Nest Realty’s Sweat the Details Podcast Episode 65: Land Use Tax with Sally Hudson

Sweat the Details Podcast by Nest Realty cooperation

Nest’s Sweat the Details podcast continues, and we’re excited to bring you interesting conversations that touch on real estate — and how we look beyond real estate for inspiration.

Listen to the podcast here, and subscribe to the podcast here.

Summary:
Real estate and property taxes – they go together hand-in-hand. This week we spoke with Sally Hudson, Virginia Delegate, and UVA professor about how a land value tax might change how we tax properties, and how that would affect urban design, parking, affordable housing – basically everything in real estate.

We hope you’ll join us for the next episode of Sweat the Details. View the full transcript below.

Keith:
Jim, Jonathan, as we sit here and we talk about next episodes of Sweat the Details, and we’re talking about planning and how we’re going to do it, I think let’s just chat about three or four different things. And Jonathan, you were just talking about apartment renewals and relationships formed within a community, and likelihood of staying within your apartment.

Jonathan:
Right. Yeah, and this spawned from a great pod that we listened to recently with Brian Chesky, the founder of Airbnb, who, if you haven’t listened to any podcasts with him, go in your pod app and do a search for his name. He’s amazing. And the most recent one he did was on the Prof G show. But so Airbnb is big on what’s the future of Airbnb? He talked about communities, communities, communities. We want to build communities. We want to be more than just kind of a place you go stay for three days and go back home.

But this led to a stat I saw recently, and I don’t have the exact numbers, but the concept is that renewal rates at multifamily apartment buildings increase dramatically the more friends you have there. So if you have zero or one or two friends, it’s a very low likelihood of renewal, versus if you have five to seven friends at that community, you are more likely-

Keith:
Which totally make.

Jonathan:
To stay there, which we can go in a million ways. One of these is like, what does that mean for back to the office? Which is, that’s changing too. If you’ve seen, actually I’ve seen a lot of numbers across the board, and the badge check-ins, which is how they gauge it in the big cities like New York, the badge check-ins are now 55%. So the office is like 55% full, which is a lot more than what it was a couple of years ago. A couple of big companies recently have had back to work mandates that they’re implementing of four days a week back to the office.

Keith:
It’s funny, I remember the week that I graduated from college and I had moved into my own apartment. I remember waking up on a Saturday morning and realizing I didn’t have 50 friends in walking distance from my door. And I remember thinking that was the most isolating feeling of not… I never planned on a Saturday morning in college what I was going to do for breakfast. I walked out of my door and there was somebody in the hallway and we went to breakfast. That was the plan, right? There wasn’t one. But it worked.

I think when you talk about the apartments and we talk about some of the different models of building culture within residential communities, whether it’s clustered housing or apartments, I think that’s a huge part of people’s enjoyment and what they gain from that living environment. I mean, that doesn’t surprise me the slightest, that that’s the take.

Jim:
I mean, I think also, it speaks to where American culture is, and probably around the world is that we are so isolated in so many ways. I’m guilty of this, buried in my phone, going out on my own to do a thing that you don’t take the time to look around and create those friendships. And that if you have a built in community, like those of us who went to college, mine was a very different experience at VMI, but when you go to college, you have a built-in community you’re a part of, and then when you leave that environment to, Keith, you’re on your own, that’s a different world.

Keith:
Completely.

Jim:
Versus one of the ones in the city of Charlottesville, up and down West Maine. You have a potential built in community. So I think that it’s one where people seek that out. I mean, the question that my buyer clients come to me with that’s always under the surface if it’s not explicit is, will I be happy here? Will I make friends?

I’ve had them on the buyer survey I use, probably a half dozen times in the last year. When I ask, what are you trying to solve? Or what do you want? They say, I want to be part of something. And that’s a massive thing, humanity needs to be part of something. We’re social creatures. So I think that the renewal rates in those apartment complexes or what have you, if they can foster that community, that’s amazing. That I think will lead to better everything. Renewal rates, staying, taking care of care of the community, taking care of the apartments, cleaning, picking up trash. I think that that can lead to all sorts of positive effects.

Jonathan:
Absolutely. And so going back to the question I had is, what is this kind of loneliness which a lot of the America has fell into this loneliness era-

Jim:
Epidemic.

