Latest / The Land Development Podcast with Ryan Glick / ADUs, Cottage Courts, and Pocket Neighborhoods with John Anderson - TLP199

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ADUs, Cottage Courts, and Pocket Neighborhoods with John Anderson - TLP199 · The Land Development Podcast with Ryan Glick

• 0:00
  SPEAKER_01: I wish more people, particularly elected officials and neighbors and staff, would understand the math.
• 0:07
  SPEAKER_01: You know, that you're at the Planning Commission and you wanted to do an eight-unit project, and for some reason you leave with five.
• 0:14
  SPEAKER_01: Again, for no apparent reason.
• 0:16
  SPEAKER_01: Somehow more neighbors is worse.
• 0:18
  SPEAKER_01: You know, less neighbors is good.
• 0:20
  SPEAKER_01: And I think that understanding that you still have all the utilities to build, you still got a lot, everything to do, but by making it go from eight to five, it's now a project that's not going to happen because it doesn't pencil.
• 0:48
  SPEAKER_00: Hey, what's going on, everybody?
• 0:49
  SPEAKER_00: Welcome back to the Land Development Podcast.
• 0:51
  SPEAKER_00: I am your host, Ryan Glick.
• 0:53
  SPEAKER_00: I'm excited today to be joined by John Anderson.
• 0:56
  SPEAKER_00: John is the principal at our John Anderson Consulting.
• 0:59
  SPEAKER_00: John, thanks for joining me.
• 1:00
  SPEAKER_00: I'm glad to be here.
• 1:02
  SPEAKER_00: Well, I'm excited to get into some of the topics we're going to get into today because there are things that we haven't really gone into in much depth on the show in the past.
• 1:09
  SPEAKER_00: And so, you know, that's the topic of ADUs, and then also getting into the concept of pocket neighborhoods.
• 1:15
  SPEAKER_00: But before we get into those topics, I first want to get into your background.
• 1:19
  SPEAKER_00: And so a couple of questions for you here to get us started would be how did you first get into land development?
• 1:27
  SPEAKER_00: And then I'm also curious to find out at what point or how you decided to kind of transition your approach to land development over your career.
• 1:37
  SPEAKER_01: Well, the die was kind of cast.
• 1:40
  SPEAKER_01: Um my second attempt at being a high school sophomore.
• 1:44
  SPEAKER_01: I was pulled into the vice principal's office, oddly for not having a fight this time.
• 1:50
  SPEAKER_01: But uh, and I met my guidance counselor for the first time.
• 1:55
  SPEAKER_01: And it was explained to me that I could no longer take any more shop classes until I brought my academics above F or incomplete.
• 2:03
  SPEAKER_01: And then next day was crucification, and and I didn't have like a big, you know, I'm out of here.
• 2:09
  SPEAKER_01: I just never went back.
• 2:11
  SPEAKER_01: So I was out on my own, fairly young, 15, worked constructions on the weekends, worked in kitchens.
• 2:20
  SPEAKER_01: And a buddy of mine, uh, I'm from northern Minnesota, from Duluth.
• 2:24
  SPEAKER_01: And in the early 70s, there was a strike on the docks, and the steel mill closed, and 20,000 people out of the 90,000 we had comes the diaspora.
• 2:35
  SPEAKER_01: And I so my friend would could get me in the electrical union in New York City.
• 2:39
  SPEAKER_01: So I went out and I did that.
• 2:41
  SPEAKER_01: Went through the apprenticeship program, came a journey, was Ron Cruz, and uh fell off a scaffold and shattered my shoulder.
• 2:49
  SPEAKER_01: And ended up, rehab put me in an architect's office of drafting before CAD.
• 2:55
  SPEAKER_01: It was all pencil on mylar stuff.
• 2:57
  SPEAKER_01: And I was there for a couple years, uh, but it was pretty clear I wasn't gonna like gonna go to college and be an architect.
• 3:03
  SPEAKER_01: So there was you know, an argument to be had with an Italian contractor in Queens.
• 3:09
  SPEAKER_01: It's like, well send John, those are his people.
• 3:12
  SPEAKER_01: And so I ended up working for contractors, property owners and the like.
• 3:18
  SPEAKER_01: And the earliest land development I did was it's actually was at a an equestrian arena and horse barn and then house slots on the hillside around it.
• 3:29
  SPEAKER_01: And it was all on septic systems and stuff out in in the farthest reaches of Orange County, New York.
• 3:36
  SPEAKER_01: So the idea that there were actually rules for doing this and the people at the city and the county took the rules really seriously, even when they were well orderly but dumb.
• 3:48
  SPEAKER_01: It's like but this is the rule.
• 3:50
  SPEAKER_01: It's like and you can get an exception to the rule, but there's a process to get an exception to the rule.
• 3:55
  SPEAKER_01: And if you make the argument that the rule is orderly but dumb, I don't like your chances.
• 4:00
  SPEAKER_01: So, you know like that.
• 4:03
  SPEAKER_01: So I ended up uh bouncing around, always kind of a bigger project, a bigger project, never like settling down in one company, just project project.
• 4:12
  SPEAKER_01: Always and to the point where uh I got recruited from the minor leagues to be one of the project managers, one of seven at the Mall of America for four years.
• 4:23
  SPEAKER_01: Which was would have been a really good education for two years.
• 4:28
  SPEAKER_01: So I was living in uh like a one of the streetcar expansions of St.
• 4:33
  SPEAKER_01: Paul in my little Sears and Roebuck house, and I would get in my car and drive through every successive generation of American development until I came to where we were building the largest mall in the country, the intersection of two freeways by the airport.
• 4:50
  SPEAKER_01: And at the end of the day, reverse the process.
• 4:53
  SPEAKER_01: And just the feeling of, you know, why is why is America so damned ugly?
• 4:59
  SPEAKER_01: You know, like my neighborhood is really cool and nice and interesting, and then it just gets worse and worse and worse and worse until I get to work.
• 5:08
  SPEAKER_01: And so after I was done at the mall, we hung out a shingle and was doing kind of contract project management work for various folks.
• 5:18
  SPEAKER_01: Uh, and I had a client who was doing in town in infill townhouses.
• 5:24
  SPEAKER_01: And he was early involved in the organization called the Congress for the New Urbanism, which was made up, I said, like four years into it at that point.
• 5:35
  SPEAKER_01: A lot of folks on the design and the policy side looking at how could we do this better?
• 5:40
  SPEAKER_01: You know, what are the things that we can learn from how it was done well in the past?
• 5:45
  SPEAKER_01: Can it be done that way again?
• 5:47
  SPEAKER_01: And so a lot of the things that were coming forward is like parallels like, okay, this is a conventional way to do this.
• 5:55
  SPEAKER_01: You have single-family houses, and so larger single-family houses, and then shopping centers, and all these things are separated, and then you glue them together with the trip on the only road, which has a lot of traffic, and nobody addresses onto it except for McDonald's and the like.
• 6:13
  SPEAKER_01: So to see that that really kind of zoning is the like the DNA that's being followed, you know, all over the place.
• 6:21
  SPEAKER_01: And to f to fall in with people who had such profound authority issues.
• 6:26
  SPEAKER_01: It's like, yes, these are the orderly but dumb rules.
• 6:29
  SPEAKER_01: But uh, we took a little time, we wrote some other rules, we would like you to adopt these so we could build something like the best part of your town.
• 6:37
  SPEAKER_01: Oh my god, that would be the apocalypse.
• 6:39
  SPEAKER_01: You know?
• 6:39
  SPEAKER_01: So and so uh bounced around a lot, helping people on small projects.
• 6:46
  SPEAKER_01: I did serve three years of hard time at the Minnesota DOT.
