David Smith, chairman and founder of Recap Real Estate Advisors, is one of the foremost affordable multifamily-housing specialists in the United States. His firm has helped recapitalize and preserve more than 133,000 apartments (over 905 properties) since its founding 20 years ago. Smith also is the founder of the Affordable Housing Institute, a global nonprofit that provides financial guidance to low-income housing NGOs. “You need to convert good ecology into good economy,” says Smith, who sees “green capital” as the foundation for affordable housing’s future.
In the rapidly urbanizing 21st century, we have three sub-ecosystems that are increasingly interdependent: the physical ecosystem, the political ecosystem, and the economic ecosystem. Bad economics lead to bad ecologies.
In my field, affordable housing, slums are “economically rational,” and people once thought they were the poor’s own fault. Starting about 150 years ago, we realized that slums are a byproduct of urbanization and that they’re bad for everybody, not just the poor. Today, we have to change that. As the planet supports more human beings, more will live in cities, and cities are social and technological constructs. They certainly can be better than they are now, and they also can be worse.
Architects need to start embracing their inner left-brain, the heartless money side. What gets built is not what gets designed but what gets financed. So if you want green for the ecology, translate that into green for the economics. What wins with those parties is not your demonstration of cutting-edge technology, but how much more it costs to be green. The “green capital needs assessment,” a financial analytical product we invented at Recap’s subsidiary On-site Insight, makes it possible for architects to design the economically optimal combination of green improvements, and talk design in terms translated into underwriting lingo.
In my work at the Affordable Housing Institute, the $300 House contest asks: Could you develop a livable small house with an overall build cost of $300? Why that price? Because that’s what a billion really poor people can afford to pay. Now, $300 is hard—and that’s the point—but if we can get close, say under $1,000 a house, even that changes the economic ecosystem. Mix found or low-cost indigenous materials, plus low-tech local labor, plus the right nifty developed-world gadgets, and you have an improvable core house. It makes you think about how to create a global hybrid value chain that delivers small modules at small unit costs.
An interconnected planet with massive amounts of poor people is unsustainable. The only way for the planet to succeed is to make more people “rich.” It all starts with a house.—As told to William Richards.aia