It's not that building a new city is hard. Real estate developers do it routinely. The problem is jobs. There are, at present, quite a few places in the US with more houses than jobs. Only in a few places, such as SF and some areas of Oklahoma where there's heavy drilling activity, is the reverse the case.
If you want to buy an empty town of new houses, there are plenty in San Bernardino. Vacant lots run about $7500. San Bernardino even has a new airport, fully completed and ready to go. But no airlines fly there. Because there are no jobs.
You are comparing a small theoretical start-up town in the middle of nowhere and with a non-existing economy and job-market - to an already established city that is the business center and capital of a country (a country that itself is the business center of the EU).
That seems like an exception being used to disprove someone else's rule.
Unless they already have the money to exist and live there, no one is going to move to a place they can't afford.
So the question is again - why would they move there, except this time you are asking only people that are not part of the typical job market / economy (because the number of available gainful jobs there is too low; and at the same time no one is looking to start businesses there).
It seems like these types of places are for only the upper class, especially considering that low scale gives high prices.
Or goes the other way, and makes lots and lots of suicide inducing standard units, small in size, with uniform paint jobs, and all placed together. A place where the government pays your rent.
Well, perhaps. But it's probably pretty hard to make a lot of money as a landlord in Berlin if that is the case. Which is ultimately what this company would need to do to be successful.
Quite the contrary, due to the high demand, rents are on a steady rise. [1]
The government is issuing caps now on how much higher the rent can be with new contracts (there are already caps for how much rent can be increased with an existing contract, but when old tenants move out, they could ask for any price on the new contract, especially when renovating the place - which led to shady methods to get long-term tenants out)
Look, you can't have both an overabundance of housing supply and an overabundance of housing demand. I don't really know or care which is really the case in Berlin, and of course demand could be low but rising, but if housing is oversupplied, then landlords won't make much money. If housing is undersupplied, then Berlin wasn't a good example of what you thought it was.
So your claim here is that there is enough demand for housing in Berlin to produce tidy profits for landlords and a steady influx of new people for whom there are not enough jobs and so those people are unemployed?
That is:
1. Obviously not true.
2. Obviously not a good or sustainable thing if true.
This has nothing to do with any strong form of the efficient markets hypothesis.
If there aren't jobs for the people in Berlin, then obviously they can't pay these great housing prices that the OP claims they can. I guess barring a case where Berlin is a vacation spot for the idle rich, but I don't think that anyone is arguing that.
If there are plenty of jobs, but housing is super-abundant, then I suppose you could make some weird case for there being a non-efficient market that's propping up housing prices despite there being no reason for that. And then landlords are, heh, making a rent, not the normal one but the economic concept, and sure, Berlin is super-overpriced for what it should be. But that's obviously nonsense too, everyone knows that Berlin is affordable.
I don't care if markets are for some reason inefficient the other direction and landlords are making less than what they ought to be -- the entire point of this ridiculous digression was the OP's claim that Campus could design an attractive model city which people would flock to despite there not being any jobs, and the point is that Campus is a landlord. They will not grow and become a giant disruptive force in the world if they are not making lots of money. If they build cities in which landlords for whatever reason make less money than they "ought to," then they will not grow and will not make many cities.
EDIT: I think this was all lost in the weeds, so let me play out the whole thing. I am not denying that Berlin is a vibrant, great, wonderful city that is also affordable and is attracting people for any reason you care to name. All I'm saying is that there are two possibilities:
1. Jobs are scarce in Berlin -> people do not have a lot of money in Berlin -> landlords do not make a lot of money in Berlin -> Campus could not make a neo-Berlin and then roll the incredible profits into making neo-neo-Berlin, because Campus is a landlord.
2. Jobs are not scarce in Berlin -> Berlin is not the counter-example that the OP thought it was.
For whatever it's worth, I think that the actual situation with Berlin is that it's still affordable but getting less so, and the OP confused the graph with the graph of the first differential.
EDIT2: In the case of Berlin, you could I suppose make the case that landlords are renting properties for low absolute rents but high profit margins, and that thus a sufficiently large landlord could use high volume to produce large absolute profits. But I don't think that could be the case for a new city. Building a city is a capital-intensive process -- even if the land is inherently cheap, building the structures and the infrastructure is just expensive, full stop.
