The Dumbest Place For Apartments

This is just about the stupidest place somebody could want to put 300 apartments. You’re ensuring that every single one of these tenants will own a car, creating a potentially huge traffic issue.

Meanwhile, there are plenty of good places in downtown Easton to build a few hundred apartments. Right across from the river on the surface parking lots, or further up Northampton in the West Ward. Who the hell wants to rent an apartment with zero amenities within walking distance?

The lesson, as ever, is that the demand for rental housing is there, but it’s not getting built in the cores cities because their zoning regulations absurdly rule something like this out. So people are building the apartments on greenfield land and locations where it makes no sense.

Comments

  1. John says:

    Or there are still a lot of people who don’t want to live in Easton, or Bethlehem, or Allentown…..

    • Jon Geeting says:

      Why are the rents so high and apartment vacancies so low then?

      • John says:

        There’s demand for both so both are getting built.

        Let’s put numbers to it. 300 apartments will easily cost $30 million to construct. With today’s banking climate, the builder will be required to put at least $10 million of his own cash into the deal.

        Anyone who is doing a deal that size will have reams of market data before a single shovel is put to work. It’ll include demographic information, rent comparisons, competition both existing and anticipated, zoning, utility availability, etc.

        In this market the only way this deal gets done is if all these questions come back supporting the projections. And there’s no way anyone puts $10 million of their own cash up without being pretty darn certain it’s coming back to them.

        So no, it’s not dumb. It’s just not what you want or where you’d live. And that’s ok.

        • Jon Geeting says:

          And yet, it’s completely absurd to build that many apartments out in some field when there is so much prime space in the good areas left to develop. The cost of building in Bethlehem must be higher than in this ridiculous location. Politicians need to be asking themselves why that is, and what can be done to lower the costs.

          • John says:

            It’s not absurd Jon. Not everyone wants to live downtown so stop treating them like they’re maroons. It’s not a crime to want something different than you want.

            Here are a couple of examples of cost increases – demolishing existing structures, cost of recycling demolition debris, that many areas of cities were garbage dumps 100 years ago/driving up site costs, and that it’s more expensive to build in a constrained area (more labor than if you’re just able to spread out).

            The only thing that can be done to lower these costs is to have the taxpayer cover it. Your favorite solution!!!!!

          • Jon Geeting says:

            Not everyone wants to live downtown, but it does make sense for multifamily housing to get built downtown. Again, that’s where the rents are highest and the vacancies are lowest. We don’t have to speculate about it when we can look at what the market prices are telling us.

            I get that there are some costs of city development that can’t be reduced, but others can. The time cost of getting zoning approval and getting a building permit could be reduced through by-right zoning. Eliminating parking minimums would reduce costs. Reducing or eliminating the tax on site improvements would cut costs.

          • John says:

            When you look at rents you’re looking at about 10% of what you need to look at in order to reach any conclusions. Also remember that when you make this kind of investment you have to have a very long time horizon in mind – it’s not just what rents are today, but where you project them to be in 5 years. What does your capex budget look like? What’s the tax / regulatory environment look like? Etc. Etc.

            Your gross oversimplifications just don’t work Jon. You need to do a ton more research before you can be taken seriously on this topic.

          • Jon Geeting says:

            Looking at the long-term makes this location look even dumber! Where are people going to want to live 10-20 years out as the population ages and young people increasingly prefer walkable housing and transit? We’re probably past peak-car at this point. The biggest groups of apartment consumers – boomers and youngs – aren’t going to want to live in a damn field by Wal-mart

          • John says:

            Have you looked at development trends and growth patterns in that area? IN 20 years it won’t be a ‘field by a Walmart.’ Not at all.

            That’s another example of what I mean when I say you need to do alot more research in order to be taken seriously. You have no experience or expertise on this topic – couple that with the fact that you hate the development and the result is you lobbing grenades.

            Call it a hunch, but I’d bet the guy who is spending $10 million of his own money and borrowing another $20 million that he has to pay back has done more research on this project than a blogger from NYC.

          • Jon Geeting says:

            Every day millions of people make bad investments, this tells us nothing. It’s like Warren Buffet’s point about Innovators, Imitators and Idiots. Exurban sprawl like this is now solidly in the “idiot” phase. There was a lot of construction in this area before the housing bubble popped, and nothing since. Since then the market has shifted away from this style of development, and there are few signs that it’s going to pick back up. Don’t take my word for it, I’m just summarizing what I’ve seen repeated over and over again by all the credible analysts.

          • John says:

            Banks today are not allowed to make mistakes, they are under specific instructions from Obama not to take any risk whatsoever and use that cash instead to buy Treasuries. This deal gets bank financing, then it’s a good deal with solid fundamentals.

            I don’t take anyone’s word for it with these things, I do my own research. That includes a lot of reading, then testing assumptions, asking dozens of questions, analyzing and asking dozens of questions again. The only way to reach supportable conclusions is to challenge.

            The fact that you resort to personal attacks instead of really looking at fundamentals tells me all I need to know – you’re not interested in facts.

  2. Jack Contado says:

    Raaaaaacist!

  3. Jon Mac says:

    Agree w/Jon (Rents/Vacancies ratio).

    Still, could we agree that getting the approval and actually getting these 300+ units into being is not a done deal? Do we continue to learn nothing from grotesque, watershed-destroying buildouts in this Valley (looking at YOU Lower Mac)? It’s like we’re still reading the ‘developer playbook’ from the ’90 to 2000 period out in the townships. Maybe we’ll get lucky and the Dev won’t be able to get financing, because, well, almost nobody is getting any financing around here, consumer or commercial. Or worse, the ‘model’ unit will sit there for 5 years, in 5 Sq miles of bulldozed land until unit “1″ finally gets sold. Sigh.

    • John says:

      Doubt it would have gotten to this point without the financing being pretty well in hand. Otherwise the developer would have already been spending tens of thousands of $$with no deal yet in place – not smart.

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