WEBVTT - Why We Don't Build More Apartments for Families 0:00:10.080 --> 0:00:14.520 Hello, and welcome to another episode of the Odd Lots podcast. 0:00:14.600 --> 0:00:18.800 I'm Joe Wis Tracy. You know, we did a recent 0:00:18.880 --> 0:00:22.439 episode on rent and whether the price of rent is 0:00:22.480 --> 0:00:25.000 ever going to go down? And I asked the question, like, 0:00:25.160 --> 0:00:27.880 why don't they ever build new apartment buildings for families? 0:00:28.080 --> 0:00:32.120 Totally un self interested questions from now from here on out, 0:00:32.520 --> 0:00:35.800 Now that our years of just doing supply chain episodes 0:00:35.880 --> 0:00:37.640 are going to come to an end, let's just do 0:00:37.680 --> 0:00:40.760 episodes about our own personal ground, our own personal frustration 0:00:40.760 --> 0:00:42.880 of the economy. All right, where are all the dog 0:00:42.920 --> 0:00:46.879 amenities for apartments? That's my question. That's the thing. Like, 0:00:47.320 --> 0:00:50.479 there's plenty of buildings with dog amentities. And as a 0:00:50.640 --> 0:00:53.440 you know, I have two kids, and sometimes we look 0:00:53.479 --> 0:00:56.160 at like new apartments and they're like, I want like 0:00:56.200 --> 0:01:01.200 a building with dog amentities and billiard rooms in gyms 0:01:01.600 --> 0:01:04.880 and dorman and all that stuff. But they don't make 0:01:04.920 --> 0:01:08.319 those buildings for like the actual units. And my kids 0:01:08.319 --> 0:01:11.320 don't play pool. Well, you got to teach them, no. 0:01:11.400 --> 0:01:13.360 But I think you're right. It seems like a lot 0:01:13.400 --> 0:01:17.240 of apartment buildings are geared towards young professionals. For the 0:01:17.280 --> 0:01:21.200 most part. It's studios, it's one bedrooms. Here in New York, 0:01:21.319 --> 0:01:24.280 it tends to be larger apartments that have been cut 0:01:24.360 --> 0:01:26.440 up at one point in time, and you end up 0:01:26.480 --> 0:01:30.480 with these really weird floor plans where like the bathroom 0:01:30.600 --> 0:01:33.840 is right next to the kitchen. Yeah, and it's it's 0:01:33.920 --> 0:01:36.560 not a very pleasant experience for anyone. But I think 0:01:36.560 --> 0:01:40.160 there is there is this overarching question of why are 0:01:40.280 --> 0:01:44.160 these decisions being made in the way that they're being made, right, Like, 0:01:44.200 --> 0:01:46.560 there must be some reason, And the people who are 0:01:46.600 --> 0:01:49.760 building these buildings, you know, obviously they have, you know, 0:01:49.800 --> 0:01:53.120 presumably some good business reasons, but I don't know what 0:01:53.200 --> 0:01:56.200 they are, and I find it frustrating, And I guess 0:01:56.200 --> 0:01:57.880 I'd like it to change, but I don't know, like 0:01:57.920 --> 0:02:00.360 if any like developers are going to like change their 0:02:00.400 --> 0:02:03.160 business models. For me, I think the expectation is, like, 0:02:03.160 --> 0:02:04.960 I just got to move out to the suburbs. My 0:02:05.080 --> 0:02:08.080 kids are really tired of sharing a punk bit. Okay. 0:02:08.480 --> 0:02:10.760 What I will say also is I think this is 0:02:10.800 --> 0:02:16.840 a peculiarly American problem because having lived in many other places, 0:02:17.080 --> 0:02:20.560 apartments are well designed, even in Hong Kong, where the 0:02:20.600 --> 0:02:24.240 average size of apartments tends to be incredibly small. They 0:02:24.240 --> 0:02:27.840 are designed for that tiny square footage, and so they 0:02:27.880 --> 0:02:31.280 tend to be quite functional even for families, and certainly 0:02:31.320 --> 0:02:34.600 in Europe there's much more of a culture of renting 0:02:34.800 --> 0:02:39.320 versus ownership, so that you do have families who spend 0:02:39.360 --> 0:02:42.720 decades in the same apartment building. I think you're totally 0:02:42.800 --> 0:02:45.200 right here. The basic idea is that if you live 0:02:45.200 --> 0:02:48.680 in the city in an apartment, you're young, you're single, 0:02:48.800 --> 0:02:50.600 and then if you have kids at some point, then 