What (may have) happened in Berlin is that somebody did the expensive city-building and then took a bath on it. Present landlords who are (hypothetically) making a good profit bought the distressed assets cheaply and now are making that profit off low absolute rents because essentially they've profited from the previous landlord's failure. Again, this is not a potential route to high absolute profits for Campus' potential future cities, as Campus will be the first landlord. They will need relatively high absolute rents in order to have substantially high absolute profits.
I think I made too many assumption, so the point I wanted to make got lost.
Basically, Campus wants to build what normally is the end result of gentrification, I'm not critical of that at all, I just wanted to point out that there has to be more to a city than the availability of jobs - there have been previous modelled cities specifically for that purpose (e.g. Eisenhüttenstadt) which turned out rather boring.
As for Berlin, it's isolated position during the cold war/much abandoned property after reunification led to rents being quite low, which attracted creative types - who probably couldn't afford to live at Campus. The vast availability unclaimed spaces after the wall came down enabled them to try all different kind of things, there was a niche for everyone. To pull that of you need a certain density - Leipzig just barely does that, but many other East German cities are rotting away and experiencing an exodus because there is not the critical mass of people. But I also think the Hobrecht-Plan plays into it by providing dense and flexible city spaces - areas where those structures are preserved are the most popular today.
To get back to the original point, the target audience of Campus will rather move to a place they find desirable and find/create jobs there than to move to a place that has no other appeal than a job.
Berlin is still perceived to be desirable enough and affordable enough that young people move there without a job, often from another country. (Both of those assumptions are often made based on a magazine article or blog post, btw.)
This definitely warps the jobs-to-housing relationship, and is hard to account for in any predictions because it's not strictly logical.
Perhaps they could sign with a company or group of companies that don't rely on physical location, e.g. software companies.
Even then, it would only have potential if it filled a bunch of other checkboxes of desirable qualities people wanting for those companies might want which are not filled by established cities, like great outdoor activities nearby, proximity to large cities, extremely low property costs ...
But if they don't rely on physical location, why would anyone want to live there? (assuming you mean remote workers)
What I'm reading / glancing over is that they want to create campusses, modeled after some SF software company headquarters. That would only work in SF, because said software companies aren't going to move out of SF anytime soon. Even then they'd stick to bigger cities where the jobs are.
The only real reason is cost of living. If you build it yourself you could omit half a dozen middle men who make money from real estate as well as potentially local taxes, planning regulations you dont agree with, etc. You could then pass this on in part as higher wages.
Nonsense. The middle men are part of the economy of real estate. Building, selling, reselling, tenanting… These are all economic activities with associated costs. These costs are higher where you are working within an existing cities where there are already people, property owners, residents, communities, local governments.
So, yes building in the middle of nowhere reduces your costs. Mostly because land is cheap, but also other reasons. The thing is, those reasons are both cause an effect of the higher value of those houses. people will pay through the nose to live in a roach infested box in central London, Manhattan & San Francisco fro precisely those reasons. These places have people, jobs, vibrancy and the tangle of all these that makes it very to build on a large scale but give these places an unmistakably organic feel.
So you disagree with me where? The vibrancy of big cities is great - all im saying is that theres a segment of the population who would rather live in a less vibrant neighbourhood with a better home and more pay. Which is entirely achievable.
I know a way of solving this, but "ideas are worth nothing, execution is everything". If anyone's willing to value the idea as significantly more than nothing, I'd be happy to discuss.
See my reply to commenter below. I for one don't believe ideas are worth nothing, and am willing to pay for ideas/information useful to me.
This includes various classes of challenge, including the Ideation Challenge:
"An InnoCentive Ideation™ Challenge is a broad question formulated to obtain access to new ideas, similar to a global brainstorm for producing a breakthrough idea or market survey which may include ideas for a new product line, a new commercial application for a current product, or even a viral marketing idea to recruit new customers. Ideation™ Challenge submissions are typically about two written pages, and Seekers receive a non-exclusive, perpetual license to use all submissions."
For the record, I'm very much open to buying ideas (or other information) that help me make more money. If you're selling ideas that would help me make more money, and willing to make payment conditional upon me being able to utilize your ideas (and I'll certainly try, given that it's in my interest) post your contact info and I'll get in touch.
I realize there isn't a very efficient market for ideas, and I have difficulty understanding why. I suppose other market participants are just not like me in being interested to buy them, but I suspect a reasonable number of similar people exist. My 6-second guess about the situation is that the market for ideas is inefficient because the small percentage of people willing to buy ideas is difficult to market to and ideas are not equally useful to each person.
