Jonathan Meier | Craig Rosman | Dennis Tseng

Launch | ARCH 3239

SuperLet
Here in the United States, our world continues to become denser, and
our infrastructure struggles to keep up with the trend. Meanwhile, city
centers continue to lose their character and their affordability by erecting
soulless towers that house numerous ultra-expensive apartments and
condominiums within shells of mediocrity and awkward floor plans
planned in an attempt to fit within the constraints of municipal affordable
housing ordinances (like New Yorks 80-20 rule). Looking around an
American mega-city like New York or San Francisco, or even up-and-coming
neighborhoods like West Oakland, Pittsburghs Bloomfield and East
Liberty, or Durhams American Tobacco District, one can see these towers
sprouting up to accommodate the insatiable demand for city housing.
As a salve for these woes, we propose Superlet, a new type of
commodities exchange that will have a significant effect on the way we
envision our neighborhoods, our cities, and our skylines. We envision
Superlet as a system to facilitate the efficient trading of affordable
housing credits amongst developers and small landlords, helping to
foster customizable buildings with character, while simultaneously giving
landlords incentives to create and upgrade affordable housing units. All
the while economic diversity is maintained, and wealth is created for both
parties and for the community. With Superlet we envision an invisible tool
helping to shape the topography of cities and neighborhoods, allowing
them to evolve organically, becoming more and more dynamic.

The Problem
As the demand for housing in general increases in urban centers
nationwide, rents go up as a function of a dearth of available supply.
Builders and renters start to move to previously underserved communities
to take advantage of cheap land, and build new developments that largely
charge market rates in addition to razing any historic character of the
neighborhood. Meanwhile, floor plans, aesthetics, and functionality for
developers of all stripes are constrained by affordable housing quotas,
ADA requirements, as well as significant public opposition to projects
that are seen as taking away from previously affordable neighborhoods.
Moreover, the small, distributed landlords that populate these
neighborhoods are then pushed out by the developers who need entire
city blocks to accommodate this complex footprint these landlords are
themselves unable to upgrade their aging housing stock, and, finding
2

SuperLet

themselves unable to compete with the market-rate apartments for

amenities and quality, they are pushed out of the neighborhood entirely.
The resulting effect of these towers, which have a predilection towards
gigantism, is what we refer to as the Hong Kong-ification of cities
where mega-dense, unremarkable, and undifferentiated buildings go up
right next to each other, and the desirable high-low cityscape disappears.
The population within that neighborhood, or even within the city itself,
becomes more economically homogenous, and the delightful things about
living in a city diversity, innovation through cross-cultural exchange,
wonderful public plazas and spaces for communion quickly disappear to
make room for the insatiable demand for housing. [City Diagrams]

The Solution
With Superlet, we are developing a system in which landlords, large and
small, can trade their affordable housing credits with developers, thereby
creating monetary incentives for landlords to upgrade their stock, and
for developers to customize their towers and create public amenities to
complement their towers. This system will manifest itself in the form
of a Housing Exchange, a kind of facilitated banking operation a la the
carbon bank, or any mercantile exchange. Superlet would function as
the manager of these affordable housing credits (our unit of exchange
would be Units, as in housing units, or units within a large development)
and serve as the broker between all interested parties. As governmentsanctioned intermediaries, we would help facilitate the efficient allocation
of Units and the creation of neighborhoods that accommodate residents
of all income levels.
At its very core, Superlet is an urban planners bank, a financial tool with
a broad mindset towards spatial consequences at both the micro- and
macro-levels. It balances the concerns of the varying stakeholders
and constituencies involved in shaping (and reshaping) cities and
neighborhoods residents old and new, developers and landlords,
community organizations, preservationists, capitalists, government
officials, and economic development wonks all gain concessions from the
Superlet system. With us at the helm of helping facilitate the efficient
transfer of funds, we envision single-unit floor plans becoming designed
specifically for their potential users, we see buildings becoming more
aesthetically interesting and simultaneously more hospitable to residents,
and we see entire neighborhoods gaining amenities and new residents.

Developers vs Landlords: Economy of Scale

Developers vs Landlords: Economy of Scale

Unit Exchange

Quality Assurance

Municipality

Jonathan Meier | Craig Rosman | Dennis Tseng

Launch | ARCH 3239

And with the influx of new stores, parks, schools, and people to populate
those places, these neighborhoods will evolve upon their existing
character. Gone will be the days of rapidly-mutating neighborhoods with
out-of-character steel and glass structures growing like weeds amidst
brownstones, colonials, or Victorian houses. Superlet will help to usher
in an era of high-low neighborhoods that are both aesthetically pleasing
and capture the benefits of living in a dense urban environment, fostering
additional investments in mass transit infrastructure, upgraded utility
grids, reduced crime, and increased community buy-in.