• 6:51
  SPEAKER_01: Wasn't wasn't a fit.
• 6:53
  SPEAKER_01: My job was explaining why it was a bad idea to take away the parking spaces in front of the stores in the downtown, you know, that just to make customers get out of there faster.
• 7:03
  SPEAKER_01: That people needed those parking spaces.
• 7:06
  SPEAKER_01: Right, right.
• 7:07
  SPEAKER_01: Yeah.
• 7:08
  SPEAKER_01: But an institution like a DOT is really driven by its culture and the and it's a rules-based kind of hierarchy.
• 7:17
  SPEAKER_01: Uh so they're often kind of in the way, orderly but incredibly dumb.
• 7:23
  SPEAKER_01: So uh ended up '99, moved out to California, had some clients there, and we started developing first little 20-acre kind of neighborhood fragment with an eye toward 200-acre master plan across the road that was landowned by the hospital that they were going to relocate to, and economics and healthcare changed.
• 7:46
  SPEAKER_01: So we built out the 20 acres with uh an exotic approach to uh houses are raised on stem walls, net streets are narrow with trees, alley in the back, utilities in the in the in the alley.
• 8:04
  SPEAKER_01: And we started out just basically with houses and ADUs over garages and eventually uh bundle up, you know, cottage courts and uh townhouses and apartments.
• 8:16
  SPEAKER_01: But and we built a building company.
• 8:20
  SPEAKER_01: Initially our thought was we just need to have enough of a building company to build cool stuff.
• 8:24
  SPEAKER_01: And then later it became clear we're closing 50 or 60 houses a year.
• 8:30
  SPEAKER_01: We need to have an excellent company that happens to build cool stuff.
• 8:34
  SPEAKER_01: And that was that had was not on my bingo card.
• 8:38
  SPEAKER_01: Uh uh that's like the lad of understanding people's feelings and being patient while they don't do what I say.
• 8:45
  SPEAKER_01: There was a fairly long period where I was pretty much a jerk who had to win every argument.
• 8:50
  SPEAKER_01: I like to think that I've evolved since.
• 8:54
  SPEAKER_01: But my primary network continues to be the Congress and New Urbanism.
• 8:58
  SPEAKER_01: We get together once a year, kind of a gathering of the tribe.
• 9:02
  SPEAKER_01: The 200-acre master plan that we were in the middle of of uh doing first phase site development on.
• 9:12
  SPEAKER_01: In 2008, the bank called their debt on it.
• 9:15
  SPEAKER_01: They weighed about 30% of the project in local bank debt.
• 9:18
  SPEAKER_01: But at that time, the regulators were telling the banks, you know, 200 acres uh figure of bulk sale and a 90-day close, that's the value.
• 9:29
  SPEAKER_01: Did you lend them more than that?
• 9:30
  SPEAKER_01: Oh yeah.
• 9:32
  SPEAKER_01: Oh, then you gotta call the loan.
• 9:34
  SPEAKER_01: So I got diluted out and almost lost the house kind of thing.
• 9:39
  SPEAKER_01: So between 2009 and uh 2019, we gypsied around Albuquerque, Portland.
• 9:49
  SPEAKER_01: A year before COVID, we moved here to Atlanta.
• 9:52
  SPEAKER_01: But we started looking at this in terms of the places that we really like and I think are really valuable, you know, financially, culturally, are usually built out of smaller pieces rather than in big chunks.
• 10:05
  SPEAKER_01: But uh business model for development is big chunks.
• 10:09
  SPEAKER_01: Particularly working in California, if someone's thinking about 400 acres, might as well do 4,000 because the environmental litigation will cost the same.
• 10:18
  SPEAKER_01: And you can dedicate 800 acres and maybe be done in five years instead of seven, you know, with the entitlements.
• 10:26
  SPEAKER_01: So coming from that environment to the South, whatever level of regulation or, you know, stormwater or whatever, it's like, these are this this is the rules.
• 10:38
  SPEAKER_01: It's like these are adorable.
• 10:41
  SPEAKER_01: You know?
• 10:41
  SPEAKER_01: I felt like I'd been training at altitude and is now, you know, competing in track on sea level.
• 10:48
  SPEAKER_01: The these days, uh, oh, 2015 we started a nonprofit called the Incremental Development Alliance, which trains people about how to do small projects in their neighborhood with a business model that makes sense at that level.
• 11:02
  SPEAKER_01: A big outfit can't get excited about a hundred-foot lot, you know, next to downtown.
• 11:07
  SPEAKER_01: They the juice is just not worth the squeeze for them.
• 11:09
  SPEAKER_01: They're set up on economy of scale.
• 11:12
  SPEAKER_01: And a big production home builder has got maybe two product lines they're gonna be bringing out, and they need at least 50 closes for five years to justify a superintendent and a sales operation.
• 11:22
  SPEAKER_01: So they're stuck in a conventional model that is going to be producing something that's either kind of a commodity or a commodity with a little zhuz on it, you know, some licking six dollars and a few more gables.
• 11:37
  SPEAKER_01: But, you know, people know that product, the appraisers know the product, the financing knows the product, and nobody's expecting it to be Paris anytime soon.
• 11:46
  SPEAKER_01: My view is we developing in the States, we don't have to be Paris, but we should be a noticeably less shitty version at Houston.
• 11:55
  SPEAKER_01: So, you know, and that takes real work.
• 11:57
  SPEAKER_01: Incredible Development Alliance has trained over 10,000 people uh the last 11 years, half of them women and people of color.
• 12:05
  SPEAKER_01: And they're doing amazing work.
• 12:07
  SPEAKER_01: It was like the the proudest that's the I I couldn't be prouder of that group of folks.
• 12:12
  SPEAKER_01: So they do workshops, they do training, they help cities understand how to clear the underbrush to make it possible for small operators to survive.
• 12:20
  SPEAKER_01: And so most of my work these days is on our own development projects, largely infill, and you know, uh some development advisory for smaller outfits or people that want to build in smaller increments.
• 12:36
  SPEAKER_00: And we do a lot of uh pocket neighborhoods and cottage courts.
• 12:40
  SPEAKER_00: So I think where I would like to start is uh digging into the ADUs.
• 12:44
  SPEAKER_00: So I think most of the people listening in probably would say they have somewhat of an understanding of what they are, but I'd like to hear from you what uh for people listening in, you know, what are ADUs and how do people sometimes misunderstand ADUs and what they are?
• 13:00
  SPEAKER_01: Aaron Powell Well, they're meant to be an accessory to something else.
• 13:04
  SPEAKER_01: So you got a larger house and a little cottage in the back or a unit over the garage, a granny flat, you know.
• 13:12
  SPEAKER_01: But you'll also sometimes see uh uh an accessory dwelling unit actually attached to the main house.
• 13:18
  SPEAKER_01: But the idea is that to be it's a dwelling unit, like under the building code, so it's got bathroom, kitchen, cooking in actual range and stuff, but they're typically going to be smaller.
• 13:31
  SPEAKER_01: And a lot of municipalities will regulate them relative to the size of the house.
• 13:35
  SPEAKER_01: Like where I live, you can have one as big as 800 square feet or half the size of your house, whichever is smaller.
• 13:44
  SPEAKER_01: My house is 700 square feet, I could have a 350-foot ADU.
• 13:49
  SPEAKER_01: So now the reasons why people want them is typically issues of greater flexibility.
• 13:57
  SPEAKER_01: Maybe you want a home office that the next time your sister-in-law gets divorced again, you'd rather she not be in like the second bedroom in the house.
• 14:08
  SPEAKER_01: You know, it's like it she'll stay longer, you'll get along better.
• 14:12
  SPEAKER_01: Boomerang kids.
