What's Driving Apartment Construction - Good News or 2007 Redux?

Yesterday, Kaid Benfield posted a great stat-filled blog entry on housing forecasts, which lines up with the “perfect storm for rental” storyline I heard at CNU20 last week.  I chatted up developers who confirmed the story, but added one REALLY worrisome trend (scroll down to #7 for the punchline).

The perfect storm, summed up, is:

1. Not much stock – the building boom pre-2007 focused on single family units.
2. It’s old stock -  Renters have the luxury of seeking out new.  One developer’s observation is that older stock is less wired and gadget people need outlets.  Lots of them.
3. Demographics - As reinforced by data, the Boomer + Millennial cohorts are large, like urban living, and see renting as an advantage at this stage in their lives.  Again, I will turn you to another one of Kaid’s posts on evolving markets, which is filled with other great references.   
4. Don't want to commit to a house –Renting lets people take a trial run at a region, neighborhood, or even a building.  This is key for the quiet-loving, suburban empty nesters who are moving to more urban areas.
5. Rents going up – This has caught the eye of investors.
6. Costs are low – One developer said contractors in his region are doing work at cost or slightly higher (though this can’t last much longer).
7. Can't get financing for anything else –For any other product, banks are requiring demonstration of up to a 70% commitment for inking a finance deal, such as pre-sales for condos and signed retail/office tenants.  You can’t require this kind of commitment from apartments because people don’t really go apartment shopping until a month or so before move-in.   

On the one hand, multi-family dwelling enthusiasts see this as sweet irony.  Apartment housing seemed to be the forgotten stepchild of the building boom, despite its important role in better housing/transportation/economic patterns.   The fact that financing is finally meeting demand just feels good.  On the other hand:

• The storm is dying down as rents are increasing to tip the “rent versus buying-a-house”balance. 
• There is no guarantee that the apartments being financed are in the "right" place.  A Walkscore analysis would be fun.
• Question: Is Wall Street being driven by fundamentals, or has the pendulum for up-front commitment swung SO far that money is chasing the one product that can justify not having commitments?
• One developer had to disassemble his vertically mixed use site plan and plant an apartment building at the high traffic corner just to get started.  Whether this will dilute the smart growth performance of the site plan is a question.  However, most of us in planning know that in walkable communities, increasing distance and separating uses by even a small amount makes a big difference.
• We still need to solve the HUD/Fannie/Freddie restrictions on commercial components for mixed use.  One developer purposely designed a first floor to LOOK like units in order to get financing, but which could be converted later.  The Fannie Mae caps draw the most ire, and are particularly painful here in the land of three-story smart growth.  The taller your apartment building, the less these numbers have to matter, since the residential component on upper floors dilutes out the commercial contribution of dollars and floor area. But, important new buildings like this one in Sarasota have the roughest time.

• See this CNU website for more on this chart.

This brings us to the billion-dollar question: once the apartment construction markets are saturated - what's next?  Batten down the hatches. 

@CNU20, @Kaid, @CNU

Video Series on Platinum Commercial up the Road

 Let's get this over with.  I know there are environmental friends who might feel that any investment on the coast is foolhardy - and irresponsible.  I do not agree. 

While I generally agree that it's time to pull back, I also think that beaches are special places and the more people cycle through them, the better the shared sense of value for natural places.  We don't know when the "big one" is coming, whether its horizontal (surge) or vertical (sea level rise).  So we may as well make best use of those community places where there are lots of rentals and hotels.   Anna Maria Island is one of those places. 

The owners of a small commercial area went all out with green with a first of its kind LEED platinum commercial area and net zero buildings.  The use of geothermal is particularly intriguing to me.  I've embedded video on the series:

1) Introduction

2) Historic Preservation

3) Sustainable Development

4)  Moving and Retrofitting a Sears Cottage

5) Sharing Power (Geothermal, solar)

6) More on Geothermal

Open Source at Congress for the New Urbanism - the Planning Edge

Here is a poster for the new project called the planning edge.  I'll be hosting open sessions for 3 days getting ideas on how to better address the edge where new development meets the neighborhood.  It's where the most anxiety lies with residents and frankly where the larger share of impacts can happen if not well examined, addressed and maintained.

However, through great up-front design, good policies, and a commitment to maintaining good features over the long haul, we can make sure the new development is a great neighbor.  And if I sound confident, it's because I was one of those anxious neighbors who saw a big project become one of the best examples of how to bring new density alongside established neighborhoods. It also became a neighborhood where families like mine can no longer afford to live next to great new places. 

Sarasota’s Most Compelling Public Art: A Salvaged Chalkboard

It’s been quite a couple of weeks in public art here in this formerly sleepy arts colony.  First, a driver careened into a bayfront statue named “Unconditional Surrender.”  Loved and reviled, the damaged statue of the famous sailor/nurse kiss celebrating the end of WWII was lowered to the ground last week by a crane, sending the damaged sailor from a vertical kiss to a horizontal grope.   

The bigger news, though, is a new mural, which replaced a controversial old one.  The sequence of events:

1. A mural called “Fast Life” was painted on the side of a prominent building.   The mural’s name comes from the eight letters  painted on a would-be gangsta’s knuckles.
2. Fast Life gains immediate notoriety, with pushback from this historically African American (and crime besieged) neighborhood.  The mural seemed like a recruiting tool glorifying gang life. Perhaps more galling to the neighborhood was the fact there was no outreach in the first place. 
3. Earlier this month, Fast Life was painted over by the building owner, who was sick of the vitriol.
4. Last week, a new mural by same temperamental French artist appeared on the side of Sarasota Architectural Salvage.  This mural contains all sorts of imagery mocking removal of Fast Life, with stinging, but less controversial content.

Here is where #5 gets interesting.  The owner of Sarasota Salvage, Jesse White, at first expressed apprehension about the pointed painting, but then did something unexpected: he put a chalkboard at street level to solicit opinions from the people.  

This marks a new direction for public arts talk here in Sarasota.  While we all love spirited public debate, all too often, art talk is uncomfortable for the wrong reasons.   Arts, which is supposed to tap the talents of the many, is perceived (right or wrong) to be a possession of a few.  The chalkboard may or may not attract that many comments, but all of a sudden, it is part of a mural, that is part of a neighborhood, that is part of our collective artistic heritage.  We are MTO (whether he likes it or not). 

This is not the only way chalk has become a transformation in communities.  In Charlottesville, Virginia, the popular pedestrian mall is home to the First Amendment Wall. 

In New Orleans, a large project called “Before I Die” hit town, combining the ultimate morbid thought with aspiration and inspiration.     

What Jesse White did was something Sarasota needed: he shifted the way we look at things from problem to asset.  The mural seems to still be a work in progress and there are all sorts of ways this may not become the transformational piece we need it to be.  But that’s our job.   

Congress for the New Urbanism - Green Cities & Water

On Saturday, the CNU group Rainwater in Context will be doing "speed presentations."  You may be wondering why we aren't calling it Pecha Kucha, and we aren't because the session is not sanctioned by the National Association of Pecha Kucha or whatever.  But come on over.  My 20 slides will be be a review of where urban+stormwater design is on the innovation curve and what we need to think about.  It will be a hoot.