How It Works
Superlet will incorporate as a for-profit entity whose primary mission is to
function as a municipal economic steward. By functioning within existing
borders of business improvement districts, economic empowerment zones,
and municipality-defined neighborhoods, we can ensure that affordable
housing is not moved to the fringes of the city, and that the positive
effects of redistribution and reallocation are realized by the entire
community.
Within these communities, Superlet will function as the exchange for
Units (representing one housing unit mandated by the local housing
development authority to be affordable), assisting in the purchase and
sale of these Units between developers and small property owners. To
remain economically sound, prices for these Units (in dollars) will be
indexed to a 5-year difference between affordable rents and marketrate rents in the local empowerment zone creating a huge incentive
for landlords to sell their credits and use the money to improve their
affordable housing stock, but not a prohibitive price tag for large-scale
developers who can then use the freedom of needing less affordable units
in their large buildings to construct towers that more closely reflect the
character of the neighborhood, and are more efficiently designed to the
needs of the incoming residents. Moreover, the municipality itself can
contribute to the stock of available Units by contributing capital to create
public amenities; as each of these communities develops, the surrounding
commercial ecosystem and civic infrastructure must also be shepherded.
This way, developers also have additional stock of Units to purchase in

SuperLet

exchange for the promise of a public park or plaza, a grocery store, or

partially financing a bus or rail stop.
To see how it might work in an actual neighborhood, imagine a dozen
landlords in the Bloomfield neighborhood of Pittsburgh. These small
brownstones have housed middle- and lower-income Pittsburghers for
decades, and though the residents are happy with their neighborhood,
their apartments have peeling paint, lack of access for people with
disabilities, and have infrastructure that was built in the 60s and is
beginning to decay. Between all of the landlords, they probably have 50
units, with about 120 residents in total, but the landscape is beginning to
change. Younger, more affluent folks flowing into Pittsburgh to work in
the thriving technology and biotechnology sectors are looking for cheaper
neighborhoods that are closer to the city center, and Bloomfield is one of
the primary targets for this group. As a result, other landlords in the area
are posting their new units at markedly higher rates, and rents are going
up across the board. Likewise, condominium tower developers are coming
into Bloomfield with the goal of creating high-rise buildings to take
advantage of the relative wealth of the new residents. In this version
of the game, the small landlords have two options to keep pace with the
growth of the neighborhood: drastically raise rents on their tenants,
effectively forcing them out and renting unupgraded housing stock to
more affluent residents, or sell the entire building to a developer, forcing
their tenants out, and razing the native building to make way for a new
development. In both cases, the landlord is forced to make a decision that
has extremely negative consequences for both its old and new tenants
the old tenants can no longer afford to live in the neighborhood and
must move, and the new tenants are then forced to live in an apartment
with crumbling infrastructure for a market-rate price. And arguably, the
neighborhood itself loses as clusters of buildings are subsumed by giant
towers. In addition to the twelve landlords, the city block may also include
a small park, a grocery store, and a public school, all of which will be
swallowed by the developer.
Our story, the story of Superlet, is a happier story. In our world, the
twelve landlords have another choice they sell their market-rate rights
to developers in the form of Units. This is an economically sound option
for them each unit is going for between $75K and $150K, depending on
the differential between the affordable and market-rate rents. This means
that a landlord for one of these brownstones can sell all of their Units for

Unit Exchange: Initial Exchanges

Unit Exchange: Fully Integrated System

Unit Exchange: Initial Exchanges

Unit Exchange: Fully Integrated System

Jonathan Meier | Craig Rosman | Dennis Tseng

Launch | ARCH 3239

a total of $300K - $600K, providing a huge influx of cash with which they
can upgrade their facilities and add amenities, all the while keeping the
apartments at the affordable rate. Its also quite a deal for the developers
who can potentially buy the 50 units from all twelve landlords for $3.75
to $7.5 million, and thereby have the freedom to create a much more
appealing and customizable building occupying a smaller footprint in the
neighborhood. So to recap, in our story, the neighborhood evolves in an
organic and positive manner. Relatively affluent new Pittsburghers move
to Bloomfield and find both delightful and functional high-rise buildings,
as well as upgraded affordable apartments. Longtime residents of the
neighborhood would be able to stay, and in fact get better facilities due
to their landlords cash influx. Pittsburgh itself chips in money to the
Bloomfield Superlet branch to create incentives for developers to build an
additional middle school, a drugstore, two groceries, and a skate park, all
projects that the developers are happy to take on, knowing it will increase
their property values and provide additional revenue streams from
commercial and municipal rents. And finally, the community will maintain
its distinctive character by not having city blocks razed wholesale, and
the jobs and disposable income that come to Bloomfield will increase
the overall economic welfare within the empowerment zone. In essence,
by adding a Superlet as an efficient broker between landlords and
developers, helping to navigate the rules of affordable housing, we can
create millions in economic benefits to every party involved.

