What the Market Needs Next

Deploying efficient design in the new residential reality.

Ask any reputable economist and they will confirm that the pre-2008 go-go housing market is not coming back—ever. “The housing bubble distorted decision making, luring buyers to purchase more expensive properties based on the expectation of rapid appreciation and big profits at sale,” says AIA Chief Economist, Kermit Baker, Hon. AIA. “Now the fantasyland surrounding the market is gone and we expect to see a return to housing decisions based on need, as opposed to appreciation.”

If the days of bigger and more extravagant homes are over, what do people need now? The answer varies by generation and geography as much as by income bracket. Two major demographic groups will soon reach turning points in their lives. Some 77 million Baby Boomers are aging and the oldest among them will reach retirement in the next decade. Some 80 million Gen Y’ers, ranging in age from 18 to as old as 30, have delayed home buying. Add another 40 million immigrants and there is a substantial market looking for places to live.

While the needs of these groups is not completely clear, John K. McIlwain, senior resident fellow and J. Ronald Terwilliger Chair for Housing at the Urban Land Institute in Washington, D.C., offers a perspective in his article, “Housing Gen Y: The Next Challenge for Cities.” “When asked how they want to live…members of generation Y respond much as did previous generations,” McIlwain writes. “Many want to rent for a while, but a high percentage of Gen-Y’ers wants to own their own home eventually. These are the first-time homebuyers needed to restore the housing markets to stability.”

McIlwain notes that this generation is the most economically challenged in several decades. Its members face high unemployment, student-loan debt, and uncertainty. Creating appealing, affordable housing for them, as well as others currently priced out of homeownership—including retirees—is one of the strongest opportunities for residential architects.

Frank Lucas, AIA, founding principal of Maryland’s Lucas Associates Architects, attempts to match generational needs and wants in one Baltimore project, along with a local developer. “It’s part of an up-and-coming neighborhood—Charles North—with vibrant retail, restaurants, and nightlife,” he says. Lucas also plans to include a Zipcar terminal, bike storage, and meeting rooms in the project. “Consisting of one-bedroom and studio lofts, it’s targeted for young professionals,” he reports.

In Boston, which has suffered a substantial residential market downtown, Alfred Wojciechowski, AIA, a principal at CBT, reports an uptick in interest in rental units. As apartment developers seek locations in urban centers, he says, “National developers are now looking at challenging city sites. Even primarily suburban builders are finding properties in the city center because that’s where the market for rentals is the strongest.” Developer AvalonBay’s recent decision to begin construction on Avalon Exeter, a rental apartment tower at the edge of the Prudential Center, is a case in point. Wojciechowski sees other similar projects happening throughout greater Boston.

For buyers, projects that are “rightsized for the price point” are coming back, according to Sherida E. Paulsen, FAIA, principal at New York’s PKSB Architects. “We are seeing no RFPs for new market-rate multifamily [projects], but projects that were on hold—like 20 Henry Street in Brooklyn—are going into construction,” she says. “If those units sell as expected, we will hope to see more demand for well-designed, well-located, well-priced condos and co-ops.”

The market drivers are similar for young buyers on the West Coast, according to firms like Los Angeles’ Modative Architecture. Modative’s principals envision affordable, small-lot subdivision homes. “As a startup firm, in 2006, we saw an opportunity in the Small Lot Ordinance that the city of Los Angeles implemented in 2004,” says Derek Chase Leavitt, AIA, cofounder and principal. “There was a void between single-family and condos for a home that would have no one above or below you, no shared walls, but provided some outside space and was reasonably affordable. It was a place that fit our personal profiles as young professionals.”

In researching and designing their “starter home for Gen Y,” Modative’s principals brought the creative thinking and skills that J. Carson Looney, FAIA, principal of Looney Ricks Kiss, and veteran residential architect, sees as critical to successful future housing design. “Residential architects need to return to thinking about—and understanding—how people really live,” Looney says.

Looney also understands that the architect’s job doesn’t stop at design. Working with clients on achieving net-zero homes, he also is helping them secure Energy Efficient Mortgages by convincing banks and appraisers to consider more than just square feet. “If we can help quantify the comparative energy savings, then we can help change the way valuations are made and move housing towards a more sustainable future,” he says.

Every residential market type presents architects with opportunities that sit at the edge of their conventional role, whether it’s market rate homes, luxury homes, starter apartments, or senior living. The new economic and demographic realities favor architects who are willing to work with all the players at the table to find innovative solutions to zoning ordinances, financing, energy efficiency, or affordable amenities. “We have the ability to solve lifestyle issues, to build green, efficient homes where every foot matters—and we need to do it,” says Looney.