0:02:50.600 --> 0:02:52.880 you move out to the suburbs, and the housing stock 0:02:53.040 --> 0:02:56.480 is not made for people who would say like to 0:02:56.560 --> 0:02:58.800 stay in the city and maybe be a renter in 0:02:58.800 --> 0:03:01.400 one unit or one building for twenty years. Yeah. I 0:03:01.400 --> 0:03:04.240 think that's exactly right. All right, So what explains the 0:03:04.360 --> 0:03:06.800 state of affairs? Is there any reason to change it? 0:03:06.840 --> 0:03:09.600 We're going to be speaking to two guests I think 0:03:09.639 --> 0:03:12.680 they were both heard our last episode and then spend 0:03:13.040 --> 0:03:15.400 a couple of days sort of debating it on Twitter, 0:03:15.800 --> 0:03:17.760 and so it's like, well, why debate on Twitter when 0:03:17.760 --> 0:03:19.280 you can come in. So we're going to come talk 0:03:19.320 --> 0:03:21.760 to us. Yeah, just come talk talk to us. Rather 0:03:21.800 --> 0:03:24.560 than wasting get all in tweets. We are going to 0:03:24.600 --> 0:03:27.919 be speaking with Stephen Smith. He is the executive director 0:03:27.960 --> 0:03:30.720 at the Center for Building in North America, I think 0:03:30.720 --> 0:03:33.200 tank around construction policy. And we're also going to be 0:03:33.240 --> 0:03:36.520 speaking with Bobby Fian. He is a real estate developer 0:03:36.560 --> 0:03:38.760 and he there's all about apartment floor plans and the 0:03:38.880 --> 0:03:43.880 thinking behind the business reasons behind these decisions. So, Bobby 0:03:43.880 --> 0:03:46.920 and Stephen, thank you so much for joining us. Very 0:03:46.920 --> 0:03:49.280 glad to be here. Yeah, thanks for having me so, Steven, 0:03:49.320 --> 0:03:51.960 I'll start with you, but really, are we right? Like, 0:03:52.040 --> 0:03:55.720 let's start with is the premise that we're talking about 0:03:55.760 --> 0:03:59.200 that a lot of these new developments really aren't geared 0:03:59.680 --> 0:04:04.920 towards families? Is that correct? Yeah? I mean the typical 0:04:04.920 --> 0:04:07.120 new apartment building in the United States, the developer will 0:04:07.120 --> 0:04:09.160 try to cram in as many studios in one bedrooms 0:04:09.160 --> 0:04:11.800 as they can. You know, I think it's mostly driven 0:04:11.840 --> 0:04:14.080 by policy. You have a lot of there's a lot 0:04:14.080 --> 0:04:17.039 of planning policy that tries to encourage more family sized units, 0:04:17.040 --> 0:04:22.360 but they're really pushing against some more fundamental regulations that 0:04:22.440 --> 0:04:25.680 make it quite difficult to build family sized apartments in 0:04:25.720 --> 0:04:28.400 any sort of affordable way in not just the US, 0:04:28.400 --> 0:04:31.520 but also Canada, North America. Stephen can I ask you 0:04:31.520 --> 0:04:34.039 a quick follow up before we bring in Bobby, But 0:04:34.200 --> 0:04:36.960 why does it matter? Do we need to have families 0:04:37.080 --> 0:04:39.960 in apartments? Why can't everyone just move out to the suburbs. 0:04:40.040 --> 0:04:42.080 I mean that, you know, that's the that's the safety valve. 0:04:42.120 --> 0:04:43.880 As you know in America, you can just move out 0:04:43.920 --> 0:04:45.840 to the suburbs, and we make it quite easy to 0:04:45.880 --> 0:04:49.560 build family sized houses. So I mean, you know, does 0:04:49.560 --> 0:04:51.159 it matter? I guess you know, if you want our 0:04:51.200 --> 0:04:53.120 cities to thrive, if you want, you know, people to 0:04:53.160 --> 0:04:55.480 be able to raise families in them, you know, for 0:04:55.839 --> 0:05:00.000 environmental reasons or you know, even for some social reasons. Yeah, 0:05:00.000 --> 0:05:02.200 I would say it matters. I don't want to live 0:05:02.240 --> 0:05:04.040 in I don't want to live in the suburbs. I 0:05:04.080 --> 0:05:06.200 didn't either. I like living in Manhette. I don't want 0:05:06.240 --> 0:05:08.000 Joe to have to live in suburbs. Point. Thank you, 0:05:08.640 --> 0:05:11.000 thank you for recognizing that. All right, Bobby, all right, 0:05:11.080 --> 0:05:13.799 let's bring you in. So you come from