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Eric Kronberg is a zoning whisperer. He specializes in examining and demystifying zoning ordinances to find ways to make great projects possible and help others navigate through the zoning swamp.
Kronberg Wall’s projects have a lovely, authentic, grounded feel to them. You can imagine yourself inhabiting them. Nothing super slick. All of them super beautiful. And of course Kronberg Wall boasts a long list of achievements and awards.
Eric uses his skills for the force of good as a principal at Kronberg Wall, leading the firm’s pre-development efforts by combining skills in planning, development, architecture, and zoning. He leverages this potent cocktail to chart the course of best possibilities for each site’s redevelopment. His work with Kronberg Wall, the Incremental Development Alliance, the Congress for the New Urbanism, the Georgia Conservancy, and the Atlanta Bicycle Coalition has solidified his stance as an advocate for walkable and bikable communities.
Eric has also been deeply committed to community redevelopment for the past several decades. He has served as a community leader in roles of Vice-President, President, Zoning Chair, and now Zoning Guru Emeritus for the Edgewood Neighborhood in Atlanta, GA.
Together, on this podcast, Eve and Eric talk about the role of design, architects, zoning, conscious place-making and revitalization projects, all of which can advance the triple bottom line.
Insights and Inspirations
- A favorite quote by Charles Montgomery from the book, Happy City: “Great public space is a kind of magical good. It never ceases to yield happiness. It’s almost happiness itself.”
- Let’s demonize single family zoning everywhere. It’s a zoning type that doesn’t produce enough in taxes to cover the cost of infrastructure to support it. And only 20% of households are made up of mom, dad and the kids, looking for a house to live in.
- Density matters. We’ve got to change our land use laws.
- Don’t be too quick to pull down an old building. Elegant decay can be valuable.
- When you’re developing affordable housing, or on a budget, you need to find sites that have infrastructure, such as sidewalks, in place.
Information and Links
- Read the Kronberg Wall blog. Its goal is to help demystify issues like zoning, parking, mobility and housing choices, and to illustrate how they interrelate to make great places.
- If you want to learn to be a small-scale developer, turn to the Incremental Development Alliance who conduct training sessions for aspiring developers and cities. Look for one in your neck of the woods.
- Eric wants you to watch Urban3’s video, The Value of Downtown. He thinks it should be required watching for anyone who cares about cities.
Read the podcast transcript here
Eve Picker: Hey, everyone, this is Eve Picker, and if you listen to this podcast series, you’re going to learn how to make some change. Hi, there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Eric Kronberg.
Eve Picker: Eric is a principal at Kronberg Wall, an architecture and urban design firm based in Atlanta. They describe their work as conscious urban placemaking, and they describe Eric as the firm’s Zoning Whisperer. We’ll unpack that in this podcast, along with Eric’s belief that the revitalization of a neighborhood is perhaps the best way to advance the triple bottom line.
Eve Picker: Be sure to go to EvePicker.com to find out more about Eric on the Show Notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.
Eve Picker: Hi, Eric, how are you today?
Eric Kronberg: Doing well. Thanks for having me.
Eve Picker: Thanks for joining me. So, you’re an architect, and you have a firm that focuses on conscious urban placemaking, which I really love. I sort of poked around your website a little bit and really enjoyed it. I especially enjoyed some quotes that just made me smile. The first one was, “Great public space is a kind of magical good. It never ceases to yield happiness. It’s almost happiness, itself.” Well, that’s really true for me, but I wonder if most people are even aware of that?
Eric Kronberg: I would absolutely agree that they probably are not and that part of a lot of our work is to help raise awareness of really what makes great places, and inclusive places, and trying to break down the terminology and the components of that. So many folks are eager to advocate for better places, but they don’t know the words to use; they don’t know the things to advocate for. A lot of our work is to make it- to help give people tools, and knowledge to push themselves, developers, elected officials to make and create better places. A lot of our work, particularly on our blog, is written from that perspective to help everyone to advocate for better places, because it takes everybody pulling together to make that happen.
Eve Picker: The role of the architect/urban designer, then, is educator, right?
Eric Kronberg: That’s a major component of it. At a sort of selfish basic level, we come at the vast majority of it from a standpoint – the vast majority of projects require some kind of governmental permission. In Atlanta, that means there’s a zoning change, or this, or that, and we need the community to bless that change. If we want the community to go along with something that they think is a bit weird, or different, or outside the typical rules, we’ve got to make sure they’re comfortable with why it’s a good project. The more educated the neighborhoods are with what good urbanism entails, the more likely we are to get our projects approved and design great things for our developer clients, or nonprofits, or city officials, or whatever. We take an approach that the more educated and inspired citizens are, the better chance there is to do better work.
