Chuck Marohn 0:00

Hey everybody, this is Chuck Marohn. Welcome back to the Strong Towns Podcast. Strong Towns recently released our second of three toolkits around "Escaping the Housing Trap." The book came out in the spring of 2024, and I've been on the road pretty steadily since then, sharing stuff from the book.

One of the early bits of feedback that I got was from a great mayor in Massachusetts. She said to me, "I read the book, I've listened to the presentation, I'm all in. Where do we get started?" And I'm like, "Well, everything you need is in the book and in the presentation." But she's like, "No, no. I need the first step. Like, where do I get started? What are the things that I need to tell our staff or team to do? Break it down for me."

This is a very earnest person trying to do good work, working really hard, very smart. So inspired by that, I was like, "All right, how can we break this down a little bit more?" So we took the three pillars of action, let's say, from "Escaping the Housing Trap." The idea that we need to reform our local regulations and codes, that we need to build an ecosystem of incremental developers in our community, and that we need to localize the finance of these entry-level units. We took those and we broke them down into toolkits.

The first toolkit was on regulatory reform. It's called "The Housing-Ready City." It came out last spring. For those of you that were here as part of that, or got part of that, it's very exciting because lots of cities have stepped up since then and said, "Yep, we're going to check these six things off, and we want to be on your map, and we're a Housing-Ready City." We've got dozens of them on there now. If you go to strongtowns.org/housingready, you can see that map of all the places that have signed up to make these reforms. It's really exciting.

The second toolkit just came out in early October, and in that one, we're trying to help, in a sense, change the way we change the culture at City Hall so that we become supportive of the ecosystem of developers that we need to build these entry-level units. As part of the rollout of this, we wanted to schedule a session with elected and appointed officials, the people who are leading their communities and leading this change, and walk through this toolkit with them. We did it in a way where we left a lot of time for questions at the end because we know these are people who are in the trenches making tough decisions, having to lead their communities in ways that are really challenging through this complex issue of housing and housing reform. They're getting bombarded with advocacy messages. They're getting bombarded with NIMBY messages. They're getting bombarded with reactions. We have a deep amount of respect for people who are doing this work, and we wanted to not just give them a toolkit—here's how your culture needs to change—but actually talk to them about the nuances of this. Both because I think we have a lot that we can share, but also because we have a lot we can learn.

We ran out of time, and there was not enough time to answer every question that came up. So I said, "Hey, let's get a list of the questions, and I will go through them and answer them in a podcast, and then we'll release them." So I have a list of questions. The first two were comments, and then there's 18 more in total, so 16 questions. I have not read them, so we're going to be reading them here live with you, and we'll answer them at the same time. I'm going to try to get through this in less than an hour because I got to go to the dentist. So hang on.

Question 1:

The first question: "Beyond parking minimums, what other transportation levers do cities have to affect housing development?"

Well, it's interesting because there's a lot of money in transportation. So what we tend to do—and we don't just do this in housing, we do this in everything—we tend to define all of our problems as transportation problems. We want jobs? Oh, that's a transportation project. Do we want economic growth and development? That's a transportation project. We want housing? That's a transportation project. We tend to see every problem as a transportation problem because transportation is a big funding hammer that we can pound problems with. So I'm guessing that's not exactly the frame that this was asked in, but it's certainly the backdrop to it.

At the end of the day, the biggest thing that we can do to support housing at the local level is to change our stroads into streets and to make our stroad-streets more street-like. Make them more walkable, slow down traffic, make it easier to cross the street, make them more respecting of the neighborhood as opposed to deferring to through traffic. The more we can make our places into places, the more they can thicken up and the more they can add and accommodate housing—and not just housing in terms of number of units, but housing in terms of a lifestyle. Be able to add commercial units so you can walk places and bike places and live in a neighborhood and only have to have one car, or actually, in some places, have no car. These are all things that make it easier for people to live and would add housing units.

I don't think that there is a big transformative transportation investment we can make. I know people like to talk about transit-oriented development. "Hey, if we build transit, we can get a lot of housing." Okay, maybe there are cities where that is still true. But the reality is we have overbuilt our transit systems beyond our ability to maintain them as well. If you travel them—and I've been to most parts of the country and ridden on lots and lots of transit systems—if we just spent the next three decades developing the land around our transit stops to the intensity that would be needed to sustain them, that's a heck of a lot of housing right there. So to me, we've over-indexed transportation investments, and we have under-indexed everything else that is needed. So I would not think of this in terms of transportation.

