We've all looked at a property or lot in our community and thought to ourselves: 'If only somebody would do something with that.' Well, perhaps that somebody is you!
Many developers are still struggling to adjust to the growing market demand for walkable urbanism and the demographic changes driving that demand. Furthermore, developers and city planners are mostly focused on single family homes, and mid-high rise apartments and condos.
Missing Middle Housing
There's a missing middle portion of the market that is not being served. These are duplexes, triplexes, smaller apartment buildings (4-10 units), row houses, and live/work buildings. Their scale and design attributes make them a perfect way to transition from the larger buildings typical in a downtown setting to single family homes. Dan Parolek with Opticos Design does a good job of explaining missing middle housing on this Strong Towns podcast:
But who's going to build this missing middle housing? The larger developers have yet to show much interest in this sector. That provides an opening for local entrepreneurs who want to earn some money while investing in their community.
We talk a lot at Strong Towns about the importance of making small and incremental investments in our neighborhoods and communities versus large and risky bets. Small scale developers incrementally developing missing middle housing is a great example.
Better still, there are resources out there to help those of us who want to fill the void and invest in our communities. I had the great pleasure last week of attending a Small Scale Developer Bootcamp in Atlanta put on by Jim Kumon and John Anderson with the Incremental Development Alliance.
I was first introduced to the notion of small scale development at the Strong Towns National Gathering in 2014. Strong Towns member and developer, Monte Anderson, gave a presentation on the small, incremental projects he has worked on in his community of Duncanville, a suburb of Dallas. These projects have helped revive Duncanville's downtown while providing opportunities for local businesses.
At the Congress for New Urbanism in Dallas this past May, John and Monte Anderson (no relation) did presentations and workshops on small scale development. They implored architects, planners, and citizen activists to consider becoming the developer. They sat down for an excellent podcast with Chuck while there:
At the bootcamp in Atlanta, we learned about the growing market for missing middle housing. The market potential is huge - there is an estimated 20-35% gap between demand and supply of walkable urban living choices. And with 75-85% of households being childless by 2025, there will be a growing demand for more housing units.
We also learned about the many mechanisms for developing missing middle housing on a small scale. John Anderson shared pro formas for various types of developments and emphasized the importance of designing the building in a way that takes advantage of financing mechanisms such as FHA's 203b program which provides financing for new construction of 4-units or less with as little as 3.5% down. We spent a lot of time learning how to craft a proposal that would be looked upon favorably by lenders and other investors in the project.
Interested in becoming a small scale developer?
There are more bootcamps in the works and resources available on the Incremental Development Alliance's website. I'd also encourage you to check out John Anderson's blog and the small scale developers group on Facebook - a lively and helpful community.