Snout Houses with no front door.

Today I saw a lot discussion and concern about a potential housing bubble in the Facebook chatter among residential realtors.

All over the Atlanta region we continue to see rapid increases in house prices and rents. Folks are wondering how long this is going to last. Toward the end of the piece linked below, (part one in an excellent series of five from Strong Towns) there is a breakdown of housing production in Atlanta, by Eric Kronberg. I think a similar breakdown probably applies to the larger Atlanta metro.

With 50,000 people moving to the region every year we cannot keep up with that demand on the production side of the enterprise. That keeps inventories very low and prices high. Why are we so far behind on production of new housing? The biggest reason is a serious long term shortage of skilled construction labor. Remember, there was little or no work for these folks during the Great Recession. So people retired, changed their line of work, or returned to their country of origin. The shortage is not surprising. What would you do if you could not find work for five years?

With the labor shortage, productivity in residential construction gets hammered. It takes longer to get anything built if you can’t rely on your trades to show up. Construction schedules get stretched with nobody working on the site as projects compete for the scarce resource of people who can build.

Costs rise dramatically, but while lots of folks in the trades are charging more, many are making less money at the end of the day because they can’t finish the project when other trades don’t show up for weeks at a time. A plumber I know had his crew completing work on 30 houses last year, even with the pandemic. This year he says he’ll be lucky to work on 18. His overhead is the same with that reduced throughput, so he is making less money per house. -and his best plumber went to work for someone else. Let’s not bitch about the cost of construction and ignore the really low levels of productivity we should expect from the folks doing the work because there just are not enough of them to go around.

Add supply chain problems to the shortage of skilled labor and the problems of low levels of housing production are going to be with us for a while. Beyond the significant short fall in housing production, the types of housing being built are skewed to the higher end market segments.

Starter homes and Multifamily are not getting the attention needed, so the range of housing types being brought to market is impacted. As for a bubble, I think we have more immediate problems. The gap between how much a service worker is paid and how much it costs to keep a roof over their head gets worse every day. Atlanta is moving from its familiar position as a vital city with a lower than average cost of living and a great workforce, toward being a city with a high cost of living and workforce shortages. We will continue to see rapid appreciation in home prices and increases in rents because people will continue to move here in large numbers and we cannot build fast enough to provide housing for them. The construction labor shortage is going to be part of our reality for the next 5-10 years.

While folks in Atlanta can continue to speculate, betting that the price of their house is going to continue to increase rapidly for the foreseeable future, the lack of housing production outside of the high end market segments is going to cripple the regional economy and force people who cannot afford to live inside the Perimeter to endure ever longer commutes from the surrounding rural counties.

You think traffic is bad now. Force a quarter of the population to drive to cheaper housing and see what happens…. The fundamentals are out of whack and the folks with less resources and fewer opportunities are going to bear the consequences. So what can we do about that? The 5 part series from Strong Towns presents some neighborhood scale answers and some hope.

Where did all the small developers go?

Last weekend I was working on a charrette crew that included my colleague and partner, Bruce B. Tolar.  Searching through my hard drive today I came across my (improvised) remarks from when the New Urban Guild gave the 2015 Barranco Award to Bruce, the Developer/Builder of Cottage Square in Ocean Springs Mississippi.

"For those of us who knew Michael Barranco and were there for the Katrina charrettes, this is a person who really made a mark on our lives, not just because we showed up and did work together, but because his character was such that it was like playing in a pro-am: You really upped your game when playing around Michael. Very genuine. No artifice. No phoniness. He was genuinely concerned about every person he ever met, and wanted everyone’s life to be better. He decided that architecture was his way to do that.

With his passing, there is a hole in the CNU, but the New Urban Guild offers the Barranco Award to practitioners who are that kind of stand-up guy. It’s about the character with which you comport yourself. It’s about how hungry you are to learn. It’s about how much you care about your community. It’s about how much you love and encourage your fellow-citizens. With that said, I’d like to introduce you to this year’s award-winner, Bruce Tolar, through some of his work. <begin slides of Bruce's projects>

The original Katrina Cottage which by itself was great, but Bruce took it out of the total chaos and mayhem and bad financial circumstances that were pretty much an everyday deal in Ocean Springs at that time, and all along the coast. And from nothing, he created the peaceful excellence of Cottage Square, where he put the pieces together into something amazing which that community cherishes. It has even become a tourist destination. Imagine that: an interim housing solution after a hurricane has become a tourist destination!

So Bruce pulled together all the Katrina Cottages that were built as prototypes for demonstration purposes and brought them to Cottage Square. And he made something out of the pieces, just as we all try to do, which is to aggregate a great place from small incremental parts. It is a modest place, with gravel sidewalks; a place where you can operate a tiny business out of those tiny buildings. And the community that has formed there has become a real anchor to Ocean Springs. From there, Bruce launched an expansion, which was an incredibly ambitious project in a place governed by FEMA… <cough> <laughs and applause> … a terrible environment to work under, but he is doing amazing, excellent work with modest little pieces.

He reached out to nonprofits in the area; he connects with so many people; he’s been in that town forever, serving on many boards; and the idea that there was something to be done after a hurricane, and fixing civilization in general, was a natural thing for Bruce. The people love this neighborhood. The nonprofits he’s been working with have been tremendously empowered by seeing one guy’s ability to put people together and make things work. Bruce is the best design caulking gun you can imagine, pulling everything together on modest means and making things happen. So with that, I’d like to present this year’s Barranco Award to Bruce Tolar."

If you are traveling along the Gulf of Mexico between New Orleans and Mobile you should give yourself a treat and stop to walk around Cottage Square.  It is a special place built in tough circumstances by a remarkable guy.

The following is PG-13 version of a piece of an interview which was cleaned up a bit for this piece by Rob Studeville on Public Square. (thanks Rob).

Incremental Development does sound like you need a lot of capital and that there would be a lot of risk if you don't know what it is. If you didn't know what indoor plumbing is and how it works, that might also sound like a crazy risky idea. But Incremental Development is not that complicated nor that risky. The biggest barrier to entry is the initial step. What is the road map? What is the territory? It's a black box in a lot of people's minds.

Developers are held in very low-esteem.  I see that as more of a feature than a bug because if the bar is low, it's pretty easy to under-promise and over-deliver. On the spectrum of all possible developers that might arrive in your neighborhood from Mahatma Gandhi to Darth Vader,  people expect a developer to resemble Darth Vader.

A small developer just needs to be a noticeably less shitty version of Darth Vader."