• 14:15
  SPEAKER_01: We used to lease ours to uh a kind of a rookie elementary school teacher.
• 14:22
  SPEAKER_01: And it would throw$500 a month toward our mortgage.
• 14:27
  SPEAKER_01: So it would make our our house payment more affordable for us, so we didn't have to have two jobs to support the house.
• 14:34
  SPEAKER_01: So and I think that these days with so many people working from home and having side hustles and everything else, to just be able to arrange your buildings with a little more flexibility is a great a great thing to do.
• 14:49
  SPEAKER_01: There's always room for people to get the wrong idea and get really upset about something they haven't actually read, you know, and go on cable TV and wave their fingers and stuff.
• 15:02
  SPEAKER_01: And so when some when a city is maybe considering an ordinance to allow accessory dwelling units or backyard cottages or laneway houses, you hear all these different words.
• 15:15
  SPEAKER_01: It can be pretty controversial.
• 15:18
  SPEAKER_01: And I think a lot of it comes down to you hear people talking about, well, you know, uh, we just don't want renters.
• 15:26
  SPEAKER_01: You know, renters.
• 15:28
  SPEAKER_01: And when when I hear people talk about in my town, it's like 48% of households are renters.
• 15:35
  SPEAKER_01: It's like renters, when you talk about half the people in town, it's kind of that's that's really these are your neighbors.
• 15:43
  SPEAKER_01: Relax.
• 15:45
  SPEAKER_01: I think one of the reasons why folks get upset about the prospect of renters is they may be remembering when they rented and the sort of behavior they engaged in.
• 15:57
  SPEAKER_01: Maybe it's that.
• 15:59
  SPEAKER_01: But I think more realistically, I think the we put so much emphasis on homeownership that it's you're graduating into being a real grown-up, right?
• 16:11
  SPEAKER_01: So somehow, if you have signed three-quarters of an inch of mortgage paperwork without reading it, you're somehow a better person.
• 16:20
  SPEAKER_01: And at that point, with you know, 5% down, you're basically renting with bank debt.
• 16:25
  SPEAKER_01: You know, it's like it's you're not that special, you know.
• 16:29
  SPEAKER_01: Or that somehow, if someone is renting over someone else's garage, we'll see the collapse of civilization and your property values will dive.
• 16:38
  SPEAKER_01: And, you know, uh, so it's uncertainty.
• 16:41
  SPEAKER_01: People are worried about change.
• 16:42
  SPEAKER_01: The uh, what about parking?
• 16:45
  SPEAKER_01: What about all the traffic that will be generated by nurses having to go to the hospital?
• 16:49
  SPEAKER_01: You know, it's like so it isn't, it isn't right.
• 16:53
  SPEAKER_01: The opposition of this is almost never rational.
• 16:56
  SPEAKER_01: It's always kind of emotional.
• 16:59
  SPEAKER_01: And uh my wife explained to me that humans are incredibly social and are capable of tremendous emotional investment, and are also capable of rational thought if they feel like it.
• 17:13
  SPEAKER_01: And and that's not what's going on in a lot of these when it's more controversial.
• 17:20
  SPEAKER_01: And so once somebody actually builds a few and people see that it's fine, then things smooth out.
• 17:29
  SPEAKER_01: You'll often see a city council adopt a requirement that, well, you can have an ADU, you can build a cottage in your backyard, but either the cottage or the house has to be occupied by the owner, otherwise it's the end of the world, you know.
• 17:46
  SPEAKER_01: And those things almost never get enforced, but they're kind of put in as a some sort of feel-good measure.
• 17:55
  SPEAKER_01: I mean, realistically, if you have to move away to take care of your mom in the next town and you could rent out your house, but the cottage in the backyard has to be vacant, it's just dumb.
• 18:06
  SPEAKER_01: So the so the the I think the the big challenge is to kind of get things calmed down, build some good examples, people can see it on the ground, it's fine.
• 18:21
  SPEAKER_01: And I think that being able to have a lot more flexibility in the way that you bit as builders, the idea that we could build two-bedroom, two-bath houses that had the third bedroom over the garage, and people's mortgage was less because they were renting out over the garage, it was like it was a product line nobody else had.
• 18:41
  SPEAKER_01: And, you know, we had a waiting list out the door.
• 18:44
  SPEAKER_01: I think it's a it's a good way to exp it's a good way to um serve a lot of latent demand to people that want it but can't find it anywhere else.
• 18:56
  SPEAKER_01: And if you're looking at just the conventional kind of single-family subdivision, townhouses, garden apartments, and the like, a lot of folks end up kind of settling for their least worst option.
• 19:09
  SPEAKER_01: And it's a huge amount of money involved.
• 19:12
  SPEAKER_01: There's a lot of pressure.
• 19:13
  SPEAKER_01: And I think to if you can have a little bit more room in how your buildings, building or buildings work together, I think that's all to the good.
• 19:22
  SPEAKER_01: So we're big fans of ADUs.
• 19:24
  SPEAKER_01: We built a lot of them.
• 19:27
  SPEAKER_01: We did do some backyard cottages, but for the most part, we did units over the garage.
• 19:31
  SPEAKER_01: So the which is almost a no-brainer.
• 19:36
  SPEAKER_01: Our standard garage was like 26 by 24 deep, and the and the and so you'd put a standard two-car garage door, and then to one side you'd have a hunk of wall big enough to put your utility meters on.
• 19:51
  SPEAKER_01: And then along the side was a door and a stair bay, take you upstairs, a little one-bedroom studio, and you can park right next to your garage.
• 20:00
  SPEAKER_01: It it's not like we were inventing cold fusion or anything.
• 20:03
  SPEAKER_01: People have been building this stuff for years, they just kind of got out of practice.
• 20:08
  SPEAKER_01: So I think that the well, what's happening in my neighborhood since they're little seven and eight hundred square foot houses, is people are adding on to the house to make it like a three-bedroom, two-bath.
• 20:19
  SPEAKER_01: They have a master suite, and then they'll have a door that locks that goes to the master suite.
• 20:25
  SPEAKER_01: Master suite has a like an eight by nine uh bathroom big enough for a stock washer, and a little galley kitchen, which is not a kitchen, it's a heck of a wet bar, and a little porch to the outside, and they'll rent that out separately, or they'll move into it.
• 20:40
  SPEAKER_01: And now they get enough square footage to get to a larger ADU.
• 20:46
  SPEAKER_01: So you end up with what's essentially kind of a stealth triplex.
• 20:50
  SPEAKER_01: And for and you're able to uh today's mortgages you can Fannie Mae, Freddie Mac, VA, FHA, if you have two or more units like on the one property, the standard mortgage that all those entities write will allow you to claim 75% of the gross rent toward your income to qualify.
• 21:16
  SPEAKER_01: So instead of white knuckling it with two people that absolutely have to have a job, otherwise they lose the house, you could have one person with a job and your real estate helping you qualify.
• 21:29
  SPEAKER_01: And you could end up with, you know, your share of the mortgage payment could be a couple hundred a month, takes a lot of pressure off, makes room for exotic things like daycare and medical insurance.
• 21:41
  SPEAKER_01: So again, not rocket science, but I think uh a really stable, straight ahead kind of way to uh to do things.
• 21:51
  SPEAKER_01: You'll often see them more popular in existing older neighborhoods with small houses uh rather than new subdivisions.
• 22:00
  SPEAKER_01: Particularly if the new subdivision has the garage sticking out the front, you know, it's it's an awkward arrangement to add a little building in the back.
• 22:08
  SPEAKER_01: But if you've got if you're building your new subdivisions with alleys, it's a breeze.
• 22:12
  SPEAKER_01: So we would typically build on like 36 or 40 by 90 or 100 lot with an alley in the back.