Eve Picker: Yeah, I would agree with that. Another personal favorite of mine on your site was this one: “When revitalization of our distressed neighborhoods is done well, it is almost unrivaled in the ability to advance simultaneously the triple bottom line goals of sustainability, improving the environment, the economy, and social equity.” That’s a really big statement, right? So, I wonder what you think is a really good example of a revitalization done well that advances that triple bottom line or one that you’ve done that you think best advances it?
Eric Kronberg: Well, sure, and before … A couple of those quotes, we have borrowed from friends, too, so I want to make sure I give credit-
Eve Picker: No, I know. I thought about giving credit, and then I thought, no, that’ll really slow things down. Let’s just say this – if anyone wants to know who made the quote, go to Eric’s website, which will be posted on this website, right?
Eric Kronberg: Yeah. Sounds great. One of our earlier projects that won a lot of awards – kind of surprising us a little bit but helping us understand that really honing in on how this work matters – was one we did in New Orleans over a series of years with a wonderful client, where he bought up a series of distressed, vacant single-family and duplex houses. This is all post-Katrina. He assembled 20 to 25 dwellings across 15-16 buildings and married that with a Low Income Housing Tax Credit project. He was able to take a really complicated government funding mechanism for affordable housing and work specifically on blight removal.
Eric Kronberg: But the blight removal wasn’t tearing these things down and building new, by and large. We were doing historic preservation. We were taking historic, beaten-up old shotguns, and doubles and renovating them to be energy efficient and to come back as affordable housing. The neighborhoods we were working in were a range, but primarily Seventh Ward and Tremé in New Orleans. These are neighborhoods that now have just seen massive housing price appreciation. They’re highly desirable; they’re highly expensive. So many folks are facing challenges of displacement and trying to stay in the places they grew up.
Eric Kronberg: For us, I think, over five years in total, we did a hundred dwellings that are affordable housing for 30 to 35 years, depending on the specific project or time that this was done. Also, as the neighborhood was revitalizing, we would do sometimes two-three houses on a block, or over the course of a couple blocks scattered. Our client would specifically target the worst houses, the ones on the verge of collapse, for a variety of reasons.
Eric Kronberg: You cannot understand how powerful it is to take them as blighted structures on a block, and revitalize them, and renovate them to an amazingly high historic preservation standard, and HUD affordable housing standards, and have it be one of the best houses on the block, but not a shiny, blingy spaceship, landing from far away, but just the house that’s been there for 200 years-
Eve Picker: That’s pretty fabulous.
Eric Kronberg: We’ve done other great work, but sometimes it’s really hard to beat that one-
Eve Picker: Those houses remain affordable for 35 years, and they’re kind of woven into the fabric of a now very solid neighborhood that is mixed and everyone can enjoy.
Eric Kronberg: We could talk for an hour about this project, but it’s a natural mixed income development, because these are inserted into, with other private homeowners who have seen appreciation. That’s wonderful, but one of the most powerful things we’ve seen for the residents is, as highly energy efficient homes, some had to meet Energy Star; others had to meet Enterprise Green Community standards. These are homes where utility bills, in total, for water, gas, electric, may be about 80 or 90 bucks a month. These are residents, oftentimes, that were living in really substandard housing before, and they may be paying $400 to $500 a month in utilities, because [cross talk] and leaking windows. Not only is the rent exceedingly affordable, but the utility costs have been crushed.
Eve Picker: Their quality of life is changed radically.
Eric Kronberg: It really, really is. Also, for those that live around these houses, because these were the houses that were the absolute problems that attracted crime and other kinds of nuisances on the block. It’s just such a great win, without a doubt. Our client’s been asked about it and spoken about it a lot. We speak about it from time to time.
Eric Kronberg: The big cautionary tale we tell people, though, is that this was really possible because we were able to marry the Low Income Housing Tax Credits to the [Y Tech] with historic tax credits. That’s an amazingly complicated legal tightrope to be able to do on the best of days. but applying state historic tax credits, and federal historic tax credits, and Low Income Housing Tax Credits; then there were some home funds here and some block grants there; NSP2 dollars for some of them. There was tremendous layering off capital stack to make this happen, but the outcome has been phenomenal.
Eve Picker: That’s pretty great. I have to think about what’s an example of revitalization that misses this completely and could do the same thing. I don’t know if we can think of one.
Eric Kronberg: We do a lot of work in Atlanta, where we’re taking often crappy 1960s warehouses and revitalizing them into restaurants, and loft office, and breweries, and other stuff. But one of the components of this is if the place you’re starting with has blighted structures on it and you can reuse, and/or add to them, you’re not displacing people typically, or generally with that endeavor. That is a starting point that makes it easier.