Question 2:

Second question: "What can be done in high-cost cities and towns where existing housing and property are very high-priced, even for development or conversion of single-family homes to duplexes or triplexes? We have very low vacancy rates, pushing up rents."

This is the question. What do we do with high-cost cities? I think I understand what is meant here. Let's be real with each other for a second. Every city is a high-cost city right now in the U.S. in terms of what is affordable. I live in a city where the median house is way lower than what it would be, say, in Minneapolis, two and a half hours away, but the median wage is even lower. So nothing here is affordable for the median family either. But I think what we're talking about here are the big, high-growth cities.

Let me say two things about the high-cost cities—the San Franciscos and New Yorks and Austins and Chicagos and what have you—because I do think that these places are in many ways different than the rest of the country. I've had it argued that we could build double the number of housing units, and people would still flock to these places because there's such demand to be here. That may, in fact, be true. I get it. There's no limit to the demand. If you build entry-level homes, people just fill them at high prices. This is a massive supply shortage that can never actually be filled. Okay, maybe New York could be 20 million people. I get it, and I get that argument.

When I visit these places—when I'm going to D.C. next week, when I'm in D.C. and people complain about the height limits and it's stifling housing and we've got all these things—and then I get on the Metro and I go out two stops, and I get to a stop and I get off and there's a strip mall and a neighborhood of single-family homes. I get the same thing in San Francisco. I get the same thing to a lesser degree, a much lesser degree in New York, but still some degree in New York. I don't understand the dynamics that keeps that in place. You literally have the most expensive real estate in North America connected to by a rail stop—high-quality transit service. How do those houses stay at such a low rate of investment? There has to be massive upward pressure. The land value itself is so valuable it can't support what's actually on it. What's actually on it is way, way, way depressed.

So to me, the low-hanging fruit in a lot of these cities—yes, it's probably regulatory. I'm sure there's regulatory things that can change about these places. But to me, there's another layer of complexity. There's another layer of dysfunction that's in place that is freezing these neighborhoods beyond the NIMBY resistance to change and beyond the bureaucratic zoning of properties. I'm not positive that I completely understand it, and I'm not going to say that I know exactly how to fix it. That being said, we do see all over the place where the regulations are changed and nothing changes on the ground. So ultimately, to me, if we're talking about high-cost, high-demand cities, I feel like the long-term answer is to just build a lot of really nice places.

To me, the way you get to where everybody doesn't want to live in New York City is actually make Hoboken really nice, which they've done. I think Hoboken is a great place. Make Jersey City a really nice place. Make upstate New York have a lot of nice places. There's a lot we can do in Albany and Syracuse and what have you to make these really great places to live in a way that, yes, is not Broadway and it's not the New York experience. But I mean, I even talked to New Yorkers, and they're like, "New York's no longer the New York experience."

I don't have a ready answer for San Francisco and how we fix housing prices in San Francisco, particularly when you tell me that if we double the number of units we had, they'd all be filled. Okay? I think the only way to do that, then, to solve that problem, is to make other places as nice as what people are moving to San Francisco for. I'm sure that's an unsatisfactory answer for a lot of you, but I feel like it's an honest one. I feel like all these, "Oh, if we just change the staircase ordinance, we'll get more housing built, and that will solve this." Listen, I think you can build entry-level units throughout San Francisco. I think you can build entry-level units throughout Washington D.C.'s transit-accessible areas that are underbuilt and underutilized today. I think you can do that. I think it will alleviate some of the pressure, and I think it will make opportunities for people. Do I think it will solve the housing unaffordability problem? No, because I think largely in those markets, it's the finance of it that's driving it. You got to change the financial equation, the underlying economics. If we aggregate and consolidate capital in Silicon Valley, Wall Street, and Washington D.C., those places are always going to be expensive markets. They just are. That's the other side of the coin of being the center of capital. It just is. I think we have to be honest about that.

That doesn't mean there aren't things that we should do and we should keep building. I think a lot of Strong Towns ideas have a lot of hold there. The thing that I get kind of reactionary about, perhaps, is the idea that there are policies to be made in those places—which really are the loudest places in housing advocacy today—there's policies to be made to deal with what I think is the financial flow through those places that are land-use policies, and that then those land-use policies are good for, or should be exported to, the rest of the state or the rest of the region or the rest of the country. These are weird places.