it from 0:05:13.880 --> 0:05:17.719 the business perspective, What is like the sort of like 0:05:17.800 --> 0:05:21.919 big picture math in your view of someone builds a 0:05:21.920 --> 0:05:24.520 new apartment, they have an opportunity, they get the approvals 0:05:24.520 --> 0:05:26.960 to put down apartments on a plot of land. Why 0:05:27.080 --> 0:05:30.880 is it better to target young professionals and the types 0:05:30.920 --> 0:05:33.880 that don't need that space for children. Well, it is 0:05:33.960 --> 0:05:39.960 simple math in that smaller units generate higher rent per 0:05:40.000 --> 0:05:44.200 square foot, and that is the primary driver of returns 0:05:44.279 --> 0:05:46.880 for ground up apartments in the way that we finance 0:05:46.920 --> 0:05:48.800 them here in the United States, which is, you know, 0:05:49.080 --> 0:05:52.480 through private market capitalism, unlike other parts of the world. 0:05:52.800 --> 0:05:57.360 So in those places, someone will look at the building 0:05:57.560 --> 0:06:00.560 in their spreadsheet and they'll look at or comps from 0:06:00.560 --> 0:06:03.119 the market, and the primary way that they compare units 0:06:03.160 --> 0:06:05.760 to other units that they say, here's the rent, here's 0:06:05.800 --> 0:06:09.000 the size, here's the number of bedrooms. I want to 0:06:09.040 --> 0:06:12.000 try and make it slightly smaller. So like it's like 0:06:12.040 --> 0:06:15.640 the power of diminishing marginal turns like in reverse, right, 0:06:15.960 --> 0:06:18.840 a five hundred ninety nine square foot one bedroom will 0:06:18.880 --> 0:06:20.839 get basically the same right in a six hundred square 0:06:20.839 --> 0:06:24.240 feet So that dynamic ends up pushing all units to 0:06:24.320 --> 0:06:28.919 being smaller. That's the basic math for why realistic developers 0:06:28.920 --> 0:06:31.360 are incentivized to try and put as many of those 0:06:31.400 --> 0:06:33.719 types of units they can into the building as possible. 0:06:34.120 --> 0:06:37.159 There's a host of other things that I'd say have 0:06:37.279 --> 0:06:41.559 to do with the different timeline of incentives, but that's 0:06:41.600 --> 0:06:46.160 the largest driver. So walk us through as a real 0:06:46.279 --> 0:06:49.520 estate developer. You know, when you are considering a potential 0:06:49.560 --> 0:06:52.719 investment or a potential new project, what are the things 0:06:52.760 --> 0:06:55.480 on your spreadsheet that you're looking at? How are you 0:06:55.560 --> 0:06:59.039 making those calculations? While I like to think that I 0:06:59.080 --> 0:07:01.080 make them a little bit differ than other people, but 0:07:01.160 --> 0:07:05.160 I would say in general, what I and other people 0:07:05.160 --> 0:07:09.920 are looking at is the trends in the market to 0:07:10.080 --> 0:07:13.800 see which unit types are getting the highest rents. Those 0:07:14.120 --> 0:07:17.600 obviously are going to be within the class a new 0:07:17.640 --> 0:07:20.760 construction sub market, so you're not going to compare yourself 0:07:20.800 --> 0:07:24.960 to a pre war building unless it's been heavily upgraded. 0:07:25.360 --> 0:07:29.680 And well, i'd say it really is ends up being 0:07:29.680 --> 0:07:31.640 that simple. If there's a large problem that we have 0:07:31.680 --> 0:07:33.960 within real estate, which I hope to like advance in 0:07:33.960 --> 0:07:35.920 the future, and I hope like our industry advances, it's 0:07:35.960 --> 0:07:40.200 that the real estate data is very simplistic. Rents are 0:07:40.280 --> 0:07:45.560 extremely opaque, and things get i'd say reduced down to 0:07:45.680 --> 0:07:48.040 different unit types. There's a lot of different i'd say, 0:07:48.040 --> 0:07:51.040 like data on new housing inventory that gets added individual 0:07:51.040 --> 0:07:53.680 markets and that's almost never broken down into type, and 0:07:53.800 --> 0:07:56.840 even when it's broken down into type, it's definitely never 0:07:56.880 --> 0:08:00.280 broken down into is this three bedroom, four family or 0:08:00.360 --> 0:08:03.680 is it essentially three one bedroom suites? Those kinds of 0:08:03.760 --> 0:08:08.000 nuances are always lost in data. Yeah, that's something that 0:08:08.080 --> 0:08:10.680 came up in our kind of in our last episode 0:08:10.800 --> 0:08:13.320 on rent, which is that you know, we talk about 0:08:13.320 --> 0:08:16.400 like multifamily, et cetera, but like it's kind of meaningless. 