Can upzoning increase affordable housing options?

Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Victoria Wickham: Pulled from the hottest topics coming across our news desk, I’m Victoria Wickham, and this is HousingWire Daily. 

Today’s episode features an exclusive interview with Atticus LeBlanc who is the founder of PadSplit, a company that claims it’s disrupting the affordable housing marketplace. LeBlanc, who is also the co-founder of Stryant Construction and Management, discusses how the nation’s eviction moratoriums could cause long-term issues for housing affordability and why he believes America needs more upzoning for help with the affordable housing crisis. But, before we listen, here’s a brief word on HousingWire’s newest podcast. 

Welcome to the REAL Trending podcast where your host, Tracy Velt, Managing Editor of REAL Trends, interviews the brightest minds in real estate. Brokerage leaders, top agents, team leaders, and industry experts share their success secrets, trends, and lessons learned navigating this ever changing industry. 

Tracy Velt: Hello, HousingWire listeners, today I’m joined with Atticus LeBlanc, the founder of PadSplit, a company that claims it’s disrupting the affordable housing marketplace. Thanks for joining us on HousingWire Daily, Atticus. 

Atticus LeBlanc: Great. Thanks for having me, it’s a pleasure to be here. 

Tracy Velt: Of course. So, listeners today, Atticus, who’s also the co-founder of Stryant Construction and Management, will speak to us about how the nation’s eviction moratoriums could cause long-term issues for housing affordability and why he believes America needs more upzoning to help with the affordable housing crisis. So, Atticus, before we dive in today’s conversation, can you tell us a bit about yourself and how you got started in real estate? 

Atticus LeBlanc: Sure. Yes, I’ve actually spent my entire career in real estate, about 20 years here now in Atlanta. Kind of fell into it through a course in college and really I guess cut my teeth. I discovered, in 2003, that I could buy a foreclosed home to live in for cheaper than I could rent an apartment. So, that was really the foundational experience for me and I have been investing in real estate and just intrigued by housing really for about 25 years now. 

Tracy Velt: All right. Now let’s discuss your company. As I was researching to prepare for this interview, I discovered you’ve been featured in a number of publications, including “Forbes,” “The Wall Street Journal,” “Bloomberg,” “TechCrunch,” and more. While each of these publications have approached discussing your company differently, what really stuck out to me is the comparison you often get to Airbnb. In fact, a publication recently claimed that your company was aiming to be the Airbnb of affordable housing. Now, that’s an interesting comparison and makes me curious on whether or not your model is more single-family or multi-family focused. Can you explain PadSplit’s model and how it’s challenging the affordable-housing marketplace? 

Atticus LeBlanc: Yeah. I mean I really think the comparison just stems from the fact that, whereas we leverage vacant space or empty and wasted space inside existing dwellings for long-term affordable housing, of course Airbnb does that for short-term stays and vacation rentals. And, so, that’s really where the comparisons, I think, begin and, frankly, end. The biggest other commonality is just that we know that for workforce housing accessibility is a huge barrier that we need to address. Where frontline workers don’t have either income or savings or ability to overcome certain barriers, whether that’s credit or previous history, to access housing options. And, so, we have to be very much an on-demand service that provides the immediacy of short-term flexible options but also still conducts the underwriting that would be expected in a traditional apartment or multi-family or rental house type of setting. 

Tracy Velt: All right. So, as we discuss affordable housing, we have to focus on three primary factors. The COVID-19 pandemic, the nation’s financial health, and a significant lack of housing inventory. 

Each of these factors, in some way, have impacted how Americans view home buying, whether they’ve been  relocating to a new market, downsizing, cost, or entering as a first-time home buyer.

In your point of view, how has the housing market changed in relation to these factors? And has it made finding affordable housing easier or much harder? 

Atticus LeBlanc: There’s no question that it’s made harder. I mean, if anything, though I appreciate that at least the pandemic has brought affordable housing and housing our frontline workers into the forefront of people’s minds, but the underlying problem hasn’t changed. And a lot of the factors you just mentioned exacerbated what is a supply shortage in the market here in the U.S. today. And I think that’s really at the root of all these affordability issues, it’s a simple supply-and-demand problem. And, as supply has been constrained for a long long time now, and that was only really exacerbated through the pandemic. And, so, as a result, we’ve seen that the access of those options to people who need them most has been more limited. And I really think…we’ll probably see a theme, throughout the podcast, that we keep coming back to a supply-demand problem. 