• 22:20
  SPEAKER_00: So one thing, as I'm I wrote a few things down here as you were talking, because it feels like these can serve multiple different purposes.
• 22:28
  SPEAKER_00: I mean, you've got the concept of people looking to rent at something that they can afford.
• 22:34
  SPEAKER_00: Uh, you can provide that housing to those individuals.
• 22:37
  SPEAKER_00: You also have maybe some of these, well, whether they're existing homeowners or maybe for even first-time home buyers who can have some rental income to help them be able to afford the house, or like you said, not necessarily have to have both of the people living in the household or everybody in the household actually having to hold down a steady position or a steady job.
• 23:00
  SPEAKER_00: And so that all makes sense to me.
• 23:02
  SPEAKER_00: I'm curious if there's any are there any reasons or situations where ADUs don't necessarily make sense, or maybe there's better options other than ADUs?
• 23:11
  SPEAKER_01: Aaron Ross Powell, there are situations where the prospect of even considering an ADU will get you several crazy hostile people on the city council for several years.
• 23:21
  SPEAKER_01: If people are upset about this, it's almost glandular.
• 23:25
  SPEAKER_01: You know, it's the one issue they're running on.
• 23:28
  SPEAKER_01: They're ruining our neighborhood with renters.
• 23:30
  SPEAKER_01: And it's like, they're not.
• 23:32
  SPEAKER_01: You know, so it's a it's a hypey thing.
• 23:35
  SPEAKER_01: And I think people would be well advised to understand the audience.
• 23:40
  SPEAKER_01: And, you know, if you're in a situation where you think it's a really swell idea, but you're going to be kicking a hornet's nest, you should, you know, you should reconsider.
• 23:50
  SPEAKER_01: In terms of places where they don't make sense, that may be more of an issue of uh uh infrastructure where you're on minimal lots that have septic, and if you try to put another building in, you don't have room to expand the septic field or something.
• 24:07
  SPEAKER_01: So you know, there could be some kind of hidebound situation where it doesn't work.
• 24:13
  SPEAKER_01: In Portland, Oregon, where we live for a couple years, there's an outfit that would jack up houses and, you know, uh off of a crawl space and make a full basement, and then they would finish the basement and set up an egress well, and now it's a duplex, or you know, or an ADU underneath the principal house.
• 24:32
  SPEAKER_01: So there are a lot of different ways to do it.
• 24:34
  SPEAKER_01: I think the uh where things get complicated is if you decide that, well, we could have a bazillion people living here, so if you're going to build an ADU, you need to have three parking spaces off street.
• 24:47
  SPEAKER_01: Or, you know, wouldn't be a big deal to tap the sewer from your ADU into your service for the house.
• 24:56
  SPEAKER_01: You know, just run it around the outside and bring it in.
• 24:58
  SPEAKER_01: But there are municipalities who say, oh, they have to have their own dedicated utilities.
• 25:03
  SPEAKER_01: You know, so it doesn't take much to load up enough extra cost onto a little cottage that it the juice isn't worth the squeeze.
• 25:13
  SPEAKER_01: And so and that's really a function of kind of the you see a lot of people that really do need to have a kind of a one-size-fits-all way to approach regulating things.
• 25:24
  SPEAKER_01: And that always ends up with something that, no, it one size does not in fact fit all.
• 25:30
  SPEAKER_01: Places that will allow you to count the parking spaces on at the curb toward whatever number that you're supposed to have make it a lot easier.
• 25:41
  SPEAKER_01: And if there is no alley, then a corner lot makes it a lot easier to uh to do this.
• 25:46
  SPEAKER_01: If you're on like 36 or 40 foot lots with like a bypass driveway, older, older houses, it can still work, but you know, it's uh it takes a little more tailoring.
• 26:00
  SPEAKER_01: I I don't think it's like the universal cure.
• 26:03
  SPEAKER_01: I think it's one of a number of solutions we should be trying as often as we can.
• 26:08
  SPEAKER_01: The thing is that if your municipality is not ready to take that kind of baby step, probably want to find another town to work in.
• 26:16
  SPEAKER_01: Because if you're trying to do if you're trying to do something more substantial or more different and they can't get their arms around an ADU, they need to see you build somewhere else and invite you back rather than you don't want people to sort of begrudgingly accept this under duress.
• 26:33
  SPEAKER_01: Nobody's gonna do their best work, you know?
• 26:36
  SPEAKER_01: And it doesn't take much to gossip it up into some horrible end-of-the-world scenario.
• 26:41
  SPEAKER_01: So it's emotional.
• 26:43
  SPEAKER_01: People are are then told that protecting their property values is something that I think you people figure they have a license to be a real jerk if they're talking about protecting their property values.
• 26:57
  SPEAKER_01: And I and I think that communication suffers when when we take on those kind of positions.
• 27:03
  SPEAKER_00: One thing I want to I have one more thought here on this same topic, and then I'd like to get into the pocket neighborhoods, but on the ADUs, one thing I was thinking about coming into the conversation was we see a lot of new communities being built and a lot of single-family residential communities that are built, and they're they're somewhat spread out, right?
• 27:20
  SPEAKER_00: These big master plan communities and everything.
• 27:22
  SPEAKER_00: I always wondered what those would look like or could look like if something like ADUs were built into the concept.
• 27:32
  SPEAKER_00: And are people do do any developers do that?
• 27:34
  SPEAKER_01: Oh, yeah.
• 27:35
  SPEAKER_01: No, there's there's a whole subspecies of developers that are doing traditional neighborhood development, TNDs, new urbanism, walkable communities, and they're a standard part of the toolkit, you know, along with duplexes and row houses and mixed-use buildings and stuff.
• 27:52
  SPEAKER_01: So and the uh we put uh the plans that we built up on a stock plan site called Liberty House Plants, and it's a very well-curated site.
• 28:03
  SPEAKER_01: A lot of stock plant sites are like thousands of terrible houses and a couple of good ones.
• 28:07
  SPEAKER_01: These are all really good.
• 28:09
  SPEAKER_01: And so uh that we've seen some municipalities put together like a collection of plans that are uh pre-reviewed.
• 28:18
  SPEAKER_01: You know, so if you want to do an ADU, here's five.
• 28:21
  SPEAKER_01: Some places will even give you the plan the plans for free.
• 28:25
  SPEAKER_01: Or it's already been through the whole plan check process, and all you need is a site plan to pull a building permit.
• 28:31
  SPEAKER_01: Creating ways that not just make the barriers not too terrible, but creating ways that actually encourage this.
• 28:40
  SPEAKER_01: We're seeing a lot of that.
• 28:42
  SPEAKER_01: Both for infill and for new greenfield projects where, you know, that's a uh the ADUs and the other building types, the other kit of parts are in common use.
• 28:51
  SPEAKER_01: And they appeal to, you know, I I live in Fulton County, Georgia, where Atlanta is, and 32% of households in Fulton County have one person in them.
• 29:02
  SPEAKER_01: And those people are living in three-bedroom, two-bath houses because they can't find a one-bedroom or an ADU.
• 29:10
  SPEAKER_01: Uh so I think that there are big segments of the market that are not well served, uh, smaller households.
• 29:17
  SPEAKER_01: One person, one person plus one kid, two adults.
• 29:21
  SPEAKER_01: This market is maybe 25% mom, dad, and kids, and 75% a whole lot of something else.
• 29:28
  SPEAKER_01: And I think that people's commitment to a house, to a neighborhood is significant enough that they ought to have real choices.
• 29:36
  SPEAKER_01: And ADUs uh can help flesh out that range of choice.