Eric Kronberg: That doesn’t always happen. Sometimes people get kicked out of the building we’re working with as clients, but usually we’re starting with weird, blighted buildings that are empty. So, you’re not displacing there, then, and to the degree that the outcomes of the uses benefit the community, that’s great. Sometimes, it’s affordable housing, and that’s an easy win. Other times, it’s market rate loft office, and sometimes, that’s not exactly – you could argue – for all the community.
Eric Kronberg: Finding market uses for blighted buildings that can pay the rent to justify renovating them is a critical component to fixing up neighborhoods. We always take an approach that there’s never enough federal subsidy to go around, or state or local subsidy. So, anything that we can do from a market rate perspective to help remove blight is something we’re very, very interested in.
Eve Picker: Be sure to go to EvePicker.com and sign up for my free educational newsletter about impact real estate investing. You’ll be among the first to hear about new projects you can invest in. That’s EvePicker.com. Thanks so much.
Eve Picker: I think people don’t realize the cost of building or renovating is so great that, often, developers are thought of as just greedy. But I think many of the developers I talk to are really just trying to make it work. They have enormous expenses in construction expenses, and they have to somehow find an income stream. It’s very difficult, right?
Eric Kronberg: Well, yeah. Another area we spend a lot of time, which is definitely outside the realm of traditional architect, is we focus a lot on infrastructure costs. In our mind, infrastructure is everything other than the building. We look at all the costs based on parking requirements, which also trigger stormwater requirements, which waste land that doesn’t produce rent. In Atlanta and other cities, we’re required to put in a lot of streetscapes and street trees, which we love but are expensive.
Eric Kronberg: What we try to do is help people understand that every dollar that goes into those components takes away dollars from the building. As architects at heart, we would love as much budget to make our buildings as beautiful as possible. If we want our buildings to at least look decent, we’ve got to find ways to reduce all those costs. We work really, really hard on zoning and a whole other range of issues to find ways to minimize the costs of what we have to do.
Eric Kronberg: Sometimes, it’s educating clients to look for places where sidewalk and street trees are already in place, so you don’t have to redo those. It’s reducing parking requirements, so you don’t have to pave over half a lot and do a huge stormwater vault underground. There’s a range of ways to tackle this.
Eric Kronberg: A lot of it comes down to showing clients where, if you start with an existing building, you can also often do partial conformance to energy codes and building codes and save a really cool old building and have it actually be more cost effective, because you’re not having to necessarily renovate to the full standards of a new building.
Eric Kronberg: Energy nerds get mad at me, because it’s not as great as a new building. I’m like, Yeah, sure, right, but we just saved that building, and it’s back in productive use, and it didn’t get torn down.” We take a very global holistic view at all of these things and look to create the most good with the scarce resources we have at our disposal.
Eve Picker: I think that’s the right approach to take. You mentioned zoning, and another comment that made me smile was – I read through your bio – you’re described as a Zoning Whisperer. You specialize in examining and demystifying zoning ordinances to find ways to make great projects possible and help others navigate through the zoning swamp. That’s a pretty big statement – zoning’s a hot button at the moment. I’d love you to tell us a little bit about how you think about zoning.
Eric Kronberg: Zoning, to me, is this collection of legalese that is filled with good intentions, usually; sometimes discriminatory, awful intentions, but, usually, the hope is that there’s good intentions with what they’re writing this for. It produces typically amazingly awful outcomes. Most people don’t understand the intent, or the why for zoning, and they absolutely don’t understand the outcomes of what they’ve written for those who write the codes.
Eric Kronberg: So, it’s our job to understand the how, and the why, and then to kind of re-manipulate what’s going on to get to better projects. There’s so many layers to the zoning, but what we find time and again in a range of jurisdictions is that the people enforcing the zoning understand the letter of the law, but they don’t understand much beyond that, oftentimes. They may want something better, or hope for a better project, but they don’t understand how the rules prevent those things from happening. Without that knowledge, they don’t know how to change or modify the rules to encourage better behavior or better projects and outcomes.
Eric Kronberg: We do a lot of coaching in the zoning sphere from both teaching communities, but also elected officials, to help people understand: if these are the things we say we want in a community that’s going to make for a better neighborhood, here are the specific rules that make that either specifically illegal, through zoning, or functionally illegal, through regulations that make it impossible to provide under any circumstances on the planet Earth.
Eric Kronberg: Most people are not able to connect the dots, because they’re either planners, who work at 30,000 feet and don’t really understand nuts and bolts of development, or they’re architects who just can’t look past the property lines to understand that there’s more out there. So, it’s our job to really go between these different realms and show not just design outcome goals, from the architecture side, but development necessity.
Eric Kronberg: We stress all the time that if you can’t get the rent, you don’t do the building. The building’s got to pay for itself, or it’s not going to happen. If the zoning mandates not- buildings that can’t pay the rent, you’re not going to get the buildings you want. It’s design, to development, to urban planning, and city goals – to say: if these are your goals, your rules are in direct opposition to those goals and not just to complain, but to say: these are how the rules need to change, if you want better outcomes.
