The Moving Middle: A generational opportunity to diversify housing

Yonatan Cohen, VP of Design

Starter homes have historically been bungalows, shotgun houses, and rowhomes. Source: Library of Congress

Demand for missing middle homes is surging at the same time that Build-to-Rent (BTR) is taking off. This is not a coincidence. Both trends reflect the need for more affordable housing stock following a decade of under-building and the consequential peaking of home prices. Connecting them also is a drive to expand housing options and patterns beyond those which have defined the American residential landscape for the last half-century.

Daniel Parolek coined the term “missing middle housing” in the aftermath of the ‘08 recession to describe the medium-density homes that, once prevalent across the U.S., have practically vanished from new construction. But today, over a decade later, “middle” implies much more.

To match how markets and lifestyles are changing, we not only need missing middle housing in the sense of size and density but also in the sense of a middle ground between buying and renting, between villa and apartment, between owning and sharing and between settling and being transient. This expanded middle is no longer the outlier, but where many people in the U.S. actually live, and BTR is one validated housing model addressing it.

Sources: CoreLogic Public Records; U.S. Census Bureau from New York Times

Why the Middle is Missing

In the 1940s, nearly 70% of homes were under 1,400 square feet, according to the New York Times. Townhomes, courtyard bungalows and cottage clusters, duplexes and fourplexes and row houses were a staple in cities and towns across the country. Compact, affordable and clustered, they were where small households, those in transition and the elderly could settle. They also provided starter homes for many families. From the 1950s on, strict zoning laws prioritized single-family homes on larger lots on the one hand and multi-family apartment buildings on the other—two poles which were separated both spatially and demographically. New medium-density housing became hard to build, if not illegal.

In 2020, the number of missing-middle starter homes built in the U.S. was less than ten percent of new home construction. Prices, even for smaller homes, have escalated.  The amount of “affordable” units (detached new houses costing less than $200K) is now practically zero, according to John Burns, making it difficult for this country to sustain middle-income households. Reintroducing missing-middle housing is crucial to overcoming the starter and affordable home shortage. The crux today is that it has to happen at scale.

More Variety in Mid-Density and Smaller Homes

BTR is creating new mid-density housing at scale. The homes have smaller footprints than traditional single-family, making them less expensive to build and rent. Because they are designed within the context of a neighborhood, there isn’t a loss to livability. For instance, BTR homes don’t require the large setbacks for garages and yards that detached homes typically do. Parking can be on the street, inviting more walkability and amenities that used to go in the backyard consolidate into common areas. With BTR, residents don’t share walls yet both they and developers gain the benefits and efficiencies of density—affordability, space-saving, community and sustainability—with the individuality of stand-alone homes.

Significant growth in the number and share of households renting their home since 2006.

BTR Fills the Gap to the Starter Home

BTR neighborhoods exemplify how missing middle housing meets current housing trends. In the past few years, we have seen housing prices reach an historic high and rising mortgage rates, leading more people to rent and homeownership to slow to its lowest point since the 1980s. But there may be more to the story. Until the 1950s, Americans leaned more towards renting. Following the post-war surge, the ratio of homeowners steadily rose in each decade following, until the Great Recession in 2008. Today, 36% of Americans and 62% of those under the age of 35 rent, according to the Pew Research Center 2022 analysis of U.S. Census Bureau data. The scale is again tipping towards for-rent: For the first time since 1974, Q4 of 2022 saw more build-for-rent units started than single-family build-for-sale.

While experts call on missing middle housing to bridge the gap of the increasingly elusory starter home, BTR goes further. Framing housing as a service rather than as an investment, it provides solutions to different people at different stages of their lives. For the growing number of people in transition, who are ready to move out of an apartment but not ready to buy, it offers a more flexible and, in some cases, less expensive option than purchasing year-over-year.

Are shared spaces coming back to suburbia?

Rental Neighborhoods: More Flexible and Fluid Lifestyles

BTR also carries the concept of the missing middle forward to meet changing models of work, life, family, and ownership. The average American family is decreasing in size. Remote work is on the rise. Elders want to age in place near loved ones. The sharing and service economies continue to expand. Design is all important. People want to live in communities where they can walk to green spaces, the gym, a cafe, and stores and have easy access to well-maintained shared services. All of this reshapes how people envision living.

Rental neighborhoods offer a middle ground between the quality of life in a single-family home and the affordability and convenience of an apartment. BTR’s horizontal detached architecture gives residents more space and privacy than vertically stacked apartments or condominiums. The homes can comfortably be smaller in part because the community shares and cares for many of the amenities—such as pools, gyms, parks, and working and events spaces. This access extends to resources like vacuum cleaners, tools, printers, dog-walking services and bike rentals available from apps like Venn and Tulu, among others. BTR is not just cluster housing, but professionally managed and maintained neighborhoods full of amenities.

Pages from Economy houses for 1949 catalog

A Major Generational Shift in American Homes

BTR brings new possibilities to a housing market that misses the middle. As an emerging typology with little precedent, it is more susceptible to innovation—spanning design, zero-carbon readiness, smart building materials and construction methods, financing models and developer investment in local communities. BTR can explore and integrate all of these, partly because in BTR there is greater alignment between the long-term success of the community and the success of the owner.

With for-sale projects, homebuilders fine-tune the process and take care that houses are built right for a buyer hand-off. When a developer is the owner, as in BTR, they are also focused on assuring a community’s financial and physical performance in the long run, and in the attractiveness and quality of life it offers residents. This kind of investment extends the time horizon: the trees you planted need to take root and grow, you install solar roof panels because they will pay off in the long term and you understand the life cycles of designing a real place. BTR Developers are open to innovation because it delivers sustainability and longevity to all aspects of a project.

With deep insight into how BTR communities are designed, built and managed, Mosaic’s GC  platform enables developers to build and maintain this next generation of American homes and neighborhoods.

The author, Yonatan Cohen, is the VP of Design at Mosaic, previously he has been an award-winning architect and researcher in M.I.T.’s Social Computing Group, and earned a Master of Architecture and Urban Design from Harvard.

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