The Multifamily Market Heads Toward a More Sustainable Model- (Small Units in an Urban Location)

As we come out of the Great Recession, the pent up demand for housing has manifested itself in a steady drop in  vacancy rates nationwide.  Denver's multifamily market is already superheating, with small class B+  units selling at an all-time high of over $100k each.  (Don't try to do a condo split, however, no one will buy a studio condo even for $60k...it's a weird market)

Consumer demand has shifted to green, as a natural economic evolution.   Although today's renters may do a lot of recycling, and worry about global warming, but their personal bottom line rules their housing choice, not their carbon footprint.  They would prefer to live in a neighborhood close to amenities so they can do without a car, which saves a lot of time and money.  And if your neighborhood is lively, who needs a big home if you're never there?  So living greener can also be living cheaper.

http://www.multihousingnews.com/features/development/best-bet-for-building-small-units-in-an-urban-location/

As we mentioned last week, this trend will should also start showing up in the single family market since building on smaller lots has finally been re-legalized.

Denver's Zoning Now on the Cutting Edge

By now, anyone studying urban planning knows that cities brought wasteful sprawl upon themselves through idiotic policies, culminating in the "greatest mis-allocation of resources in the history of the world"

If cities are to heal themselves, we are unfortunately at the mercy of the same species that got us here, the zoners and planners.

The City of Denver recently adopted a new zoning code after a six year process.  A lot of  anti-sprawl policies were incorporated, however, some "neighborhood preservation" policies were included that tend to be anti-density and therefore pro-sprawl.

Rewriting the zoning code is difficult, because it's like answering the question, "How will our great grandchildren live, work, commute, and what do they want their city to be like?"  So Denver has taken a stab at it, and in some ways we're on to something.

A recent article predicts that the housing market will help revive our economy, but it's not your father's housing market anymore:
http://www.washingtonmonthly.com/features/2010/1011.doherty-leinberger.html

" the Great Recession has highlighted a fundamental change in what consumers do want: homes in central cities and closer-in suburbs where one can walk to stores and mass transit. Such “walkable urban” real estate has experienced less than half the average decline in price from the housing peak."   


Denver has responded to this change in the market by legalizing carriage houses for a few thousand lucky homeowners, and introducing tandem house zoning for some of the neighborhoods that used to be zoned for duplexes (R2).


During the recent real estate boom, many reasonably nice homes in gentrifying R2 neighborhoods were being demolished to make way for profitable duplexes.  Due to the limitations of the old R2 zoning, building a duplex was formerly the only way homeowners and infill redevelopers could take advantage of the changing demand.


Under the new tandem house and carriage house zoning,  a detached new home can be built to the rear or side of the lot without having to scrape the old house.  In fact, in the present economic climate, it would be very risky to scrape a performing asset and invest $500,000 to $1M in a speculative duplex.  Very few other cities now offer this new option, but those that do will have a clear economic development edge.  The livability of these neighborhoods will gradually improve, and home values should follow.

The Advantages of Neighborhood Photovoltaics

Here are three reasons to like PV mounted on Denver houses, even though it's expensive:

1.  Transmission losses - - Although grid-tied PV needs a functioning grid, most of the PV kilowatthours generated at a PV-equipped house stay in the neighborhood and aren't diminished by transmission losses which are usually quoted at 30%.

2.  Autonomy - - Let's say you are building a spec house that you want to have low net energy usage.   If you install PV, you have added value to that house.  If Xcel invests directly in wind energy, that doesn't help you or your buyer.

3.  Utility power outage avoidance - - Once PV market share reaches a crucial point, the Xcel will see the potential of outage avoidance that distributed PV inherently has.  At that point they will start providing direct inverters and distributed batteries.  Utilities receive big rewards for reducing outages.

In Colorado, Xcel is required by law to reach 30% renewable energy by 2020.  Neighborhood PV is one of the top 3 ways this will happen, partly because it's easy and incremental compared to larger, more cost effective but cost intensive measures.

Is a Renewable Energy Portfolio Standard an artificial incentive?  Of course it is, but until a carbon tax is implemented, there is no other incentive to reduce the use of fossil fuel.