Eve Picker: This moment in time is a perfect storm for zoning, because many zoning laws around the country have been in place for quite a long time, maybe even 50 years, right? Right now, people are experimenting with new types of commercial uses, and new types of housing uses, and moving away from the very traditional suburban one-family-per-house model. I don’t know what Atlanta is like, but I know other states are kind of playing with mixing single-family zoning, for example.
Eric Kronberg: Yeah, which we’re super-excited about. Atlanta’s actually been doing some great stuff. Some cities are getting splashier headlines. Hat tip to Minneapolis and the great work going on in Oregon. We really hope California can find a way to solve its housing crisis, because we know they need all the help they can get.
Eric Kronberg: We’ve been working quietly in the background with friends of ours that are on the code writing team to help Atlanta solve some problems. Atlanta’s actually done some quiet- they’re calling them ‘quick fixes,’ where they’ve tweaked some codes around the edges. The thing is, they’ve tackled really substantive components to make the city better, and it’s usually in the geeky areas that you would never start with.
Eric Kronberg: We helped and had some great leadership on the city side, and the consultant side, but the city enacted some amazing parking reforms that you may not typically think of as a suburban developed city, like Atlanta, or as it’s been pegged historically. Little things like stating that all buildings built before 1965 no longer have parking requirements. That’s transformational for historic preservation of the city.
Eve Picker: That absolutely is, yeah.
Eric Kronberg: Then they also said all buildings within a half mile of transit no longer have parking requirements-
Eve Picker: That’s fabulous.
Eric Kronberg: -that’s for all uses other than alcohol, over a minimum size. That’s kind of a weird twist, which we can kind of gloss over for now, but, on-street parking [cross talk]
Eve Picker: Why alcohol? Hold on a second-
Eric Kronberg: This is fun. So, the parking exceptions don’t apply to any use with an alcohol license over 1,200 square feet. Everybody says, “Well, why should you drive to a bar?” The rationale – and this is sort of the twisted logic – is that uses with alcohol licenses can pay a lot more in rent than typical retail. They’re trying to find a way to be flexible, but to protect smaller scale retail from getting priced out and having all of these places become entertainment districts, which is a very interesting balance and problem to try to wrestle with.
Eve Picker: Yes.
Eric Kronberg: There are always other ways to skin the cat and solve the problem, but that was the way that Atlanta landed upon to do that. The goal was that hopefully you could do a small neighborhood pub; that wouldn’t have to have parking, if it was small enough. But once you got over a certain size, with alcohol, you might become more than just a neighborhood spot. You might become more of a- I wouldn’t call it a regional attractor, but more of a multi-neighborhood attractor, attracting more traffic. Traffic is the bane of neighborhoods from a perceptional standpoint, so that was the compromise they used to pass. Nothing’s ever perfect with zoning, so that’s a reasonable compromise to get the great stuff we got passed. We deal with it. It’s a lot better than what it was.
Yeah. I’ve always been fascinated by people who complain about not enough parking, and then they go to a place like New York, and say how fabulous it is. I want to say, “Well, we should be so lucky as not to need parking or to have as little of a place New York, because it’s economically vital, and vibrant, and you don’t need to drive everywhere. There is some pretty big upheaval going on around zoning, and I really- I wonder how quickly that’s going to continue. It just sort of started, and it’s taking off.
Eric Kronberg: Well, I think that one of the one of the big areas that we focus on as a personal mission is to really demonize single-family zoning to the extent we possibly can. We know we’re not going to change that everywhere, and it doesn’t need to change everywhere, but one of the reasons we focus on that, and I think why it’s becoming to the fore with a lot of places is that, fundamentally, in 99 percent of cities, single-family zoning, the development pattern does not produce nearly enough property taxes to pay for all the services needed for those places.
Eric Kronberg: By services, that’s also infrastructure renovation, or replacement, along with police, and fire, and pensions, and trash, and everything else. Most single-family homeowners are mortified to hear that. They think they’re carrying the weight for the whole city, but they’re not. As city after city tends to go bankrupt or goes deep in the red trying to provide services for their citizens, a lot are finally starting to wake up and realize something’s got to change.
Eric Kronberg: Then you also combine the city tax structure along with massive change in household makeup, and demographic. We’ve only got 20 percent of American households with three people or more living in them with nuclear families. I think it’s over 76 to 80 percent of households are one or two people. Single-family housing, which makes up 65-66 percent of US housing stock, is a complete mismatch for most people living in America. Then you can layer on millennials and baby boomers, in particular, who wanted to live near a walkable amenity … It’s just a disaster from our housing stock to what we need. Then there’s land use regulations that prevent us from building the stuff people want.