Jonathan:
Epidemic, the last couple years, and I think that we’re going to snap back out of it and people are just going to… Within reason. Maybe it’s not going to be like 2019, but in droves people are just going to say, “I want to go back to the office.” And I’ve already seen and heard some examples of this, the people coming back to the office is increasing. But what does that mean for, do you think, the future of offices?

Jim:
Less populated? Yeah, I think, again, we work in a small office by most standards.

Jonathan:
By all standards.

Jim:
Okay, all standards. But I think you read the stories about the large down towns that have had just a dearth of people coming downtown. I think that there are going to be societal changes and economic shifts, if you’ve got 15 restaurants or whatever in a block that are dependent on 12,000 people being in the… My math is off. 10,000 people being in an office building, and then it’s down to 4,000 people, you might have three fewer restaurants and you’re going to have more parking available. But that might bring into more people coming from out of town to come to park.

It’s one of those things that, almost everything in this business, I’m looking for hindsight. I want to be able to look back from 2027 and say, “Oh, that’s the thing that happened.” But I think that there’s a lot of things that are going to shift as people choose to come back, and who comes back. I think that the more the young people who come back to the offices, those people who are face to face are going to have, likely, I would suppose-

Keith:
Their job satisfaction levels are going to be higher.

Jim:
And they’re going to stay employed at that place for a longer. It’s like we talked about a little while ago, we took a break from the podcast, from doing Sweat the Details, in part because we were Zooming, and we just didn’t have the same level of interaction. So I think if you’re Zooming in office buildings, there’s not as much of appeal.

Jonathan:
No, not at all. And we’re in the process of building a new office, and the plan three years ago was to have about 6,700 square feet. We’ve subleased about 1200 of that, and we still feel like we’re in good shape. And fortunately we were able to do that, but you’ve probably read about this too, but there is a big concern with commercial real estate in three, four, five years, of if it’s going to fall off a map and have some major issues, repercussions with these banks that had these commercial real estate loans.

Jim:
Right.

Jonathan:
And so it’s my hope within the next couple of years that people do start to come back to the office, and people are in the office. And that’s going to increase a sense of community. It’s going to help restaurants. I mean, there’s so many positives for getting people out of their basement and around each other.

Jim:
But I think you also have the potential for, there’s a building near our current office that, my understanding is that when they built the building, they built it to condo specs. So, if and when that time comes… This is pre-pandemic. If and when that time comes where commercial space is not viable, they’re going to make it into residential. So I think you have the opportunity there of shifting commercial into residential condos.

Keith:
I will say actually there’s a REIT that, I wish I could remember off the top of my head which one it was, who had said when they’re building their office complexes now, their parking garages, instead of doing internal ramps that take you from level to level, they’re doing all the ramps on the outside. And they’re building all of the height levels within that building garage to allow for conversion into residential heights. And then they can just remove the outside ramps, that extra column. And they now have a residential building. Everybody’s looking for how do you retain the flexibility of these things instead of… And it’s simple changes, but it’s huge changes to the mindset of designers.

Jim:
Is that reflective of a different and more long-term perspective? Because a lot of the stuff that you see-

Keith:
I think it’s an acknowledgement that what companies have that currently works, they recognize that in 10 years, that may not work anymore, and they need to have the nimbleness to be able to make that shift. Make a shift. They don’t know what that shift is yet, but they know this may not work for 50 years.

Jim:
Because you see all the time, you see how big buildings are built with a 20, 40 year lifespan, they’re expected and intended to be torn down and rebuilt. Whereas, if you look at something like that, I have no idea, might be a 40 to 70 year lifespan. So I think, again, I think you build in permanence. I think that you have more continuity in community, which I think will build, again, all the stuff that makes a place better. If you get rid of cars.

Jonathan:
It’s not that easy. I’ll tell you another article that I read recently, which goes into communities and kind of loneliness. So we’ve all heard the apartment building boom across the US the last four or five years. I mean, we’re at an all time high with apartments being built. And population’s not really increasing.

Jim:
No.