Well for one thing, the term "idea" isn't very well defined. If you are talking about something like Elon Musks Hyperloop, I can see that it might be worth money. But someone else might consider "Uber for dog walkers" an idea. And it is to some extent, but how would you know before you buy? No worries, you say, you'll just make a clause that says that you only pay for an idea if you execute it? Right, but then you are looking to buy an idea without knowing anything about it, and if you hear it but don't like it, you have now exposed yourself to the anger of the idea-guy if you ever go on to do something related.
I have once upset an acquaintance because he felt that I stole his idea. After that incident, I have actually started to ask people not to tell me their ideas unless they are cool with me possibly using them some day. Otherwise, I just risk making enemies with very little upside.
I think it's possible to sufficiently reduce this problem. For example, "needs to be an idea I can execute on with skill set X (or hire for)", "needs to be something I can execute on with $Y or includes a plan to acquire $Y that I can execute on", "needs to have a potential ROI of Z%".
Also, enough information can be given in advance that I'd be able to filter out ideas that I'm not interested in pursuing. General industry it's in, whether or not it's legal, etc.
I have plenty of information/ideas that would be valuable to software engineers, so I know that there exist scenarios in which information/ideas are valuable. I would've benefitted from the same information/ideas a few years back, and I suspect there's more ideas I don't have yet that would provide more gains. However, as I mentioned in another post, not many people willing to pay for information/ideas so I've had difficulty finding buyers.
Same as any other market. If there is a potential value of say, $5M assuming a problem can be solved, but that potential disappears without the solution, then it's worth $5M. Obviously the other side will want to keep some of that potential value otherwise they won't make the deal.
I don't understand why this is getting downvoted (not that it matters much). I'm totally serious. Ask a question if something isn't clear.
I live in one of their houses. It has beautiful shared spaces and nice kitchens — but it is very expensive. Great place to live when you first arrive in a new city, but most people move on after ~6 months.
A nice thing is that the effective land lords (campus employees) are my age — which helps.
Previous versions of this vision statement described colonies on Mars ... so they've scaled it back a bit lol
OK, now let's figure out how to do something like this that might actually work for families and then you will have something useful to society as a whole. The current "managed roommate" setup they have going is probably not going to work very well if families are involved. I'm not sure my two year old running through the halls of one of the five bedroom houses after a shower screaming "I'm naked I'm naked" would go over real well but maybe I'm wrong.
I'm betting they could do something better and more interesting for families and lower income folks once they start building their own properties. Certainly it's worth a try because housing is badly broken in the US and a lot of other countries.
Your comment reminded me that there's actually a community in Alaska that is located within a single large building. It looks rather pleasant, actually.
didn't expect the post to hit frontpage so quickly! Just thought some other HNers might be interested.
regardless of the lofty plans, what they have actually built already is pretty great. The communities indeed evolve overtime, but the team is careful about how they transition communities and how quickly they add new people.
The services are useful too. Literally showed up at my place and Internet, common room furniture, cleaning, basic kitchen utensils all already provided and working. Sure there are some kinks in the processes, but remarkably smooth considering all the logistics.
And did I mention the month to month lease? I wish this company existed years ago when I was moving cities more often.
I'm curious as to why they are choosing to start their pilot program in the Bay Area - they're not a software startup, so why choose one of the most expensive areas in the world to rent/purchase land? There's a lot of land out there with easier avenues to self-sufficiency that are just a plane ride away at the most, I cant imagine them needing to be close to an urban area at all actually.
The type of tenant they seem to be targeting, young, mobile and willing to rent a room in a well managed share house exist in high rent, high rent urban areas. If you can rent a furnished townhouse for $750, no one needs this. If the rock bottom rent for a studio is $1,300, some people might prefer to be in one of these boarding houses with a better location instead.
At second glance, you seem correct - I seem to have misunderstood the nature of this venture. I was under the impression they were building distributed urban settlements in strategic but unpopulated areas (which would require large amounts of capital and/or land).
I don't know the numbers, though it seems easier to find potential renters more easily in the city. It's about $1.4k with no long-term lease (using the cheapest room for Lower Pac Heights) which is about the same you would find for a single in SoCal (albeit with a contract lease).
So, potential residents have the benefits of like-minded roommates, tech-driven area, and no-contract housing.
Other cities could have better profit for the landowner to rent out, but it would only really share the no-contract perk.