Question 3:

Next question: "Aside from streamlining zoning, what is local government's next best opportunity to facilitate incremental development in their jurisdiction?"

I feel like I answered that in the presentation, but let me restate it here for the podcast. I don't think streamlining zoning is the answer. I think that what we have is we've created a market where there is ample capital for single-family homes and kind of closely derivative products. There is a capital market for apartment buildings and five-over-ones and intense high-density condo units, but there is no capital. There is no market for entry-level units: the house with three extra bedrooms where they rent out one of them with an exterior door and a staircase, a backyard cottage, an entry-level house 400, 500, 600 square feet, something like that. There's no capital for that. There's no market for that. So they're not getting built. I think you can reform codes and regulations, and you still won't get them built.

You need to reform codes and regulations. You need to create an ecosystem—and that's the best word for it—an ecosystem of incremental developers. We need to get people who will build this stuff off the sidelines today and into the development community building these incremental units. The existing set of homebuilders will not build them. They're just not. It just doesn't work for them. It's not a game they want to play. We actually have to get a different set of developers off the sidelines. That's what the second toolkit is about.

Then we have to localize finance. We actually have to have local government be the ones that fill that gap of finance. They need to fill it without losing money and without taking risk. We can do that. We can build as many entry-level units as our market demands. That's the next thing. Those are the three things we need to do in conjunction with each other.

Question 4:

Next question: "Central Valley cities do not have robust transit within town or to employment centers out of town. We unfortunately need vehicles. For those of us who want to move the pendulum towards walkability, we are fighting the reality that we need our cars economically. How do we balance that?"

Well, the answer is to not try to solve it all at once. Make a neighborhood walkable. Make it walkable for a few people a little bit at a time, and then keep working on that. We talk a lot about incremental investments. Incremental comes from transportation as well. If we can make it easier for people to cross the streets, and we can make it easier for people to walk down the streets, and we can make it easier to build a corner store, and we can make it easier to put that accessory commercial unit in the neighborhood—getting walkability from where we're at today is an incremental step of patching things together to make it work. It's not just a matter of building sidewalks. Sidewalks don't give you walkability if you lack the other parts of walkability. It's not just a matter of building Complete Streets or that kind of thing. We actually need to do just this incremental work of patching our neighborhoods back together. You don't need transit to get started on that. In fact, I would argue that transit is a further down the line strategy.

One of the, I think, hangups we've had with regard to transit is that—again, going back to the very first question on transportation—we build transit thinking that it will trickle down to a degree of walkability. We've gotten a little bit better in the last decade or so of focusing on the stations that we're building and the transit stops that we're building and the walkability around them, but we still don't do a very sophisticated job at this. We have decades of transit that's been built to parking lots and other places where you can't really even walk to it very well.

My argument has always been, and I think it's more important today than ever, that if we want to support transit, the first step is to actually build a walkable neighborhood, a place where you can actually be outside of a car. That doesn't mean 100% car-free. It might mean that I own two cars. I actually own three cars. My kids—I have a car for my kids. It's in storage now because they're at college. But I own two cars. I drive my car to the airport to go places, but when I'm home, I rarely, rarely drive. I drove today because I have to go to the other side of town for a dentist appointment, but I don't usually drive. My car sits in the alley. That's a really good outcome for my neighborhood. I can get places by foot. I can walk around. Someone in my position with a little bit less cash and a spouse with a little bit more flexible job could go down to one car. In fact, when the kids started to drive, we only had two cars, and sometimes they would take mine because I don't really need it most days.

I think when we're thinking about walkability, we need to think about it in terms of a scale. We're not going to go overnight to a fully walkable neighborhood. What we're going to do is we're going to incrementally get there, bit by bit by bit. Some of the signals that you're getting there is you're going to see more people walking and more people biking and more people move to the neighborhood and have just one car and that kind of thing over time. This is something that we can do in every single neighborhood, not just in ones that have great, robust transit, as the question said.

Question 5:

The next one starts with not a question, just a statement. Should I read it? I guess I'll read it. "We allow garage units and cottages by right in our single-family districts. Yay. However, the builders are maxing out on the lot. These are just not physically possible. Where we see this happening is in our older sections of town that developed a long time ago."

