It’s been well over a decade now that I’ve been using the term “affordable luxury” to describe the predominant design style I use. I remember when I first started using this phrase in normal real estate conversations, most people were standoffish about it… or at best, it didn’t quite resonate because—this is me paraphrasing responses—“It sounds like section 8 housing or a polite way of saying cheap homes.” Well, I wasn’t discouraged and kept using it. I felt in my gut that this would be a term that catches on because I’ve seen the “light at the end of the tunnel,” so to speak. Let me back up a bit to explain my reasoning behind this.
In the early 2000s, I was doing what you’d expect from a real estate investor just cutting his teeth: your typical fix-and-flips, some full rehabs, and some cosmetic rehabs. I’d sell a few and keep a few for my portfolio. This progressed for a bit, and then very quickly, I pivoted into new construction. This was at a time when, in the Southeast US, where I was based, building costs for a higher-end product were about $120-$130 per square foot. In many instances, a full rehab could, in practice, cost more than its new construction counterpart. At the time (of course, this is market-dependent and ebbs and flows), new construction was the thing to have, so this seemed like a no-brainer to me unless there was a rehab that was just a steal. I’ve finished a lot of houses and commercial space, and one thing I can tell you is that when selling or leasing properties, I could probably count the times on one hand (if even that) wherein a buyer or tenant said to me that they would have wished I used crappier, cheaper fixtures and finishes.
Now, at the time, I was penny-pinching—reinvesting everything that I could into the business, so I was living in a small house (remember, this is pre-tiny-home revolution). The house was about 900 square feet and was a 2-bedroom, 1.5-bathroom – little cottage (actually, it was a mill house I scooped up on the cheap and poured its value in money back into). The house was cute and comfortable. Now, granted, at the time I didn’t have a big family, but I did have a spare bedroom I wasn’t using at all… so there’s that.
When I would have friends or family over to the house, they were surprised at how much room a house could have if it was laid out properly and efficiently. This was a perfect example, and probably my first example, of how “square footage” can be a deceiving topic. Digressing back to the new construction builds…
I noticed an interesting phenomenon very early on in my real estate career. This was because many builders (predominantly in the residential sector, but also commercial) were always very keen to maximize the buildable square footage that would fit on their lot(s). This makes sense for obvious reasons, as you would think that the more you build, the more you’d profit. Well, from a net standpoint, this is correct; however, I found the ROI, as indicated in annual yield and a percentage, acted more as a sliding scale. Larger houses would give me more net profit in dollars collected; however, they would take longer to construct than their smaller counterparts, and their cost basis was quite higher as well. This is food for thought, so let’s back-burner this and switch over to the perspective of the buyer.
At the time, interest rates were stabilized around 7% and 9-11% for short-term investment money. Not far away at all from where we are today, by the way (this is important to remember later on in this story). When a buyer buys a home, we all know that the mortgage payment is just the tip of the iceberg when it comes to the costs of ownership. There are property taxes (often factored into the monthly payments one would make to the lender) and then there’s your insurance, and—the one that gets swept under the rug the most—the regular and deferred maintenance and care. Lastly, let’s not forget about utility costs. Now, people were confident enough in their “fixed rates” that most could and would obtain at the time, that it was easy enough to let the other costs of ownership slip their mind (at least when convincing themselves of the emotional benefits of owning said property). Let’s set this aside for a moment and come back to it at the end of my story.
Around 2007, I started traveling abroad. On a whim, I decided to travel to Eastern Europe. This came about during the construction of one of my houses in the US, as one of my contractors was raising money for the master planning and development of a resort community over there and asked for my assistance with both investment and the master planning. I figured, sure… I’m in, and hopped on a plane. Well, long story short, I immersed myself in the locale and region, took the plunge to make the investment, and thus began my overseas “education” so to speak. It wasn’t long before I found myself setting up multiple businesses, many of them verticals in the real estate development sector – in niche segments I never imagined could exist at that time in my career. This action as well as many others on my part spawned many real estate projects not only in Romania but multiple other countries and regions as well. It led to the creation and development of what became one of the first and incredibly successful vacation rental, yacht charter, and vacation companies in the Dominican Republic, and I also spent time in Argentina on a real estate venture. Now, I don’t say this to brag, but to set the stage for what inspired me to fully embrace this idea of affordable luxury…
In these locations, as you may suspect, living situations are substantially different than what we’re accustomed to in the US. The cities that I was in (I can’t speak for everywhere in the world, however) are central-business-district centric, and therefore quite dense in their urban epicenters—i.e., the majority of the population base is urban-centric. As such, space is at a premium. Sure, there are villas and apartments considered luxury, and they are indeed very high-end, but as far as square footage, the “biggies” were barely cracking 2,000 square feet (not to mention that in all these regions, “livable space” also includes outdoor terraces and porches, so there’s that to consider too). At this juncture, I’d like to point out that in many instances (and being that all these countries are Latin countries), the families were much larger than in the US—sort of akin to the average family size in mid-century US (this is an important tidbit we’ll broach soon).
