Monopoly Hotels and Missing Middle Housing

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At the higher end are new buildings like 2100 Market Street. The triangular site was once occupied by a small, one-story fast food outlet and a parking lot. I watched as this modern, seven-story, mid-rise building went up in its place. The developer, Brian Spiers, complied with all city rules and regulations by building 52 small, stylish, market-rate apartments, as well as eight below-market-rate units offered to qualified full-time tenants. Then the property was leased to Sonder, a management company that specializes in medium-term corporate housing. Sonder now sub-leases the 52 units as fully furnished hotel-like rentals to a corporate clientele. This is a complete return to the old upscale residential hotel model.

Spiers and Sonder have found a way to build and operate desperately needed new housing in a ferociously regulated and difficult jurisdiction, while generating a profit. The eight subsidized below-market-rate units are a token improvement for the lucky folks who live there. Remember, no one lived at the fast food joint that was demolished to make room for this building.

But this model doesn’t scale to provide meaningful quantities of housing for the majority of low-to-moderate income renters who are still priced out. And it isn’t meant for full-time, long-term occupants. The cost of land, materials, labor, and regulatory friction don’t allow for that. They really, truly don’t. The numbers aren’t even close. What this property is doing instead is feeding into the long, slow process of shiny, expensive, new places that gradually work their way down to sad, old, cheap places as the economy shifts, fashions change, and physical structures deteriorate. That’s how things work in the real world, like it or not.

As an aside, the game now known as Monopoly was invented by Elizabeth Magie and was first called The Landlord’s Game, which she patented in 1904. It was meant to be an instructional device to demonstrate the way rent and taxation influenced society as described by Henry George, who advocated for land tax reform.

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