• 29:41
  SPEAKER_01: If you make everybody drive an F-150 and nobody can buy a Mini Cooper, and people have to settle for an N1 F-150, if you're buying an F-150, you should really want an F-150 and not a Mini Cooper, you know.
• 29:54
  SPEAKER_01: Of course, Mini Cooper are a little more expensive per the pound.
• 29:57
  SPEAKER_01: So, I mean, with an ADU, the ratio of like expensive space you're building, kitchens and bathrooms to other is higher.
• 30:07
  SPEAKER_01: So you're they're they're gonna cost a little more than the housewood to build.
• 30:11
  SPEAKER_01: But on a rental basis, they're almost always a home run.
• 30:15
  SPEAKER_01: Or if you will need to split your house into a place where you work and a place where you live, rather than you have a corner of the living room you're working in.
• 30:23
  SPEAKER_01: An ADU is a great solution.
• 30:25
  SPEAKER_00: Well, let's dig into pocket neighborhoods now.
• 30:27
  SPEAKER_00: So this is something where it feels like you get a lot of older communities, I feel like, are set up in a way where you have the road going, you have the road in between, you know, uh some houses, but then you have the alleys where you generally would have find a garage or you'd park and you'd actually enter the home from the either through the garage on the backside of the home.
• 30:48
  SPEAKER_00: And is that essentially what these pocket neighborhoods are, or is there a different way you'd define them?
• 30:55
  SPEAKER_01: Well, the term pocket neighborhood came up when somebody was touring one of Ross Chapin's projects in the in the Seattle area.
• 31:03
  SPEAKER_01: It's like a little neighborhood I could put in my pocket.
• 31:06
  SPEAKER_01: And it it really refers to kind of the scale and the idea that if it's houses facing a street with maybe an alley in the back or driveways, this the scale of the street is modest and people drive slow.
• 31:19
  SPEAKER_01: And and now the street actually becomes like a public space that's the it's like an outdoor room formed by the buildings.
• 31:29
  SPEAKER_01: So you'll see pocket neighborhoods that might have two or three cottage courtyards incorporated into them and some places where buildings meet the street and behave differently.
• 31:40
  SPEAKER_01: But Ross's book on pocket neighborhoods has great materials and great examples from projects built by a lot of people all over the country.
• 31:50
  SPEAKER_01: Now, a cottage court or a bungalow court is a thing that comes to us from built in the 1910s, where you'd have houses arranged around a common courtyard, forming that outdoor room.
• 32:03
  SPEAKER_01: So you have little detached houses or maybe duplexes.
• 32:07
  SPEAKER_01: In some ways, it's like a deconstructed apartment building with a bunch of little cottages.
• 32:13
  SPEAKER_01: So you you now you don't have a common wall or ceiling and floor with somebody else.
• 32:18
  SPEAKER_01: You probably have a little private side yard, a little patio fenced off that you can lay your dog out at three in the morning to pee.
• 32:24
  SPEAKER_01: Plus, your front porch faces this courtyard, which is landscaped on purpose.
• 32:30
  SPEAKER_01: Parking is convenient, fire trucks can get through.
• 32:34
  SPEAKER_01: And we like to we built almost 90 units in in cottage courts of eight to ten in California, in Chico and Reading before 2008.
• 32:47
  SPEAKER_01: Since then I've only been involved in cottage court projects for rent.
• 32:52
  SPEAKER_01: Because in many places you end up having a like a condo or an elaborate homeowner association, and it's it's a lot of a lot of brain damage.
• 33:02
  SPEAKER_01: Also, we found that the when we built them for sale, they were very popular with single professional women aged 40 to 60.
• 33:11
  SPEAKER_01: And they had very high expectations.
• 33:14
  SPEAKER_01: I got the definite impression that they were hoping that their little cottage, two-bedroom, two-bath, just them, that their little cottage would be like a Bavarian automobile and everything would be just right.
• 33:26
  SPEAKER_01: Because they'd seen Ross's project and fine home building and stuff.
• 33:31
  SPEAKER_01: And we were building in the Central Valley of California, building these things out of wood with a crew of dyslexic parolees.
• 33:39
  SPEAKER_01: So they were not going to be BMWs.
• 33:43
  SPEAKER_01: You know, we were going to have warranty issues and stuff.
• 33:45
  SPEAKER_01: And so the residents of the cottage court would form the bonds of community really quickly.
• 33:52
  SPEAKER_01: And if somebody's water heater made a funny noise, suddenly nine people's water heater was making a funny noise, and we needed to get on top of it and take good care of people.
• 34:01
  SPEAKER_01: So in the end, if someone resold in four or five years, they would make three or four times what we made, and we took all the risk.
• 34:09
  SPEAKER_01: Plus, you know, we had to spend a lot of time in windowless conference rooms explaining to appraisers what this new product was.
• 34:17
  SPEAKER_01: When it came time after 2008 to build cottage courts for rent, I mean, we have a project in Ocean Springs, Mississippi called Cottage Square, which got started as a recovery housing after Katrina.
• 34:31
  SPEAKER_01: And the zoning for that was highway commercial, which also allows multifamily professional office, drive-in banks, whatever.
• 34:40
  SPEAKER_01: So there's a barber shop in a cottage, there's a hair salon in a cottage, there's a marriage and family counselor in a cottage, there's an architect's office in a cottage.
• 34:48
  SPEAKER_01: And then the other 28 cottages are people living there, one and two bedrooms.
• 34:54
  SPEAKER_01: And what we found was that, you know, the nearest kind of direct competition were you could get a one-bedroom that was almost 800 square feet, kind of back-to-back in a garden apartment, eight-foot ceiling, popcorn ceiling.
• 35:09
  SPEAKER_01: Uh, they had taken the steps of upgrading with greyge vinyl luxury vinyl plank and replaced the the uh cabinets and put in granite counters.
• 35:20
  SPEAKER_01: But otherwise, it's kind of a commodity apartment build.
• 35:25
  SPEAKER_01: And those are 900 bucks a month.
• 35:27
  SPEAKER_01: We were renting for 950 for 400 square feet, one bedroom with a little porch out the front.
• 35:33
  SPEAKER_01: What we were building was very appealing to the market.
• 35:36
  SPEAKER_01: It was affordable to local workforce, and it was a big hit, and when people would renew every year.
• 35:42
  SPEAKER_01: And if we wanted to change the landscaping in the courtyard or replace some trees or put down some more crushed limestone somewhere, we just do it.
• 35:50
  SPEAKER_01: We're the landlords, you know.
• 35:52
  SPEAKER_01: We don't have to do a committee thing.
• 35:55
  SPEAKER_01: And I think the a cottage court like that, again, eight to ten units, in some ways is like the gateway drug for someone getting started in development.
• 36:04
  SPEAKER_01: It's not like you're building uh an eight-plex where the whole building has to get a C of O before you can lease anything.
• 36:11
  SPEAKER_01: You get one cottage built, get a C of O, you can rent it out.
• 36:15
  SPEAKER_01: They're typically not requiring, outside of California, they're not requiring fire sprinklers.
• 36:20
  SPEAKER_01: You know, once you get to three units or more, you're moving into the commercial, the international building code rather than residential.
• 36:26
  SPEAKER_01: So things get expensive.
• 36:29
  SPEAKER_01: But you're providing actually a superior product to an apartment building.
• 36:34
  SPEAKER_01: And your tenants uh appreciate the difference.
• 36:36
  SPEAKER_01: They pay a premium rent, they renew, and they feel more connected to each other.
• 36:42
  SPEAKER_01: It's not someone you say hello to in a long hallway.
• 36:46
  SPEAKER_01: You're you're out in kind of a a little more elevated space.
• 36:50
  SPEAKER_01: It also is a beautiful kind of a postcard shot, and the same people that might want to ride you out of town on a rail because you wanted to build apartments for renters.
