Recession | selophane.blog

Home Owners Associations and Condo Boards – are they preventing small business recovery?

I think I may have a reason why this recovery is floundering, and it all has to do with housing. Now stay with me a second, this is not subprime loans, nor predatory markets, or anything else that has already been blamed, this is a simple shift in how America lives and how that has affected our abilities to innovate and recover. Yes, I am talking about the shift from single family residences to Condo and Town home living, and the lovely association rules that come with both of those housing styles.

Last year, when I decided to start my own architecture firm (studiosml.com) I, like many prospective small business owners, hit upon a major stumbling block – my condo association bylaws. Specifically, they prohibit operating any business out of your unit. At the time, this felt like just another hurdle to get over, but now that I’ve had some distance and i’ve wathced our slow recovery, I have to wonder whether rules like this are impedeing others as well.

Let me explain. I wanted to start my architecture firm, and at least in the beginning, operate it out of my house. This is one of the very common and traditional ways that people start firms, it means a lot less overhead which translates into more funds for other startup costs like licensing fees, filing fees, accountants, lawyers, etc. Unfortunately, like many people in my generation I live in and own a condo and my condo association strictly forbids running any sort of business out of your unit. This is rather common, and its not just an issue with condo owners, many Home Owners Associations (HOAs) also forbid the homeowners within the community from conducting any businesses out of their homes. This means that not only can I, an architect, not start up a home based business, but someone who wants to run an internet based craft business, a one person maid service, or even a webdesigner cannot legally use their home address as a business address. Furthermore, in some states you can’t use a PO box as a business mailing address, it has to be headquartered somewhere where a person can sign for any legal documents. This means that with their home address off limits a prospective entrepreneur needs to rent an office or use one of the many new business “virtual office” services like Regus, which start at $100 a month minimum.

So why is this a new reason for a slow recovery? While I don’t have the hard numbers, in the two most recent recessions – 2000 and 1990, there were significantly less people living in condos and with HOAs. The only hurdle to starting a business in your house would be getting a local occupancy permit, which for most traditional home based businesses is not a problem. So, when people were laid off or put on furlough they were able start a home business to either provide a new source of income or supplement their reduced income. This means that their personal effect on consumer spending was not as greatly affected by the economic recession and they were able to make a greater contribution to the recovery effort.

Now, to bring the dreaded predatory lending and subprime loans into the picture; as people lose their homes they are forced to either move into apartment buildings or live with family. Both of these situations are incredible bad for small business. While some HOAs and Condo associations may make exceptions for certain types of businesses, it is universally accepted lease provision that you cannot run a business out of an apartment that is managed by a rental agency. This means that as the recession deepens people who could benefit most from reinventing themselves as entrepreneurs have an even greater hurdle to overcome. Furthermore, if they move in with a family member, they have to hope that they not only live in a space that allows home businesses but they also have to be receptive to having that new resident run a business out of their house.

So where does this leave us? I would propose that in an effort to jump start the small business economy State Legislatures should look at housing law and potential make it unlawful to prohibit someone from earning a living within their primary residence if their business met certain conditions. These would be things like: no employees, no costumer visits, nothing that violates noise rules of an HOA or Condo Association, no service may be performed that can be a fire risk nor a health risk, etc. This would be a big step to allowing many americans, especially those in urban areas, to get themselves off of unemployment and back into being a productive member of sociaety.

Unemployed and legally in the Nation’s Capital

The Washington Post ran an article recently highlighting the human side of how this recession (depression?) is affecting architects in the DC area.

One of the people they interviewed is a former co-worker of mine from a few years back. I’m saddened to hear that she is also going through what I am dealing with. Like most of us unemployed architectural professionals, she is a hard worker and team player and does not deserve to be jobless. Unfortunately she is in a worse situation than I. She’s a foreign national and when she lost her job she lost her work visa. I can’t imagine having to deal with the pressure of knowing that not only do you need a job to pay the bills, but also to keep living here.

[Image via The Washington Post.]

