Sustainable Summer in the City

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Ziggurats of Modernity (photo by author)

 

This week I’m attending the 2014 Summer Institute on Sustainability and Energy, an annual, two-week intensive seminar on sustainability hosted at the University of Illinois at Chicago. The program’s packed schedule includes trips to Argonne National Lab, with whom we will be working on our final projects, and to O’Hare Airport to check out the moves they are making in the directions of sustainability.

A cursory survey of the group suggests that the mean age is probably in the mid twenties, with just under half of the students presently involved in their undergraduate studies, probably about the same proportion in graduate studies whether a Ph.D. or a master’s program, and the balance (myself included) involved in some sort of full-time professional work.

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Pictured above is a sketch from a group project that required us to figure out what to do with a remediated former electrical substation in the middle of the University of Illinois at Chicago’s campus focusing on sustainability education and brownfield redevelopment. Our team, including myself (LEED GA, real estate finance, energy efficiency), Junjun (China, urban planning policy), Christine (K12 teacher), and Jason (LEED AP, interior design), and proposed building two connected structures that would serve as flexible event space and classroom space (indoor and outdoor), one structure being an “optimal” structure with high-performance, automated, and active technical systems, and the other being an “affordable” structure with more natural building materials and more passive characteristics. The exterior included plans for native tallgrass landscaping, test agricultural plots, and PaveGen, experimental kinetic energy capture technology (a lofty addition– “the donor steps,” as we called them, whose funding would help build the roughly $650,000 structure and landscaping). 2nd place out of 11, but we’ll do better for our final project!

Our final project assignments are broken down into four separate categories, each of which will involve eleven final project presentations. From the summaries:

1. Urban innovation (my group– perfect!): “Urban areas are undoubtedly fertile ground for innovative ideas and collaborative efforts. Universities, government entities, national laboratories, and businesses all exist in the same setting. How do we make the most out of this situation? How can we better collaborate to advance science, policy, and business initiatives in the energy sector?”

2. Duck Hunting: Addressing the macro-level grid impacts of high solar [photovoltaic] penetration: This is certainly the most engineering-heavy proposal and probably the most technically challenging, addressing the so-called “Duck Chart,” a graph of predicted daily electrical usage shaped somewhat like the eponymous bird that illustrates the need for major grid improvements. A society reliant on photovoltaic (PV) energy production is intrinsically more resilient, but a grid is not on its own– specifically, the chart indicates the fact that changes are going to have to be made to ensure that generation can adequately respond to the quite literal “night-and-day” effects of solar energy production on a daily basis.

Here’s how it works: Rates of electrical generation are mostly regulated by complex software and computerized controllers. When the sun rises, photovoltaic production spikes dramatically and suddenly, meaning that producers of non-photovoltaic electricity have to cut off their supply (the grid can hold a finite amount of electricity and you can’t just keep producing electricity at a steady rate because wires don’t hold extra electricity). When the sun sets, generation plummets, and non-PV plants have to quickly ramp up generation. This is problematic when you’re comparing thousands of arrays, each with perhaps a few dozen kilowatts of generation, whose users immediately need light after the sun sets– and when those kilowatts are contrasted with multiple-megawatt coal, nuclear, and natural gas plants. From the SISE document:

“According to their analysis, high penetrations of renewable energy, as a result of state goals (including a 33% renewable energy mandate by 2020), are leading to critical challenges to the integrity of the electric grid. These challenges include: short, steep ramps – when the ISO must bring on or shut down generation resources to meet an increasing or decreasing electricity demand quickly, over a short period of time; over- generation risk – when more electricity is supplied than is needed to satisfy real-time electricity requirements; and decreased frequency response – when less resources are operating and available to automatically adjust electricity production to maintain grid reliability.”

Source: CalISO via the Institute for Local Self-Reliance.

3. Revitalize the Fisk Generating Station: “Create a business model to repurpose the Fisk Generating Station that can be used as a model for other coal powered plants closing throughout the country [... identifying] planning issues under future scenarios to develop a strategy that effectively reuses the site and will benefit those who live in the surrounding community [... and considering] the social impacts the plant has had on the Pilsen neighborhood and how the site can benefit the local community.”

4. Innovate Chicago Corridors Using Sustainable Street Principles: Creating public policy and accompanying deployment strategy to create complete streets with adequate pedestrian accessibility, stormwater mitigation strategies, expanded and improved transit options.

Stay tuned as we develop our final projects, and follow the Institute on Twitter. Check it out on Twitter with at #sise2014 or @SISEatUIC or @handbuiltcity.

Past, Present, and Promise in the Prototypical Failed Steel Town

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A confluence involving a steel town and the Monongahela River– I’m sensing a trend here. (Thanks to Bruce Cridlebaugh.)

On Monday I had the privilege to explore McKeesport, a city twenty minutes south of Pittsburgh in my home state of Pennsylvania. The city had popped up on my radar last year because of the renovation of a historic YMCA building as a Passive House by Pittsburgh-based Thoughtful Balance. The building was renovated as transitional housing (“McKeesport Downtown Housing”) and its PHIUS+ certification qualification boasts quite respectable numbers– check it out, if you’re into that.

In this case, I was not only sightseeing but also visiting Alan Diede and Maryann Huk, a dynamic duo of civic and historic preservation activists and the moving force behind the McKeesport Preservation Society. Diede and Huk gave me the grand tour of the city, whose historic and industrial architecture is situated at the confluence of the Monongahela and the Youghiogheny Rivers (the “Mon” and the “Yok,” as they are colloquially known, and I had to remember to keep my vowels closer to Mawn than Mahn).

Founded in 1842 in the then sleepy backwaters of Pennsylvania (not terribly long after we had stopped calling Ohio the ‘Northwest Territory‘), the city became famous for its National Tube Works, founded in 1872 by the Flagler Brothers of Boston (no apparent relation to industrialist Henry Flagler of Standard Oil and Miami, Florida fame), who operated a factory in South Boston before relocating to McKeesport, buying an existing factory, and building the Works as we have come to know it.

US STEEL’S OTHER CHILD LEFT BEHIND

I’ll avoid rehashing the played out narrative of the boomtown-gone-bust, but I’ve referred a couple of times to McKeesport as the Gary of the Alleghenies, a dubious accolade, perhaps, but an apt descriptor when considering that both are 1) steel towns 2) in the metropolitan footprint of a major city but not within that city’s municipal boundaries, and towns that 3) lost a substantial percentage of their manufacturing base and therefore population base through 4) the same monolithic employer. McKeesport’s peak population of 55,355 came, somewhat unusually in US urban history, in 1940, before hitting its current and potentially continually descending low of 19,686 (64% loss, about a 14% averaged decennial loss), while Gary’s peak of 178,320 came, more typically of an American city, in 1960, versus its present-day, steadily-sliding number of 78,450 (56% loss, or a nearly identical decennial loss average, though over a twenty-year shorter time span).