I don't know what that means when they're not physically possible. That feels a lot like the comment that I get frequently, which is, "Our city is built out," to which case I say, "What?" I don't know any city that is built out. Manhattan is not built out. There's always a next iteration of development intensity that a neighborhood can mature to. So I don't know what this means. "Builders are maxing out on the lot. It's not physically possible." I don't know if that means there's constraints on the infrastructure, or if they just feel it's too crowded on the land, or I really don't know what that means. But I suspect that what needs to happen is that you need to broaden your notion of what physically possible is. That wasn't a question, just a statement. That was maybe my statement back.

Question 6:

Next question: "Define additional examples of the small projects beyond backyard cottages, converting to duplex and triplexes. One issue I've read is the fear that owners will use a backyard cottage for STR, which is a big issue right now in cities."

STR, for those of you playing along at home, is short-term rental. So we don't want backyard cottages because we're afraid that they might turn into a short-term rental, which is a big issue right now in cities. So the question is, "Define additional examples."

I don't necessarily think there are additional examples. I mean, I gave three, and I think there are variations on this theme, but basically it's all about doing the same thing: just adding more units. So if you have a single-family home and you've got two spare bedrooms and you want to put a kitchenette in one and an exterior door and a little step up into it, that's a great rental unit. We should be doing those things all over the place. That's really, really simple to do. You can do it in a weekend. It's pretty low cost, and it adds a unit.

If you want to put in a backyard cottage, a standalone unit, something 400, 500, 600 square feet, that's a great unit. Goes in the backyard. People can access it. That's a great use of space. It's a great way to get units really, really quickly.

If you want to build a starter home, a 400, 500, 600 square foot home—I know in Muskegon, which we've talked about on this and I talked about in the presentation, up to 800, 900 square feet—these are starter homes, in a sense, and you're getting into a place that, yes, can expand over time and change and evolve over time, but you're getting in at a low price point where people can afford.

Yeah, will people use those for short-term rentals? Sure, sure. I actually don't have a lot of problem with that when they're owner-occupied short-term rentals. I think, for the most part, I think a lot of the mechanism for creating a market for these units, there's a push side and a pull side. On the one side, if you have demand for them, for people who are going to live in them, that's huge. If you are building that demand, or if you are kind of building up the chops around that market, or you've got some market instability, the idea of people being able to rent them out short-term is really helpful for bridging that gap and giving people confidence that they can do this.

I think on the other side, part of lowering the cost is creating this ecosystem. I say ecosystem—we've looked for a different word, and I really don't think there's a better word than ecosystem—an ecosystem of incremental developers, of people who are out there building this. When I say ecosystem, I don't just mean the underemployed person who has the house across the street that they want to fix up, or the teacher who's going to take their summer and work on a project, or the person pounding nails for a contractor who's like, "I can do this in my spare time and maybe make it into my full-time job." These are all incremental developers. We profiled a bunch of them in our toolkit: the type of people who does this work. They generally are doing other things with their life, and this is a side hustle or something else they're doing. Getting these people off the sidelines—the more of them that are out there doing this stuff, the more the ecosystem around them also starts to change.

If you're the only one doing this, good luck getting a plumber. Good luck getting a framer. They're all working for the big contracting units. But you get a dozen people, two dozen people doing this here and there in a neighborhood, and all of a sudden you can start to create this ecosystem of suppliers, of contractors, of subcontractors, of people doing a little bit of work here and there. If some of those units end up as short-term rentals, and that's the mechanism that you do to build this market out, I don't really think that that's an offensive thing.

Now, if you're telling me that houses are being turned into commercial properties and then short-term rentals, and we're having commercialization of the neighborhoods, there's just hotels everywhere that are getting tax breaks as short-term rentals, that's a completely different deal. But that's a regulatory issue. That's a tax and regulatory issue. It's not a land-use and building issue. It's not a reason not to build any housing units.

Question 7:

Next question: "Do you know how many cities/communities have pre-approved middle housing plan programs? Do you have a list of those places? Do you know if their legislative bodies approve those pre-approved plans?"

I feel like we're mixing a bunch of things together here. I mean, the short answer is, no, I don't know how many have it. I'm not a spreadsheet. So no, I don't know. I don't have a list, and I don't know about their legislative bodies. So maybe that's the short answer.

