Quote:
Originally Posted by Steely Dan
That's interesting, I've never thought it about that way before, but the bolded is probably why chicago still sees so much small unit-count multi-family construction.
It's not that developers out in the neighborhoods wouldn't build more intensely, if allowed, but because they can easily snatch up individual underdeveloped 25'/50'x125' lots and throw up a 3/6-flat as of right, as opposed to going through a costly and laborious entitlement process (not to mention all of the increased construction costs of elevators, structured parking, etc.), 3/6-flats get built around me with unsurprising regularity.
So a lot of it really is zoning.
And local building culture.
When you've got an entire cottage industry of small-time players that know how to build 3/6-flats (and make a modest profit doing so), and the path of least legal resistance is to just build more 3/6-flats, guess what?
you get more 3/6-flats.
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This is a major point that needs amplification. In older cities where traditional housing typologies never really died (though they did come close), like Philadelphia and Chicago, there is still a great deal of local expertise on how to build to these typologies, which makes pro formas for building new ones easy because the parties involve know how to do it. In cities where knowledge of how to build to these typologies is lost, the lack of knowledge makes attempts to build them seem risky to lenders who are unfamiliar with their economics...which then makes it impossible for these projects to pencil out because they're low-margin to begin with.
Which creates another problem. If a medium-sized developer specializing in this kind of housing (think
How Properties in Philadelphia) wanted to decide to diversify to another city where local knowledge of how to produce it has been lost, would they be able to get the money to do so? If not, would it not be amazingly risky for How's backers to lend them money to expand into a market the backers know nothing about? The only real way to transplant this knowledge might be to see developers specializing in this type of housing become large enough to finance entry projects in new markets entirely out of their own savings.