Map of McKeesport with the riverfront Tube Works site highlighted.

1955 tourism map of McKeesport with the riverfront Tube Works site highlighted.

A 1955 town map listed 12 industries including nine other than the US Steel facilities, and four of these were expressly situated in the metal fabrication sector. Before the current era of cheap and easy transportation, heavy industry (really quite heavy) often spurred the growth of an industrial cluster in its vicinity. Back in the days before industry was something that was relegated to robots in corrugated steel warehouses in suburban industry parks, a mill was more than a simple facility for production that  could be moved as soon as the next town over ponied up some TIF dollars– it was an institution. A Mill, writ-large, couldn’t easily be moved, couldn’t inexpensively be started up or shut down (for example, with blast furnaces that had to be run continuously), so it was a safe bet to count on that source of production. National Tube employed at its peak more than 10,000 workers, about a third of the peak employment of US Steel’s Gary Works– but still massive, and about three times larger than the workforce of Braddock’s Edgar Thomson Mill, which still operates today at about 25% the size of its peak workforce.

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Quality control inspectors at National Tube, 1944. (uncredited, Library of Congress photo)

How did that work out?

Well– not so well, as it turns out. National Tube Works, originally independent and acquired by US Steel in 1901, closed in 1984, by which time the city had already lost a substantial amount of population. US Steel decided to reopen the plant in 2011 amid the Marcellus Shale frenzy, which has brought industrial demand, jobs, and major questions about water quality to the Keystone State– but just kidding (closed again in 2014, blaming, again, cheap imports from Korea and China).

Warehouse on the old Tube Works site.

Warehouse on the old Tube Works site.

Before visiting, I had imagined McKeesport as an Allegheny analogue to Gary, whose downtown is a crumbling remnant of its former greatness. To compare them purely in terms of their urban forms in addition to the ways I’ve already mentioned, In Gary, the major north-south artery of Broadway, which runs from US Steel’s Gary Works the whole way to suburban Merrillville and southward, is largely abandoned, and many of the buildings are in severe disrepair. Gary has offered some success stories, but attracting interest in even nearly free real estate has been difficult– McKeesport has some of the same challenges.

Both cities have great waterfronts, though– namely waterfronts that have been cleaned up since their old steel days and are ready for development. McKeesport even has a marina (Gary is working on it). Local development corporation RIDC offers much of the former mill site for industrial, commercial, or mixed-use development at affordable prices, and a number of the original buildings have been restored while the rest of the site has been cleared.

INDUSTRIAL CLUSTERS AND THE CULTURE OF MAKING STUFF

Some have noted that in spite of the steel industry having taken a major hit, the loss of monolithic producers didn’t actually cause the demise of the Pittsburgh region overall since, in spite of net losses of jobs, the industrial clusters of producers that were created to supply products to and manufacture products from the steel mills actually ended up forming a diversified industrial sector able to compete in complex regional and global supply chains. In other words, the diversified steel production and associated manufacturing industries remain productive, even if their job numbers, especially from the monolithic Mills, are but a shadow of their former greatness.

Detroit demonstrates this cluster phenomenon through the rise and fall of the automobile industry and creative attempts to revitalize the city through smaller scale manufacturing operations capitalizing on the city’s wealth of skilled manufacturing workers– indeed, this is partly based on branding (Detroit, the manufacturing giant) as well as actual technical skill sets (workers who know how to build stuff). Will we start seeing made-in-McKeesport wristwatches or outrageously expensive designer jeans as we see in Detroit? Probably not today or tomorrow, but we do have to think about the latent economic advantages in places like this, where a legacy of industry is as important as the underlying assets of the market– affordable prices, intact architecture, location in proximity to a major urban center, and existing infrastructure.

TOWARD A NEW CITY THROUGH ITS HISTORIC BUILT ENVIRONMENT

The primary reason for my visit was not to research the decline of USX, but rather to check out one specific facet of this core of intact architecture. The Benno Janssen-designed 1925 Penn-McKee Hotel is one of the more iconic abandoned buildings in McKeesport’s downtown, but it would be an unconscionable understatement to say that it is among but a few. Occupying the better part of a city block with a foot print of nearly 17,000 square feet, the steel and concrete structure offers four floors and a basement for a total usable square footage of about 70,000 square feet.

The major incident that really bolsters the Penn-McKee’s overt historical significance is a 1947 debate hosted there between then-freshmen Congressmen and later-presidents, Congressmen John F. Kennedy and Richard M. Nixon. The debate occurred shortly after the passing of the Taft-Hartley Act, an act that, if not the sole or most direct contributor to the demise of American labor, certainly raised the arm holding the hammer to drive nails into the coffin of the labor movement in the decades to come. Proponents, remembering the Great Strike of 1919 (which hit the entire Pittsburgh metropolitan area pretty hard), fed up with the postwar labor strikes 1945-46 and increasingly wary of the possibility of radicals coöpting union power to incite strikes and subvert the pillars of the Great American Democracy, passed the Act to keep a closer eye on labor.

Kennedy and Nixon didn’t agree on this matter. There aren’t any great records of the debate itself, which included a number of local dignitaries from both sides of the debate. The event was trumpeted as a showcase by the city– whose power elite included major players in both labor and industry- of its significance on the regional and national stage of industry. It weren’t called Tube City USA for nothing.

Sanborn maps– when typefaces and steel production were grand business.

Using the historic hotel as a centerpiece for broader revitalization efforts would require a substantial intervention, [November update:] as we pieced together in a meeting with a pro, probably something to the tune of a couple million dollars in tax credits plus the same amount in a public loan guarantee or very low interest financing. The property is in severe disrepair, having suffered smoke damage from the Great Fire of ’76, which also wrecked a lot of the downtown, and a fire in 1997. Fortunately for the future of the structure (but unfortunately for proponents of its demolition), its rock solid concrete-and-steel construction means it isn’t going anywhere fast. Indeed, many of the rooms on the third and fourth floors are still intact with original furniture– metal furniture by the Simmons Company, famous for its mattresses, since the builders wanted to make the structure exceptionally fireproof by avoiding the use of wooden furniture. Excellent link to some refurbished versions here.

simmonsWith negative stigma hanging over the town like an air inversion, even the distant future potential market value of the building is considered by the average banker or investor to be less than the liability of owning it (it is assessed at $30,000). Mayor Mike Cherepko was reached for comment saying that he’s interested in figuring out a way to renovate the hotel but cited as a difficulty in the redevelopment the scarcity of public funds and what he believes is the extraordinary unlikeliness of private capital to mobilize for such a grand project.

The preservation of buildings like the Penn-McKee is critical to the future of the distressed city, and an effort toward revitalizing it in a manner congruous with a broader idea of sustainable community development will necessitate a community equity model like what we can potentially achieve through Fundrise (once we get past the idea that Regulation A offerings have to necessarily cost $50,000 to file).

