Taking a divide and conquer approach to housing crunch
BuildCasa helps homeowners take advantage of California's law that allows lots to be split
In recent years, California lawmakers have approved a flurry of legislation aimed at increasing the housing supply and addressing the state's decades-in-the-making housing crisis.
Many of the changes are modest — rather than creating massive apartment towers or sprawling new subdivisions, they are meant to add moderate density in existing neighborhoods. It's the type of “missing middle” housing that advocates say will help the Bay Area hit state regulators' goal of building 441,000 new homes by 2031.
Senate Bill 9, passed in 2021, is one such change: It allows single-family homeowners around the state to split their lots in two, and build two homes on each lot. An analysis by the Terner Center for Housing Innovation at UC Berkeley estimated that the new law could result in 700,000 new homes.
But in the first year after SB 9 passed, just a handful of homeowners applied for lot splits, the Terner Center found.
Is that a surprise? Housing law is dense, obscure and difficult for the average homeowner to navigate. Enter BuildCasa, a company founded by serial entrepreneur Ben Bear and former architect Paul Steidl. They work to identify homes on large lots where an SB 9 project could be feasible, then offers to buy up the extra land to get it developed. To start, they are targeting three key markets: San Jose, Sacramento and San Diego. In just their first year of operating, they've received plans approved for 115 new housing units.
Bear and Steidl recently relocated their company headquarters from San Francisco to downtown Oakland. In the midst of their move, they took time to chat about California's housing crisis and how BuildCasa could help address the shortage.
QBuildCasa wouldn't exist without SB 9. Why do you think so few people are using SB 9, and how does BuildCasa help?
STEIDL >> There are a lot of folks who have really great properties with the potential for new units, but don't have the financial or the logistical capabilities of taking on a project to add additional units, like an accessory dwelling unit (ADU) or a new house. It can cost hundreds of thousands of dollars — you have to hire an architect, an engineer, and then go through the whole development process.
BEAR >> Homeowners aren't developers, right? We saw the need for someone to come in, so homeowners could take advantage of this trapped asset — their extra lot space — with no cost or work. So far, we've had our first few projects that have had their lots appraised after a split. On average, people are losing about 4.5%
of their home's value, but they're gaining 15% to 20% on top of that with the new parcel.
QIf I'm a homeowner with a big backyard and I want to split my lot, how does this work? Do I still maintain ownership over the other half of my lot once it's been split?
BEAR >> We have two models. In one, when the homeowner is looking to get liquidity, we help them sell to a developer. In the second model, we help the homeowner subdivide the lot, they retain ownership, and they develop it themself. We've been surprised: Most people are interested in selling. It's appealing for people with low-interest mortgages who want to keep their house, but want to get some extra cash without taking on any debt or work.
In particular, it's popular with senior citizens — a lot of them are house rich and cash poor. They want to stay in their neighborhood, but they could use more financial flexibility. In Sacramento, the average payout is $100,000. In the Bay Area, we've seen upwards of $350,000 for a split lot. It's a significant windfall — and you're not taking on any debt, like in a reverse mortgage, and you're not losing out on your Prop 13 eligibility.
QWe've heard a lot about how California has a lot of singlefamily homes and a lot of tall apartment buildings, but that there's a need for more “missing middle” housing. Tell me why that's important?
STEIDL >>
At the turn of the 20th century all the way through the 1940s, there used to be a lot of housing like this — duplexes, townhouses. Then we made changes to how we regulate land use, and these types of housing dropped off a cliff. Most houses built now are either large multifamily properties in urban centers, or tract housing in the exurbs. We look at opportunities in existing neighborhoods. It's much more sustainable to build where there's already infrastructure like water and sewage lines in place, and when you build in walkable communities, you're also cutting down on vehicle miles traveled.
Q
How does building more missing middle housing help with affordability?
BEAR >> There's a lot of programs for low-income, renters and homeowners — but there are very few market rate options available for folks who are middle-income. The focus of our company is really creating new for-sale units that are affordable by design. For example, on the lot that's split, state law gives us the right to build a duplex, and each of those units can be sold separately as a condo — which may cost around 35% as much as a single-family home. It can really be this new version of the American dream where you still have private outdoor space, and you're living in the type of singlefamily neighborhood that people want to live in, but you can afford homeownership, even if you have a middle-class occupation.
QTell me about the technology you're building at BuildCasa and how that helps you find the best candidates for a lot split?
BEAR >> We have developed a geospatial algorithm that would attempt to find the best opportunities for development. We can look at a lot and assess whether, given the local constraints and zoning and the requirements of SB 9, does a duplex design fit? A property owner can go to our site, and within 30 seconds, they can get a sense of what that extra lot space would be worth, were they to subdivide it.
QSacramento is one of your first test markets. Why start there?
STEIDL >> Sacramento is very orderly — it's got lots of rectangular lots and a repetitive city grid. We figured this would create a lot of potential SB 9 opportunities. It also looks a lot like the rest of the country — so as we're thinking about the expansion of laws like this around the U.S., it's a good testing ground. And third, it's helpful to demonstrate the power of these new laws in the backyard of the people who are writing them.
BEAR >> We looked at San Jose next because it has a progressive and competent planning department. Residents there have really embraced new housing laws, too.
QHow important is it for you to have strong relationships with local planning staff?
BEAR >> Previously, I was the CEO of Spin, a Fordowned electric bike and scooter company that was focused on working with the government rather than against it. It doesn't come super naturally to most folks in tech — there can be an antagonistic relationship with business.
We've been laser-focused on working with jurisdictions that are prohousing. Before we launch in a city, we make sure to meet with the mayor's office and the planning director, and even at the staff level. The rubber meets the road at the intersection between state law, local regulation, and then the planner that's actually reviewing the application.