Closing the Gap: Why the Type of Solution Matters

For businesses, scalability matters. Scalability means that there is an ability to respond to growth in opportunity and increases in demand. Scalability enables businesses to be competitive, efficient, and meet the needs of customers, despite environmental changes. Scalability can be the difference between a business that remains small, or even fails; and which businesses take off, and sustain success.

Scalability should not just be a metric reserved for private industry. Scalability directly applies to solving complex social problems, like housing instability and homelessness. In Charlotte-Mecklenburg, there is a 23,060-unit gap for housing units which are affordable to extremely low-income households. That housing gap should be considered the floor, because it is growing. Such a gulf requires solutions that can effectively bridge this ever-changing problem. These solutions must be scalable.

In response to COVID-19, communities have been willing to try new approaches to address housing instability and homelessness. Some of these approaches, such as constructing temporary “tiny houses” to address unsheltered homelessness, are stopgap measures which can help protect individual and public health. Once circumstances improve, interventions that keep households “temporarily housed” or housed in inadequate conditions should be removed and replaced with permanent housing solutions.

Sometimes, approaches may have been intended as temporary, but could become permanent “business as usual” solutions, based on scalability. Rehabilitating vacant buildings, like hotels, with the potential for higher intensity use and transforming them to permanent housing is one scalable solution. Given the fact that there are limited resources (including real estate) to address a growing problem that both pre-dates the pandemic and has worsened because of it, it is essential that communities focus on and invest in housing solutions that are scalable.

This week’s blog post examines four factors for communities to consider, with specific examples, when determining which scalable housing solutions to advance and/or prioritize, and what this could mean for Charlotte-Mecklenburg.

DENSITY & INTENSITY

In Charlotte-Mecklenburg, there are not enough units at all price points to meet the overall need for housing. This situation puts added pressure on households with the lowest annual income. To close the housing gap requires that communities increase the supply, which requires scalability, which in turn typically means increased density and intensity. Recently, and primarily in response to the pandemic, tiny houses have come to be viewed favorably as a way to address homelessness. The reasons for this could be attributed to a confluence of several factors: an increased awareness of homelessness; the need for more affordable housing; and the perceived trendiness of tiny houses.

Tiny houses are, by definition, small; examples range in size from 50 to 738 square feet. To understand the limits of tiny house villages, consider the following illustration: although zoning of tiny house villages varies, many are built under a single-family residential zoning designation. In the City of Charlotte, a standard designation is R-4.  R-4 means that no more than 4 units (of any size) can be built per acre of land. In comparison, R-22MF is a typical zoning classification in the City of Charlotte for multi-family residential uses, like apartment complexes. With R-22MF zoning, a developer can build up to 22 units per acre, exclusive of associated amenities and parking. When compared with tiny houses, multi-level, multi-family housing development (or the rehabilitation of existing vacant multi-family spaces) allows for more than 5 times the number of tiny house units per acre. Considering that the permanent affordable housing gap is expanding; land is only getting more expensive; and the open space to develop low-intensity housing is decreasing, this difference in density is significant.

COST

In addition to density, cost is a primary factor for communities to consider. Looking at both factors together, you can compare both the total cost and the cost per number served. In this way, communities can ensure that limited resources are used most efficiently and effectively. Final costs will vary by project and by type of housing solution: the final cost depends on multiple factors, including building materials and construction typology; site development and preparation; landscaping; amenities; zoning; inspections and fees; and the cost to acquire the land underneath the improvements.

Using the example of tiny houses, based upon a national survey of tiny houses built specifically to address homelessness, the average published price tag of a tiny house is $21,160. In most cases, the cost of tiny houses does not capture the cost of the land.  Additionally, many tiny houses lack plumbing, air conditioning, or both. To compare the total per square foot cost of a tiny house to a multi-family housing unit, a recent development in Wilmington, North Carolina can be used as an example. The $3M development intends to produce 32 tiny houses on 4.6 acres of land, which was purchased for $250,000. The combined total of the land, plus the cost to build and install each pre-manufactured 400 square foot tiny house, is $62,813 per unit. This translates to an approximate per square foot cost of $157.03.

Currently, the average cost to develop a multi-family unit in the United States ranges between $85 and $200 per square foot; the average is $125 per square foot. The per square foot cost of the multi-family unit also includes other costs of unleasable space, such as elevator shafts, lobbies, hallways, equipment rooms, and common areas. 4.6 acres with an R-22MF zoning would allow 94 units, by right.  The cost to acquire and rehab an existing property, whether a motel or apartment complex, also offers a potential cost-saving per unit over new construction, regardless of type.  At bottom, it is important to consider the following question: how many more people can be served at the same (or less) per square foot cost, on the same piece of real estate?

ACCESS & PROXIMITY TO RESOURCES

Access and proximity to resources means ensuring housing solutions are near things like healthy, affordable food; childcare; healthcare; and transportation, as well as surrounded by an inclusive, supportive community in which they can thrive. In the case of tiny houses, some have been installed as singular spaces; or as an Accessory Dwelling Unit (ADU), which is an addition to an existing property. However, most tiny houses that target homeless populations exist within a self-contained “village” setting; serve that specific population; and are even gated.

This is the inverse of concerns expressed about a gated residential development that targets one (higher) income band. In fact, to develop these projects often requires that the tiny houses be constructed in an area isolated from other, more typical, residential spaces. This corresponds to a lack of access to resources, too. In tiny house villages, the potential exists that the only community is one grounded in housing circumstance; not one assembled by choice or access to opportunity. It is, therefore, critical that the shadowy sides of this concept be explored, including the extent to which some housing solutions concentrate poverty; increase exclusion; impose barriers to access jobs and other resources; and foster residential segregation.

SUSTAINABILITY

Finally, sustainability refers to the degree to which the housing solution will last. It includes components relevant to the quality of the structure, itself, such as the materials. It also means ensuring that the land underneath remains affordable. Sustainability is also about the person in the home: does the housing solution provide a path to asset development and/or wealth accumulation? Does the housing solution facilitate participation in the job market, or even society at large?

Regarding the example of tiny houses, the 2019 national survey reveals that many tiny houses do not have amenities that should be considered essential: 59% of tiny houses did not have plumbing; and 18% were without heating and air conditioning. In fact, some tiny houses appear to be not much more than storage sheds; these are actually more closely aligned with the definition of unsheltered homelessness. Each tiny house having all four walls exposed to the exterior, and individual roofs, also adds to costs related to maintenance and capital repairs. What else is lost when the essential components of a home are stripped away to make an “affordable housing solution” more inexpensive?

SO, WHAT

The opposite of employing scalable solutions is playing “Whack-a-Mole”: like the game, problems will continue to pop up faster than we are able to resolve them, resulting in inconsistent and temporary results.

Communities like Charlotte-Mecklenburg have already ramped up higher-impact, more cost-effective housing solutions, like homelessness prevention and hotel conversions. It remains critical that communities consider the full merits and consequences of all potential housing solutions as part of any comprehensive plan to address homelessness.

Exploring the factors of intensity and density; cost; community and resources; and sustainability enables communities to identify housing solutions that are scalable to close the current gap in permanent, affordable housing. This is not to say that all tiny house solutions are necessarily bad, just as not all multi-family solutions are equivalently good. Having a framework enables communities to compare all options objectively. Intentionally creating segregated communities of substandard housing is not an inexpensive, responsible, nor just path to ending and preventing homelessness.