National Tube’s founder John Flagler nailed it at a reception held to honor him in McKeesport in 1909:

“The growth of cities and the growth of capital are signals of opportunity to every wage earner. As the population and capital grow, the workmen can seize advantage. Much of the prosperity of our people is due not to the day’s work, or the year’s salary, but to the investment in a house and lot, in a farm, or in a few shares in a business enterprise, which with the growth of the country have all increased in value and have converted thousands of workingmen, in spite of themselves, into capitalists.”

Whether or not this rosy image of capitalism might have panned out for every worker is, of course, dubious. It certainly didn’t pan out for the city over the long term, but that’s not Flagler’s fault, it’s the corporate responsibility of US Steel for screwing up the game as well as a whole broken system of equity and ownership– a system that needs to be fixed. But what better way to realize Flagler’s mantra here than to rebuild the city with a better vision for what equity can be and what it can do for the city?

Huk and Diede drive me by a pile of rubble downtown and mention that it was, just a few weeks ago, a Richardsonian mansion. With sky-high labor costs, tight credit, and the need for a hustle to get past that first step, the mission of preservation as a tool for revitalization is all the more important– but also all the more difficult- in cities like McKeesport that lack the economic momentum to begin with. Beyond decrying the sins of demolition, it is important to figure out better ways to advocate for it, and better ways to capitalize on a city’s history in thinking about redevelopment efforts rather than just chasing after the “next big thing.” The facility at Carrie Furnace just up the river toward Pittsburgh, for example, is still standing– and offers tours.

I ask what the reason was for the demolition of the home, which must have cost a pretty penny. (The Penn McKee Hotel’s demolition is budgeted well into the six figure range.)

“More boat parking?” Diede speculated.

It’s not just on an individual project basis but on a philosophical one as far as how we think about progress. And we’ve got a ways to go.

Upcoming Webinar on Crowd Finance

Partner Nat Zorach will be presenting a webinar with Housing Action Illinois on June 5th at 10:00 CT on the use of crowdfunding as a community development tool. Exploring the historical origins of crowdfunding and a few different models, most notably the unique Fundrise platform on which The Handbuilt City currently maintains a substantial and growing network, Zorach will go through several individual case studies as well as scenarios in which the funding model could be successfully deployed.

Zorach connected with Housing Action’s Nate Hutcheson and David Young during the polar vortex winter of early 2014 after presenting on Fundrise at Open Gov Civic Hack Night, a weekly Tuesday-night plenary of tech-savvy, civic-minded Chicagoans at 1871 in the Merchandise Mart.

Handbuilt’s team is meanwhile working on putting together a private placement memorandum as the major step forward in developing an investment offering on Fundrise, and we hope to finish this up in July to begin the process of raising money for affordable housing development in Gary.

Register for the webinar here. We’ll see you there!

Lyft Some Weight Off The Argument

San Francisco, origin of the pink mustache. (Wikimedia photo)

The ridesharing debacle made its debut most recently in St. Louis over Easter weekend. Members of the young, hip intelligentsia are at odds, not for the first time, with the city fathers, with a judge issuing an injunction banning Lyft operations. As a city whose management often comes across as being a bit more defined by entrenched civic power than market forces, St. Louis can in many ways afford to push hard lines that cities like Chicago can’t. While St. Louis boasts a highly dedicated enclave of smart, vocal, entrepreneurial folks who are getting amazing things done, the city isn’t inundated by the never-ending deluge of high rent-paying citizenry that defines the success of disruptive technologies like Lyft in Chicago, so civic power remains pretty entrenched. The crackdown has been as controversial as the rollout in both cities, but St. Louis hasn’t yet seen a rally of political power in support of ridesharing (I suspect it will).

But I’ve got a message for those besot with woe and the troubling notion that the government of a shrinking Midwestern city would ever challenge novelty: It’s going to be okay. But first, we have to have a critical look at the conversation that’s happening and take into account some things that are missing.

While I’ve been following Lyft and Sidecar since their early days, I started following the debate when it heated up in Chicago, which offers a competitive environment of licensed cabs, licensed black cars, Uber, UberX, Sidecar, and Lyft, and even alternatives like a peer-to-peer ridesharing network being developed by CNT, which pioneered now Enterprise-owned iGo. In a city where, as a pedestrian, cabs will aggressively honk at you to try and cop a fare, it’s nice to have an alternative accessible from your iPhone. The taxi industry is less convinced, and the city is furious at the notion that corporations could sneak into their city and operate a business without going through the proper channels (n.b.: without them getting their required cut, that is, through regulatory channels).

In a March hearing, an alderman schooled Lyft’s executive representation, demanding to know how much money the city had received from Lyft for its operation of services. Nothing, it turned out, so, in addition to a lawsuit by the taxi industry alleging that the city inappropriately allowed these ridesharing companies to violate their turf in a way that actually ended up discriminating against potential passengers who didn’t have access to smartphones (an interesting legal argument and I think ethically probably pretty true, if not legally viable), the city now wants to regulate ridesharing apps. The venture-backed companies whined, saying that paying the fees to the city would kill their business, which is based on the (theoretically– I’ll explore why in a minute) managerially-lean business model of peer-to-peer transactions.

So, my first bit of advice to St. Louis? Settle down. Any time an innovative product, solution, or project comes onto the scene, there is guaranteed to be a knee-jerk reaction, especially in a city that can’t figure out how to keep its streets paved or keep its eponymous landmark festivals from relocating to the far-flung suburbs. (Why, you all were up in arms when Chicago reversed the flow of its River to dump sewage into the Mississippi, and that seems to have worked out alright! Sort of…)

Complaints against Lyft include that in providing essentially unlicensed transportation mediums, they are subverting regulations that are often meant to  protect the safety of passengers, and, whether or not these regulation do a perfect job of always making people happy, enable effective tracking and record keeping that is often readily available if something should ever go wrong.  Corporations are cagey because they’re not required to be accountable to anyone but their investors, and the city of Chicago actually had to subpoena these companies to get the information they wanted.

Getting Beyond Trendy Innovation

To me, ridesharing has little to do with the ethics of taxes being paid or $350,000 medallion costs being paid (a princely sum that equates to about ten years of average income). Sure, that’s an unfortunate nuisance, but probably necessary that we’re disrupting an extremely broken system. That plus the fact that in addition to cab rides in Chicago being exorbitant, you have as much of a chance of being in the back of a car driven by a quite friendly driver as you do being in the back of a car driven by a speeding lunatic who can’t understand your directions amid shouting unintelligibly into his Bluetooth. In other words, I like to have a relationship with the driver, and that’s what the p2p system allows– in addition to affordability.