Eve Picker: Yeah. How do you get through all of that, Eric?
Eric Kronberg: The good news is the problems are endless. We’re talking with a range of [inaudible] development folks in state of Georgia. We’re working with a great nonprofit in from our development alliance, helping the state of Michigan and the state of Virginia. I was talking some great people in the state of Maine this morning. The thing is, everybody thinks their place is special and every town is unique, it has character … That’s great, but these are fundamental problems with the American development pattern that are pretty typical.
Eric Kronberg: Whether you’re in Maine, Michigan, Montana, a lot of the problems these towns face are relatively similar. Since most zoning laws tend to be generally cut-and-paste from the ’50s through the ’80s, the land use regulations, generally speaking, tend to have a lot of similarities of the worst qualities. The repairs to these zoning codes always have to be calibrated to local conditions, but there’s some pretty typical stuff places could do to make their places better.
Eve Picker: Absolutely. Your projects have a lovely, authentic, grounded feel to them. I can imagine myself living in them or using them. Nothing super-slick, and all of them are very beautiful. I think the word is approachable. Along with that, you have quite a list of achievements and awards. It looks to me like your firm is pretty young. I’m not sure when you put your firm together, but why do you think your projects are so well received?
Eric Kronberg: Well, thank you for the compliment. [inaudible] part of it’s because we don’t have any budgets. We have to help the developers scrimp and stretch every dollar as far as they possibly can. There’s nothing superfluous. Everything has to matter. Any move we do, we need to get the triple benefit of fixing a facade with new windows; it’s got to provide better natural light. We don’t have projects with fat in them, so everything is just kind of stripped bare and as meaningful as it possibly can, often just due to necessity. In terms of awards, we’ve got an amazingly talented friend who works for us to write award submissions. The key to winning awards is having a writer-
Eve Picker: I don’t believe that for a moment! It’s not the writing of the award submissions.
Eric Kronberg: Yes, it is! You just invest in a great writer. Don’t spend any money on PR, spend your money on great photography and a great award submission writer. That is the key to our architectural award success.
Eve Picker: I think why your projects resonate with me is it’s pretty much what I had to do with my own development projects. It was absolutely no fat in them. You had to make the bones of the building beautiful, because that’s all you could afford, right?
Eric Kronberg: Yep, yep.
Eve Picker: I like that authenticity in the projects. They don’t feel like buildings that are covered in layers of granite and finishes that just speak to wealth. I think they feel like places for everyday people. That’s very nice.
Eric Kronberg: Yeah, and part of that, where it kind of … I went to Tulane, in New Orleans, so I had five years at school to learn a few things in between barhopping but have gone back and worked there a ton since. One of things that really hit home is that there’s beauty in patina, and sometimes just elegant decay is amazing. You can’t top it; just letting things be what they are. That’s often just enough.
Eric Kronberg: Sometimes, it’s a matter of convincing our clients to just … “That brick wall – don’t even worry about it. It’s fine. It’s good. It does what it needs to do. Don’t waste your money here. Let’s spend a little bit of money over there. Just let the building be what it’s going to be and be comfortable with that.” Sometimes it’s just don’t do stupid things and just kind of be confident that it is going to be okay with simplicity. Don’t gussy it up or fuss too much about some of the stuff.
Eric Kronberg: If more architects had a little bit more restraint in those areas, that’d be great, but part of why we can have that approach or take that approach is we’re looking at a really holistic approach to redevelopment. For us, it’s a win, if we take an old building, get it back into productive use. We’re not measuring our success from a project by how fancy we made the building. It’s really kind of what did we start with, from a heap of junk to getting it productive and functioning, and that’s enough for us.
Eric Kronberg: Our metric of success is directly in line with our clients, and it’s not often in competition with our clients, as a lot of architects tend to be, by seeing how much fee they can extract and construction costs to make the building as spectacular as possible at the client’s expense. That’s another component of why we get hard to do what we do and makes things better.
Eve Picker: You make architects sound bad.
Eric Kronberg: They’re not my favorite.
Eve Picker: You and I know that architects take many, many directions, just like in any other profession. What led you down the path of this conscious urban placemaking?
Eric Kronberg: All of us here at our office have a desire to do and get things done. We want to effect change. We want to make places better. We know that means that either laws have to change, buildings need to get renovated – things need to happen. Part of what gets us up in the morning is getting buildings put back into service. That matters a lot. We are a young firm with a young staff. Understanding that, as a priority, provides a lot of flexibility and freedom in how we approach problems.
Eric Kronberg: The other component of it is I do my own development. I teach development, training for Incremental Development Alliance. We also teach our staff, so they can understand the decision-making process, the developer clients, and the tradeoffs involved of where to emphasize and spend money, so that they can better respond with great solutions to making buildings better. So much of this, it gets back to not just putting yourself in the client’s shoes, but understanding how pro forma works, and the returns, and where cash flow is going to come, and financing. The more folks understand about that process, the better we can help people do better things.
