Hi All - Happy Sunday. It’s the last day of the month, which means it’s time for the Last Cast Letter.

In this letter, we've discussed real estate topics ranging from European green housing regulations to the state of the US multifamily sector. 

However, we have yet to put our therapist hat on and ask you the most important question:

"How does real estate make you feel?”

Yes, really. 

In this month's newsletter, we are taking a break from real estate investing projections and analysis to diagnose a potential root cause of one of America's greatest issues: anti-human urban planning. 

The Missing Middle

You can tell a lot about a society and what it values just from the aesthetics of its communities. And for many parts of the US, it seems like our primary value is expediency, which, to us, is different than convenience.

Expediency often implies that something is done quickly and efficiently, but possibly at the expense of quality or thoroughness. See Exhibit A below. I both love and hate this picture.

American communities weren't always overcommercialized and lifeless sprawls. In the early to mid 20th Century, American cities were vibrant hubs that featured classical European-styled urban planning.

So, what happened? Well, city planners became obsessed with orienting American life around the motorcar, and the 1956 Federal-Aid Highway Act demolished medium-density housing to make way for high-speed roadways — as seen in Detroit's shocking transformation from 1959 to 1961: 

The destruction of medium-density housing, which made community life possible in metropolitan areas, has become known as the "Missing Middle" by advocates who wish to restore walkable neighborhoods and affordable housing to American life. 

And, when the government isn't destroying medium-density housing with highway construction, it's regulating it out of existence. 

Middle housing has been largely outlawed through single-family zoning and building requirements for mid to high-rise apartment buildings. For example, nearly two-thirds of San Francisco's residential land is zoned for single-family housing.

The Real Costs

In case you've been living under a rock, America has some serious societal issues, namely those surrounding both physical and mental health. One could argue both of these are byproducts of our built environment. 

The Physical 

As we organized our living spaces around automobiles, the inevitable result was a less active population. A study published last year showed that Europeans walk over twice as much as their American counterparts when making short trips. 

This activity differential is unsurprising, considering that Europe is home to a variety of middle housing as well as politicians advocating for "15-minute cities," an urban planning concept in which residents can easily walk or bike to everyday destinations. 

While not all physical ailments lie at the feet of poor urban planning, it is undoubtedly a contributing factor: 43% of Americans are obese, compared to just a 13% prevalence of obesity in Europe.

The Mental

In the wake of the Missing Middle, a focus on roadway convenience, and single-family housing mandates, American culture faces social atomization — a phenomenon in which people live relatively close to one another but have very little interaction.

As Americans become increasingly disconnected from community centers, seen in the historic drop in church attendance, social interaction falls off a cliff, and depression spikes. 

Last month, a survey from Pew Research found that 66% of US adults feel close to other people in their country. But, when asked if they feel close to people in their local community, the figure paradoxically dropped to just 54%. Among foreign nations, 78% of adults report feeling close to those in their local communities. 

This increased social disconnection has fueled sky-high suicide rates — the US has the highest suicide rate of any wealthy nation and double the rate of the UK. 

Hope on the Horizon?

With all that doom and gloom out of the way, let's explore what there is to be hopeful about. As the saying goes, "In the midst of every crisis lies great opportunity." In this case, the crisis is the American housing shortage. 

America is short an estimated 4 to 7 million homes. As a result, both private investors and politicians are looking for creative solutions — and many are turning back to the all-but-forgotten Missing Middle housing:

• Minneapolis's 2040 comprehensive plan revised existing zoning regulations and legalized duplexes and triplexes in residential districts.

• Salt Lake City's new housing policy incentivizes missing middle and multifamily housing development.

• Houston's Livable Places project is boosting medium-density housing and seeks to diversify housing stock.

We are seeing similar pushes to revive the Missing Middle in cities like Portland and Sacramento. So, don't be discouraged — all we need is a bit more of that classic American ingenuity and some elbow grease, and US communities will be back on their feet. 

There you have it, that’s all for now. As always, if you’re interested in investing alongside us, fill out the form below.

— Brooks