Affordability, however, is challenged by the idea of a company that will go to any length to penetrate a market. Think about Uber, a barely five-year old company that grew from literally an idea to over eight hundred employees– and is hiring en masse. With about $1.5 million seeded by 2011 to a Series C round of $258 million in investment capital raised in August 2013, it stands to reason that Uber is looking at growing– a lot. And who pushes growth? None other than venture capitalists, who are becoming the new big banks. There’s a limit to innovation when it’s dictated by these actors, who may fail frequently in their investments but make their money off the big success stories. Limits to innovation are, in this sense, also limits to sustainability, since the fees collected from every ride don’t get recirculated locally but rather go straight into the pockets of the funders. A challenge to innovation, to be sure.

St. Louis cabbie Umar Lee likened rideshare drivers to scab workers, a comparison that I think is apt when you consider that for as little money as taxi drivers may make, the rideshare companies are inundated with profits. He echoed questions raised by the Chicago lawsuit in real terms of equitable transit accessibility in a recent blog post:

“Lyft and Uber aren’t coming to serve good ole St. Louis hoosiers [local, often derogatory slang for 'common folk'] or North St. Louis. Nope, they are coming by invitation and for the hipster population ( and to a lesser extent business people and college-students). Hence they kicked off at Nebula [coworking space in an "up-and-coming" neighborhood] ( the center of hipster thought in St. Louis).”

So, ridesharing becomes problematic not only for challenging the taxi cabs but because it’s not really addressing transit accessibility overall. Not that most customers care about transit accessibility, but the issue is important because it Tech is painted as the new Messiah and the savior of shrinking cities– and until we recognize that “tech” is really just a series of marketing venues and channels to deploy and aggrandize venture capital, we can’t get to any meaningful achievement of actual innovation. If transit accessibility is the issue, let’s fix that rather than just buying into the latest well-marketed product craze.

USGBC: Illinois LEEDs Green Construction!

The US Green Building Council announced that Illinois and the District of Columbia led the nation in new square footage per person of LEED construction. Illinois came in second behind D.C. (or, the first-ranked bona fide state, if we’re using fighting words), with 2.29 square feet of LEED-certified space per resident. While only one of two Midwestern states that made the top ten ranking, Minnesota coming in tenth at 1.55 square feet per person, it’s exciting to see Illinois leading the list.

Southern Illinois University Edwardsville’s new LEED-certified Art and Design center. (St. Louis Post-Dispatch)

Even though the impressive 32.45 certified square feet per region in the nation’s capital do not take into account the growing city’s daily spike in population from its substantial commuting workforce (numbering around 400,000), taking into account daytime population still leaves you with around a respectable 19 certified square feet per capita (several times more than Illinois). A caveat in understanding this number will also take into account the fact that the GSA mandates LEED Gold for federal facilities including new construction and major renovations, and that DC itself mandates LEED for new non-residential construction over 50,000 square feet.

Virginia and Maryland also posted strong numbers, owing in no small part to the building boom continuing in the DC metro. North Carolina also climbed in the rankings owing to strong support for LEED in the Research Triangle, with a new, LEED Platinum administrative and maintenance facility transportation center in Raleigh alone totaling over 100,000 square feet.

DC’s green building standards evidence the strength and viability of LEED in higher-density building projects, and it’s no surprise that a city with such a substantial growth rate over the past decade is ready to capitalize on that. Hopefully we’ll give them a run for their money out here in Chicago, though!

Show A Building Some Love This Valentine’s Day

St. Valentin of Terni, a noted, early martyr of the passive housing design standard, is pictured here supervising a construction project in Rome, circa 272 AD.

This Valentine’s Day, I wanted to take a more lighthearted approach to the highly technical field of building science with some maxims of high performance architectural romance. Learn a bit about the passive house design standard in designing and retrofitting structures:

1. “The only thermal bridge I want is the one between me and you.”

Jeanne Gang’s Aqua Tower in Chicago.

Eliminate from your design (or insulate in a retrofit) thermal bridges. Thermal bridges are parts of a building that connect conditioned (interior) space to the exterior (weather exposure)– they could be parts of windows, concrete slabs, or structural elements. The PHIUS-CPHC® course uses as an example of severe thermal bridging Studio Gang’s Aqua tower in Chicago, wherein concrete slabs run the whole way from the exterior of the building to the interior spaces. A superior option would be to thermally isolate (insulate) things like balconies from the interior slab construction. While the PHIUS standard stipulates that the building must be “thermal bridge free,” it is impossible to completely separate thermal zones, though sensible design should strenuously emphasize insulating around such bridges where insulation is due, and avoiding the creation of bridges unnecessarily (such as the slab construction in Aqua). This isn’t to say that Aqua is invariably a completely energy-inefficient structure, but the unusual thing about PHIUS compared to something like LEED is that the point is not only long-term energy savings but also thermal comfort.

File:Thermal bridge by Zureks.png

2. “Your love heats every square foot of me– at a rate of ‘<3′ kBTU per square foot per year!”

In order to comply with the PHIUS standard, houses must demonstrate an energy usage of ≤ 4.75 kBTU per square foot per year. That’s not much, but when you think about a house that is extremely well-sealed and well-insulated, it’s attainable. Calculations in the WUFI modeling software that PHIUS uses allows users to take into account heat loss from things like appliances that give off what ends up being substantial amounts of heat.

I calculated that my old apartment, with its 80% efficiency furnace, probably uses at a minimum several times this amount to keep the space even at 65 degrees. (Thankfully, my current apartment, in a multi-unit building, doesn’t even have heat and is a constant 65 degrees, for reasons unbeknownst to me.) See the next section for some ideas about a major energy reducing component of the design/retrofit process.

3. “Are you ASHRAE 62 compliant? Because I can hardly breathe when I look at you.”

Perhaps the most important tenet of the passive house design standard is its emphasis on airtightness. PHIUS’ standard for airtightness is far more stringent than the industry standards, and if you’ve ever lived through a Midwestern winter in a historic home, feeling like a frigid breeze is blowing across your face at all times, you’ll understand why. Airtightness is extremely important because, regardless of thermal mass inside the envelope, efficiency of a heating system, or wall insulation, a draft (i.e. an unsealed gap, or improperly designed penetration, in the building envelope) will offset savings from the former improvements. Think about it like a big ship– even the largest, most advanced vessel will sink with a hole in the bottom. Pictured here is a blower door, which is essentially a testing mechanism that measures this rate of “air changes per hour.” As the link above noted, PHIUS’ standards for airtightness are about five times the traditional metric. Of course, if you’re not building a performance building, you’re not going to worry about air changes per hour,

But seriously– you’re smothering me.

Don’t worry. Somewhat ironically, passive houses rely on active systems of ventilation to ensure that occupants are supplied with constant fresh air. A well-designed ventilation system will utilize an HRV or ERV (Heat/Energy Recovery Ventilator), essentially high-tech blowers that are bewitched with a magical charm (n.b.: a highly-efficient heat exchanger) that allows them to transfer the heat of incoming/expelled air to air going in the other direction. In other words, an ERV will take 70 degree air and exhaust it to a 25 degree exterior at a temperature pretty close to 25 degrees, and will cycle fresh air into the house at closer to 70 degrees. You can even buy ones that are made in southeastern Ohio!

