If you think more creatively about building opportunities and can navigate the associated hurdles, you could significantly impact housing supply in your market
As 2019 comes to a close, it’s customary, perhaps instinctive, to look ahead to the coming year. For those of you who responded to Pro Builder's annual housing forecast survey, the mood is generally positive going into 2020 and builders see and presumably will pursue multiple opportunities, namely offering smaller, more energy-efficient homes and relying on move-up, move-down, and “recession-proof” upscale buyers.
Those are all great, and likely. But given the general optimism about 2020, I implore you to peek outside the box and consider other, if a little niche-y and more challenging (but perhaps also more lucrative), avenues.
Here’s all you need to know to start the conversation: An estimated 205 golf courses nationwide closed in 2018, according to the National Golf Foundation, and a similar number is expected this year. The average 18-hole golf course is about 175 acres, and the average density of a new housing subdivision is about four to the acre. That’s 700 housing units at a baseline. Admittedly, that’s a highly simplistic view of the opportunity, and builders and developers should expect some resistance if they delve into it. But if you can navigate those hurdles, the impact on supply and affordability in your market would be significant.
A 2017 Credit Suisse report estimated that up to 25% of shopping malls in the U.S. will be abandoned by 2022, and about 8,600 retail stores are expected to close this year ... with no replacements in sight. The “average size” shopping mall is hard to pin down, but let’s assume one that’s about 700,000 square feet, with a couple of anchor stores and multiple smaller shops averaging 3,000 square feet apiece ... all with existing infrastructure to and within them, and likely closer to employment centers and city services than any greenfield. What might a smart developer or builder do with that kind of space to create some new housing?
Remodeling at Scale
Of these opportunities, this one seems the most relatable to home builders, as 13% describe themselves as diversified into remodeling. The idea is to apply a production mindset to upgrade and, in some cases, transform aging housing stock (ideally within a subdivision to achieve economies of scale) to suit more diverse household formations and single-family renters. Remodeling, especially within the same footprint, provides a far easier and less costly path to approvals compared with new construction and offers competitive housing options within established, closer-in neighborhoods. Yes, it’s easier said than done, but about 5 million existing single-family homes are sold every year. ’Nuff said.
Access a PDF of this article in Professional Builder's December 2019 digital edition