic and bureaucratic barriers. This is why we often look at the margins: in Portland OR or Providence RI or Walsenburg CO–places that aren’t besieged by insane property values, places whose ebbing fortunes make them more receptive to trying out new ideas.

The person who turned us onto Dishotsky’s article was Jeff Wilson, aka Professor Dumpster and the man behind Kasita prefab, plug-and-play housing. He and many others we cover here testify that there’s not a complete void of intellect and resources devoted to innovative housing. But for many of these players, it’s still an uphill battle: fighting development, financial and government institutions that favor market tested models over actual market needs and smart design.

So you might be asking, what can I do? Well, you can buy or rent innovative housing if it exists in your area. Create demand. You can write letters to your congressperson, petitioning for regulation reform that might be more hospitable for innovative types of housing. You can encourage your children to go into real estate development with an eye on innovative design. You can change your Facebook picture to a Nakagin Capsule. We’re not entirely sure, really. All we want to say is making housing that works–functionally, financially, environmentally–is one of the most important things we can do and it deserves our attention.

  • Or… just don’t live somewhere so expensive. It comes off as very elitist when people complain how expensive it is to live in one of the most expensive cities in the world.

    It seems that every absurdly expensive real estate area is also a highly regulated area. Houston has basically no zoning regulations, and it’s quite affordable. I know, I know. Everyone has to commute there. Well, your choice. Commute or pay absurdly high living costs.

    • Jill Joiner

      Personally I feel that is an oversimplification. You go where the jobs are in your industry. Also if you move into a what may now be a smaller area you may not find jobs in said field. Furthermore that nice small town may eventually become larger more sprawled etc as what you just left due to people saying hey it’s cheaper to live here than there. Having lived in 18 states in 21yrs I have seen it. Also saw it in my hometown. When I left home as an adult my hometown had a pop of about ten thousand. Now it is 120,000. For the record I am 40 to give you an idea of how quick it can happen.

      • That’s true to some extent, but the vast majority of industries have jobs available outside of NY, SF, and LA.

        Basically, don’t move to one of these cities and then complain that the cost of living is too high. You should have done that research before you accepted the job.

        As for population and price increases, that’s a great opportunity to buy property and pocket the profit. If you’re not around long very long, it’s very easy to turn a home over to a rental management company and get checks in the mail every month. This is what I do, and I’m able to do it because I live in an affordable but fast-growing city (Durham, NC).

  • Michael McMahon

    As a web developer who is interested in moving into the small housing building space, I can relate firsthand to the challenge you’ve outlined here. Am thinking about starting with my own tiny place and working from there.

    One small point/correction, MVP = Minimum Viable Product.

  • alarswilson

    +1 for boring things like zoning, the bane of much innovation.

  • Nicholas Reynolds

    INNOVATION IN THE HOUSING MARKET

    When was the last time you flew in a wooden aeroplane?

    Thanks LifeEdited for the article, a great read and something we have been working on for the past 12 months.

    As an Australian living in Seattle, I was amazed to find that most Americans on the West Coast are content to build and live in wood frame buildings. Whether apartments, hotels or affordable housing projects, wood frame construction up to five levels is still the only game in town. If only they knew there was another way.

    OneBuild is based in the same city that makes the world’s best aircraft (sorry Airbus!). How is it that Boeing can have a forward order book of thousands of aircraft worth billions of dollars when across the road carpenters are still at it with hammer and saw? True, most now use an electric saw and nail gun, but essentially the same construction
    technologies from 150 years ago are still in use today.

    And guess what, none of the Boeing planes are made of wood!

    How can this same innovation be brought to the construction side of the affordable housing equation; to reduce cost and waste and improve quality and speed to market?

    We have all heard the benefits of modular construction, but in America for many reasons it has largely not lived up to its promise. However, around the globe, from Australia to Singapore to Shanghai to London and Europe, there have been enormous strides made in the delivery of exceptional modular buildings and new and exciting materials and technologies.

    Why has America not moved forward with modular building? One reason on the West Coast is because of the established wood frame industry; even wood frame modular here is just traditional wood frame building, indoors. There has been no real innovation. We believe the time is right to disrupt the status quo with new technologies, materials and systems.

    To use the software start-up analogy; for the past 12 months OneBuild has been quietly “writing code” to develop a new paradigm in steel framed modular construction that will meet USA building code and compliance. We have been consulting with State and City building officials; with structural, plumbing, electrical and mechanical engineers; with logistics companies and the Federal Customs department; with onsite construction teams, developers, end-users and investors. But most importantly, with offsite prefabrication and manufacturing companies offshore, working together to
    deliver to the USA the same modular efficiencies that other countries have embraced.

    OneBuild are now at the prototype stage, and developing, designing, fabricating, importing and constructing a 49 apartment building project near Seattle. We believe that it is possible to break the traditional wood frame construction model and provide cost and time savings that will enable more affordable buildings. True modular efficiencies will include the ability to replicate in scale and quality basic building elements. We will not need to reinvent a project from scratch every time, standard engineering, construction documentation and approvals will be reused and reconfigured to meet specific site constraints.

    Sure, some say modular means repetitive and boring, but with an estimated 500,000+ apartments required every year by the end of the decade, we know they will not be all bespoke residences. Good modular design can be delivered when rigorous thinking is applied in conjunction with modular construction systems.

    If a small start-up company like OneBuild can get this far, imagine what could be achieved with the scale of investment that has created the likes of Boeing, Tesla or SpaceX; our goal is to create real disruptive technology in the construction industry and we invite others to join us on our quest.

    • David Friedlander

      thanks nicholas for reading. i’m pretty familiar with onebuild. sounds like you have some great stuff happening. would love to hear more some time. drop me a line at david @ lifeedited dot com.