PHIUS emphasizes the need to use appropriate design and construction methods to ensure that airtightness will result in appropriate hygric buffering, ensuring that mold does not have an opportunity to grow, and thus the model is highly attentive to technical hygrometric and thermal modeling.

Learn more about PHIUS on their website or contact us to learn more about how passive design can be deployed in your next project! Hopefully everyone has developed some airtight schematics for a superinsulated evening. (N.B.: The Handbuilt City and its affiliates disclaim all responsibility should the reader actually choose to use these lines on their respective partner, spouse, lover, love interest, etc.)

CPHC® is a certification mark of Passive House Institute US (PHIUS). Used under license. The Passive House Building Energy Standard promoted by PHIUS is the most rigorous building energy standard in the world.

Safer Streets: Community-Driven Commuting

This past Friday morning as I stopped at a light on my bicycle, another cyclist rolled up next to me and commented on the unusual number of drivers using the bike lane as another travel lane and making thoughtless turns. Living in San Francisco’s historically working-class but rapidly gentrifying South of Market neighborhood, where there have been a number of high-profile cyclist fatalities in the last year, this isn’t just a comment on rule breaking so much as a discussion of personal safety: watch your back today, people are acting a fool.

This particular day was notable because a pedestrian in Redwood City had been hit by a CalTrain car. The commute was stalled up and down the Peninsula with trains delayed in both directions and people opted out of public transit in an effort to get to work on time. As a result, more car commuters, and in particular, more car commuters who were unfamiliar with the rules of shared streets and the routes where bikes are funneled — and more opportunities for collisions. And where normally my ride is a remarkably chill, six urban miles, on Friday my fellow commuters were treated to my surprisingly extensive vocabulary of profanity.

The Bay Area has some of the longest commutes in the nation, but despite the California car culture we still need to think about the people on the ground. Cities are full of people who walk and bike to work (and those who walk and bike to transit), and those are disproportionately people who are lower income. As a result, pedestrian and cyclist fatalities disproportionately affect the working poor, helping to contribute to disparities in accidental deaths. The more cars on the roads, the more crucial it is that the drivers of those cars are properly educated on the rules of the road.

San Francisco’s Mayor Ed Lee suggested that city’s pedestrians — who can range from “accustomed to courteous drivers” to “utterly oblivious” — take a more defensive stance when walking, “be nice, look twice”. The mayor’s victim-blaming tone led to an uproar in the bike/ped advocacy community, who are currently pushing for Vision Zero, a plan to eliminate traffic deaths in the city over the next 10 years. While hand-held-technology-absorbed hipsters (cue eyeroll) should be more aware of the space that they occupy in this city, most of the high-profile car-involved traffic deaths in the past year have been the result of gross negligence on the part of drivers, not reckless pedestrians and cyclists (and, yes, we all know about that terrible guy in the Castro, but that’s a very very rare exception). Moreover, most of the deaths have been working class women, men and children, not those gentrifying kids with their wild abandon and their handlebar mustaches.

Ultimately, much of the policy that drives bike and pedestrian enhancements is driven at the regional level, by the metropolitan agencies tasked with allocating federal transit dollars. (Local governments are welcome to spend their own funds on enhancements over and above that, but those local dollars are typically distributed according to neighborhood and that’s a whole other can of worms.) As such, advocates tend to operate within the municipal and regional sphere, largely by pressuring cities to implement complete streets policies. But they should take into account the spatial and socioeconomic distribution of pedestrian deaths in a region, and work on building community buy-in for complete streets policies in those neighborhoods.

While bike- and ped-forward policies are well-meaning at their core, their implementation in poor neighborhoods wind up being just another way these communities are acted upon by outside forces. A neighborhood organization’s involvement in the planning of pedestrian enhancements or traffic calming measures will ensure that residents feel empowered by the process. Even better, this kind community-driven change is what helps to shift normative behavior and ultimately ensure that car and transit traffic continues move safely through neighborhoods where there are more pedestrians. Nothing is going to get you to slow your car down faster than your neighbor knocking on your door to call you out on rolling through the stop sign she petitioned the city to put in.

Most cities have a long tradition of civic involvement on the hyper-local level: block units and neighborhood organizations. Active living advocates would build the diversity and the power of the movement considerably by listening to the concerns of those groups. In turn, this will help build their own belief in their ability to make change. Rather than the learned helplessness that is pervasive in many poor and minority communities where civic engagement is low, there is a sense of being tied to something greater, and access to the tools they need for success.

After all, building livable communities is more than just the infrastructure and the flow of traffic within, but about strengthening the people who live in them and the interactions between them. Most cyclists and pedestrians would much rather give a courtesy nod to a driver who waves them through a stop sign than to bang on the hood of their car.

Clever Crowdfunding: Risk, Regulation, and Social Capital

The crowdfunding movement raises many questions about how to protect investors from fraud or risk. A recent article on CrowdClan discusses the debate between “self-attestation” by investors, that is, a fairly typical process wherein investors declare information about themselves and their access to an investment offering is limited or granted based on that information, and the creation of a federal or third-party database that could track and verify all of this information.

Wait a minute. The JOBS Act was supposed to help democratize the process of investment in startups by opening up equity investment to more people, right? After all, the OMB figures that the average SEC Regulation A offering requires more than 600 hours of love. That’s a little bit more than even the sexiest of Kickstarter campaigns. Devin Thorpe’s recent article claims that crowdfunding is becoming a thing suddenly as evidenced by the law’s apparent radical inclusiveness to smaller, wait– accredited- investors. Sure, it does simplify the process of securitization of a startup. Never mind that the average Kickstarter user doesn’t know what securitization means, nor do they know how complicated it is to become an accredited investor.

This building was built and renovated by human hands for human purposes-- this is my crowdfunded startup venture.

This building was built and renovated by human hands for human purposes– this is my crowdfunded startup venture.

Indulge me as I hop up on my locally reclaimed wood soapbox for a minute: Ordinarily I might drop to my knees, clench my outstretched hands, and scream an Ayn Randism toward the Heavens to ask why we can’t just let people be people, but I’ve realized two things from living in Chicago: The first? Most kinds of restrictive regulations don’t work very well to achieve their intended goals. The corollary is the second thing I’ve learned: that restrictive regulation invites clever workarounds, but that innovation is really more a matter of making the right connections and having the right system in place rather than waiting for the government to slowly adopt regulation that won’t end up making much sense anyway.

Around the time I was getting set up on Fundrise, my partners in Indiana told me we should do a Reg-A offering, and the math worked out that we’d raise about a million dollars and pay some six-figure package of fees to lawyers and brokers. Lawyers and brokers I have never met, lawyers and brokers who do not live in my neighborhood or work in the distressed communities that I work in. An offering with the approval of the SEC, but at a six-figure cost?

Nobody has time for that.