I do think this idea of pre-approved building plans and missing middle housing are two separate things. Pre-approved building plans are the idea that we can speed up the permitting process by saying, "This set of building plans is already approved by our building inspectors, our department. If you come in, you can skip that part, which tends to be a longer review process. You can skip that part of the review process by just taking one of these pre-approved plans off the shelf." That's a really good strategy to get stuff built more quickly and to give assurances to builders that what they want to do will get built or will get approved.

Missing middle is a completely different thing. Missing middle is this idea that we build single-family homes and we build multi-story complexes, and that there's this whole entire thing in between. I think people are doing really good work on that. That's not what "The Housing Trap" is about, per se, and it's not what our toolkits are about. Our toolkits are really about getting that entry-level housing in place so that we can change the financial markets of cities and make them more responsive, make housing a more localized, locally responsive product so it actually reflects supply and demand dynamics instead of macro finance.

Question 8:

Next question: "How does the incremental builder compete with the larger builders for the construction workforce?"

That's a really good question. I feel like I answered that in part two questions prior where I talked about building out an ecosystem. I think it's really hard at first. I think the more people that are in the game, the easier it gets. There is a certain kind of momentum that comes about when you start building these units at scale and when there's more and more people building them. The cool thing about markets is that when there's demand, people will step up to meet it. The more people that do, the more affordable prices become over time for people. So I think markets are great, and I think they can solve a lot of problems. I'm not a market maximalist, but I do think that a big part of the supply chain of housing being so inflated, including the contractors and subcontractors, is that it is so consolidated into such few number of players. The more we distribute that and the more that ecosystem grows, I think the more competitive our markets become and the more affordable housing construction will be.

Not to sound Pollyannaish about that, let me give you a very concrete example. There's really two lumber companies that create lumber in the U.S. There's different mills and different things, but there's basically two lumber suppliers. There was an article like four weeks ago in the Wall Street Journal saying they've dramatically cut back on their production because home prices are softening and builders are cutting back on what they're building. Essentially, these places are acting like the OPEC of lumber production. If they just kept up production, they would create a whole bunch of lumber, and with the market demanding less because building is slowing down, there would be a surplus of supply and prices would go down. They do not want prices to go down. So what do they do? They cut back on what they're creating, what they're putting out there, and so prices stay elevated for those supplies.

I would like to see a lot of local lumber production. I would like to have a lot of mills around the country that sold locally. That would change the dynamics of the lumber market, and it would be less efficient in terms of being able to take Canadian lumber and put it on a truck and drive it down to Georgia and have it planed out and go through this whole process of industrialized lumber production, but I think it would ultimately be cheaper. That's just one example, and I think you can multiply that over many, many different facets that you create when you localize your markets.

Question 9:

Next question: "Do you think it helps to overcome resistance to giving up control by likening the thing you're seeking to permit administratively to something that could already happen anyway? For example, if a single-family home can happen with just a building permit, how is that similar in its use to a duplex or triplex? After all, single-family homes can be rented too."

This is a question about overcoming resistance, and I feel like the way you overcome resistance is to make the thing you want to do as normal and commonplace as you possibly can.

Let's face it, planners have a really bad track record of forcing radical changes on neighborhoods—neighborhoods they generally don't live in—because that's what their theories or their ideas tell them to do. "Hey, we're going to have bonus density over here if you do this because it's in the common good." And then they create this world of NIMBYs who don't trust anything that they want. They can stand up and vouch for it and say, "Oh no, this will fit in. Oh no, we'll have all these character things." And no one believes them because they've seen over and over and over again how it actually doesn't work out that way. When you let planners have free reign, they experiment on society. We could get into all the reasons why, but this is what happens. Generally, they experiment on people. They experiment on their neighbors, and people generally don't go for it. So you get a lot of resistance.

To me, the way you overcome resistance is, yeah, you make the next step that you want to do, the next increment you want to do, as normal as possible. So yeah, in your example, if we've got a neighborhood where we permit single-family homes, why could we not permit duplexes? I think you could permit duplexes. I don't think that that would be a big deal. Yes, there would be people who squawk over it, and yes, there'd be people who are upset, and "I don't want the duplex right next door to me." But the reality is that most people walking by, most people driving by, once the thing is done and built, aren't going to even recognize the difference between that and a single-family home. Same with a backyard cottage. If you go on vacation and you come back three months later and your neighbor put in a backyard cottage, you might not ever even know that it's there. That's a good outcome.