• 36:58
  SPEAKER_01: I don't like to use the term like tiny house because that in the building code that includes like houses on wheels.
• 37:06
  SPEAKER_01: But a cottage just I mean, you think about it.
• 37:09
  SPEAKER_01: It's like a cottage is intentionally like cute and cozy on purpose.
• 37:15
  SPEAKER_01: Yeah, it is smaller, but it's cute and cozy.
• 37:19
  SPEAKER_01: And it's not for everybody, but for some people, it's just the it's the it's the house they've always wanted.
• 37:26
  SPEAKER_01: And these days, um it's not that hard to, you know, get a construction loan for five or more units and to get a permanent mortgage for it from Fanny or Freddie, or you know, a debt service coverage ratio loan.
• 37:41
  SPEAKER_01: We're looking at them in places where, just outside of a metro area where the U.S.
• 37:46
  SPEAKER_01: Department of Agriculture will, uh, for a fee, sell you a 90% loan guarantee for multifamily.
• 37:53
  SPEAKER_01: And then they're they're thinking that they need the income, the rents to be affordable to somebody at 100% of area median income, but they will use the area median income from the larger metro.
• 38:05
  SPEAKER_01: So one of the projects we're looking at, one bedroom cottage, you know, 500 square feet rents for 1800 bucks.
• 38:12
  SPEAKER_01: It would be okay to rent that for$2,300 and still be underneath the cap that the Department of Agriculture has.
• 38:20
  SPEAKER_01: But market rate is going to be 18.
• 38:23
  SPEAKER_01: So you're basically getting a federal guarantee on a project that's building market rate housing.
• 38:29
  SPEAKER_01: Just happens to be like in the small town, you know, five miles out of the big town.
• 38:34
  SPEAKER_01: So we're looking at that in a number of locations around the country with local people doing it.
• 38:39
  SPEAKER_01: I'm just shipping them the Proforma and helping them with the site plan and stuff.
• 38:43
  SPEAKER_01: The key to all this is always going to be forum follows finance, parking, and fire access.
• 38:50
  SPEAKER_01: And then the building should look good.
• 38:51
  SPEAKER_01: But if you don't get those other ones in place, you don't get a chance to have good-looking buildings.
• 38:56
  SPEAKER_00: What about the the density of these?
• 38:59
  SPEAKER_00: So obviously, if you're in apartments, then everything's attached together.
• 39:02
  SPEAKER_00: And so it's all it's all touching anyway.
• 39:04
  SPEAKER_00: So when it comes to like privacy and density and stuff like that, I'm curious how in these cottage court or these pocket neighborhoods, do you run into any issues with people concerned from a privacy standpoint or anything like that when they're really packed together?
• 39:16
  SPEAKER_01: Aaron Powell Well, they're they're not really packed together.
• 39:18
  SPEAKER_01: You want room in between.
• 39:20
  SPEAKER_01: Okay.
• 39:20
  SPEAKER_01: And also if you do it right, what we do is with each one of our floor plans, we have what's called an active side, which is full, you know, as many windows as you want, and a passive side, where if there are windows, the sill is set at six feet above the floor.
• 39:36
  SPEAKER_01: So the one with the with the windows facing the other one gets to use all the way up to the wall of the building, like a zero lot line, except they're separated enough that you don't have to have rated walls.
• 39:48
  SPEAKER_01: So you got a 10 or 12 foot side patio, and it's fenced in the front and it's private.
• 39:53
  SPEAKER_01: So you have the courtyard, you have your front porch, which is kind of semi-public.
• 39:58
  SPEAKER_01: You know, you're available for conversation.
• 40:01
  SPEAKER_01: If you don't like that guy, you can go inside or you can go inside and go out the kitchen door and be on your private patio.
• 40:08
  SPEAKER_01: So you have a lot of options.
• 40:10
  SPEAKER_01: And but density has always bothered me that people give it so much weight.
• 40:16
  SPEAKER_01: It's like, I mean, technically, I have the same density as Brad Pitt.
• 40:21
  SPEAKER_01: Not quite six feet tall, you know, male white guy.
• 40:28
  SPEAKER_01: Somehow the way the pattern that Brad Pitt is arranged in is apparently more financially rewarding than me.
• 40:36
  SPEAKER_01: But zoning, like white guy one each, you know.
• 40:39
  SPEAKER_01: I mean, the the obsession with like counting dwelling units per acre as if it means something and arguing about, oh, twelve is too much and eight is maybe okay, but Goldilocks would be nice.
• 40:52
  SPEAKER_01: It's like do we really need to engage in that level of abstraction about building places that are worth caring about?
• 40:59
  SPEAKER_01: I don't think we do.
• 41:01
  SPEAKER_01: Aaron Ross Powell We can deliver cottage courts at a range of 12 to 24 units to the acre without them touching.
• 41:09
  SPEAKER_01: So it's basically townhouse to garden apartment yields, but a completely different experience.
• 41:16
  SPEAKER_01: The the pattern is different.
• 41:17
  SPEAKER_01: Aaron Ross Powell And if there is a uh a density limit, then maybe you build on half the site and wait for the, you know, for the zoning to change so you can build on the other half because you've demonstrated that no one died.
• 41:32
  SPEAKER_01: And I think that when projects come through and it's all about arguing about the number of units per acre, mostly people have forgotten what the buildings look like.
• 41:42
  SPEAKER_01: And so it's a little bit like having a tax code conversation with someone who has actually read the tax code.
• 41:48
  SPEAKER_01: I hear I'll have to pay taxes.
• 41:50
  SPEAKER_01: It's like, well, yeah, but it's in this chapter here.
• 41:52
  SPEAKER_01: I don't want to read that.
• 41:53
  SPEAKER_01: I think that the cute and cozy little houses forming uh an outdoor room.
• 42:00
  SPEAKER_01: What you see happen when people kind of walk into that courtyard is they like they lower their voice because it they're aware that they're kind of on someone else's turf.
• 42:08
  SPEAKER_01: And there's a level of uh, like I say, eight to ten units is nice for a courtyard.
• 42:14
  SPEAKER_01: You get closer to twelve and people become a little more uh standoffish, a little more anonymous.
• 42:21
  SPEAKER_01: So if you were going to do multiple ones, you might string them together with like a passage or paseo, but they're each kind of distinct.
• 42:28
  SPEAKER_01: Plus, also it makes it really easy to phase.
• 42:32
  SPEAKER_01: In a lot of the planning textbooks and stuff, you'll see cottage courts is like a really tidy rectangle.
• 42:38
  SPEAKER_01: And what we find is that it works better if you have some random amoeba-shaped lot with a couple of mature trees and some topo and stuff, because you're working with small footprint buildings and doing cool stuff.
• 42:51
  SPEAKER_01: You know, compared to mass creating for garden apartments and losing all the trees and all that.
• 42:58
  SPEAKER_01: And we're also able to, you know, you could find sometimes a piece of land that's zone multifamily or townhouse or something where you could do this, where if you build it, people could walk to exotic stuff like daycare and$2 coffee.
• 43:13
  SPEAKER_01: Which to my mind, that's like a real amenity versus the apartment complex with this kind of a janky swimming pool nobody uses.
• 43:22
  SPEAKER_01: But you still got to pay to build it, operate it, insure it.
• 43:25
  SPEAKER_01: And it's just there as a tiebreaker kind of, well, I'm not gonna use it, but my grandkids might, so I'm gonna rent there because that is a pool and that one doesn't.
• 43:34
  SPEAKER_01: And I think that a lot of a, you know, the big apartment complexes that are big enough to have on-site management, it's you know, it becomes kind of a commodity form of housing.