What the partnership usually did instead of securitizing anything is instead borrow money from investors and use that money to set up a corporation, whose operating agreement would stipulate that after that money was invested in real estate, the real estate would pay back the investment loan and renovation costs (on a last-in, first-out, or LIFO, basis), after which net cash flow and profits would be split equally between the principal (lender of the original chunk of cash) and the managers. In terms of its legal and fiduciary structure, this was extremely risky, because it was unsecured debt (the debt did not confer any lien positions on the property because of the added legal complexity of doing so), but the capital stack was quite simple because the money went from cash (from the principal) directly into real estate, and the operating agreements outlined the rest.

Theoretically, at least.

The argument in favor of crowdfunding à la Fundrise is that the bypassing of possible restrictive regulations of the JOBS Act doesn’t necessarily result in a riskier product. Case in point: The regulation doesn’t necessarily achieve what it’s supposed to, even if it’s not, in and of itself, a failure, and, make no mistake, investors interested in a project will figure out how to get their capital into the project, regulation or not. The key, then, is figuring out how to mitigate risk.

littlemen

Either investment arrangement involves the same amount of cash. One involves more social capital, and with social capital comes information and transparency– risk is shared over a whole community.

The very point of the writ-large Crowd, like its shifted-consonant counterpart, the Cloud, is that decentralization can (and should) actually be a way to solve problems. Crowdfunding operates on a network of social capital as much as it does on one of financial capital, but the decentralization of capital is as important in mitigating risk as it is in broadening outreach. I often say that Fundrise is more important as a tool for outreach (for me, at least) than it is as a tool for investment fundraising, but in spreading out risk over many investors instead of a small handful of investors, you’re also addressing an important issue, especially when thinking about funding projects that won’t get funded otherwise, say, by banks or large PE investors.

In considering crowdfunding for startups, which are much higher risk than even distressed real estate investment, though bankers might quarrel with my characterization, Dr. Marina Nehme, an Australian law professor, expressed doubt in an article last month in The Age by Mahesh Sharma, that deregulation would do little other than undermine investor protection, market fairness, and transparency, instead driving up risk. “Certain crowdfunding platform providers have dismissed this risk by noting that the ‘wisdom of the crowd’ would help discover potential fraudulent projects,” she said.

This may be true for high-stakes startup ventures, where many companies fail and a very few comprise most of the actual profit being made from such ventures. But real estate is completely unlike startup ventures. Buildings are expensive and used by many people, so crowdfunding can capitalize on that pool of people. Fundrise isn’t producing venture apps with dubious value, it’s producing institutions concretely, pun intended, situated within human communities.

As far as the value of the crowd in determining the viability of individual crowdfunded investments, place not the crowd on any pedestal, for it comprises ordinary, flawed human beings flawed like any other economic system. But increasing the social capital in the process of capital sourcing means that more information will be shared, and more information leads to more transparency. More transparency leads to mitigated risk. I’m not arguing for or against regulation, but I think that we need to push for innovation over regulation, and innovation comes at a structural level such as how we think about the makeup of investment at the levels of its individual investors and their relationships with the principal, with each other, and with their communities.

Meet Our Newest Blog Contributor, Alissa Nelson

On Christmas Eve, I rode a quiet bus from San Francisco’s Mid-Market area, with its fraught juxtaposition of Twitter-led tech firm wealth sharing sidewalks with the mentally ill homeless, to my job near Candlestick Park which had just hosted its last final 49ers game, thus closing a chapter in the equally fraught history of the historically African American Bayview-Hunters Point neighborhood.

Stevenson Street, in San Francisco’s South of Market.

Riding the 8X Bayshore Express down the 101 gives an unparalleled view across the city’s eastern half, the Edwardian multi-family homes marching in lockstep from the flats of the Mission southward up the slopes of Bernal Hill and west to the base of Twin Peaks. Along the dry slopes near the Potrero public housing projects, agave plants sprout lewd flowers while cactus fruits ripen to a blush. Cities are like this: wild and unkempt and beautiful, defying the order we attempt to impose on the physical space.

As a new contributor to The Handbuilt City, I am so excited to have the opportunity to present some of my thoughts as a community development practitioner on the social, physical and mental health of communities. It’s so rare that we have the opportunity to engage in a thoughtful discourse about the values behind the work that we do and the principles that guide us. In my relatively short time in direct service work, I have found that being open and honest with my clients and community members about my motivation helps to construct a frame from which to think about how to move forward.

In 2003, I moved to St. Louis after nearly my whole lifetime in New England. I expected that the detour from my coastal trajectory would be brief since I was there for a PhD, not to start a life or raise kids. After a couple of years of getting increasingly involved in the civic life of St. Louis, my goals began to shift, I quit my grad program, and my partner and I purchased a home at the height of the housing boom, expecting an easy flip in a few years.

When the great crash of 2008 happened, we found ourselves underwater on a mortgage, the for sale signs in our neighborhood looking more and more like white flags of surrender to the great economic meltdown. I began to learn more on my own about the horrors of inequality, manifested in people’s bodies as health disparities. Ever the problem solver, I decided to go back to school for a master’s in social work and public health, gaining experience in community organizing, coalition-building and public policy research along the way.

After a summer stint back in my birthplace of Oakland, I decided that I wanted to move back west. So I packed up to work in a public housing project in San Francisco as a social worker. For a big-picture person, this type of work is a huge challenge. But I feel like this experience has fundamentally shifted the way that I work with and within low income communities and communities of color, and I think that it’s very important that I share my experiences with my peers and colleagues who wish to do the same.

I believe in working towards solutions. I believe that those solutions should be equitable and sustainable. By working with shared goals in mind, we can all come up with solutions.

While we all have part of a solution, making them equitable and sustainable takes three things: a problem-centered approach, by which we focus on meaningful metrics and outcomes; community-driven decision making, and making certain to elevate the voices of marginalized peoples; and a collaborative approach that builds bridges across sectors and disciplines to impact multiple outcomes.

Solutions should be: Problem Centered

Community development issues have a tendency to balloon. Many problems appear so impossibly interconnected that it becomes impossible to figure a way out of the tangle of weeds (poverty anyone?). But sometimes pulling a single thread, however small, can unravel some of the issues.

When you focus on discrete problems, individuals and communities can begin to make progress towards goals that had initially seemed too large to tackle. This helps to build consensus around issues that arise and momentum to continue to work together. Oftentimes, low-income communities themselves wind up being considered manifestations of the most intractable problems. The north side of St. Louis, the south side of Chicago, San Francisco’s southeast: all cities have a wrong side of the tracks. Neighbors and civic officials alike often end up working to push out rather than help to navigate a way out of the poverty, crime, and unemployment.

By looking at problems with measurable outcomes, success can be measured. Community empowerment thrives on accumulated small positive changes in pursuit of a larger goal. Individuals can see their place within the larger community, and how their acts as individuals can multiply through collective action.