0:08:16.400 --> 0:08:18.680 What city are they in, how many you know whatever? 0:08:18.720 --> 0:08:21.880 It is like that sort of drill down is like, 0:08:21.960 --> 0:08:23.880 you know, desert. It's not all fungible, it's not all 0:08:23.920 --> 0:08:26.800 the same. I just realized we should probably talk about 0:08:26.800 --> 0:08:30.440 what we mean by apartments meant for families, Like what 0:08:30.680 --> 0:08:34.400 exactly is it that families would like to see here? 0:08:35.480 --> 0:08:37.959 I mean, I would say fundamentally, what families want is 0:08:38.000 --> 0:08:40.760 a lot of bedrooms. And you know, Joe, like when 0:08:40.760 --> 0:08:43.400 you think about like what would you like, you'd probably like, 0:08:43.679 --> 0:08:46.080 most of all, you'd like just one extra bedroom. You 0:08:46.080 --> 0:08:48.120 don't need an extra walking closet, you probably don't need 0:08:48.160 --> 0:08:51.240 an extra bathroom. You just want one extra bedroom. So fundamentally, 0:08:51.280 --> 0:08:53.880 I think, you know, a family sized apartment might be 0:08:53.920 --> 0:08:56.200 a three bedroom, one and a half bath, maybe a 0:08:56.200 --> 0:08:59.080 three bedroom, two bath, but the second and third bedrooms 0:08:59.080 --> 0:09:00.760 they don't need walking clos that they don't need on 0:09:00.800 --> 0:09:03.360 suite bathrooms. And that's what you get in the US. 0:09:03.480 --> 0:09:05.720 And that's maybe it's not by design, but it is 0:09:05.800 --> 0:09:08.880 in some sense mandatory based on the building and zoning codes. 0:09:09.960 --> 0:09:12.440 I think we should have this. It should really just 0:09:12.480 --> 0:09:14.480 be Tracy hosting this and I should just be like 0:09:14.480 --> 0:09:17.600 the third guest. That's I have all these complaints. But clearly, Stephen, 0:09:17.679 --> 0:09:21.600 like you must view this question somewhat differently than Bobby, 0:09:21.720 --> 0:09:27.160 to identify zoning and codes as being a driver rather 0:09:27.240 --> 0:09:31.320 than this simple unit math. Yeah, I mean I would 0:09:31.320 --> 0:09:33.920 say in the United States to add an X. You know, 0:09:34.280 --> 0:09:38.520 let's say, let's imagine your typical new construction apartment. There's 0:09:38.520 --> 0:09:41.440 a long hallway in the middle of the building, and 0:09:41.440 --> 0:09:44.600 then perpendicularly a rate off of it, there's apartments, and 0:09:44.679 --> 0:09:47.680 you enter one of the apartments, and if it's a 0:09:47.679 --> 0:09:50.079 two bedroom apartment, it's designed in what someone wants called 0:09:50.280 --> 0:09:53.600 a bowling alley configuration. So you enter it, you enter 0:09:53.600 --> 0:09:56.520 in the kitchen, you're about I don't know, thirty feet 0:09:56.559 --> 0:09:59.760 from the window, probably, and there's not actually a whole 0:09:59.760 --> 0:10:01.840 lot of window space in the apartment, and it's you know, 0:10:01.880 --> 0:10:04.080 thirty feet away from you. So on the left you 0:10:04.080 --> 0:10:05.959 have a bedroom, so you know, you enter in the 0:10:06.080 --> 0:10:08.360 kitchen and then you go then you go forward and 0:10:08.400 --> 0:10:11.160 then you see like a living area, and then on 0:10:11.200 --> 0:10:13.000 the left you have a bedroom. On the right you 0:10:13.040 --> 0:10:15.240 have a bedroom and those are by the window. But 0:10:15.360 --> 0:10:18.160 what do you fill all that other space with. There's 0:10:18.240 --> 0:10:21.040 a ton of this space that would not exist in 0:10:21.520 --> 0:10:25.319 Europe or in Asia, mostly because the building is much 0:10:25.480 --> 0:10:28.240 much thicker than it would be in another country. So 0:10:28.360 --> 0:10:29.800 you know, when we think about what a family wants, 0:10:29.800 --> 0:10:33.040 they want another bedroom. In a bedroom typically you know, 0:10:33.080 --> 0:10:36.400 by codes and customs has to have a window, so 0:10:36.640 --> 0:10:38.679 you know, you want to capture that extra window space. 