• 43:45
  SPEAKER_01: You know, no one really has an address.
• 43:47
  SPEAKER_01: Nobody's unit is unique.
• 43:49
  SPEAKER_01: The hallway in between, nobody rents in that apartment because they love the hallway.
• 43:54
  SPEAKER_01: And I think also cottage courts are typically one, one and a half story building.
• 44:00
  SPEAKER_01: Buildings, sometimes two, or somebody that wants to live on one level, have a little garden, have a dog, have neighbors.
• 44:05
  SPEAKER_01: They pay a little bit more per square foot in rent, but they do it gladly.
• 44:09
  SPEAKER_01: So we're happy to help them with that.
• 44:11
  SPEAKER_00: Are there any other things that you think a developer out there who might be listening that may be considering doing their first cottage court project?
• 44:19
  SPEAKER_00: Is there anything else that they need to be thinking about or anything like that before they take on a project like this?
• 44:24
  SPEAKER_01: Aaron Powell I think when you branch out into new product, you need to keep your kind of the scale of your project kind of modest.
• 44:31
  SPEAKER_01: And you want to keep the level of complexity kind of tapped down because there's a lot of learning to go through, particularly if it's if you're the first person doing it in your area.
• 44:41
  SPEAKER_01: So if somebody was used to doing small lot subdivisions or townhouses, or even garden apartments, if they were used to doing it that way, I think they should be really rigorous and you know run in parallel.
• 44:55
  SPEAKER_01: Like use my townhouse project.
• 44:57
  SPEAKER_01: If I did the same land and I did with this cottage court, what do the numbers look like?
• 45:01
  SPEAKER_01: What's the utility installation?
• 45:03
  SPEAKER_01: And this one I'm gonna I would do townhouses, I would sell them.
• 45:07
  SPEAKER_01: I do cottage court, I would hold on to it.
• 45:09
  SPEAKER_01: How do the taxes work with that?
• 45:11
  SPEAKER_01: So I think rather than just I like the look of this, I'm a capable builder, I want to try it.
• 45:17
  SPEAKER_01: I think sort out the business case.
• 45:20
  SPEAKER_01: If you're a townhouse builder and you used to sell in townhouses, cottage court's probably not gonna be a good deal because your cottage court buyers are gonna be much more demanding than your townhouse buyers were.
• 45:31
  SPEAKER_01: And also your trades and everything you're talking about, introducing a new product.
• 45:36
  SPEAKER_01: So uh I would look at it as the opportunity to expand and add to your toolkit.
• 45:43
  SPEAKER_01: Because there are gonna be some places that just townhouses are not gonna work, but a cottage court physically might make more sense.
• 45:49
  SPEAKER_01: Also, when you think about like the spectrum of all possible developers, right?
• 45:54
  SPEAKER_01: Between like Gandhi and Darth Vader, and people talking about, oh yeah, there's a developer gonna come talk to the city council.
• 46:03
  SPEAKER_01: Everyone's expecting someone from the vicinity of Darth Vader, like a villain, a guy in a nice suit with a leased car and a briefcase from out of town, right?
• 46:13
  SPEAKER_01: And oh, you know, those people.
• 46:16
  SPEAKER_01: And so if you're the local small operator and you're doing things like cottage courts and infill and the like, your job is to have enough daylight between you and that guy so that people actually support your projects and are happy when you build them.
• 46:33
  SPEAKER_01: So your job's not actually to be like, you know, Gandhi the perfect human developer.
• 46:39
  SPEAKER_01: Your job is to be like a noticeably less shitty version of Darth Vader.
• 46:43
  SPEAKER_01: You know, where local folks like, well, if it's gonna get developed, I'd really like for Janine and Jeff to do it because, you know, they that cottage court where my mother-in-law lives, that they did it right.
• 46:54
  SPEAKER_01: So it's a product that it can be part of your identity as a builder.
• 46:58
  SPEAKER_01: It can happen on smaller lots than would be necessary for, say, townhouses or garden apartments.
• 47:05
  SPEAKER_01: It'll get good social media.
• 47:08
  SPEAKER_01: And also the the sort of folks that move in there tend to recruit their neighbors, you know.
• 47:12
  SPEAKER_01: So someone works at the hospital and they can live three blocks away in a cottage court, before you know it, it's full of nurses.
• 47:19
  SPEAKER_01: And they're happy to be there and happy to renew the or the traveling nurses come through and the like.
• 47:24
  SPEAKER_01: And if you're gonna be doing, you know, short-term rentals, having one or two that you do short-term, and the rest of them you do as a regular rental project, you know, it's not hard to imagine that.
• 47:34
  SPEAKER_01: But folks that are used to building and selling and paying ordinary income tax on their profit from building, the idea that you could have a small portfolio of rental properties that have a lot of tax advantages is usually big news.
• 47:49
  SPEAKER_01: It's like, tell me again how that works.
• 47:51
  SPEAKER_01: Is that legal?
• 47:52
  SPEAKER_01: No, no.
• 47:53
  SPEAKER_01: When you refinance it, it's like getting your uh home equity loan, you don't pay taxes on your home equity loan, you know, when you refi.
• 48:00
  SPEAKER_01: And for the most part, you'll see that the cash flow that comes after paying your expenses and your debt service, that that money is going to be sheltered by your depreciation anyway.
• 48:11
  SPEAKER_01: So if you're making 50 grand a year off your cottage court, it's gonna be tax-free.
• 48:16
  SPEAKER_01: And also you still own the asset, right?
• 48:18
  SPEAKER_01: So if your project is like the whole neighborhood and things are getting better all the time, each project has the pencil, but there's kind of a flywheel effect and and rising values.
• 48:32
  SPEAKER_01: You end up with equity in the property that you could borrow against if you want to start another project.
• 48:38
  SPEAKER_01: Like I say, gateway drug for small, small developers.
• 48:42
  SPEAKER_00: Well, I think at this point, just based on where we're at time-wise, I'd like to shift into the last segment.
• 48:46
  SPEAKER_00: So to keep this episode consistent with all the other ones, I've got five questions for you, and they're all going to be pretty much on topic of what we've been talking about.
• 48:54
  SPEAKER_00: Just uh get your thoughts on a few things here.
• 48:56
  SPEAKER_00: So, first one for you do you prefer front porches or backyards?
• 49:03
  SPEAKER_01: I prefer both.
• 49:04
  SPEAKER_01: You do it right, you know.
• 49:07
  SPEAKER_01: The uh I mean the purpose of a front porch is to have people know that's how you get in the house, but also to cut the sun off of your living room windows.
• 49:18
  SPEAKER_01: And also the porch ought to be big enough to furnish so you could, you know, you don't have to entertain, but you could if you wanted to.
• 49:26
  SPEAKER_01: If there's too small and all it is is like cover to like fumble for your keys in the rain.
• 49:31
  SPEAKER_01: Or I see people all the time, they'll cut eight-foot material to put a four-foot porch on, and they have all the labor and all the material there already, they may as well do a proper porch.
• 49:41
  SPEAKER_01: Now, a backyard or a side yard should be set up so that you have more privacy than you would in the front.
• 49:48
  SPEAKER_01: So it really is a question of working with a pattern that can give you both.
• 49:53
  SPEAKER_01: More privacy in the backyard, uh, a good public space, and also when you think about I mean, we've all seen neighborhoods that with like two-car garage door, barely a man door, and kind of a window, and some lick and stick stone.
• 50:10
  SPEAKER_01: And there isn't even a a walkway that goes to the man door, it kind of jogs off of the parking pad.
• 50:17
  SPEAKER_01: And so, you know, you could and gee, people just, you know, everyone's parking in the front yard, there's a transform in the front yard, the street isn't really doesn't feel like a safe or public space.