Jonathan:
And rents are up. So let me read you a couple of quick stats. This is nationally. So since 2019, New York City, rents are up 19%. Chicago up 17%. Up 13% in Seattle and 10% in Washington DC. Why is it that we have more apartments and our population is increasing, and rents are up? You want to know why? So the reason is because everybody wants to live by themselves. And so because of the fact that they’re like-

Keith:
Is that they’re now wanting more space to be able to work at home?

Jonathan:
People want more space to work at home. They don’t want have a roommate anymore. And at certain point in time you can’t afford this. We know this.

Keith:
So it’s household creation by isolation?

Jonathan:
That’s it. Yep.

Keith:
That’s a hell of a title.

Jonathan:
These households being, more households are being created because people are deciding to live by themselves. And part of it is because they need more space to work. So maybe I’ll get a one bedroom and a den.

Keith:
Doesn’t bode well for population growth for our country for the long term.

Jonathan:
It doesn’t.

Jim:
I think that makes a lot of sense in some ways because people want to be… I think they want that flexibility. They don’t want to live with four people. They want to live by themselves and have access to 10 people.

Keith:
Do we blame colleges for instituting single dorm rooms In the last 15 years that didn’t exist when any of us went to college in our freshman years? We all had roommates, right? Now everybody wants a single from starting from day one.

Jim:
Well, if you lived with my roommates in college, you’d want to live alone.

Jonathan:
Wow. Anyways, enough on that topic. But it is really interesting to kind of see these trends out there and what’s happening and why it’s happening.

Jim:
No, but I think it’s… One of the things that my clients talk about, I talk about is being part of something. So shifting a bit is, we do our Nest County fair, we’re doing it again now in person it. In Charlottesville we, what, had a couple of thousand people there last year? I think that it’s always a fun thing to see my clients interacting with your clients, and with your clients. And they like to be… When we started the company years ago, we didn’t know necessarily it would be this, but seeing people happy to be sharing, to having a shared experience with their peers and friends and colleagues ended up being a surprise in some ways is kind of fun.

Because again, they wanted to say, “Oh, I worked with somebody from Nest, you worked with somebody from Nest?” That’s kind of cool. So I think that building more of that community and the things that we do, it just accentuates what we do, but also accentuates the client’s experience as well, in their communities.

Jonathan:
Sure. You’ve heard me use this before, people gain confidence in their decisions when other people have made the same decision. And you’ve heard me talk about this, but if you have your favorite restaurant and you go to your favorite restaurant every Friday night and nobody’s ever there, you start to think, what does everybody else know that I don’t know? Versus if you go there and it’s always packed and there’s a line, there’s not just the vibe that’s better, but you think, all right, I’m making a good decision. I like this place. Everybody else likes this place. So it must be good.

Jim:
Affirmation of what you’ve chosen.

Jonathan:
It must be good. So that’s that whole idea of, you’re right, community is, people like to… Within reason. I mean, there’s definitely the people that like to make the opposite decisions than everybody else, but for big decisions like choosing your real estate agent, it’s nice to have the affirmation that other people are making the same smart decision to work with a Nest agent.

Jim:
Yeah, I think it’s fun watching it, having built over the years, but also looking ways to continue to foster agent community as well. I mean, I think that years ago, one of our agents said, because pre-COVID, when we had the bullpen, it was always active. He said, “I am better at what I do because I interact with people who are better than I am.” I think that’s something that, again, you build that community within the brokerage. And, Keith, you continue to foster that as you go forward coming out of COVID? Because we’ve all seen that COVID is over.

Keith:
Well, I think the first part is the importance that we don’t think about on a daily basis of the actual design environment. We talk about, I remember when we first opened up our first office, I think a lot of what we did was because of desire not to spend a huge amount of money on build out.

Jim:
Yes.

Keith:
We did. We left the big open space of 2000 square feet as big open space with desks in the middle of it. And it felt a little odd at first that we didn’t have the privacy, but it quickly showed us that that environment fostered more cooperation, because we would hear each other talking and we would just engage in natural conversation that would lead to better understand.

Jim:
“Are you writing a contract on that house, I am too.”

Keith:
And then you would step outside to walk around the block so you could have a client conversation, except… But it did change everything. And so when we built out intentionally the space we’re in now, we’ve started with the bullpen. When I started work on the Richmond design, my first comment to Taylor when she started designing was, I said, “I want a coffee house feel. I want the majority of the space to be open.” Because I wanted tables where everybody would just gather. And watching the way it works in Richmond right now and watching the way our agents engage, it’s entirely a response to the design.

