The 2 interfaces of residential development

Photo by  Vadim Sherbakov  on  Unsplash

Whether you're a regular home buyer, a builder, or a property developer (or any of the dozens of other participants in the residential real estate game), no one would fault you for being overwhelmed by the volume of work, apparent complexity and number of parties who participate in the build of even a single home.

If you just look at the work to be done, it feels herculean: chasing around townie agents with less responsiveness than your local DMV, a mountain of paperwork that is largely found, filled, and distributed in paper format, legions of subcontractors, earth, wood, and glass swirling in chaos until a home is built.

But if you abstract away the details, I think you might agree that the work of the builder largely falls into two realms: the analysis, workflow planning, and paperwork at the beginning of a home, and then the actual construction that turns the plan into a house. Lets call these the two interfaces: One is largely data: the math behind a plot of land, a series of paperwork to file, and checking the boxes to get a building permit. The other is largely building: turning raw materials and labor into a structure.

2 Interfaces: The Data & The Build

2 Interfaces: The Data & The Build

There are some advantages to thinking about a house construction project in this way: There are available techniques that you can use in working with information, and others that you might use in dealing with physical work. We'll focus this post on the data interface, and will come back later to review ways to deal with the build. (And there are ways!)

The Data

The flow of data in a homebuilding project has a few components to it:
1) Find a build opportunity (ie. empty plot, knockdown, or even a client)
2) Analyze the viability and feasibility of potential projects on it
3) Identify a design that would be desirable in the area (plan, elevation, layout)
4) Get the necessary permits, and meet other red tape obligations
5) As a final deliverable, get the building permit

In other words, there's a multi-step process that involves inputting the right information into the right forms, such that you output a building permit.

If this sounds overly simplistic, perhaps that is because of the realities in actually executing these steps, the opacity in some areas in exactly what information is required, and the poor portability of exact process from one town to another. This is where web technologies shine: in executing data processing steps, creating transparency through community, and creating portability through abstraction. Lets look through some examples.

There's no shortage of opportunities, so I won't spend too much time there. As it is, my inbox is full of potential opportunities sent my way by friends, realtors, brokers, and other market participants. They benefit if I act on them, and so the status quo of incentives is likely to keep that machine humming. Most people I know who do any number of real estate developments have found their way onto a half dozen email circulations and have a ton of opportunities at any given time. For a small shop, typically more than you could feasibly do at once. This is not including opportunities that you could actively dig up in a variety of ways.

Analyzing Opportunities

So the first step is analysis of a given opportunity. This has three main sub-steps:
1) A bulk use or zoning analysis to see what the local community would allow you to build "as of right" (that is, without seeking special permission or exceptions). The output here is, at its most basic, a building envelope (or the three-dimensional box that represents the size and shape of what you could build), and its effective square footage.
2) A proforma financial analysis that, in its simplest format, combines that envelope with your own known costs to build (ie. sqft x cost-per-sqft). This number is your construction cost estimate, and along with the cost of the plot, is the total cost of the build.  
3) A comparative analysis that compares this cost to the value of other houses in the area, based on recent sales information, and their size, including details like number of bedrooms, etc. Any difference between cost and value is profit! (in the case of a custom build, you effectively split this with the client)

Photo by  on  Unsplash

Photo by on Unsplash

Papering Local Requirements

So now you know you have a project worth doing. Cue the red tape:

1) Zoning Permit: The first domino in many areas is the zoning permit, if you have the zoning analysis done, and if what you want to build is within the allowed constraints, this could be as simple as mailing the right PDF to the right office. Many municipalities will even accept said PDF by email. Inputs here can be many: you may need a survey, and a few related bits of paper -- but ultimately all that needs doing here is filling out the right fields on a permit application. This is only challenging in a world where the data and the paperwork are hard to find: if you have them all in front of you, getting the zoning permit is trivial.

2) Design: Zoning permit in hand, you also know the dimensions of what you've been approved to look into. Lets think of this as a rectangle with length and width to it in the simplest case. (these can also be L-shaped, H-shaped, etc, but largely, we're dealing with rectangles. In most cases, you can then pull a design either from your own library of past designs, or from the web, in any of the many libraries that sell simple designs. Because you know from your comps analysis what the area demands, you know how many bedrooms and bathrooms you need already. Sorting the rectangles into a design of the right shape is then straightforward. This is challenging in a world where an outside designer or architect needs to do many hours of work: but if you have your rectangles presorted, and a library design in place, all they need to do is review it, tweak it, and sign it. This minimizes the cost involved, and while the work of the AOR is not trivial (ie. they need to check building codes, structural requirements, etc), the builder's work is. 

3) Building Permit: With a design stamped by your AOR that you know is within bounds for the area, you can put that same information into a new form and submit for a permit. With the exception of some towns that due to historical requirements, special topography needs, or some lightweight corruption at the clerk's office, this step is also trivial once the right information is on the right form. (and in cases of the latter, you can often get by on paying an expediter to grease the wheels for you).

Photo by  on  Unsplash

Photo by on Unsplash

Red tape is annoying because today it is manual. I know many people that routinely spend their weekends filling out forms and visiting city and county offices to butter up the clerks.

Changing the Interface

What if that wasn't the interface? What if we lived in a world where data flowed between the forms without the builder needing to fill and mail them by hand? What if we lived in a world where zoning and building code information was readily and digitally available?

Then the work of the builder stops being the administrative gruntwork of chasing paper around town for months, but instead to convert the right opportunities from their desk to building permits.

Does that sound like magic? Or does it sound like our increasingly digital world makes this inevitable?

Vik VenkatramanComment