• 50:31
  SPEAKER_01: And it should be a machine that sells real estate.
• 50:34
  SPEAKER_01: You know, if you flank the street with, you know, houses with porches and you have five-foot sidewalks and you have a planter strip with trees that provide shade and a place to park, that's a machine to sell real estate.
• 50:51
  SPEAKER_01: And if it's just a bunch of roll curb and parking spaces and transformers, that's like you know, the loading dot.
• 50:59
  SPEAKER_01: Let's go to number two here.
• 51:00
  SPEAKER_01: So do you prefer alleys or no alleys?
• 51:02
  SPEAKER_01: Alleys.
• 51:03
  SPEAKER_01: Alleys all the time.
• 51:05
  SPEAKER_01: But I don't like a single loaded alley, like on the edge of a property.
• 51:09
  SPEAKER_01: What we'll do there is we'll do a little stub alley, two of them, and then three lots on each side facing a common court.
• 51:18
  SPEAKER_01: Rather than front loading garages, uh we'll we'll use the stub alley scheme on the edge of the thing.
• 51:24
  SPEAKER_01: And we typically will do a 12-foot paved section in front of a 20-foot ride-of-year and have uh the utility easements.
• 51:32
  SPEAKER_01: We'll have 30 feet between the buildings back there so that people can make the turns.
• 51:38
  SPEAKER_01: I mean, you can store a lot more uh muscle cars under renovation off an alley than you can in your front yard.
• 51:45
  SPEAKER_01: And and also it sets it up so that a lot of municipalities won't collect trash in the alley anymore because they're using a robot truck.
• 51:53
  SPEAKER_01: So everyone has rolled their trash to the front.
• 51:55
  SPEAKER_01: But it used to be you could also run the uh trash cans to be in the alley too.
• 52:00
  SPEAKER_00: All right, third one.
• 52:01
  SPEAKER_00: If you could change one zoning rule, what would that be?
• 52:04
  SPEAKER_01: Aaron Ross Powell, I would remove the responsibility for city staff to guess how many parking spaces every possible use of this building would need until the end of time.
• 52:16
  SPEAKER_01: Because they're really bad at guessing and they make you build more parking than you need.
• 52:23
  SPEAKER_01: And it's just dumb because and they'll they'll overestimate because they don't want to get phone calls.
• 52:29
  SPEAKER_01: Right.
• 52:30
  SPEAKER_01: So now you're adding cost to the build for something that isn't necessary.
• 52:36
  SPEAKER_01: So regulate where it goes on the private lot, but however many or few you want to build as a builder, I don't have them telling me how many toilets or closets I'm gonna build, but somehow they're gonna tell me how many parking spaces I need.
• 52:48
  SPEAKER_01: It's nonsense.
• 52:49
  SPEAKER_01: And you have people that get really, really, really militant about parking for no apparent reason.
• 52:55
  SPEAKER_01: We get lots of problems to solve.
• 52:57
  SPEAKER_01: Parking is not one of them.
• 52:58
  SPEAKER_00: All right.
• 52:59
  SPEAKER_00: Fourth one.
• 53:00
  SPEAKER_00: You've worked with a lot of developers over the years.
• 53:02
  SPEAKER_00: What's something that developers tend to overthink?
• 53:04
  SPEAKER_01: Aaron Powell They tend to overemphasize the for sale element, even though they're gonna be doing some multifamily or some mixed use, because they see that as the early cash flow.
• 53:13
  SPEAKER_01: They have some prime lots they can sell, they can get things going.
• 53:17
  SPEAKER_01: I think they also, once you've decided that your capital source is gonna be more or less institutional, then you start making mistakes about how big.
• 53:28
  SPEAKER_01: You start tailoring your project to the financing.
• 53:31
  SPEAKER_01: You start amplifying the potential risks.
• 53:34
  SPEAKER_01: So I think that a lot of developers feel like they're comfortable with their product, but they're not good at analyzing risk, and they're not good at understanding how much additional risk comes when you use large amounts of money.
• 53:47
  SPEAKER_00: Aaron Powell All right, last one.
• 53:49
  SPEAKER_00: What do you wish more people would understand about land development?
• 53:52
  SPEAKER_01: Aaron Ross Powell, I wish more people, particularly elected officials and neighbors and staff, would understand the math.
• 54:00
  SPEAKER_01: You know, that you're at the Planning Commission and you wanted to do an eight-unit project, and for some reason you leave with five.
• 54:08
  SPEAKER_01: Again, for no apparent reason.
• 54:09
  SPEAKER_01: You know, somehow more neighbors is worse, you know, less neighbors is good.
• 54:15
  SPEAKER_01: And I think that understanding that you still have all the utilities to build, you still got a lot, everything to do, but by making it go from eight to five, it's now a project that's not going to happen because it doesn't pencil.
• 54:29
  SPEAKER_01: So I wish people understood the basic math and also understood the hoops you have to jump through, as opposed to we need more hoops for people to jump through because we can't be having people coming from out of town changing our town.
• 54:42
  SPEAKER_01: Let's give them some more hoops.
• 54:44
  SPEAKER_01: Of course, my daughter can't afford to live here and she's gonna have to move, you know, because it's really expensive to build a town here.
• 54:51
  SPEAKER_00: Well, John, I think that brings us to an end here.
• 54:53
  SPEAKER_00: I really appreciate you hopping on here and uh sharing some of your knowledge and experiences over the years and everything.
• 54:57
  SPEAKER_00: What's the best way for people listening in to connect with you?
• 55:00
  SPEAKER_01: Probably on LinkedIn.
• 55:02
  SPEAKER_01: It's initial R space John Anderson.
• 55:05
  SPEAKER_01: That's the easiest way to find me.
• 55:06
  SPEAKER_01: I'm also on Facebook, too, you know, for older folk.
• 55:12
  SPEAKER_00: There you go.
• 55:13
  SPEAKER_00: Well, I'll throw the links uh on the show notes page.
• 55:16
  SPEAKER_00: So if you guys listening in, look down in the description for this episode, you'll see a link there to the show notes page.
• 55:20
  SPEAKER_00: And on the show notes page, I'll put a link to the LinkedIn profile as well as your Facebook page.
• 55:26
  SPEAKER_00: You got another one?
• 55:27
  SPEAKER_01: Oh, I think also the I mean, the way that we work and we've taken it for granted for a long time, is that if you're doing an early like site plan, you should be doing an early pro forma at the same time.
• 55:39
  SPEAKER_01: You shouldn't get it all drawn and then give it to some finance guy who can't read drawings who says it doesn't work, and you go back to your architect and say, uh numbers guy says it doesn't work, can you guess again?
• 55:51
  SPEAKER_01: You know, for the same fee.
• 55:52
  SPEAKER_01: Uh that's not really fair.
• 55:54
  SPEAKER_01: And I think that bring the design and the money and the numbers up at the same time so that they can inform each other and and you're not left with a bunch of bad compromises just because it's a fantastic project, but it, you know, we can't afford it.
• 56:08
  SPEAKER_00: All right.
• 56:09
  SPEAKER_00: Well, anything else you want to add before we wrap up here?
• 56:12
  SPEAKER_00: No, I'm good.
• 56:13
  SPEAKER_00: Cat wants to be fed.
• 56:14
  SPEAKER_00: So there we go.
• 56:16
  SPEAKER_00: All right, guys.
• 56:17
  SPEAKER_00: That is all for this episode.
• 56:18
  SPEAKER_00: If you're not already subscribed, please click that button.
• 56:21
  SPEAKER_00: We'd love to have you back for the next one.
• 56:22
  SPEAKER_00: Otherwise, we will talk to you all next week.