Ah, a picket fence, a shingled roof, and green grass. The fundamental image of the American Dream, right? Freedom of Opportunity at its finest. It is interesting in today’s world, for something deemed so relevant it is so far removed from us. Think about it, when is the last time anyone built their own home? We buy from a line of pre-assembled models, all of which were developed in mass, and sold at an increasing higher margin. What gives? If housing is the ultimate expression of hard work, then why is it so damn hard to afford, even when I bust my ass. If you want to get nit picky on construction techniques, which I gladly will, can we say that there have been any radical changes in how we build homes since balloon framing was invested in the 1830’s. Sure we have gotten rid of asbestos and the 70’s era wood paneling (thank god!!), but has enough really changed to constitute the rise in prices? Housing cost, similar to healthcare and education, is on the rise. If the economy is so good, why is it so hard to find a decent place to live and have a little money left over for retirement and socializing? I could spend a few thousand words on all the contributing factors, which for real estate there are many. But hone our focus shall we on development. When we look at how housing is built, it becomes evident it is as much about the real estate process as it is building a home.
Finishing a recent book by Samuel Stein, Capital City, Gentrification and the Real Estate State, some startling things come to the forefront. There is a tug of war being played between the planner and the capitalist as it pertains to building cities. Property development is a long, multi-discipline orchestra of players, all pursuing an end goal of producing a built commodity. When one looks at a development model a realization comes to mind, there is a large gap between the investor and the eventual inhabitants, and a culmination of steps and assumptions built into the process. This process can take a lengthy period of time and is built upon completing an economic equation to repay investments. As a designer in my previous career, my role kicked into play at the middle of this process, with a lot of the design elements already determined by this economic equation. When finished, the results portray a familiar look. Blocky buildings wrapped in a plethora of colors or elements to bring some expression to a stale facade. There are variations in material and scale as one travels, but the essential elements are the same. Space built as cheap as possible to sell for the highest cost and programmed for one function, to recoup investments. Real estate in essence has become about creating and growing value, the building is merely just the vessel to do it. Housing, contributes a large part of this value as a report from Leilani Farha of the United Nations, reveals.
"Housing and commercial real estate have become the “commodity of choice” for corporate finance and the pace at which financial corporations and funds are taking over housing and real estate in many cities is staggering. The value of global real estate is about US$ 217 trillion, nearly 60 percent of the value of all global assets, with residential real estate comprising 75 per cent of the total." [1]
With housing contributing such a huge chunk of the investment portfolio what incentive if any is there to change habits as a developer? Given it takes capital to build any of these projects, are these results the fault of any one player in the development process? "Is it wrong for investors to finance developments for rich people since the rich are financing it?" A statement I have heard from some developers. An innocent enough thought but, when we look at the tax incentives given in the form of Tax Incremental Financing (TIF) or Payment in lieu of Taxes (PILOT), that shift risk from the private sector to the public sector (us), then how true is this statement? We essentially are paying to shift risk so higher profits can be made and allowing the city to lose additional tax revenue for higher property values. A very recent example happens to be in our backyard with the construction of the Rangers Stadium posed to cost taxpayers over $1.6 billion over 30 years. Even by generating revenue with the naming rights, estimated at about $300 million over 30 years, the City of Arlington will still be in the red.
What about family owned land? We have a right to build generational wealth by holding and selling land for a profit right? Again an innocent enough thought, but when we look at the shift in land ownership, 37% of home sales were made to absentee investors with most of them being banks, hedge funds, and private equity firms like Blackstone, who is now the world’s largest landlord. [5] Additionally with private land owners like Ted Turner, who owns approximately 2 million acres of land between 9 states and 2 countries it is safe to say land could very well become an extremely rare commodity in the hand a few wealthy individuals and businesses.