Eve Picker: Clearly, there’s a lot of real estate that happens that isn’t triple bottom line. How necessary do you think socially responsible real estate is in today’s development landscape?
Eric Kronberg: Again, taking a sort of- I don’t want to say cynical approach to this, but here’s what we see, big picture – everybody is trying to move back into cities. There’s a huge demand for interesting places with $2 coffee, tacos, and donuts; ideally with transit nearby and jobs close. Those are really important things to a lot of people.
Eric Kronberg: Construction costs are just too high, right now. We don’t have the labor, tariffs, everything else. It’s too expensive to build. What we explain to folks is you need to find sites where the infrastructure is in place, where the street trees, the curbs, the on-street parking, and all this stuff exists. That typically means in existing towns, and most of these towns have crappy zoning. If you’re going to come in and do good stuff, you’re going to have to get approvals from the townsfolk to do good stuff.
Eric Kronberg: The more triple bottom line development you do, the more of a reputation you can develop for doing good projects, the easier it is to gain trust with folks in these places because they know you’re a credible designer or broker of making things happen. We tackle each project … We’ve got 30 or 40 more years to go of doing stuff, and we’re not going to burn a bridge with a community over a project, so it’s our job to find the right clients, to find the right places, and make good things happen. All this to say that if you’re not taking some kind of triple bottom line approach, your ability to effect change may be kind of short-lived.
Eve Picker: Interesting point of view. I’m going to just change track a little bit. I’m going to ask you if there are any current trends in real estate development that interest you a lot or that you think are really important for the future of our cities?
Eric Kronberg: The current drumbeat will beat some more with missing middle housing, that’s definitely the hot buzzword, and it’s well-deserved, and it’s also critically needed. For folks that may not have heard this before, and I think, hopefully, a lot of people have, it’s looking at more housing choice that you might … Instead of the house you might build on a typical single-family lot, it’s everything from a house with a guest cottage, or ADU behind, to a duplex, up to a 20-unit cottage-court development, or a 40-unit smaller three-story apartment building.
Eric Kronberg: What we continue to talk about with zoning change and development is that cities like Atlanta, and Portland, and otherwise have anywhere between 65 to 85 percent of their land in their city constrained to single-family zoning. You can’t have a great city with that kind of land-use pattern. It just doesn’t work. You can’t have enough density for it to support small business, to support transit. You’re going to be a sprawled-out, car-based society. So many people want something else.
Eric Kronberg: We’ve got to change our land-use laws to allow more things to happen on these lots. It needs to be contextual. It needs to be well-designed. Atlanta just took a step in this direction by creating a new zoning designation that will allow for up to 12 units on a standard single-family lot. Now, you have to up-zone, or rezone your property to have that, which means you’ve got to convince the neighbors that this is a good idea. That is not an easy prospect in the best of days. Even having a category is a huge start, because Atlanta’s never had a zoning category that’s functional for small-scale multifamily infill. If you don’t even have a zoning category to allow whatever, it makes it really hard to deliver anywhere in our city.
Eve Picker: Do you think it’s right that it’s up to the developer to convince neighbors?
Eric Kronberg: No, I think … We’ve been talking a lot this week about this, because we’re working on several projects and rezonings. Ultimately, my common, and Atlanta’s process, which is a normal process, is if we want better housing, and better zoning like this, we’ve got to take the voting away from the city council members. I say that because city council members, by and large, understand the high-level needs that we need to do to change our city from a housing perspective. They also know that if they’re on record voting for some of this stuff, they’re going to get voted out.
Eric Kronberg: How do you give them political cover for large-scale, broad policy things, and then let staff provide a set criteria to allow these things to happen without putting council members on the hook? An example of this that we’re talking about, internally, is if you have a lot that is in close proximity to a heavy-rail transit station that you’re not going to take out any mature top-quality trees; that you’re willing to provide a little bit of workforce housing in; that you’re not going to do more than the parking minimums … If you can check those key boxes, we would like to see a path to an automatic administrative up-zone that doesn’t take city council blessing.
Eve Picker: Right.
Eric Kronberg: I think it’s that kind of reorganization of the entitlement process that is going to be critical, or you take an approach like Minneapolis and up-zone the whole city and just roll with that, which is also another great way to do it.
Eve Picker: It’s kind of like a checklist for good. If you do a whole bunch of things, you get something extra and [cross talk] don’t do them, you don’t get that extra thing.
Eric Kronberg: Absolutely.