The Business Model

We chose to incorporate as a for-profit entity as it would allow for us to be
self-sustaining, and in fact easily raise capital for startup and expansion.
An estimated $10 million in startup capital will be required, which is
comparatively low mainly because the startup costs will largely be human
capital, IT, and government relations, and have few hard assets. Because
of the complex nature of the space Superlet occupies, we believe that the
capital should primarily be raised from standard VC firms, impact investing
firms, and perhaps a handful of individual investors. Leaving government
contracts out of the capital requirements (separate from government
contributing to create amenities), and not relying on developers for
investment will help us to avoid the perception of being captured by an

SuperLet

industry or a government interest. Our intentions can remain pure and

untainted.
For revenue, Superlet will charge a flat fee on every transaction, to both
the buyer and the seller of the unit. The fee will be structured as 0.5%
of the Unit price indexed to that year. This is neither prohibitive enough
to keep developers or landlords from utilizing the exchange system (it
will still be plenty lucrative for both sides), nor will it be nominal enough
to encourage high-frequency trades of Units or market manipulation
of any sort. Because we expect demand for Units to exceed supply
(some landlords will just choose to sell to developers), we plan to raise
additional capital through municipal contributions. Municipalities will
pay the market rate for a Unit, plus an additional 2% in order to create
Units that will be designated for public amenities only. Developers can
then purchase these specially-designated Units with an obligation to
build said amenity, with a pledge to build larger, more public amenities
equaling more Units, (e.g. a grocery store would give the developer three
additional Units, a small park five, and a large public high school would net
20 additional Units for the developer.)
In this manner, Superlet becomes immediately self-sustaining and can
reinvest its income in expanding to other neighborhoods and eventually
into other municipalities. With an estimated 500 units exchanged in
the first year for each up-and-coming neighborhood, Superlet would be
reaping an estimated $500K in its first year from just one neighborhood.
Adding two additional neighborhoods in Pittsburgh in the following year
would result in additional cash flows of approximately $1 - $1.5 million,
plus reduced flows from the existing Bloomfield neighborhood. With
aggressive expansion, Superlet could be seeing revenues of $10 million or
more within ten years, and have a model that is exportable and scalable
all across the country and around the developed world.

The Micro and Macro Scales

As seen in the images, a landlord would upgrade their housing stock at the
individual apartment level. The apartment becomes far more usable and
attractive for prospective or existing tenants, and developers can easily
recoup the capital invested in the transformation by pricing the apartment

Fees Over Time

Incentives Generated Over Time

Units over Time

Jonathan Meier | Craig Rosman | Dennis Tseng

Launch | ARCH 3239

at market-rates. Landlords, in the meantime, will not have to worry about

the capital investments, as they will come directly from the sale of Units.
At a wider scale, we envision migration patterns will be affected by
Superlets appearing in specific neighborhoods. These up-and-coming
neighborhoods will have already seen an influx of new residents,
and we will help the real estate community capitalize on this existing
migration. However, we also see a future where Superlet is actually used
as an economic development tool, moving into a poor neighborhood and
teaming with the municipal government and developers who would have
previously avoided the area to build up the housing stock and economy
and provide for greater infrastructure. Here you can see Pittsburghs
migration patterns, and how they might shift in the future.

A Proposal for the Future

Superlet is the right way to consider urban development in a new era
of enlightened thinking around density and infrastructure. There is
much momentum from the Ed Glaesers and Vishaan Chakrabartis of
the academic and practicing communities, and much buzz amongst the
urban planning cognoscenti around the move towards more livable
cities. We believe that Superlet will help to usher in this new era through
responsible stewardship and distributed access to the amenities that
cities provide amongst all income levels. We will serve as the catalyst and
the multiplier of a future with a humming economy, a thriving community,
and a housing stock that enables growth instead of stifling it.

SuperLet

Quality Assurance: Updating Units

Quality Assurance: Updating Units

No Closet Space

Closet Added

Living Room has

view to Bathroom

Circulation Rerouted

Bedroom 1

Bedroom 2

View of Bathroom
Blocked by Coat
Cloaset

Closet
Bathroom

Living Room

Closet

Closet

Closet

Kitchen

Kitchen has no
Dining area

Kitchen

Dining Space
Added

Individual Apartment Modifications: Before and After

City Migration Patterns: Pittsburgh

Bathroom

Living Room

Closet

Bedroom 1

Closet

Bedroom 2

Closet

Circulation Through
Living Space

SuperLet