This past summer, one of my coworkers launched a small beautification program in the community where we work, hiring 21 neighbors to pick up trash and cut grass. Participants were unemployed, some convicted felons or former drug addicts, high school dropouts and graduates who hadn’t made plans for after they got their diplomas: generally people who are seen as part of the problem in public housing communities. They quickly moved from picking up trash to planning more complex projects. They identified problems like an unused park – a problem as much spatial as it was social – and then worked together to identify steps to take towards a solution,  planting vegetables in the corner of the park, making sure that space was welcoming by trimming low-hanging limbs that got in the way of using the grills and building a path. After the 8 week program was completed, over half of the participants were working or in GED programs, and the rest have remained engaged with the community center’s programs.

Solutions should be: Community-Driven

Academics are experts at pointing out problems. They have access to data sets and GIS and they are there to tell you that your kids are more likely to have asthma if you live in a low-income neighborhood. That data is absolutely essential to move decision-makers and drive policy. But if you just spent the night in the emergency room because your child was having an asthma attack after a particularly active day for the lead smelter up the road, then data starts to feel hollow.

That is not to diminish data at all. But before prescribing solutions to communities and families, it is vitally important to listen openly and honestly to the people who you want to help. They live in those public housing units and dilapidated homes that you want to improve. They can point out every single problem to you and they are very aware of the causes. What they are less aware of is the magnitude of the problems that they face, and bringing data into the picture can help to give residents the platform on which to elevate their stories and build coalitions to advocate for positive change. Now they can find those other parents of asthma sufferers and work towards environmental improvements that will help everyone.

It is also important to remember that everything that was old is new again. Just as people in their 20s and 30s are pushing back into cities seeking our grandparents’ opportunities and the problems that arise mirror the ones that that drove our parents to the suburbs, the changes that we propose in response are often ones that have been tried before. When listening to people’s problems, remember to ask what they have done to try to solve them. Did it work? If not, why not, and what was still good about those failed interventions? If yes, what worked best, and what things should change? We have a lot to learn from past successes and failures. But the best people to tell us are often going to be the people who live this day to day.

Solutions should be: Collaborative

It sometimes feel like the most obvious thing in the world to say that we should work together to make things better, but it turns out that this looks very different on the ground. There are so many turf wars in the community development field that it starts to mirror the chaos and the drama of the communities around us.

Collaboration should be horizontal and vertical. At the nonprofit where I work, our clients are just as important a stakeholder as our funders. Our government should be as responsive to the needs of citizens as we are expected to respond to policy shifts. And thoughtful responses are preferable to fast ones: as much as it might seem like a person wants an answer when they’re standing in front of you, being good at follow up will do more to build trust over the long run. It’s hard to resist the temptation of just telling someone what to do because they’re standing in front of you yelling and you just want them to stop. If we wait and listen, we’re more likely to hear the actual need being expressed and ways to move forward. Resisting falling into the professional “expert” roll keeps me honest.

To that end, I am always looking for opportunities to learn about what works, and I will use this space as a way to explore how communities are working to heal themselves from the ground up. I’m looking forward to being part of the conversation.

Social Media Meets Investment: A Primer on Fundrise

Many loyal followers of our Twitter account or Facebook page have probably read about Fundrise, or have individually been invited to join our network. I figured I’d give a bit of background to help along the process and explain what it is, what it’s not, and why it’s important.

(Editorial note: This post will use a few scary words like “investment” or “real estate” in this post. TLDR: Last paragraph.)

Bar graph + buildings? Genius. (Copyright Fundrise.)

Fundrise is an innovative platform for real estate investment developed by a team of Washington, D.C. based veteran real estate investors who, tired of being forced to work with investors whose goals were at odds with their own and who had little actual social investment in the communities they wanted to work in, decided they were going to figure out a way to do it better. The goal is, in their words, to “democratize” the process of real estate investment. Fundrise managed to get approval from the SEC to allow real estate developers (such as Handbuilt) to create individual investment offerings that effectively crowdfund development projects. To respond to a question I (and, I imagine, they) often get asked, this is not the same as the JOBS Act crowdfunding provisions, since you’re not investing in a startup company as an unaccredited entrepreneur; rather, it’s governed under SEC Regulation A. I am quite thankful that we didn’t have to go through this process for The Brick Trust (though we did think about it quite seriously with our private equity partners for awhile), as filing SEC paperwork has a time horizon just shorter than getting a building permit in the city of Chicago.

Citing the need to reduce the number of middle men that separate investors from actual buildings, Fundrise aims to fix what they call a “broken system” dominated by opacity of investment, unequal access (to unaccredited and small investors), and high costs that translate to lower returns for investors. Real Estate Investment Trusts, publicly traded real estate funds, are notoriously opaque and suffered catastrophic losses in the 2008 collapse. One of my former partners in the real estate world told me once that the success to business is being a good middle man, and this notion has its merits. Making connections that help two parties come to an agreement about some mutually beneficial, productive transaction. But Fundrise is governed by an aspiration to be better than a productive transaction; rather, it is governed by skipping the steps in this traditionally Byzantine process of investment to save money for investors and to build social capital alongside financial capital.

Key to this process is building relationships with unaccredited investors. Regulation A requires the relationship between investor and investee, if you will, to be “preexisting and substantive,” meaning, not some random guy you met on the street, but rather a colleague, friend, relative, or professional referral. It’s not really surprising but rather how human beings have been doing business since the beginning of time before automobiles, Thomas Friedman, and the global supply chain of cheap fossil fuel convinced Westerners that it was, in fact, more beneficial to buy products and services from people you had never met, people you would never meet, in places you would never visit. Elementary enough, right? Bring business back to the level of the human relationship. This is what social media is ostensibly all about, since Facebook and Twitter allow us to interact directly with other human beings, sharing information, cat pictures, or investment notions.

Pretty simple, really.

Structurally, the most important step in this process to achieve this goal is eliminating not one but many middle men. Most forms of business in the global market have become so large that very little can get done without ridiculous degrees of specialization and compartmentalization. Each of these processes and degrees cost money that, for investments, chip away at the bottom line for you, the investor.

“But wait,” you might say, “what about a mutual fund? I’m only paying a management fee of 0.5-1%! That’s just pennies, right?” That might not seem like a lot, especially on a per-dollar basis on your own end, but with an average stock market return in the vicinity of 4-8% for the average year, you’re talking about a management fee that could top twenty-five percent of profits, even if you’re still pulling a return from it. If you dilute the returns of each share of stock over its already inflated value (remember that stocks trade at a premium of their intrinsic value because growth is the only constant in the stock market mindset) and spread that return over billions of dollars or hundreds of thousands of investors, you’re talking about a huge amount of money that gets sucked into the pockets of a few wealthy investment managers.

Founder of FinancialMentor.com, Todd R. Tresidder, said in 2010 “All the evidence supports the disappointing fact that regular investors as a whole underperform the market. As long as they try to ‘beat the market’ they actually underperform.” The best way for regular investors to achieve better risk-adjusted returns is by focusing not on out performance, says Tresidder, but instead by losing less. (emphasis added)

(From Investopedia– is this really how we should think about money?)