So why do we allow this? Planning and public policy it seems plays a part in raising land value. Influenced by capitalistic tendency and some of the governing boards that oversee them, planners can encouraging certain conditions by using zoning and other abrasive tactics. Historically in the United States we can see how zoning and development have been used to draw clear lines of intention. Examples like the Standard City Planning Enabling Act (SCPEA) and the Standard State Zoning Enabling Act (SSZEA), allowed for discriminatory zoning based on race. [2] An example in Modesto, California in 1885 banished warehouses and public laundries mostly operated by Chinese immigrants to keep them from entering the city. [4] These same practices were also used in New York in 1916 to zone out manufacturing in an attempt to keep Jewish garment workers off the street and away from high end retail customers off Fifth Avenue [3]. However probably the most known is the role the Home Owners Loan Corporation played in limiting communities of color in being able to qualify in loans. An online map published by Richmond University showcases a collection of red-line maps used to categorize communities. Blue, often reserved for white families represented safe and non risky, while red, reserved for primarily for communities of color represented high risk. Not only did this inhibit non-white citizens from being able to purchase homes, it killed development opportunity in these communities. Similar in 1975, New York planners, influenced by studies performed by the RAND Corporation, developed harsh tactics to deny services to poor people of color to encourage them to exit the city. [3]
It is troublesome that the metric for success for most developments is often the price per square foot. Often fueling displacement and gentrification, luxury development and the planning tools used to encourage it can cause more damage than benefit. Communities are forced out to secure higher values and the result product, at least for Fort Worth, becomes a commodity not affordable for the locals. It seems like an alternative narrative of trickledown economics. Build an expensive development and good the wealth will be eventually trickle down to everyone. Yet, living in through this over the past 15 years, it begs the question, when does the wealth reach me? If anything, the only constant is the price to live is getting more expensive. It would seem our cities are being packaged and build as luxury items, all to be sold to the highest bidder.
With wages plateauing, even those with full time jobs simply cannot afford stable housing. Coupled with punitive legislation scripted against the poor, roughly 2 million people nationwide suffer from homelessness and an additional 7 million live with housing insecurity [6]. Even with a good job earning enough to purchase a home and have residual capital for retirement and contingency, especially for a single person in my shoes looking for a small urban condo, is becoming increasingly difficult. If we look at United Way of Tarrant County’s Community Assessment, particularly at the median incomes of Fort Worth compared to the average cost of living, there is room for improvement. This wage gap limits any potential for an individual to engage in development, at least as an investor, and seeing how communities of color are most affected by this gap, the separation from opportunity becomes even greater. Even with private crowdfunding platforms, particularly 506(c), require an annual income of $200,000 or $300,000 if joint. [7] Looking at datausa.io, the percentage of families in this bracket is only 2.35%.
With the increased mentality of housing as in investment, the temptation to seek our own profit is always lurking. The development process will be geared to build higher value bringing with it a chain of additional gains that eventually price out the local buyer. Where does it stop? What constitutes healthy capitalism and how do we ensure our cities are designed for its inhabitants? With homelessness an growing issue, particularly for youth here locally, what are the options to ensure housing? Furthermore, this raises a key question. Is housing a fundamental right or something to be earned? Is it possible to create a better process and put capital and opportunity back into hands of the public?
Its essential we build our own table and break some eggs on this current development process. There have been some interesting innovations through Wiki House and Habx to bring new perspectives to the mix utilizing crowd-sourcing to alter the development process. Globally, community land trust have been experimented with varies levels of success to help provide stable land prices to communities, mitigating the effects of gentrification, and allowing the community to have higher stakes in determining future development. Our first step will be conducting an experiment to dive deeper into this issue and see what radical new solutions we can discover both in design and in the development process. Looking at the future of our built environment we aim to ensure some form equity, affordability, and beauty in a new process that works for the American wage. I’ll be frank is saying I am not entirely sure where this will take us, but if anything the journey will be a rewarding one.
Works Sited:
[1] Farha, Leilani. "Report on the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, and on the right o non-discrimination in this context." United Nations Human Rights Council, January 18,2017.
[2] Whitnall, Gordon. History of Zoning. The Annals of the American Academy of Political and Social Science. May 1931
[3] Stein, Samuel. Capital City Gentrification and the Real Estate State. Verso, 2019
[4] Scott, Mel. America City Planning Since 1890. University of California Press, 1971
[5] Clark, Patrick. “Landlords are taking over the US housing market.” Bloomberg, February 23,2017
[6] Gee, Alestair, Liz Barney and Julia O’Mailey. “Outside in America: How America counts its homeless – and why so many are overlooked” The Guardian, January 16, 2017
[7] Kaufman, Adam. “Intro into Real Estate Crowdfunding: Not All Models Are Created Equal”, August 13, 2018
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