Episode Summary

  1. Are you interested in the remote worker? Consider investment into internet infrastructure. 100 years ago the United States made a massive investment into the electricity and telephone grids. It's time to do the same for internet. Not only will this benefit remote works but I'd wager there's a lot of positive side effects of this type of investment
  2. Multifamily housing construction is at an all time low. Form follows finance. And single family housing is the easiest form. Construction, selling, and owning a detached single family home is significantly easier than any other type of real estate transaction.

Remote work shifts big city problems to small towns (6 min read)

Why not condos? (4 min read)

Million dollar cities (2 links, 3 mins each)

Episode Transcript

Episode 55 - Patterns of Development

Shift, Condos, Million

This is patterns of development.

Hey everyone. I’m Kyle Gulau and on this show, patterns of development, we take less than 10 minutes each week to deconstruct what's going on in real estate, architecture, and urban planing.

We're looking for case studies, data, and peer reviewed work, to consider and and inform conversations in your community. My own personal goal is that I'll build some pattern recognition, and apply some of this experienced thinking in my own backyard.

Kicking off this week. Something old: Remote work.

You're all aware of the shift to remote work. Something new, however, is how less dense areas and small towns are looking to attract these remote workers.

An article my Mark Johanson, titled "Small cities and towns boom from remote work" published by the BBC discusses how now that we no longer need to be physically located where the work is, what's the impact on metropolitan alternatives?

The global health pandemic has been an accelerator. And for small towns what we've seen is big city problems shifting to small towns: infrastructure, crime, affordable housing.

Danya Rumore, a researcher at the University of Utah, observes that major transitions like this usually take years for markets and municipalities to adjust. Now it's happening in months.

Included the in the article by Mr. Johanson there's a couple of interesting rural areas that are adjusting and proactively looking to attract this remote worker,

"Ireland, where the rural-urban divide dominates politics, has seized the moment like nowhere else in Europe. It made a major push last March to decentralise away from Dublin with a new rural development policy that Rural and Community Development Minister Heather Humphreys said was "the most ambitious and transformational policy for rural Ireland in decades”.

The plan includes €2.7 billion (£2.3bn, $3.1bn) to roll out superfast broadband across the nation. The idea is to turn dying pubs into working hubs, giving declining villages a new lease on life. The initiative also offers millions of euros in financial support for regional authorities to turn vacant properties into a network of more than 400 remote working facilities as well as tax breaks for individuals and companies that support homeworking.

Japan (the oldest country in Asia, with a median age of 47) took a similar approach last April, offering a ¥1 million (£6,430, $8,725) incentive for workers to move to rural areas while logging on remotely for jobs based in greater Tokyo, which holds 30% of the population. The rural revitalisation plan also provides up to ¥3 million for those who set up new IT businesses in the countryside.

As people move to less dense areas this typically means that single family homes are the primary dwelling type. Regardless of urban/sub urban/rural multifamily construction has reached historic lows in the United States. According to the Urban Institute -- condo construction has reached an all time low in the United States.

I set this up to make it sound like a pandemic issue, but there has been a steady decline in condo construction since 2006. Condos are, of course, multifamily housing projects where the developer sells each unit rather than renting them out and managing the property.

According to real estate analytics company Black Knight Condos are more affordable than single family homes in most cities. So build multi family homes, have developers sell the units instead of renting them, and poof you get density and equity being created in your community.

As with everything on this podcast, it's not that simple. There are financing constraints on condo construction. There are financial constraints for the seller (lots of FHA/Fannie/Freddie complications making it harder for that first time home owner to get a loan), Condos themselves, I believe have a marketing problem. And according to Urban Wire defect litigation has been substantially increasing the cost of insurance and riskiness of a condo project.

Last up, a record 146 new U.S. cities became “million-dollar cities” in 2021, the highest number of new entrants in a single year, bringing the total to 481 cities nationwide in which the typical home value is at least $1 million. And if current rates of appreciation hold, 49 more could join the $1 million club by mid-year, according to a Zillow analysis of current and expected home values. A majority of these million dollar cities are located in California, and New York.

And with that our patterns of the week:

  1. Are you interested in the remote worker? Consider investment into internet infrastructure. 100 years ago the United States made a massive investment into the electricity and telephone grids. It's time to do the same for internet. Not only will this benefit remote works but I'd wager there's a lot of positive side effects of this type of investment
  2. Multifamily housing construction is at an all time low. Form follows finance. And single family housing is the easiest form. Construction, selling, and owning a detached single family home is significantly easier than any other type of real estate transaction.

That's all for this week.