And the way that that we view ourselves in helping to solve that problem is taking the cheapest possible housing that we can think of, which is the space that is already built. So, new construction costs are out of control, commodity prices have skyrocketed, there’s labor shortages in lots of different areas, regulations in different jurisdictions that make it much harder to build and create new supply. Whereas we can tap into the housing space that already exists and create supply much more efficiently, much more quickly, and that’s really how we start to address those supply constraints. 

Tracy Velt: Yes. Inventory has been a problem as lumber costs have heightened. This brings me to my next question, which talks about affordable housing in minority communities. I learned a lot about your work, which centers in Atlanta, it’s a market that has a strong minority community. In my previous question, we discussed how the COVID-19 pandemic has financially hurt many Americans. I think this is especially so in Atlanta’s market, as data shows many minority communities have disproportionately been impacted by the virus by either becoming sick or losing jobs in relation to the pandemic. This has affected their financial health, therefore, impacting their housing situations. The last time we saw a similar situation was during the housing crash when the foreclosure rate heightened for many communities of color. 

That being said, this time around, the government has enacted moratoriums to prevent another foreclosure wave. But do you think these moratoriums will allow more Americans to stay in their homes, therefore, supporting the housing market, or do you think they could eventually lead to a larger problem? 

Atticus LeBlanc: Yeah. So, I mean part of our philosophy, and looking at each of these issues, is just the value of early intervention. We do weekly all-inclusive payments, we provide supportive services with non-profit partners and actually raised over $100,000 in eviction prevention funds to provide temporary financial assistance for folks through the pandemic. And, so, our philosophy gets to early intervention. And I think the eviction moratorium has done two things. One, it hasn’t really helped the underlying cause, which is the supply shortage. And, although it’s provided some short-term relief for some people, I do certainly fear the long-term effects and unintended consequences of those moratoria where we’re not using those early-intervention mechanisms. And you’re creating some strange misalignments that I don’t think will ultimately help a lot of folks and could cause existing housing providers to raise prices, to raise housing deposits for rental deposits and, ultimately, I don’t think address some of those underlying supply issues. 

And we’ve effectively just kicked the can down the road until we’re gonna have thousands and thousands of potential evictions. And those financial deficits just get deeper and deeper to the point where, when you’re, an individual, living paycheck to paycheck, it becomes impossible to get out of that hole. And the best thing that we can do is to try to provide more direct relief for those families that are suffering and those housing providers that right now are expected to bear the burden of that cost. And you really need to support both sides to create just a calamity downstream. We have, in the case of Atlanta, tens of thousands of folks that are sitting there under eviction and, in the meantime, asking those housing providers to continue to house them for free. And I don’t think it’s really fair to either side and we need to support both ends of the spectrum. 

Tracy Velt: That does tie back in affordable housing as people in these markets, as you said, are living check to check, need housing, but lack affordable inventory in these markets. This brings me to the next question, which focuses on up zoning. For those of you who don’t know, upzoning is the practice of increasing zoning density within a certain neighborhood to increase how many people can live in a particular market. Another market that has practiced this is Minneapolis, Minnesota. It’s followed this model and many in its marketplace have claimed it’s led to more affordable housing. After researching your company, I discovered PadSplit’s model encourages its creation. In your own words, how does it introduce more affordable housing to the marketplace? 

Atticus LeBlanc: Yeah, the easiest way to look at this, I think, is to view housing in America historically and leaving aside for the moment that these zoning regulations were actively discriminating against low-income people of color from their inception in the early 20th century. And a lot of that burden is still with us today. If you look at just the data of population and housing, over the last 70 years, you’ve seen a dramatic increase, almost three-fold, in terms of the square footage of a single-family home increase. And, at the same time, we all acknowledge that the size of families and the size of households has come down dramatically, where we have people that are living much longer, we have younger generations that are living alone much longer than has historically been the case. And so, as a result, our family makeup in no way matches our current existing housing stock that is designed for nuclear families that comprise no more than 20% of the total population. 