Not entirely, but it is largely fostered by the space. And if you put people into offices… I remember somebody, one person I had talked to said they wanted a closed door without glass. And I thought, why? Would you not want to have an office that you’re visible? Why would you? Because they wanted an environment in which they weren’t collaborating. They wanted a privacy. And I thought, that’s not where we’re headed with this. We want people who want to be a part of a larger group.

Also, we had Sally Hudson on recently, and we were talking about changing the urban growth patterns through taxation, but part of that is also how do cities want to form growth and how do they want to form residential communities? How do apartment complexes or clustered housing or neighborhoods form?

Jim, when we sat down with developers seven, eight years ago, maybe 10 years ago now to talk about it, we said the first and most important thing was the community space within the park, because that was where the neighbors were going to start gathering. Even before there was a building they would gather in that. We wanted them meeting one another in a very organic sense. And I think that design has to start and has to be thought of as, what is it you’re trying to get out of your community, before you begin building it.

Jim:
Well, it has to be intentional. I think that you have to have defined intentional spaces that foster organic community where people want to come and hang out. You’re looking in my community, there’s a place, it’s probably going to go away, ironically with growth and development, but there’s an open space that has become the basketball court and it’s where the food trucks come and that’s where the people go.

I think it’s something that, had that been done intentionally and deliberately and carved off, there would’ve been a greater value to that community.

Keith:
Sure.

Jim:
But I think that it’s something that when, again, my clients come to neighborhoods, ideally they’re not looking for line O houses, they’re looking for houses with green space, with community space where they can send their kids if they have them, or the dogs. And actually, I saw a cat on the harness the other day. It was being carried, so it was not that functional. But, you have the spaces where people want to come and hang out and see and be seeing people.

Keith:
Yeah. I mean, I think back to DPZ, which is an architecture firm out of Miami who was kind of early in the Congress for new urbanism and on urban to design, they looked at it and said, “You have to be within a quarter mile of your target to get the average person to walk to that instead of getting in the car and to find other transportation.”

Jim:
Right.

Keith:
That simple idea of a city center has a one quarter mile radius of walk ability completely changes the way everyone engages within that community. Because if you’re going to walk, if you’re going to see your neighbors, if you’re going to get to know them, back to Jonathan, to your point of the apartments, getting to have friends. That’s what drives involvement and drives relationships. And so it’s a pretty cool, simple process. Highly complex, but simple.

Jim:
I’ve got a client, he’s moved to my area and he’s riding with my group, and he talks about how he lives in the city and if he drives from his place of where he lives to his place of employment downtown, it’s a 15, 20 minute thing.

Keith:
Sure.

Jim:
Drives, parks, walks. He bought an electric scooter, eight minutes from door to door, which I think… He was talking about how it allows more time, but also more interaction with other people. So again, I think that we are… I love isolation. I love being away from people. I love the quiet, but I also like seeing people as well and having that serendipitous interaction, which I think leads to, again, usually better things and better experiences where you…

Keith:
It also lends itself to a better understanding of what’s happening around you. And it doesn’t even have to be walking in direct face-to-face engagement. There’s an agent here who… I love this, that he lives in the city. We have a bypass that goes around the entire city of Charlottesville, 45 mile road in most places, 35 in others. But it’s the way you get around everywhere.

Jim:
Right.

Keith:
He will not get on the bypass for any reason because he said if he gets on the bypass, he misses what’s happening in the city. And so he drives on the main arterial roads through the city instead, everywhere he goes. And yeah, it takes five, seven minutes longer to go everywhere he goes. But he sees more, he understands more. He knows what’s happening. And I think that’s just brilliant. I don’t have the patience to do it, but it makes sense.

Jim:
I think about that sometimes when I do that, and then I get stuck on the corner.

Keith:
And you get on your bike though, all over town, and you see a lot more when you’re riding a bike than when you’re flying through the neighborhood in the car.