So yeah, I think that is one way you overcome resistance. I would say the way you overcome resistance is to work incrementally. If you embrace the idea of radical change, you will always have a fight. I would say you always have an upper bound on what is possible in your place, and that upper bound will be nowhere close to what you actually need to accomplish.

Question 10:

Next question: "Here in Boise, Idaho, we are facing a notable housing shortage, with an estimated need for around 2,000 new units each year over the next decade. To help address this, some have suggested a focus on supporting larger-scale development. Of course, we need more of every type of housing, but how would you engage city leaders who may have a different perspective on where strategic priorities should lie?"

I'm not sure what is meant by "a different perspective," but let me say this. Let's take it by face value that you need 2,000 units over the next decade. I think the question that we have to struggle with is, can we get there by current mechanisms? Can we get there by building single-family homes out on the edge? Well, no, you can't. Not only can you not, but you literally can't afford it. It is bankrupting you. It's going to create all kinds of congestion problems and other related problems that you don't want to have. You can't afford it. This is not a scalable option.

Can you do it by building—let me get the exact quote here—"larger scale developments," which may mean houses on the edge, but often means five-over-one apartment buildings, big complexes? Can we do it that way? Again, the answer there is also going to be no for slightly different reasons. Let me walk through two reasons: one that is universal with the single-family home part, and then one that is unique to the kind of infill five-over-one big apartment complex.

The thing that ties them both together is the capital markets. We see this going on right now. Housing prices have started to soften. In some parts of the country, they're starting to fall, kind of dramatically. So what we see is builders pulling back. There's this feedback loop—and I've talked about it many times on this podcast—in the financial markets. Financial markets, let's be clear, is what drives housing prices. There's a feedback loop in the financial markets that when prices start to become, quote-unquote, unaffordable, when prices go down, builders will pull back and build less because they need the higher prices, and there's few competitors in the market. So I'm not suggesting there's market collusion, but you're financing from a handful of banks. The capital is coming from a small, small area. People will pull back, and they will not finance this stuff, and so builders end up pulling back. This is the same with single-family homes. It is with the five-over-ones and the big apartments.

What's different about the big apartments—and this is a thing that we see over and over and over—when you start making large leaps in existing neighborhoods. So you got a neighborhood of single-family homes, maybe a couple of duplexes here and there, and you're like, "All right, we need to juice housing units so this neighborhood"—and generally it's the rundown, neglected neighborhood where, "We don't want to gentrify, but if you kick a few people out, that might be the cost of doing business." I say that tongue-in-cheek. That's not how I would approach it, but that's how people rationalize it. When we look at that neighborhood, "We're going to allow them to do that six-story apartment building or what have you in that place." So someone will aggregate four or five, six lots together. They'll buy them up, they'll tear the homes down, and then they'll build a 200-unit complex. That's often looked at as, "Yay, we need 2,000 units a year. We just got 200. That's 10% of our total. Isn't that great?"

The reality is that what you have just done is you've now priced the entire neighborhood based on the assumption of this intense level of conversion. So the only thing that can happen now, because of high underlying land values, is a large leap. And so the neighborhood will sit and stagnate until someone can aggregate together enough lots again to do a large leap. If they can't, that's fine. The neighborhood will just sit and sit and sit in this state of kind of suspended animation because now land values are way too high because they're not built on adding a duplex or adding a backyard cottage or doing something small or reasonable. They're priced on this massive shift. So the people there will hold on to the property till they get the money for the massive shift, or the developer will come in and pay the money for the massive shift and say, "Oh my gosh, land values are so high, I need even more density." This feedback loop stagnates neighborhoods. So if you think you're going to build your way to success by going to neighborhoods and having radical transformation because, "We need to catch up. We got a big housing shortage," what you actually do is stagnate things from a capital flow standpoint.

Question 11:

Next question: "Our neighborhoods that have a lot of infill properties are mostly heir property. Help!!!"

Heir is spelled H-E-I-R, which I don't know—that's the way we would say it in Minnesota: your heirs. My assumption here is that what we're talking about are places where you have a situation where taxes, property taxes, are kept artificially low until the property changes hands. It's not changing hands because it's just going to the next of kin. So property taxes stay artificially low. I don't know. Maybe. I'm not sure what is meant by this comment. I apologize. Let's go on to the next one.