And, so, even though only 12.5% of our housing stock are studios and one bedrooms, you have 20% of the population that is nuclear families. And, so, that means you’ve got 87.5% of the housing stock that’s geared to those 20% of people. And it just doesn’t make any sense. So, it makes a lot more sense, from our perspective, to be able to reallocate that space using technology that facilitates the levels of trust and accountability that are necessary to build those relationships. And it’s a much cheaper way to ensure that everyone has access to affordable housing. 

And upzoning is a huge part of that because, without allowing multiple unrelated individuals to live together, you are precluding affordability for people who cannot afford to pay a deposit or pay the rent on an entire single-family home. And you’re taking those units off the market completely and, thereby, significantly constricting an already limited source of supply and increasing prices across the board. 

Tracy Velt: Do you think upzoning is likely to take off across the nation? And have you been met with any critics for this model itself? 

Atticus LeBlanc: Yeah. So, I mean, listen, anytime you’re increasing supply, particularly in historic single-family neighborhoods, there’s a natural antipathy towards “those types of people moving to my neighborhood.” And I think that’s to be expected. And I mean, look, it’s the law of supply and demand. If you limit supply, demand is going to increase and prices are gonna go up. And any single family homeowner, their number one concern is going to be housing values and their property values. And, unfortunately, that is diametrically opposed to housing affordability. So, I think those criticisms are natural.

But, at some point, when you look at the rate of price appreciation and rental growth, over the last 10 years, you have to say, “Wait a second. When no one who works in my community, whether that is the woman behind my grocery counter or my Amazon delivery driver or the clerk at the municipal office can afford to live here, that’s a major problem. And it certainly doesn’t align with our values as a populace of people that believes in equal opportunity, theoretically.” And, so, at what point do we, as a community, step in to say, “You know what? The people who serve my community do deserve an opportunity to live there. And here are the choices that we need to make to ensure that there aren’t millions of bedrooms that just go wasted every night because of a 100-year-old zoning law that the basis was originally racial discrimination.” And I think that’s a choice that we have to make. And, to me, there’s no question where to put the line in the sand. 

Tracy Velt: All right. Thank you for that, Atticus. Before we wrap today, is there anything else we need to know about PadSplit or affordable housing in America? 

Atticus LeBlanc: Tons. Yeah, I could talk about this for hours but certainly, for PadSplit, I mean it’s just that our vision is, ultimately, to ensure that anyone with housing space anywhere in the world has the ability to take that space and use it to create more affordable housing. And it is very much a do-good and do-well model. I think we have to change the conversation around affordable housing and affordable-housing creation and start to understand we need to align incentives between the housing providers who are, very often and in most cases, driven by the bottom line, and align those incentives so that you can make affordable housing a viable business opportunity. Because, if you can do that, you can show how affordable housing can be profitable, then that’s, ultimately, how you’re going to reach scale. And you have to consider the incentives of all the priorities involved if we’re serious about solving this problem quickly. Because the way that we’ve been trying to do it through traditional subsidy programs and local housing tax credits and other tax incentive programs, we would take 120 years to create the amount of affordable housing that we already need today. 

And, so, when folks give lip service to the idea of innovation, I think it’s really important to consider that we have to make a lot of these difficult choices and we have to make them now if we’re gonna solve this issue. 

Tracy Velt: All right. Thank you for joining us today, Atticus. 

Atticus LeBlanc: Appreciate it. 

Tracy Velt: And, listeners, thanks for tuning in to HousingWire Daily. 

The housing industry is looking to its leaders for answers. That’s why each week the Housing News podcast invites a new mortgage, fintech, or real-estate executive to the show to provide its listeners with more perspective on the announcements and new stories crossing HousingWire’s news desk. Hosted by Sarah Wheeler and produced by Alcynna Lloyd, the Housing News podcast is now available on iTunes, Spotify, Google Podcasts, and more. 

Victoria Wickham: That’s a wrap for today’s episode of HousingWire Daily. Remember to subscribe, rate, and review on Apple Podcast. And join us again tomorrow.