Exactly how good those investment managers are at their jobs is dubious. Statistically, it is extremely difficult for individual or even professional investors to beat the market, meaning that more investors than not routinely fail to make decisions to buy and sell stocks that outperform an essentially randomized index of companies. When I mucked about in the stock market, I was notoriously organized about how I’d think about these comparisons between my picks and the random indices, and I found that, in binary terms (“beating the market” versus not) I could usually pull out a win about 55-60% of the time. I made some money, but I realized that the amount of time and hassle it took to spend on the financial analysis of hundreds of quarterly balance sheets, S&P reports, and even following news articles wasn’t really worth the benefit of a few extra bucks, especially when that investment had very little in the way of implications for my local community. Even if you invest yourself, you’re still paying brokerage fees, which, at $10, $20, or more per stock trade, means the brokerage is pulling in a nearly infinite marginal return on each trade executed (i.e., every additional stock trade costs them pennies out of that $10 or $20).

So, back to thinking local. Real estate can easily be thought of as a form of intrinsically local investing because you can, theoretically, put your money into the community around you. Sure, it doesn’t have to be local, but it should be. And why? The strongest communities, by and large, boast higher rates of density, stronger economic competition, and the vast amount of information and money that gets shared through density and competition.

There is no social capital involved in the production of an iPod. On the other hand, I own a house in Gary that I myself renovated with my own two hands and that I myself have lived in– whose renovation I financed and solicited financing for myself- and that is now happily rented out to three tenants. Thinking about the complete lifecycle of an investment and the management thereof, you can’t really get much more lean than that, nor can you get much more personal.

Fundrise, in effect, provides the potential to allow us to bring back into focus our mission of working with individual residents, tenants, buildings, and neighborhoods to build better housing, trimming the excess of managerial bureaucracy and costly capital. The process bridges a crucial gap between the shadowy realm of finance and the real, human scale of what a city is– people doing business together, eating together, writing blog posts together.

Understanding the difference between joining a network and investing

The biggest misconception I’ve run into when soliciting folks to join Fundrise is that investment is required. Investment is not required, and a survey of our network indicates that many of our members do not intend to invest any money– joining a network will only mean that you are kept apprised of the status of offerings as they appear. This highlights the problem plaguing our society of unfamiliarity with what, indeed, investment even is. Especially since 2008, the understanding of what investment is and what it is not has lagged hugely among a population that, quite understandably, no longer trusts many tenets of the economic system that it grew up with. I’ve encountered more than one junk bin book from the early 1990’s proclaiming how the Dow Jones was going to top 25,000 within fifteen years– sort of like how houses in Gary that were selling for $55,000 at the top of the market in 2006-08 can now be bought for $500 or $1,000. Many folks completely lost their shirts in 2008 because speculation was rampant– principally in real estate, even in cities like Gary or St. Louis- and there was very little interest in the value that social investment might have for understanding how to make better decisions about allocating capital. One ironic silver lining in the cloud of economic gloom sitting over cities like St. Louis or Gary is that many of these hard-hit Rust Belt cities that got dually hit by the decline of industry over the decades into the 2000’s and finally the housing market bubble in 2008 are now able to boast unprecedented opportunities for investment. My oft-cited statistic about Lake County, Indiana is that the April 2013 tax sale, wherein the county tries to sell some of the 14,000 or so tax-delinquent properties to everyone ranging from private equity jet-setters to toothless old men, was the largest on record following staggering bank and tax foreclosure rates that continued into 2011. The modern economy should have taught us that inexpensiveness is an economic advantage, especially in thinking about how to innovate, something discussed frequently and mentioned in a recent Al-Jazeera article by a St. Louisan. We’re very grounded in how we think about tackling this issue, so investment is not a casual pot of money that we throw into whatever we happen to be feeling that day, it’s a professional process based on a combination of creative vision and careful, analytical management.

For us on Fundrise, we’re hoping to raise investment capital to improve property we already own in neighborhoods we already are familiar with. No wildly speculative ventures, no pipe dreams, just a hope of providing affordable, comfortable, and, overall, better housing for inner city populations– while also providing a healthy bottom line for investors, emphasizing the savings of lean management and the benefits of a platform that works for you as an investor and for our cities.

The warm, southern-illumed kitchen of 7919 Locust, a rental unit two blocks from Lake Michigan, and the product of a roughly $15,000 renovation, part of which came from crowdfunded investment.

The warm, southern-illumed kitchen of 7919 Locust, a rental unit two blocks from Lake Michigan, and the product of a roughly $15,000 renovation, part of which came from crowdfunded investment. If that’s what $15,000 gets you two blocks from Lake Michigan, why stop at anything short of a Midwestern real estate revolution?

Indeed, we haven’t even put together an offering on Fundrise yet because we’re looking to build affinity through the social network of it before taking that next step. The point is not to assume that most of our members intend to invest a specific or even any amount of money, but that they will see how the process works and that more experienced investors with great sums of liquidity will help demonstrate the profitability of the projects and the viability of the model. The platform is as much about demonstrability and education as it is about actual sums of capital.

Why Handbuilt

Building our network is a crucial first step. We believe in precedent. Certainly in terms of setting our own precedent as a successful business but also in precedents that establish and refine new ways of doing things. Community development for us is as much about buildings and neighborhoods as it is about the people who live, shop, work, and play in them, and so it should go without saying that we’re more interested in someone who can invest energy, moral support, or small amounts of money rather than someone who has zero social interest in the project and just wants a hefty return.

As far as our investment horizons, we’ve struggled with a few setbacks in our recent history, mostly our extremely difficult decision to cut ties for the most part with our original Indiana partners owing to reasons  similar to why the Millers, et al., founded Fundrise– the goals of big money private equity investment in the inner city are simply not aligned with our interests in building a social movement alongside a modest-sized revolution in how we think about community investment. While I see some value and virtue in how the big private equity money can be used, I have, to grossly understate things, some doubts that the goals of (white, suburban) hedge fund traders are concurrent with those of (black, inner city) low-income tenants. These are all learning experiences, and striving for financial innovation must complement social sustainability. Still, we maintain a pretty respectable debt service ratio which will do nothing but improve in the near future, and that feels great to say.

We remain at this point the only Fundrise network that is both based in the Midwest and focused exclusively on low-income housing development, and we are likely the only one working exclusively in distressed inner city properties at a neighborhood level. As one of the smaller-capitalized companies on the platform, we believe that we stand to demonstrate the viability of the model in a major way in these Rust Belt cities that, indisputably, need some major love– and, of course, some major capital. We think we can find the love, and the capital will come later.

That being said, if you think it sounds like a cool platform, you should help us out by joining. You can log in with Facebook or LinkedIn, the signup process takes but a few minutes, and, remember– we’re not asking for money, just for your support.