Question 12:

"What do you think about self-help building projects?"

I don't know. I don't know what a self-help building project is. Is that where you're raising your self-esteem, you're taking time off to go to the spa? I'm just caught up in the self-help thing. I'm sure this means something that I'm not aware of, but I'm really not aware of it. If this means do-it-yourself building projects, I think you would call a lot of incremental developers, particularly in the early stages, do-it-yourself developers. So if that's what is meant by this, yeah, let's go. Giddy up.

Question 13:

Next question: "I agree with all of this"—that's a dangerous premise to start with, but let's go with it. "I agree with all this, but in some communities (example: mine), our projections are not enough. Backyard cottages or small homes can or will be built to accommodate demand. Thoughts on any other measures that can support five-to-six-story apartment buildings?"

Well, go back three questions, and I talked at length about that. Let me be clear. I don't think there's no place for five- or six-story apartment buildings. I think in most cities, the place for it is where you over-invested in transit, and now you need to catch up. So if you told me, "Within three blocks or four blocks of this transit stop," or "Heck, we got a big parking lot here and in this parking lot, you're going to have a five-story building," it's kind of hard to argue against that. You've already, in a sense, impaired or crippled the land values to the point where you need something large to actually justify that.

It's hard to do this without numbers, and it's hard to do numbers in a podcast, but let me try so that we're all on the same page here. If you have a piece of land and the lot itself is worth $100,000, and then you go out and you build a transit stop and you spend a billion dollars on this transit stop, and now all of a sudden the land goes from $100,000 to $500,000 because there's been this massive public investment, and it's just driven up the land values right there—there's a lot more that you can do. Okay? What that means is that whatever is built on that property, if it was a single-family home before, now needs to be 5x the value at least of a single-family home to keep that kind of ratio of what is built on the land to what the land is worth.

Yeah. Why is that ratio important? Think of a lot in lower Manhattan. You're never going to put a trailer house on it. Why are you never going to put a trailer house on it? Because the land is worth so much. You'd be insane to put a trailer house on it because the land would be worth 1,000 times what the trailer house was. It just doesn't make sense. If you have a really valuable piece of property, you put a really intense land use on it. You put a huge skyscraper. If you're out in the middle of rural Kansas, you're not going to put a 20-story skyscraper out in the middle of nowhere. The land is not worth anything. So you get these short, one-story, horizontal buildings that show up, a lot of land, because the land is not really that valuable. This is the relationship that you need to drive private investment. You're raising land values, and raising land values drives redevelopment in a place.

If you've got a lot that is stagnating in a neighborhood, and you go out and put a transit stop around it, you drive up the value of the lot. If you don't allow any change around it, you're like, "The only thing you're going to have is single-family homes." What you ultimately get are really, really high-end, expensive single-family homes. Either the ones that are there get really priced up, or they get scraped off, and then you get the new kind of mansion, high-end, rich person's house. All of that resists change to no end. Horrible outcome for a big, major transit project.

What should happen is that before we build the transit, we should be building up the neighborhood. So the neighborhood has a lot of value and a lot of momentum, and it's just filling in gaps. Now, at this point, the transit comes in and bam, now you're filling in gaps and matching the stuff around it and driving it up to the next level of intensity.

If you're telling me, "What measures can support five-to-six-story apartment buildings?" To me, it would be neighborhoods that have that transit access, where they're building it already, or where that's in place. Those are the places that it's natural to put that. If you go put that in other neighborhoods—if you go put that just like, "This is a rundown neighborhood, let's put a six-story apartment building here"—what you will do is you will stagnate that entire neighborhood. You will shift the relationship between the underlying land and the stuff that is expected now to be built upon that land in a way that makes all the single-family homes no longer viable. But it also makes a single-family home converted into a duplex not viable, the backyard cottage not viable, the four-unit or six-unit not viable. The only thing that becomes viable is the 200-unit, five-story apartment complex. That's what you'll get. The thing is, you won't get them at the rate that you need to actually close this gap.

So if you start, "Our projections are not enough backyard cottages or small homes can be built to accommodate demand." Okay, I don't know what projections you're using, but what you need to do is actually accelerate the building of that. That's what the toolkits are about. Fix your regulations, create an ecosystem of people to go out and build them, and then finance it locally, and you can build ridiculous sums of these.