0:10:38.720 --> 0:10:40.480 But then you need to fill all this space, at 0:10:40.559 --> 0:10:43.120 least in the United States, and you know, this is 0:10:43.120 --> 0:10:45.320 square footage. It costs money to build, it cost money 0:10:45.360 --> 0:10:47.520 to maintain. You have to fill it with something you're 0:10:47.520 --> 0:10:49.960 probably going to fill it with, you know, bathrooms, which, 0:10:49.960 --> 0:10:51.679 as you know if anyone's ever done at home renovation, 0:10:51.679 --> 0:10:55.000 they're the most expensive part. So in the United States, 0:10:55.080 --> 0:10:57.600 when you add an extra bedroom to a two betterom 0:10:57.600 --> 0:11:00.600 apartment or a one bedroom apartment, you typically have to build, 0:11:00.679 --> 0:11:03.839 you know, just within the apartment about three hundred square 0:11:03.840 --> 0:11:06.840 feet of extra space. The bedroom itself is only about 0:11:06.880 --> 0:11:09.080 you know, ten by ten, one hundred square feet, but 0:11:09.120 --> 0:11:10.840 then you need to you know, fill all that space 0:11:10.880 --> 0:11:14.840 in the middle, whereas in other countries in Europe, Latin America, 0:11:14.880 --> 0:11:18.280 or Asia, to add the extra bedroom you might need 0:11:18.320 --> 0:11:20.520 an extra I mean, in some cases you can just 0:11:20.559 --> 0:11:22.600 add an extra hundred square feet, but maybe you'll add 0:11:22.600 --> 0:11:26.080 another one fifty two hundred, but you're adding much less 0:11:26.080 --> 0:11:29.880 space to add that bedroom. So, you know, buildings cost 0:11:30.040 --> 0:11:31.880 money based on the rent per square foot. When you 0:11:31.880 --> 0:11:34.600 rent an apartment or buy an apartment, you're probably not 0:11:34.679 --> 0:11:36.520 looking at it based on a you know, you're not 0:11:36.559 --> 0:11:38.240 looking for a number of square foot if you're looking 0:11:38.240 --> 0:11:57.839 for a number of bedrooms. Bobby, you mentioned the lack 0:11:58.000 --> 0:12:01.480 of floor planned data. What do you mean by that exactly? 0:12:01.520 --> 0:12:03.679 Because when I think of floor plans, I think that's 0:12:03.720 --> 0:12:07.760 like the one thing that is potentially available and kind 0:12:07.800 --> 0:12:14.520 of standardized across every apartment building in America. Certainly, Oh Tracy, 0:12:14.600 --> 0:12:21.199 where to begin answering that, Yes, so I'd say this 0:12:21.400 --> 0:12:27.400 is the that question has been driving me in my career, 0:12:27.440 --> 0:12:29.400 I'd say for the last like seven years and bothering me. 0:12:29.440 --> 0:12:32.280 I'd say in looking at my own Excel models, like 0:12:32.280 --> 0:12:35.640 when I've built ground up apartments, it always intensely bothered 0:12:35.679 --> 0:12:38.360 me that in Excel there was no differentiation between square footage. 0:12:38.360 --> 0:12:40.800 It's always a multiplier, like a base rent per sure 0:12:41.000 --> 0:12:43.600 multiplier depending on type, right at just like a little 0:12:43.760 --> 0:12:47.360 pivot table. If if one bedroom multiply by four square 0:12:47.400 --> 0:12:49.760 four dollars to square foot if two bedroom multiply by 0:12:50.120 --> 0:12:54.199 usually less three fifty, right, and there's no differentiation between 0:12:54.200 --> 0:12:55.960 those two. So I'd say that is something that has 0:12:56.000 --> 0:12:58.480 bothered me for a while, given that anyone who walks 0:12:58.480 --> 0:13:02.400 into a unit knows that there are seven hundred squarefret 0:13:02.400 --> 0:13:04.800 one bedrooms that are great and seven hundred squarefret one 0:13:04.840 --> 0:13:07.640 bedrooms that are a piece of junk. Right, But it 0:13:07.679 --> 0:13:10.280 has to be captured like in data somehow or else. 0:13:11.320 --> 0:13:15.440 It's like the qualitative difference. I would say, yes, qualitative, 0:13:15.480 --> 0:13:17.920 but like