Capital
As The Prices Crisis Intensifies, Here's An Opportunity Not To Miss
In its perfect form – where perimeter identically measures its area – a triangle sets a precise scope and magnitude of challenge people in the complex community of housing investment, development, design, construction, and delivery find toughest to solve.
The triangle, one of engineering and construction's superpower geometries, shapes housing's perfect, urgent, incalculable opportunity.
In its perfect form – where perimeter identically measures its area – a triangle sets a precise scope and magnitude of challenge people in the complex community of housing investment, development, design, construction, and delivery find toughest to solve.
Our friend, Ken Semler, president and CEO of Impresa Modular, voiced, in trenchant fashion, the tight, and tightening clutch of this challenge in a LinkedIn post here.
Semler poses a question:
With today's record-high prices on all things related to home construction, are we outright removing the term affordable housing from our vocabulary going forward? Offsite construction and building systems can make home construction more efficient. But making it efficient enough to overcome material prices today is a Herculean task that even the best methods of construction will likely fail to overcome.
What do you think is going to happen with affordable housing, attainable housing, built-to-rent(BTR), and single-family for rent(SFR) going forward?
Further, a take-out special feature by Candace Taylor in the Wall Street Journal – Real-Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying’ -- adds data, geographical sweep, and poignant anecdote to Semler's point.
One in five times an existing home sells now, Taylor writes, the "buyer" is a financial services company seeking an investment return.
Home prices in the U.S. have shot up in the past year, driven by limited supply, record-low interest rates and buyer demand. Bidding wars have spread from such high-profile locations as Palm Beach, Fla., and the suburbs outside New York City to smaller cities and towns, including long-neglected locales where properties typically sat on the market for months.
Local buyers bid against one another as well as against investors who now comprise about a fifth of annual home sales nationally. Online platforms such as BiggerPockets and Fundrise make it easier for out-of-town investors to buy real estate in smaller cities across the U.S., said John Burns of California-based John Burns Real Estate Consulting.
The dilemma for stakeholders – investors, builders, developers, policy makers, distributors, manufacturers, Realtors, and, by the way, people who need and want to pay for access to decent, fair, housing – comes down to a triangle, where not only each side matches identically – equilaterally, but whose total linear measure matches its total area.
This triangle has these defining vertex points, neither of which ranks in importance or indispensability, above the other two:
- Construction
- Capital Finance
- Policy
The endgame of this perfect triangle of opportunity and challenge is equity, which by definition, means both "fair and impartial" and "ownership."
Solving for construction's vaunted and opportunity-filled cost curve – even in today's price-crazy, now-or-never environment – as often as not, creates pressure or perceived disadvantage to the other two areas that matter. Bringing costs down in isolation simply sways inequity from one part of the equity value spectrum to another.
This is why the work that Clark and Abby Ivory, Kent Colton, and the Ivory Innovation team are doing, not only to shine a light on exemplary cases of innovation's impact on housing attainability, but to elevate the need to address the challenge as a triangular endeavor, is so important and valued.
Yesterday, the Ivory Prize for Housing Affordability honored its four 2021 winners, whom you can read about here, and whom we'll spotlight on The Builder's Daily in the days ahead.
In the construction vertex, two winners took honors, Windsor, CA-based BamCore, and New York City-headquartered architecture firm Curtis + Ginsberg Architects (C+GA):
Since April 2020, “unprecedented spikes in lumber prices have added more than $24,000 to the price of the average, new single-family home, and nearly $9,000 to the price of a multifamily home,” according to the National Home builders Association. BamCore’s innovative bamboo-based framing solution has the potential to address this crippling rise in material costs, provide a more climate positive supply chain, reduce the need for skilled labor and speed up the build time by more than 50 percent, while producing a much more energy-efficient home.
Often sustainability and affordability are competitive goals for housing development. However, C+GA is pioneering new approaches to break through the budgetary barriers that previously made building energy-efficient and affordable multifamily housing difficult. C+GA has designed the largest completed Passive House affordable housing building in the United States. Their primary strategy in designing energy-efficient Passive House standards is to reduce the operational cost of buildings, in turn, maintaining affordability long after a building is built, while providing healthier buildings for residents.
In capital finance, Boston-based Homeownership With Keep by Framework took top honors:
Framework® Homeownership's Keep by Framework helps home buyers understand the process to purchase a home and how best to maintain and stay in that home for the long term. With an emphasis on first-time, first-generation potential homeowners, Keep guides users through the entire process of purchasing a home, with a keen focus on how to assist homebuyers confronting structural and persistent racial barriers, to democratize the homebuying process.
And, finally, for policy's impact on access and attainability in housing, the 2021 Ivory Prize winner is Oakland, CA-based Impact Justice / The Homecoming Project.
Thousands of Americans are not only priced out of affordable housing but are often intentionally left out of many housing options. The Homecoming Project is a program that ensures successful reentry back into communities by providing safe and stable housing and a welcoming host. Formerly incarcerated people are able to integrate more easily into the community by quick placement into stable housing right out of prison.
The point is, in answer to Ken Semler's perfectly worded quandary about whether affordability actually matters, stakeholders will do well to imagine equity – achieved only through a balance among each point of the construction, capital, and policy triangle – as the goal.
This is why the Ivory Prize is an important, transformative force factor, and a model for community-wide action toward expanding housing's box to a more inclusive universe.