The Washington Post ran an article recently highlighting the human side of how this recession (depression?) is affecting architects in the DC area.

In a time such as this, when illegal immigration has become such a hot button issue, you would think there would be some outcry for the legal immigrants who came through all of the right channels. Now face a horrible decision; give up all that they have accomplished and move back because someone let them go, or overstay their visa and risk deportation. I think there should be some sort of federal stimulus based amnesty/leniency for work visa holders who have been laid off through no fault of their own. The immigrants rights groups need to address this before we start to lose all the foreign talent we have attracted.

Surviving the Great Recession

In light of my current situation, I was happy to find that Architecture Record is finally good for something other than product mailings and precedent studies for architecture students. The most recent issue is dedicated to surviving the current recession, including articles for the unemployed and the firms that are still operating. The advice they have to offer for the unemployed is mostly common sense, but the article on starting your own firm peaked my interest. Now if I was only licensed …

Architecture in Crisis

In light of the recent 2 week’s financial news I have been a little preoccupied with reading the news blogs and playing fake day-trader on updown.com and have not found many articles to write about. That being said, I would like to write an extra special post detailing how an economic collapse, or at least a shaky market, will affect the architecture world as we know it. Unfortunately I do not have the knowledge or research to make any grand predictions or explanations. Instead, i will just make my own observations.

Here goes the list of things that we might see happen due to recent economic events:

Due to a decrease in speculative lending, new construction loans will become harder to get, and many private commercial projects will be tabled.
Because of the economic slow down there will be less capital and therefore less commercial growth, so the drop in commercial projects will be compounded by their being less demand. This may be beneficial to the projects that do seek financing, because there will be less fingers in the pie
Less commercial growth, in turns creates less personal disposable income and reimbursable business expenses. This can translate to a slow down in hospitality construction and restaurant and entertainment interiors jobs.
Less commerce, means less jobs, and in turn that means less of a likelihood of a turnaround in the housing market, because there will be fewer buyers with enough savings to qualify for the new restrictive loans. This will hurt the multifamily and mixed use development architects.
A smaller housing market and lower property values mean that municipalities will have a lower tax revenue stream and public use building contracts may start to dry up.
With 401(k)s and IRA’s and housing prices in the toilet, baby boomers may need to wait to retire. This means the assisted living and retirement community developers will be hit hard. On the other hand, with a graying population staying home, the suburbs will need to be retrofit to accommodate the newly elderly and infirm. Couple this with a drop in housing prices and more people finding ways to make their current houses work for their needs, and this means architects who focus on home renovations probably will see a rise in productivity.
In addition to retirement savings, college savings accounts may be hit hard. This may mean smaller enrollment numbers for private universities and larger applicant pools for state schools. In addition, tightening of purse strings equates to less donations for private universities. Together this may mean less collegiate jobs on the table, and those that are available will be for state institutions who need to expand capacity on a shoestring budget
I do think we will see growth in two other sectors beyond home renovation, they are sustainable and environmentally conscious design and institutional (prison and health care). Sustainable design will be a necessity as people look at ways to decrease their monthly expenditures. This will work in cooperation to the home renovation boom; people will replace windows for more efficient glazing, switch to tankless water heaters and solar hot water, and look at domestic energy production as ways of increasing their property value and decreasing their quotidian expenses.
Prison construction and hospital construction and/or repair and renovation will increase for two reasons. First, with recessions come crime waves (the need for more correctional facilities) and a greater demand on the health care infrastructure. With more unemployed workers, there will be less people with health care. These individuals may not seek medical treatment until an issue becomes an emergency. In addition, the stress of a recession could cause emotional trauma – depression and mental health disorders. All of this will stress the existing system. Secondly, the government may look for ways to provide labor for the unemployed, a la the WPA, and, transportation infrastructure aside, hospitals, prisons, and other larger public use projects are the best use of these funds.

Again, this is just what I see when I look at the tangled web of finance and its relationship to the profession of architecture. I am sure other people will be glad to point at the ways i am wrong.