By the way, one of my board members was looking at the neighborhood that he lives in in Denver, and he said something to me—he did the back-of-the-envelope math—and he was like, "Hey, we've got these really, really high projections for how many units we need, but if we look at it, basically it's two or three backyard cottages per block throughout the entire city." That's not crazy. That's actually not crazy. Even if you did half of that and then the other half in other ways, you can actually build a ridiculous number of these units. So I would question the idea that projections say this can't happen. If you actually do projections, it's going to tell you that the five-and-six-story building approach is never going to happen.

Question 14:

"What are your thoughts on prefabricated manufactured homes? We get several calls for houses like these to go on lots that can't support anything else, but our planning director is averse to anything that could be considered a trailer home going into our traditional neighborhoods."

There's a lot of air quotes here. Let me say this. I've seen some prefab backyard cottages that are really great. I've seen some prefab starter homes that are less great. The reason why I think we have a difference, even though they're the same kind of size, is that prefab homes are generally not designed to be added onto or intensified. In other words, you don't build it to eventually put a second story on it. That's just not the way it goes. So a starter home, when you build that, you're going to want to build it with an eye to, "Okay, when we save up a little bit more money, we'll put an addition on the back, and then we'll save up a little bit more and we'll put a second story on," and the building grows and changes over the decades that someone owns it or lives there. That's kind of the traditional way homes were built around the world, really, for thousands of years. It's the way that if you go to your historic neighborhoods, you'll still see them kind of lined up and set up today. That's very common.

So manufactured homes, to me, I think if we think of them as temporary structures—things that will ultimately come down and be removed—I don't think they're necessarily bad. I think particularly in the backyard cottage part, they can fill a niche. I don't want to say there's no place for manufactured homes because I think that there is. I just think that the most likely place for it is the places where—I mean, the places where I've seen it is in cheap, single-family lots on the edge of town, and that's the worst place for us to be building at all because those places come with enormous long-term expense.

I'm running out of time, and I need to get to the dentist. I got two more questions left. Let me fast-pace these.

Question 15:

Here's the second-to-last question: "Based on the comment about this being small entry-level and small builders, would that be enough to meet the huge demand for units?"

Yeah, it's the only way to scale it. It's literally the only way. It's the only thing that will scale. It's the only thing that you can build limited amounts of without the liquidity problem that you get when declining markets start to decline. It's the only way you can actually break the market, in a sense. We can build enough of these units to bend the market to be local. It's literally the only thing that will scale.

If you want a really cool booklet that we put together on this, there's one called "Release the Swarm." If you just go "Strong Towns release the swarm" on Google, you will get this e-book that we put together. It's mostly the writing of my colleague, the guy who wrote the book with me, Daniel Herriges. It's really good. We got a chapter in the book too. Daniel, actually, I think—I don't want to speak out of turn—but I think he was a big "let's build big things, and let's do that." Then he rigorously kind of sat down and said, "How would this scale?" We need to build something that would scale. He came back and was like, "The only thing that will scale is this swarm of incremental builders building incremental units." That's the only thing that scales.

Question 16:

Last question: "What about the need for larger rentals for families, something with three bedrooms?"

Yeah, I'm not trying to solve that problem directly, but I am trying to solve it indirectly. Do you know how many three-bedroom homes are occupied today by one person or two people living in a home? They have way too much home and not enough cash. Would be happy to move to a different place in the same neighborhood, but the place is just not available. We've spent decades building units that are bigger than what people actually need or are willing or would like to pay for. Now they use extra space, and I get it. Once you reach a certain level of equity, it's easy not to move. I think this is a misnomer, though. We have tons and tons and tons of units that are this size. We don't—let's just say we have a lot of empty bedrooms, a lot of empty bedrooms. In fact, I would venture to say we have as many empty bedrooms as we have occupied bedrooms in this country today. I don't know if that's a statistical fact, but I think it's pretty darn close.

Two out of three of our homes are single-family homes. Two out of three of our families are one- and two-person households. Just the numbers are a little fuzzy around that, but as a general rule, that means you have this huge group of people who are living in homes using one bedroom where they have multiple bedrooms. That's a problem that solves itself if we get entry-level units in place.

Thanks, everybody. I'm off to the dentist. It's just a regular checkup. I have a history of getting my teeth knocked out, though, so it's always an adventure going to the dentist. So we'll see what happens. In the meantime, keep doing what you can to build a strong town. Take care, everybody.