I think you can start to see where I am headed with this and what I’m building up to. Location density was a major factor contributing to the size of these properties (and we can delve into the communist/socialist bloc apartments in a different conversation), but also, the overall cost of living impacted many abroad before it similarly impacted Americans (call this a “dollar being the world reserve currency privilege). Utility costs were a crucial cost, routine maintenance was a must, and to be honest, people didn’t have the example of a massive “bigger is better” approach to their housing. Sure, a cultural and timeline differential, but as a whole, bigger was not always the solution to better living for people—it was more so the use of space, and how they could make their home “feel” and “function” that mattered.
So here I am, neck deep in real estate markets in four different countries, with the outlier being the US. Builders in the US seemed to have no limits as to how big they’d build. Everyone wants 5 million bedrooms; “it’s gotta be open concept, gotta have more space”… each house became bigger and more akin to living in your very own Costco, but really, the quality stayed the same – or even declined in some instances. Occasionally you’d see something wherein they tried to pull out all the stops—but again, this was the era of the McMansion—an exercise in how offensive and tasteless one could be.
On the flip side of the world, I was bouncing between urban and rural properties (suburbs as they exist in the US aren’t a thing—it’s more akin to the urban CBD, outside the CBD, and then the “countryside”). Given that key areas within these locations had a tourist draw, I found myself gravitating to the tourism and hospitality sectors of real estate quite early on. Being already connected to a network of like-minded people in the US, it was quite effective for me to bring people in to occupy these properties. Whether it was a short-term business rental in the city center, a vacation property, or a micro-resort in the countryside, I saw that I could attract many people. The cool thing for me was that I could use my skills as a designer and master planner combined with my newfound knowledge base to optimize the spaces inside and out of these properties. This “optimization” would not only suit many occupants and residents simultaneously but also give me a leg up against the competition. I had to knock it out of the park when it came to fit, finish, and amenities. So, as this was going on, I was mentally taking note, and, as I love marketing and branding, I wanted to create a term or phrase that embraced and tried to “capture” the essence of what I was not only seeing but also experiencing. Now, I can’t be sure the term affordable luxury had never been used before—it’s a relatively generic phrase—but I felt that if I geared it towards real estate, it perfectly encapsulated what I saw as a “better” and more effective way of living—especially when compared and contrasted to the McMansions stateside.
This new paradigm shift allowed me to excel in the micro-resort sector, the short-term vacation rental sector (well before the likes of Airbnb went mainstream), the specialty property sector, and of course, the residential real estate sector in nearly any market area. So when I returned to the US, one can only imagine how eager I was to apply what I had learned and experienced from the way people live abroad and merge those insights with market trends and cycles I saw heading directly our way in the US. As they say, history may not exactly repeat itself, but it does tend to rhyme. The historical lessons I learned in these other areas gave me clarity and vision about how American history would impact the future of the real estate sector in the US. To give a time reference, this is around 2013-ish. Recovery from the 2008 housing crash in the US seemed to be well underway, yet many builders and investors still hadn’t learned the lessons from the crash. This was when I became convinced that the “affordable luxury” concept was the right path forward.