you have to use some sort of data 0:13:17.920 --> 0:13:22.280 analytics or some sort of data columns just to say, well, 0:13:23.240 --> 0:13:25.800 how large is I get similar things like we all 0:13:25.800 --> 0:13:28.360 know that height matters, height should increase rent. But what 0:13:28.440 --> 0:13:30.199 would be the only way to prove that, Well, you 0:13:30.200 --> 0:13:31.840 would have to go through and measure the height of 0:13:31.880 --> 0:13:36.480 every place, then equalize for all other like real estate 0:13:36.480 --> 0:13:39.640 type attributes, and then say, aha, now we know that 0:13:39.720 --> 0:13:42.559 height matters by this much, when in fact every person 0:13:42.600 --> 0:13:45.000 knows that to be true, we just don't know exactly hownswer. 0:13:45.080 --> 0:13:47.760 So I would say that the difficulty on that has 0:13:47.800 --> 0:13:50.360 been driving me and my career for a while. It's 0:13:50.360 --> 0:13:52.840 why I left a real estate development for a little 0:13:52.840 --> 0:13:55.200 while to start two different sort of technology ventures and 0:13:55.240 --> 0:13:58.479 now am in, like i'd say, the software data business 0:13:58.520 --> 0:14:01.840 around floor plan data. I was just about to ask, 0:14:01.880 --> 0:14:04.959 could you create an algorithm that takes in like data 0:14:05.040 --> 0:14:07.480 inputs and then tries to spit out I don't know, 0:14:07.559 --> 0:14:10.160 like a livability score. Well, I was just gonna say, 0:14:10.240 --> 0:14:12.880 you know, Bobby, in your Twitter bio, you have quote 0:14:12.920 --> 0:14:14.679 I don't know who made this quote, maybe you even 0:14:14.720 --> 0:14:18.440 made it up Bill James of Apartments, Bill James, of course, 0:14:18.480 --> 0:14:22.680 being the moneyball guy who famously took baseball and tried 0:14:22.720 --> 0:14:25.320 to get it out of pure sort of like subjective 0:14:25.400 --> 0:14:28.280 like yeah, that guy, that guy is good hustle and 0:14:28.320 --> 0:14:32.040 tried to put nu miracle, you know, really quantify the 0:14:32.200 --> 0:14:35.440 speed that someone could go, or how all these other things. 0:14:35.760 --> 0:14:38.400 So how do you go about sort of like taking 0:14:38.440 --> 0:14:41.760 these things that seems subjective, Yeah, that seems like good, 0:14:41.800 --> 0:14:44.400 that's nice an area, it's roomy, and try to put 0:14:44.440 --> 0:14:48.080 some like hard math behind it. So that is a 0:14:48.120 --> 0:14:50.680 self that is a self chosen moniker, and it is 0:14:51.520 --> 0:14:54.920 it is an homage too, I think like the mathematical approach, 0:14:55.200 --> 0:14:57.040 and it is also meant to me to be a 0:14:57.080 --> 0:14:59.600 reminder of how long it takes you that for those 0:14:59.640 --> 0:15:01.920 people who remember the story of Bill James, he was 0:15:01.960 --> 0:15:05.880 doing this by manually calculating things from box scores that 0:15:05.960 --> 0:15:08.920 he got in newspapers thirty forty years ago, and it 0:15:08.960 --> 0:15:11.480 took at least twenty five years for the general approach 0:15:11.560 --> 0:15:13.880 to move forward. And the other thing that I also 0:15:14.000 --> 0:15:17.560 greatly admire about that approach is that none of his 0:15:17.680 --> 0:15:21.000 particular algorithms or that meaningfloor that that good anymore. But 0:15:21.040 --> 0:15:22.720 it was the approach of saying, we're going to go 0:15:22.800 --> 0:15:29.560 through and turn the sweet science into something slightly analytical. 0:15:29.760 --> 0:15:31.840 So for me, how that works in floor plans is. 0:15:31.960 --> 0:15:34.400 As you mentioned, Tracy, there are a tremendous number of 0:15:34.400 --> 0:15:37.480 floor plans. Every apartment has one. The dimensions on them 0:15:37.520 --> 0:15:41.120 are nearly always useless because it's not always clear whether 0:15:41.160 --> 0:15:43.000 it's putting into a wall or whether it ends in 0:15:43.000 --> 0:15:46.200 the middle of the room. Sometimes the dimensions just incorrect. 