This is obviously an ambitious big goal, and so naturally seems like a low likelihood shot.
It's one of those cases where I would like to hear the founders talk. Long, earnest interviews. Podcasting would be great. WTF are they talking about exactly? Step 1 sounds like a house-share idea, maybe purpose built. The likely market is students and recent grads. Beyond that they are talking about building cities.
If these guys have a chance of succeeding, they probably have interesting ideas.
It's actually a cool question: "How do we build new cities as a startup?"
One interesting idea that (I think) seems like a potential bridge between phase 1 and phase 2, is "student villages" where alumni and staff are encouraged to settle permanently. Residents would already be more intimately involved and invested in the community than they would be anywhere else, have things in common.
If 5-10% of a graduating class stayed long term it would give you a fairly rapid growth rate. The eventual size would be reached at whatever size that 5-10% equals the natural rate of attrition. Say 200 graduates settle per year and 1/10 of residents leave in any given year, they would reach 1,000 residents in 7 years and top out at 2,000 residents within a few decades.
You really can't know in advance, but I suspect that a decent number of graduates (especially of post graduate programs) from top universities could be tempted to buy in to alumni communities if the price was right.
But.. you really need to be a badass team to pull off something at this scale and in this space. The list of Big problems is daunting. Financing, governance and ownership structures would be tricky.
Here's my idea to solve the same problem (aimed at tech people):
- Buy a decent expensive plot of land in SV
- Buy several tiny homes (let's say 10)[0] and put them on said plot
- Buy a large cheap plot of land way out in the middle of California (or potentially Nevada for tax reasons) that can accommodate 100 tiny homes
- Move the tiny homes (they're portable), effectively swapping them, from the SV plot to the cheap plot every time someone wants to get funding
Now, I know this is SV echo chamber speak, but hear me out for a second. I think there is a sizable market of people who realize that living in the SF Bay Area is stupidly expensive, and are willing to go ramen style because they're close to VCs. This brings the best of both worlds - cheap comfortable living + proximity to VCs during the time they need it most (rounds), with a community of founders to keep them from going bored.
Your idea, as well-considered as it may have been, is a complicated workaround to the problem that Silicon Valley money does not want to leave Silicon Valley, and is thereby causing an explosion of inflation, driven by too much money chasing after too little common sense.
In the rest of the country, this is called a "trailer park" or "RV campground". There is no second, remote property in Nevada, because all the homes adhere to a common standard for utility hookups and foundation pads. Even so, despite the theoretical possibility, most mobile homes do not actually move more than once. This is because it is several orders of magnitude easier to move people and their personal possessions than the buildings they live in, even when such buildings are designed to be moved.
I don't want to be mean about this, because you did put your idea out there and stand behind it, but it is not an ideal business plan. There is already a solution to the problem wherein a businessperson needs to be in a certain city for 10% of the year, while still enjoying most of the amenities of home--several, actually: hotels, time-share condominiums, furnished apartments rented weekly, couch-surfing, pieds-a-terre. There are also existing solutions for portable homes: touring buses, RVs, camper trailers.
None of these are economical because their high price is driven by regularly unused capacity. Also, there are benefits to being "swappable" in that entrepreneurs are always close to other entrepreneurs. YCombinator alone could benefit from such a system where they have 100+ entrepreneurs temporarily relocated to the Mountain View area every 3 months.
I strongly encourage you to live in another city--possibly even one entirely outside of California--for a year.
To mix two entirely appropriate metaphors, you are attempting to summon the molehill to Muhammad.
Different cities have different problems. As far as I know, "not able to live in close physical proximity to potential investors" is one that is unique to Silicon Valley.
> As far as I know, "not able to live in close physical proximity to potential investors" is one that is unique to Silicon Valley.
I think you're conflating two arguments here. I'm not suggesting this is a solution that scales to other cities. I am suggesting however, it would solve them in SV given the current funding climate.
> I strongly encourage you to live in another city
I've lived (professionally) in Chicago, Philadelphia, New York, London and Germany. I'm not sure what my living experiences outside of SV have to do with the context of the discussion... for more context, the problem that is being identified here is not currently a problem that I have.
Perhaps I need to live in Silicon Valley, then, to gain an understanding of why your idea is not completely batty (or perhaps why the region itself is not as barking mad as it appears to an outsider).
