Over at the 100K House Blog, Nic Darling starts a discussion about the problems of marketing small houses, and the problem of "educating" buyers. He writes that buyers follow a series of steps:
- Step 1 -Price
- Step 2 - Location
- Step 3 - Square Footage
- Step 4 - Beds and Baths
I used to share the concern, believing that there was an American obsession with price per square foot, the question of how we switch a mindset from price to value. I concluded that I was asking the wrong question and misunderstanding the problem.
Levittown: Cheap housing on cheap land
Each step down this path eliminates homes that don't match the determined criteria regardless of their potential other benefits. This is particularly problematic in the square footage category where a well designed smaller home can be eliminated before it even makes its case. Unlike price and location, which have outside factors (proximity to work, budget, etc.), square footage is almost solely a design concern, and a well designed, energy efficient 1400sf could be just as attractive as a 2000sf one. Unfortunately, the person looking for a 2000sf home is unlikely to ever see the smaller house.
This is true. But I think Nic misses the root of the problem: American builders have been hugely successful in building cheap houses on cheap land. When you build with carpet, drywall and vinyl windows, extra square footage is incrementally almost free. When land is cheap, the footprint isn't a problem. When heating costs and cooling costs are low, (and natural gas is going cheap these days) operating costs are barely a consideration.
It is a structural problem with our understanding of home value. The MLS itself makes it difficult to search on any criteria that consider efficiency, sustainability or design. Appraisers have to have their arms firmly twisted to take performance into consideration. Banks claim to offer energy efficient mortgages, but I'm not sure I've ever heard of anyone getting one. Size is still firmly in charge of the housing market.
I do not think you can blame real estate agents or the mortgage brokers, they are just symptoms of the problem, which is that there is simply no economic incentive to build or buy a smaller house in most of North America.
When I was starting in the development business I interviewed a very successful Toronto developer who was building incredibly tiny stacked townhouses. He told me his formula:
1) determine the median income of the buying population;
2) calculate how big a mortgage they can carry;
3) subtract land and soft costs;
4) divide balance by construction cost per square foot.
That is how big or small he built, period. In times of low mortgage rates or land prices, the units were bigger; in boom times and high rates he built smaller. And I mean small; you could barely furnish the things.
We don't need to educate our house purchasers in the benefits of energy efficient construction; we need to properly price energy to create an incentive to conserve. Nor do we have to teach them to live in smaller spaces; we need to make our cities and towns desirable places to live again. That creates demand, which raises prices, which shrinks unit size.
Nobody questions the fact that you live with less space in New York, San Francisco or Paris, it is just life, not education or marketing.
More on Urban Life and House Size:
New Study Says Young People Want Apartments, Not Houses; iPhones, Not Cars
When it Comes to Green Building, Does Size Matter?
Big Steps in Building: Change our Building Codes from Relative to Absolute
How Should We Really Measure Green Building?
Why Can't We Build an Affordable House?