0:15:46.480 --> 0:15:49.440 Sometimes they've taken room names and change them from something 0:15:49.560 --> 0:15:55.560 useful to something useless, like from bedroom to dream and 0:15:55.680 --> 0:15:59.920 some other some of the ridiculous things which so which 0:16:00.040 --> 0:16:02.880 confuses people. But my basic approach has been to build 0:16:02.920 --> 0:16:06.840 some software tools to take essentially these low resolution image 0:16:06.880 --> 0:16:10.400 files and turn them into a lot more usable pieces 0:16:10.400 --> 0:16:12.480 of data. So instead of a room or a unit 0:16:12.520 --> 0:16:15.320 being described as a seven hundred and seventy five score 0:16:15.320 --> 0:16:17.840 foot one bedroom, it would be described as there is 0:16:17.840 --> 0:16:20.320 a room that has dimensions X and y. It may 0:16:20.400 --> 0:16:22.160 or may not have a living room, it may or 0:16:22.200 --> 0:16:24.560 may not have direct access to a bathroom, and it 0:16:24.640 --> 0:16:30.560 has a closet with linear feet hanging of Z. And 0:16:30.880 --> 0:16:33.640 by breaking things down into some more pieces, then you 0:16:33.680 --> 0:16:38.160 can do some of the fairly straightforward statistical analysis on 0:16:39.200 --> 0:16:42.560 apartments to say, in an area, do people want like 0:16:42.760 --> 0:16:45.360 a kitchen that's fourteen feet or are they okay with eleven? 0:16:45.920 --> 0:16:49.320 Does someone prefer that extra foot in their bedroom or 0:16:49.400 --> 0:16:51.360 in their living room given like a fixed space. So 0:16:51.440 --> 0:16:55.520 I'd say that's where it initially started. The family oriented 0:16:55.960 --> 0:16:58.120 aspect of those apartments kind of came out of the 0:16:58.240 --> 0:17:01.640 data and saying they're all lot of apartments and many 0:17:01.680 --> 0:17:05.960 of them are not being built to these sorts of specifications. 0:17:06.000 --> 0:17:08.520 Stephen touched on some of them, which is that the 0:17:08.600 --> 0:17:12.400 size of closets in the United States is at least 0:17:12.400 --> 0:17:14.520 two to three times what is in Europe, and I'm 0:17:14.520 --> 0:17:18.920 not they're huge in Europe. We still use wardrobe, yes, 0:17:19.880 --> 0:17:23.160 like a piece of furniture that acts like, yeah, Joe's 0:17:23.200 --> 0:17:26.359 looking at no OA, I had a studio or I 0:17:26.400 --> 0:17:28.720 had a loft in the financial district. Right, So you 0:17:28.760 --> 0:17:31.200 have a rail that we're just like, we just bought 0:17:31.280 --> 0:17:34.640 this like huge sort of yeah wardrobe from Ikea that's 0:17:34.840 --> 0:17:38.240 dood like next to our TV. Basically, Stephen is absolutely 0:17:38.320 --> 0:17:41.879 right that our building form does drive a lot of 0:17:41.880 --> 0:17:45.359 this stuff. Right. So the general process for real estate 0:17:45.400 --> 0:17:48.119 development is that a developer is going to go identify 0:17:48.200 --> 0:17:51.159 piece of land and then first say go to the 0:17:51.160 --> 0:17:53.520 city and say I would like to build this approximate 0:17:53.520 --> 0:17:56.639 footprint with this many units, this money, parking spaces, this 0:17:56.680 --> 0:17:59.639 amount of like mixed use. It isn't until after the 0:17:59.640 --> 0:18:02.640 building is approved that then they'll go through and configure units, 0:18:02.640 --> 0:18:05.000 because you're not going to spend money on full architecture 0:18:05.240 --> 0:18:08.199 when you don't know the general layout. So once the 0:18:08.240 --> 0:18:11.560 building footprint is defined, then it's a matter of how 0:18:11.600 --> 0:18:14.159 do you shift around walls? How do you chop up 0:18:14.200 --> 0:18:18.200 that space into a unit mix and type that maximizes 0:18:18.240 --> 0:18:21.479 your returns. And that's why almost always small ends up 0:18:21.520 --> 0:18:25.240 like driving small, and deep ends up like really pushing 0:18:25.280 --> 0:18:27.840 them forward. And once the building is set at being 0:18:27.880 --> 0:18:31.320 like sixty five feet wide in the long direction, well, 0:18:31.359 --> 0:18:33.080 now we know the simple math, like your units are 0:18:33.080 --> 0:18:35.760 going to be about thirty feet deep. Well, then