Time to throw out the old rule books

“If You Don’t Create Change, Change Will Create You” – Anonymous

Over the past several weeks, my business partners and I have been taking a series of meetings with friends from the building industry to catch up, and through these meetings most seem to share one primary goal: a return to the good old days when every company shared the same mantra of ‘full steam ahead.’ Even despite a barrage of news of long-term changes in U.S. demographics, consumer spending and the economy in general, many people sit and wait, biding their time for a type of rebound that may never come.

And why is that? Because they refuse to throw away the dog-eared rule book which made them successful in the first place -- and perhaps to be surpassed by companies which never bothered to read one.

In today’s world, new rules are constantly being written by the brash and the creative, whether it’s Google’s transformation of the advertising world or the huge success of the CBS franchise “CSI.” For example, not only did CSI creator Anthony Zuiker have zero experience writing for television, he also didn’t realize that including flashbacks and quick cuts were both against long-standing industry convention.

Not knowing any better – because he never read the old, stale rulebook – he included both, thus giving the original series a pace and look that quickly sent it to the top of the ratings game and launched two spin-offs, one of which is the most-watched show in the world. So is that just dumb luck or a sea change that will cut across all industries?

I think that even more potent forms of creative destruction are about to envelope the building industry, and it won’t just be about building more in-fill product or scaling down home sizes and prices to meet today’s demand. These changes are going to alter everything from supply chain management to the way in which homes are marketed and sold, and those veterans who keep themselves otherwise occupied while waiting for someone to call and ask for their outdated skill set may be in for a long wait.

While there will certainly be some demand for the impressive homes of the past, we’re also quickly seeing a return to designs that meet needs more than wants. This is especially important for the groups of people mostly left behind during the last building boom such as families, seniors, the disabled and the homeless who can only afford to live in housing made possible by tax credits, low-interest bond financing and various other government programs.

For example, in upscale Thousand Oaks in California’s Ventura County, our staff is currently drafting a report in support of an affordable housing project that will help to house a variety of low-income families, homeless persons and the mentally disabled, many of whom now are mere numbers on a wait list that’s close to 600 families.

And who’s hoping to build this 60-unit project? A local non-profit that has managed over the last 30 years – mostly under the radar – to build, rehabilitate and fill 400 units and provide housing for 1,000 adults and 200 children. It’s that type of story (along with appropriate private and public incentives to make it happen) this industry really needs to start telling more of around a campfire – assuming, of course, that the old rulebooks are helping to provide the kindling.

L.A. Mayor to announce $5 billion housing plan

At MetroIntelligence, we're right in the middle of producing a market study for more low-income housing on the eastern border of Hollywood, so L.A. Mayor Villaraigosa's plan to be announced on Monday to spend $5 billion on housing for the poor and middle class caught my eye. You'd think it'd be easy to get managers of affordable apartment projects to cooperate with market analysts who are producting state-mandated reports, but nothing could be further from the truth.

Even if they do know the details of the apartments they manage, most managers or owners of existing tax credit, bond-financed and other types of affordable apartments treat information on rents and vacancies like a state secret. So when it takes a phone call to a councilman's office to get these people to cooperate, I'm not sure another $5 billion will fix the problem. The dirty secret in affordable housing? That private companies make a ton of money from tax credits and below-market financing and don't want any competition in the marketplace. So who loses? Everyone else. From an L.A. Times story:

Los Angeles Mayor Antonio Villaraigosa on Monday will unveil a $5-billion, five-year plan to build housing for the poor and middle class. The blueprint, which calls for thousands of new homes along subway and bus lines, and developments with people of all incomes living together, would, according to the mayor's deputies, alter the look and feel of the city forever.

But the plan, which many City Council members and business and housing groups said they had not yet seen, is being released while the housing market is a shambles, the state is facing a massive budget shortfall and the economy is teetering -- challenges that lead some to wonder whether it is feasible...

Others were more skeptical when they were presented with the broad brush strokes of the plan. Some developers object to a so-called mixed-income provision that would require affordable housing to be included in new housing developments. They say that such a policy -- which labor and housing groups have been pushing for years -- would cast a pall over entrepreneurial efforts...

Other elements of the plan, such as preserving existing affordable units and building near transit centers, are things the city already has pledged to do.

Housing has become an increasingly pressing political issue in Los Angeles. Last month, the Los Angeles Business Council released a report saying that the high cost of housing, especially in places like the Westside, "threatens the region's continued economic growth."

Los Angeles was designated the least affordable metropolitan area in the country last year, according to the Business Council report, because so many people pay so much of their incomes for housing. The city also has the largest homeless population in the nation. In addition, although private developers have built many high-end apartment units and condos over the last few years, there has not been a similar increase for households earning less than $75,000 per year...

Under the mayor's plan, the city would pledge $200 million a year for five years from various sources, including the city's Housing Authority, its affordable housing trust fund and its Community Redevelopment Agency, to build affordable housing.

Most, if not all, of that money would have been used for housing already, but by setting out a comprehensive plan the city hopes to use its money more efficiently and to be more competitive in winning grants, tax credits and bond funds from government and private sources. In all, the plan depends on raising an additional $4 billion over five years.

Villaraigosa acknowledged that in the current climate of economic uncertainty, some of the money the city is counting on may not come through, but he said he was confident other sources might open up. Federal dollars may flow to the city because of the foreclosure crisis, for example. He said he "sat down with three economists yesterday" and they assured him the plan was sound...

Other elements of the mayor's plan include:

* A "Sustainable Communities Initiative" to encourage the development of 20 pedestrian-oriented, mixed-income neighborhoods along the Gold Line in East Los Angeles and the Exposition Line in South Los Angeles.

* Building 2,200 units of permanent supportive housing to get homeless people off the streets and provide them with mental healthcare, drug treatment and other rehabilitation services, as well as making more Section 8 rental assistance vouchers available for homeless people.

* Redeveloping the Jordan Downs housing project in Watts into a mixed-income housing development with some units for very poor people and some units of market-rate housing. Already, the city has purchased 21 acres adjacent to Jordan Downs.

* Buying and rehabilitating foreclosed homes and turning them into affordable housing. On Friday, the federal government announced that the city was getting $33 million for that purpose.

* Preserving existing affordable housing by taking an inventory of all the affordable, rent-controlled and Section 8-eligible units in the city and finding ways to keep them affordable.