I’ve always had an affinity for mid-century construction, and major architectural style movements—starting with the Sears Roebuck and Montgomery Ward houses, to the Buckminster Fuller Dymaxion House, the Frank Lloyd Wright Usonian community, and believe it or not, I was always fascinated by the Monsanto House of the Future. Beyond these American influences, I immersed myself in various international architectural styles like Bauhaus, Functionalism, Brutalism, and Classicism. Additionally, I explored different types of urban development, studying how ancient cities were structured in diverse regions of the world. I also delved into different ways of living, from citadels and villages to more modern urban settings, gaining insights into how space can be optimized and communities can be designed to enhance the quality of life. Anyways, so bringing us back full circle to the US, I started taking the approach on residential (and in many instances, this could be applied to some of the commercial stuff as well) that people could effectively and comfortably live in smaller square footage without sacrificing the quality and amenities you’d find in a much larger luxury home. Turns out, through personal experience, you can fit a ton of luxury amenities in smaller footprints and square footage—i.e., most larger homes until you reach mega-mansion scale, really just have a lot of wasted expanse in them, that needs to be taxed, heated, cooled, maintained, and insured!
Throughout my tenure developing homes, I came to many realizations that shaped the ideals of affordable luxury—in particular, this idea that many buyers (and renters of course) loved incredible kitchens and stunning master suites – common knowledge I know… but stick with me. So, if these were the main two selling points of most any property, then why couldn’t a house be designed around these features, and the rest of the needed spaces be “filled in” between? This focuses one more on “purpose-built space” rather than “space for the sake of space”. You could fit a lot of great stuff in a small space. Case in point with the vacation properties and micro-resorts I was doing… There were and are certain “must-haves” in a luxury product, and these must-haves—quite honestly, didn’t eat up a massive amount of square footage. Beyond those key components, a room was a room and could be designed in nearly any way, shape, or manner desired—much like how one would outfit a luxury yacht. I can fit a custom bunk room in attic eaves just as much as I can fit a sauna in less than 50 square feet. See where my mind is on this?
While I was out of the US traveling, the tiny house movement was gaining speed in the States. I think at the time, the leader was Tumbleweed Homes. Very cute and certainly served a well-needed niche. Now, without being critical of them, I think the “tiny homes” represent an “extreme” of the pendulum swing—possibly as a pushback to the McMansions that could be the other end of the extreme pendulum, but as a viable solution for people who were seeking to live either off-grid, semi-off-grid, or in a more “cost-conscious” manner. To me, this represented the beginning of actually being on the wave instead of either way behind it or too far ahead of it. Make sense? Granted, we’ve seen the tiny house movement morph into this pseudo-mobile home revival – albeit with a modern twist, but the concept certainly has great roots. I preferred smaller, more user-friendly spaces, pre-“tiny home” revolution, but I was unique—or a minority in this sense in the US, I believe (NYC homeowners notwithstanding of course). So with my newfound experience and knowledge, I was now able to find a happy medium between those who didn’t want to make the extreme lifestyle change and move into a tiny house, versus those who were finally coming to terms with the real costs associated with “more than you need.” To sway people towards my affordable luxury product, I needed to ensure that when someone walked into a home (or commercial space for that matter), they were not only shocked by the high-end feel and features but taken aback when they saw how little square footage was realistically needed to achieve these results! The idea was to redefine the perception of “small.” Small should not be synonymous with “tiny” or “low quality”; instead, it should signify an advancement in desirable living. Now, the “affordable luxury” concept fits exactly where it needs to fit. The prior negative connotation of this term—via the transgression of just a little bit of time—is now something that is filling a much-needed consumer need.
I started to take this idea seriously—as a “yep, I’m sure about this” around 2016. We were seeing a run-up in housing values, and builders and investors, many who had not experienced the 2008 crash, were playing fast and loose—almost as if it was a competition to see who could add the most square footage on the lots they have. I suppose that this is an appropriate time to say that this was the perfect storm for me on the affordable luxury front. Interest rates were dropping to all-time lows, which meant people started acting as if square footage was theirs for the taking. A select few, it seemed, were rooted in common sense and down-to-earth thinking and knew ahead of time the costs associated with owning such products—whether be it as an investor or an end user. I wanted to ease into it in the American market, to “prove the concept” so to speak. So, in areas where investors were “popping the tops” so to speak (or as I would call it, “raising the roof”) and trying to max out square footage, I on the other hand took a different approach. I wanted to optimize the layout. I wasn’t opposed to adding square footage if it was necessary, but in many instances, I wound up removing some of the square footage that we tacked on like warts over the years. Many thought this was a strange approach, but hear me out. I did a full gut job renovation in an emerging area of Atlanta. Now, I had precedent in the area to more than double the square footage of the home, but in fact, I reduced the square footage. My logic behind that is that, through effective optimization of the existing structure, and the application of the affordable luxury concept, I would be able to include all the elements of luxury one would expect in a home that is at the top of where the market area is headed, however, keep my final price point in a position to not be the highest priced home in the immediate area (total price, not necessarily price per square foot—as traditionally, price per square foot increases as your overall size decreases).