Eve Picker: That’s interesting. In Melbourne, Australia, which I visit a lot, I’ve been watching for years how they’re really focused their zoning changes on transit corridors, because it’s a really sprawly city, and also a very expensive one. They took the existing transit corridors and changed the density rules on those corridors to allow for much bigger projects. In other words, using the existing infrastructure in much the way you’re talking about, but at a much bigger scale. It’s been really interesting to watch.
Eric Kronberg: I’m trying to find it as we’re talking … There were some architects turned developers from Melbourne that we- they had a great TED Talk down there, where they were doing some of their own development that was just amazing. TED Talk was phenomenal. It was Jeremy McLeod-
Eve Picker: Oh, yes. Yes, I know Jeremy really well, and I hope to be interviewing him. His work is phenomenal; absolutely phenomenal. He’s [cross talk]
Eric Kronberg: We were super-impressed with how they really kind of took ownership of the entire process and really rethought everything, top to bottom. That was a [cross talk]
Eve Picker: -Jeremy is my architect on a little project I’m doing in Australia. What’s fascinating about that is there is an architect in the- a private architect who spun off a non-profit and is developing his own affordable housing policy in a country that really didn’t have any. It’s really stunning, and the architecture is astounding.
Eric Kronberg: Yeah, it looked really, really cool.
Eve Picker: Yeah. Yes, Jeremy is an interesting guy. So, that’s fascinating.
Eric Kronberg: Well, we’re fans, so, you can let him know that we think the work he’s doing is wonderful.
Eve Picker: It’s a very small world, isn’t it?
Eric Kronberg: Yeah.
Eve Picker: Then, I suppose my big question is what’s next for you?
Eric Kronberg: What’s interesting … We were asking that question ourselves, internally, and branding, and marketing folks, and everything else. One of the things that we are really working through now is understanding how to impact the most change. That’s something that we ask ourselves every day here and understanding that doing individual architectural projects are really important, and we’re committed to that. But also, when you have entire states that have state-level challenges and the cities within them, there’s a lot of places to effect change.
Eric Kronberg: I think one of our special skill sets is that we can kind of swim between these different levels of three feet from the ground to 30,000 feet and understand the nuts and bolts of both of those. We’re kind of getting our heads around how we help rethink, at both municipal and state levels, the kinds of policies and regulations to make better places.
Eric Kronberg: We had a really interesting discussion with some great folks in Michigan, where, even if you get the policies right, there’s a lot of communities – this is true for Georgia, and Maine, and all across the board – where there’s just not that much going on. In Michigan, we’re talking specifically about really trying to reset expectations for folks that work for the local land bank; that the expectation is no longer that you just sit on property, and hold it, and try to sell it someday, but that you need to become a small developer as a land bank; start to think about incrementally renovating or redeveloping the land you have, because nobody else is coming to save you.
Eric Kronberg: We’re also interested in helping places self-heal with the resources they have. Again, Michigan’s problems are Ohio’s problems are West Virginia’s problems are Virginia’s [cross talk] easy for me to speak about the Eastern Seaboard, or the East side of America, just cause I’m more familiar with that. But I know the whole Western half of the country has its own set of challenges, as well, that tend to be relatively similar.
Eve Picker: Yeah, that’s true. The really big question is where do you think the future of real estate impact investing lies?
Eric Kronberg: I’ve made a note to make sure I get a plug in for this, but we were chatting before this interview started that all these really important incremental infill projects are really hard to finance. They tend to be … Banks are not fans of them. They’re a little bit more obscure, or they’re not vanilla, and they’re kind of scary to bankers who like things beige or tan, like their two favorite colors. Anything else is kind of weird.
Eric Kronberg: One of the things we spend a lot of time on is in the sphere of accessory dwelling units. Just for an example, to recognize how hard it is to finance those kinds of buildings and also how well they cash flow in most cities. Here’s the thing that can either print money, if you rent it at market rate, or still be very reasonably profitable, if you run at workforce housing or affordable rate, but getting a loan to build those are so hard [cross talk]
Eve Picker: Oh, it’s very difficult, yeah [cross talk] You have to be kind of cookie-cutter to get a loan. I hope no bankers are listening, but I really believe that the banking system, for whatever reason, is squashing the innovation out of our cities.
Eric Kronberg: They really are. It’s probably unintentional between-
Eve Picker: Yeah.
Eric Kronberg: All it takes is a little bit of federal regulation and then some interpretation of that to scare bankers into doing nothing ever again, except sell the simplest of loans they possibly can. Financing these smaller-scale projects matters a ton. In terms of impact investing, when you want to talk about inclusive redevelopment, impact investing, this, almost by its very nature … The best stuff is going to be the smaller scale. Taking that corner, or blighted building and getting it fixed up. Taking an old duplex and renovating it, living in half, and building a cottage behind.