that 0:18:35.800 --> 0:18:39.000 means your smallest studio can be four hundred and fifty 0:18:39.040 --> 0:18:42.439 feet a two bedroom. You need to be what what 0:18:42.440 --> 0:18:48.320 does deep mean? Deep? So the difference the distance between 0:18:48.320 --> 0:18:50.440 one window to the other window on the other side 0:18:50.480 --> 0:18:53.080 of the Oh, so you're looking at it from the street, 0:18:53.160 --> 0:18:55.199 how far back does the whole apartment go? And it 0:18:55.240 --> 0:18:57.680 goes In the United States, it typically starts at about 0:18:57.720 --> 0:19:00.520 sixty five feet. I would say, right, well, yeah, well 0:19:00.560 --> 0:19:02.679 it depends, it depends on what market, but that is 0:19:03.160 --> 0:19:06.120 that is quite typical. That is quite typical, I would say. 0:19:06.119 --> 0:19:07.840 I mean when when we talk about you know, Bobby 0:19:07.880 --> 0:19:10.439 was talking about the built form of the building, we 0:19:10.480 --> 0:19:12.879 don't typically think about real estate as a field like 0:19:13.160 --> 0:19:15.560 education or healthcare where there's like a lot of government 0:19:15.600 --> 0:19:19.600 intervention because you know, it is all owned and developed privately. 0:19:19.840 --> 0:19:22.960 But I think we probably should. I mean, the regulatory 0:19:23.040 --> 0:19:27.360 burden is quite high in modern day society, even even 0:19:27.400 --> 0:19:31.040 outside the United States. The architect isn't really designing the building, 0:19:31.200 --> 0:19:33.760 you know, the codes are designing the building. So this 0:19:33.760 --> 0:19:36.000 this form is sort of set from the start, so 0:19:36.040 --> 0:19:38.960 there's not a ton of flexibility from the architect. And 0:19:39.000 --> 0:19:40.800 a lot of cities they put out these little diagrams 0:19:40.800 --> 0:19:43.360 of how the building should look and it's it's very 0:19:43.440 --> 0:19:45.600 very close to how it actually works. And the architect 0:19:45.600 --> 0:19:48.119 can do the finishes, they can do the interior layout 0:19:48.160 --> 0:19:51.679 of the building, but the fundamental form that is pushing you. 0:19:51.680 --> 0:19:54.040 You know, Bobby mentioned a seven hundred square foot one bedroom. 0:19:54.080 --> 0:19:55.800 I mean, that's a concept that just doesn't exist in 0:19:55.880 --> 0:19:58.560 other countries another countries, a seven hundred square foot apartment 0:19:58.600 --> 0:20:00.840 would be a two bedroom apartment. And it's not just 0:20:00.960 --> 0:20:04.480 because you know, our bedrooms are a little wider. They're 0:20:04.480 --> 0:20:06.080 a little wider. It's not just because we have a 0:20:06.080 --> 0:20:08.680 lot of more closets. We do have a lot more closets. 0:20:09.040 --> 0:20:11.160 It's because that's really the only way that you can 0:20:11.240 --> 0:20:13.919 design the building. If you want a window in the bedroom, 0:20:13.960 --> 0:20:17.080 at least that's exactly right. Right, So once the building, 0:20:17.160 --> 0:20:20.040 once the unit is thirty feet deep, having a window 0:20:20.040 --> 0:20:21.640 in the bedroom means the unit is going to meet 0:20:21.680 --> 0:20:24.520 at least be like twenty three twenty four feet wide. Right, 0:20:24.560 --> 0:20:28.600 So then basic geometry just tells you how your different 0:20:28.680 --> 0:20:32.520 units step up in size as you had bedrooms. Just 0:20:32.600 --> 0:20:36.080 to play Devil's advocate, and I know Joe says he 0:20:36.119 --> 0:20:40.440 doesn't like the suburbs. But setting Joe aside, what evidence 0:20:40.480 --> 0:20:44.119 do we have that families, you know, assuming that there 0:20:44.560 --> 0:20:48.359 were good sized apartments designed for families, what evidence do 0:20:48.400 --> 0:20:51.960 we have that families would want to stay in that 0:20:52.080 --> 0:20:56.520 kind of presumably more urban environment. Are there other factors 0:20:56.520 --> 0:20:58.680 at play where maybe people want to buy a house 0:20:58.760 --> 0:21:01.560 and build up equity. May be they want different schools, 0:21:01.600 --> 0:21:04.680