In search of affordable housing, what are you be willing to give up?
Location? It will probably mean a longer commute and a less livable neighbourhood.
Land? Smaller or no backyard. (And no opportunity to exercise by shoveling snow!)
Size? Will children have to share bedrooms?
In a reincarnation of an old idea, the London based not-for-profit Naked House organization has come up with an alternative approach to cut on housing costs – interiors; Or more precisely, interior finishes and partitions.
According to The Guardian, “The apartments will have no partition walls, no flooring and wall finishes, only basic plumbing and absolutely no decoration. The only recognisable part of a kitchen will be the sink.”
Building houses with unfinished parts would not be new to North American markets: unfinished basements are common in both American and Canadian houses. Some developers in the US even offer unfurnished second floors. This model offers the flexibility to expand the useable space over time as needed.
However, building houses and apartments that are fully unfinished with the idea that they can still be livable is fiction.
The idea is that occupants have an opportunity to own their own place at a reduced cost (which in London they most likely would not have been able to do otherwise) that is liveable even if it’s not up to everyone’s sensibilities. People may choose to gradually finish the place as funds permit, keep it at its’ original state indefinitely, or anything in between.
Why can this be so great?
The most obvious advantage is the saving on the cost of finishes. Depending on the cost of land, cost savings on an unfinished place can be between 15% and 30% of the total price. This might allow some to afford a place that might have been out of their reach otherwise while gradually improving as they raise funds. In areas where rent is expensive, paying money towards equity instead of rent can make financial sense.
Of course, for most people living in an unfinished house is not ideal, but if the house is liveable nonetheless it can be worth it; and they have the option to invest in finishing it right away.
Cost Savings for people who do work themselves
For those who are willing to save money by doing work themselves or with the help of family and friends, the unfinished unit represents an ideal separation of work. The developer is providing the work that people cannot do on their own: site servicing, subdivision and construction of house shells; or erecting a building with separate units.
Condos that are sold unfinished is not a new concept – especially with luxury developments, it is common that the buyers bring in their own interior designers and contractors, and get a (small) discount from the developer for not finishing the unit. And for sure, with the Naked House concept some buyers will like the idea just for the ability to finish the units fully to their own taste before moving in.
But beyond taste, similar experiments in the past have shown that when given the freedom, the occupants often organize their place in unexpected ways that would have never been planned by professionals. The space better works for individuals and offers new ways of space planning.
Not everything is Necessary
If a buyer wants to finish the whole unit or house before moving in, unless it is a very unique design, it is usually better to have the developer finish the unit since their volume reduces costs.
The real advantage of the unfinished unit, is that it is still livable. You can move in and live there.
Of course, many people won’t consider a fully unfinished unit livable. But not everyone will miss the same elements.
Some will create fully separated private rooms; some will separate the spaces with just furniture; and some will prefer a single big space as long as they don’t have kids.
Some will want to cover the exposed walls of concrete, concrete block or OSB. But even then, will they cover all of them? And will they all want to cover them with white gypsum board, or maybe they will rather choose carpet, wallpaper, or paint right on the unfinished wall?
For some, a built in kitchen will be a must, but others won’t mind just having freestanding appliances and furniture the way all kitchens were in the past.
Some won’t do anything at all before moving in. Imagine the joy and adventure of living in an unfinished place and gradually figuring out what changes you want.
Usually when you have an old place that you want to renovate, it means a messy demolition that leave stained floors and walls, so you want to redo everything at once. But if there is nothing to remove and the utility connections are easily accessible, adding things gradually is not an issue. You can lay flooring one year, paint the walls in the next, create room partitions in the next, and add a kitchen in the next, all while maintaining a nice environment.
More attention the “Bones”
If the occupants are only paying for the shell, they are more likely to pay attention for what that shell provides, forcing the developers and architects to focus on the quality of structure and the envelope. This is beneficial since unlike interior partitions and finishes, these elements are very hard and expensive to change and they impact the stability and energy efficiency of the building.
Higher Level of Craftsmanship
What’s visible, must look good enough. If the place is required to be livable when handed to the occupants and no element is covered, more attention would be required in the planning and construction of walls, floors, and ceilings. While that incurs a bit of an extra cost, it is still much cheaper than cladding these elements, and helps promote a higher level of construction.
Is it a Viable Market?
While the London organization is a non-profit, there is nothing inherent in the approach that will prevent it from working in a private sector development, as long as there are willing buyers and it makes financial sense to build. As for a target market, we believe it exists; we for one would have been very happy to not pay for standardized finishes and pre-planned space divisions.
For the development economics, there are two major issues to consider:
Smaller Development Profit
Since the developer sells a less value-added product, they make less money per project. This can be however offset by shorter construction times which reduces the cost of financing and management, and eliminates the need to handle tenant changes.
For some segments of the market an unfinished place can be the only affordable option within certain areas, and this can be a market niche for developers.
If the occupants are looking to finish their place with standard finishes right away using contractors, they are likely to pay more than it would cost to buy a finished place. That is because the developer enjoys an economy of scale when finishing multiple houses or units at once, and the savings are (partially) passed to the buyer. However, those who want a finished unit are probably not the market for this product…
All in all, this is a great idea that might work for some buyers. Since it is still in its infancy and has been only initiated by a non-profit, it is early to tell if it might gain traction, but if it does it would be very exciting.