While I have no scientific evidence to back this up, you may also have noticed that certain places have their own collective consciousness, where the local social conformity creates standing waves of recurring behavior. People in Chicago go to Portillo's, even though it's pretty much the same food as all the Vienna Beef independents in the city, only with higher prices and longer lines. I can't explain it, other than to say that people go there because people go there.
And just like you can't smell the peculiar odor of your own house until you've been away from it for a while, maybe you just don't notice the oddities of a town until you live elsewhere.
Your suggestion might work. I think the real reason I don't like it is the idea that someone might invest. The very idea that someone might possibly throw a few million into it makes me angry. It's not your fault. It's just sour grapes.
You don't go to Portillos for the hot dogs. It's not the best italian beef in the city, but it's not terrible, and it's reliably available, unlike Johnny's. It's like our In-N-Out.
Looking at the website beyond the landing page, their current business is yuppie boardinghouses. Which isn't really building cities and doesn't scale in that direction because what makes cities hard is economic diversity...Greyhound Stations and methadone clinics have to go somewhere or it's just prettier gated suburbia.
Phase 1 is "communities." These are the yuppie boarding houses. 4, 20, 200, then 5000. Looks like they on about 30 now.
Phase 2 is cities.
I like it, personally. It's got that too-ambitious element but they set themselves a proving ground. If they hit 200 "communities," are profitable and are managing scale exponentially, I would definitely be listening to them talk about creating cities.
Ah, the arrogance of completely ignoring history and human nature.
The problem with building a community of like-minded people is that after a few generations it won't be a community of like-minded people that have chosen to be there anymore. And I'm not even talking about any other form of social and economic reality. All else remaining the same (it won't), just bringing in new generations will change the entire dynamic.
What they are basically describing is trying to start a cult.
this is definitely a hard problem, but what they've accomplished so far is IMO better than alternatives. they are careful about adding new roommates, and allow existing roommates to give lots of input during the process. definitely seems to work better than standard Craigslist or friends-network only roommate searching.
not sure how it resembles a cult? their goal is not for all the communities to be the same, but rather for there to be many diff types of communities, each of which evolves over time as roommates come and go.
>What they are basically describing is trying to start a cult.
Cult is exactly what I thought when viewing the website. All the talk of like minded people, the photograph of people sitting around in a circle... hugely creepy.
Looks at some of their properties in SF. 3 level house in Haight-Ashbury, ~18 units.
Each unit is around $1500/month and they estimate clean/utilities at $200-260 per month. Is that insane to anyone else? Where the heck is all the money going for utilities?!?! I have a two bedroom in the richmond, one roommate and we use maybe $30-40 a month in electric and gas, including the washer/dryer.
For some reason I'm paying around $100/mo for water and sewer, $150 for electric per month, then there's garbage service. I'm not sure if they're including cable TV, internet service, etc. Maybe there's some HOA fees?
There are plenty of little towns and cities out there already. They were all programmed in non-portable assembly for obscure processors. Some even have a rudimentary OS written in C. And the startup in the article wants to scrap the entire code base, and rewrite the whole thing from scratch in Python, or Scala, or Clojure, or Brainfuck, or whatever closes the first round of funding this year.
Never mind that this has been done before, countless times. They're called "company towns". If the company did it well, they diversified their economies and still exist. If not, they failed, and were absorbed by natural communities.
I wonder if they'll choose to make a whole diverse city or just a "monoculture" of 20 somethign roommates. ? I dont imagine seniors are usually attracted to Campus' main market (see the communities on their website). But cities usually have all sorts of demographics.
I imagine these communities will end up resembling the student ghettos of Allston, MA. An amazing place when you're 18, but just depressing when you're 28.
Reminds me of how 'The Real World' TV show started out as a whole bunch of different people living together in SF then as the show progressed season after season it just became a 20 something mono culture.
Maybe as they develop and become bigger... But kids out of uni are more or less still 'getting away' from the adults. And empty-nesters probably would have a different tolerance for noise and active hours.
As a mid-career professional, this strikes me as the kind of thing that might have appealed to me when I was 19-23, but even then I hung out with 40 somethings. Perhaps I'm just not the target audience. Cool idea, nonetheless.
This reminds me of the Downtown Las Vegas Project spearheaded by Tony Hsieh's. Definitely interesting to see the "hacker" mentality applied to city development.
If you want to buy an empty town of new houses, there are plenty in San Bernardino. Vacant lots run about $7500. San Bernardino even has a new airport, fully completed and ready to go. But no airlines fly there. Because there are no jobs.