Jim:
I have said for years that the times when I’ve ridden my bike… A few times I’ve ridden my bike to show a property to clients, which in our hilly environment, it’s a challenge. But when I’ve ridden around on my own, just going from place to place, one, it’s scary in a lot of ways. But you hear and you feel and you smell and you just see more things about the city, and you feel more connected to the city. And, again, you’re more face to face with people, which I think, again, in our world, having that eye to eye interaction versus steel metal box versus steel metal box, it makes for, again, better community, better town.

But how do we do it? You were talking about office design, spatial design. How do we design a space, whether it’s office or community, to foster betterness, if you will, to both of you?

Jonathan:
Yeah. Good questions. I mean, I know from us, and we still have a little bit of work to do, but with our new office, I think in our, we’ll call it our common area, there’s about… Well, actually no, back up. The whole office, there’s about eight different types of seating and spaces for agents to work. It could be in a private phone booth, it could be in a small conference room, it could be in a living room area, booths, raised bar.

So what we want to do is create something that was different than home. And so it would give people a chance to come in, and depending on what your work style was, where you wanted to be in a literal cave for 30 minutes and then come out and see people, or you wanted to sit in a living room, or you want to sit in a little mini restaurant booth, that you had these different options that are out there to give people… So we’re not pigeonholing, saying, everybody is going to have this one option, and it’s just going to be in an open common space.

Jim:
Also I think that speaks to the creativity of thought, if you will. To take it a little bit deeper, when I’m writing or if I’m working on email versus creative writing, I work better in different spaces. Couch with my feet put up is better for creative writing sometimes, or a noisy environment so I can focus and tune out. My wife’s daughter and I were in Harrisonburg last weekend, and there’s a like craft/coffee shop we went into, I’d never been into, and it had spaces sort of interspersed where you could get a cup of coffee and sit in… They were on the couch and I was in a chair, and around the corner’s that raised bar. And then around the corner’s another little seating area. Within 900 square feet, there are different spaces and different vibes and different feels and different interactions between humans.

So I think that thoughtful design, as we’ve talked about for years, having that thoughtful design really matters when you’re creating a space intentionally and deliberately.

Jonathan:
Absolutely. I was in Austin, Texas recently and there was a coffee shop about a block from my hotel that I went into twice in the morning. And it was a very tight space, probably about eight, 900 square feet of space. And they didn’t have a lot of variety of different seating, but it was amazing to see how many people were in there working and having conversations.

There’s probably 20 people in a small space, kind of right on top of each other. And there was good energy and a good vibe in there, and you could tell that it was a hotspot to go. So you think about that when we think about our office space and the future of office space, people can work close by each other. There was people on Zoom calls and people just having conversations, Bible study, a variety of different conversations going on. But it was interesting to see how tight it was and what the resulting energy was.

Jim:
Well, the last few months, my younger one and I, we communicate in a lot of ways through reels and Instagram. So I’ve spent, fortunately, or unfortunately, I’ve been spending more time on Instagram lately. And one of the things I saw the other day was a guy was talking about coffee shops. And he was talking about how 10 years ago, eight years ago, you’d go into a shop, broad brush, you’d have the interaction, the experience you had with just a vibe, a noise where it’s just sort of a hum.

And now you go in and people are on their laptops, and you shush people if they’re on a phone call because it’s kind of like a library. And it’s something that I think is, again it’s a shift of design that feeds into a cultural design of people who want to interact and interface with people. Because again, you hear things. Like one of the exercises I’ve been doing recently from a writing book is, you’re supposed to do it every day. I don’t do every day, but you draw a box of, there’s four squares on a page of, I heard today, I saw today, I did today, and I overheard today.

And it’s led to some really good reframing of what I saw because it gives me story ideas and helps me recapture what I was thinking about with my clients. But being thoughtful and deliberate about how I capture my days and where I’ve gone. Back in the COVID days before I started doing this, I’d look back and say, “Well, I stayed at home. And I stayed at home, and I stayed at home and I Zoomed.”

So yeah, I think it’s getting people out into the office spaces, into the apartments, into the communities, I think is ultimately going to be a better thing. For y’all listening. Thank you. Thanks for spending your time with us, and if you have 45 seconds, please go rate us, review us, whatever you need to do to say you like what we’re doing. So really appreciate it and look forward to talking to y’all next time.

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