Eric Kronberg: These are the kinds of incremental changes that are really powerful for neighborhoods that allow for gradual redevelopment, which can minimize displacement in that process. These are also projects that may not need as much capital to get done, but it sure needs some capital. These are not $10 million projects, but maybe $100,000 to $200,000, or $500,000 projects. So, impact investing, and crowdfunding, these are important opportunities, where are these new opportunities, like Small Change, can really have an impact.
Eric Kronberg: We generally see, in America, that we’re massively over-retailed, in terms of square footage, and we’re massively under-housed, in terms of square footage of the kind of housing we need in the kind of places we need it. We don’t have good loan products for those types of housing. If you want to zoom in, or hone in on where is the lowest-hanging fruit and the greatest need, it’s going to be small-scale residential infill.
Eve Picker: I think that’s probably right. Well, this has been really fascinating. I have three sign up questions I’m going to ask you. Okay. What’s the key factor that makes a real estate project impactful to you?
Eric Kronberg: Are we doing something good with a property, which is broad-based? Are we saving some cool buildings or even moderately crappy old buildings that could be cool when we’re done with them? Are the uses, when we’re done, going to add amenity to the neighborhood? And is it something we’re going to be proud of, or, sometimes, it’s not embarrassed about, but usually proud of? If we can feel pretty good about those things, that’s an easy win. But we’re also relatively malleable in what we feel proud about.
Eve Picker: Yes. We talked about crowdfunding- that it can benefit impact real estate developers with these small projects that most banks don’t want to touch. Are there are other ways that involving a crowd of people might be of benefit to projects like this?
Eric Kronberg: One of the things we’ve talked about – and I’m stealing this idea from Monty Anderson – and this is more for the foundations, but this is another interesting way things can happen is called a tri-party loan agreement. Another way to think about it, in your realm would be low-cost mezzanine debt, where essentially a lot of projects we see, you may have a small developer with a lot of hustle and skill, but he can only wrangle together $30,000 or $40,000 of equity, and he may need $80,000 or $100,000 of equity to make a bank happy for traditional funding. We talk about looking at zero percent, or low interest percent loans that could help bridge that equity gap to help leverage conventional financing.
The reason I really like that is the lower-return money can really help unlock more lending to get more funding into projects. Other ways of kind of that bridge lending to leverage better good, as opposed to having to carry the whole lift from a crowdfunded source. If $30,000 of bridge loan can help unlock another $300,000 to $400,000, there’s just more good that can be done that way.
Eve Picker: Yeah. Where do you get that? That’s the question.
Eric Kronberg: Yeah. Any foundations listening to this podcast, we’re talking to you.
Eve Picker: Yes! I think the big question is if there’s one thing that you would change to make a real estate development better in the US, what would that be?
Eric Kronberg: Less white men doing it.
Eve Picker: That’s very, very apt, yep.
Eric Kronberg: I say that as a white man, too, just to clarify to your listeners of your podcast.
Eve Picker: What makes you say that? I don’t know if you noticed, but Jeremy- Jeremy’s team, his architecture team, is almost completely female.
Eric Kronberg: Got it, yeah. We’re about 50-percent female, and 50-percent male. Actually, I think we’re at five women and four men, at this point, so we’re outnumbered, which makes for a better, more thoughtful practice, to say the least. I think the more diverse you can be, the more inclusive you can be, the better the perspectives you can do. I also think that, on a range of levels, white men, like myself, tend to automatically assume we know the answer. That’s always kind of a weakness, to grossly generalize across broad spectrums of folks.
Eric Kronberg: Also, when you’re working in distressed communities, the more the design team, the development team can have a diverse group of people working on it, particularly folks that are of and like the community, the easier it is to connect and gain trust, and also to listen, and discuss, and find better solutions. That’s not to say that a white guy can’t come into an African-American neighborhood, and listen, and be thoughtful, and help, but the conversations can be a lot easier, faster, and trust can be built sooner, when it’s a more inclusive group on all sides of the table.
Eve Picker: I think that makes absolute sense. This has been really delightful. I’ve enjoyed talking to you. I hope we’ll will meet soon. Thank you, Eric.
Eric Kronberg: Eve, thanks so much for having me. It was my pleasure.
Eve Picker: That was Eric Kronberg. I thoroughly enjoyed our conversation. Here are just a few great takeaways that I’d like to remember. First, Eric wants to demonize single-family zoning everywhere. It’s a zoning type that doesn’t produce enough in taxes to cover the infrastructure costs, and only 20 percent of households are mom, dad and the kids looking for a house to live in. Second, don’t be too quick to pull down an old building. Elegant decay can be valuable. Third, when you’re developing affordable housing, or on a budget, you need to find sites that have infrastructure, such as sidewalks, in place.
Eve Picker: You can find out more about impact real estate investing and access the Show Notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today, and thank you, Eric, for sharing your thoughts with me. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.
Image courtesy of Kronberg Wall.