It was quite amusing to experience, as not one person could figure out what I was doing, nor could they envision the final product, as I wasn’t doing what was considered “normal.” It was painfully obvious to me at the time that there was a box that people were stuck in, that caused them to wash, rinse, and repeat the same techniques over and over again. I get it, it was profitable for them… so why fix something that isn’t broken, right? The problem is, and it was a problem I was able to identify by experiencing how other cultures lived and treated “space,” is that the American methodologies towards properties—“ie bigger is always better,” is not a sustainable trajectory. I’d say that the most common response when other investors or real estate agents walked into the house was, they’d say “Wow” and there was that big impact—however, you could see and hear the cognitive dissonance kick in when they’d reach for things that I could have done differently. 100% of the time, these people would say “I would remove all these walls and open it up so the kitchen and dining room and living room and great room and entry and hallway are all one big space.” I get what they’re saying, that people like the feeling of space—but the feeling of space (demonstrably so) can be achieved without turning your home into a Macy’s Department Store. I also happened to know (and was just ahead of the curve on this) that there would be a shift to “semi-open” floor plans instead of open floor plans. This would allow for more creative use of space, and sort of act as the “balancing” or middle point of that extreme pendulum swinging that we always seem to experience. For example, on one end of the pendulum, you have your older homes (early American per se) with many many small rooms. On the other end of the spectrum is the open concept with one or two massive common areas. Both of these models had their pros and cons, of course, but in the middle would exist the semi-open floor plan. This type of layout would give people the living spaces that allowed for communal gatherings but also include smaller, more “purpose-built spaces” that would allow me to implement the experience of luxury. I found that for very little cost, it would be simple enough to create designated spaces for things that would traditionally be earmarked for super luxury estate homes. For example, how much space does a butler’s pantry truly occupy? A larger walk-in master shower? A steam room and infrared sauna? The list goes on, but… when you optimize square footage instead of maximizing square footage—that’s where the magic happens—and that’s where affordable luxury really starts to take shape. This works in not only residential but also commercial applications. It’s one of those things where if you grasp it, you grasp it… you have to be willing to refocus your target demographic, as you will be losing people who only buy based on square footage, but you will be gaining a new and untapped demographic of people who want to have the finer touches in a property typically relegated to much higher price brackets. Make sense? This is a very important nuance of affordable luxury to understand.
So, let’s fast forward to today. We have certainly seen what lowering interest rates to obscene lows can do to a market. It can cause rampant price increases, drive up demand, and be one of many causes of drying up supply. It can cause builders and institutions to adopt the “we can’t lose” mentality – overbuilding and underdelivering on quality, aesthetics, and imagination. “More square footage” becomes the repetitive mantra. Sure, this lowering of interest rates spurred growth by not only homebuyers but by hedge funds and the like—creating the perfect storm of the APPEARANCE of a massive bull market and value surge. It did, however, offer an opportunity for many to enter the homeownership arena for the first time. However, let’s be honest… most homebuyers used this as an opportunity to purchase more home than they may have realized they could afford. People shopped only based on monthly payments, as well as what their lenders would “approve” them for. As a short time progressed, these people became the ones to realize the actual operating costs of homes, and MANY of them took to refinancing their homes to tap into the “equity” that was accumulated in this same short period, due to the dollar losing its value, the surge of buying tightening supply and giving the impression that this was going to go on forever and their equity would just keep pouring in. In reality, we were seeing people in hyper-drive burying themselves into these assets-turn-liabilities.
Now today is the moment that the concept of affordable luxury starts to take hold in people’s minds. Why? Because of the perfect storm that I just outlined. The true cost of homeownership revealing itself, the lack of supply of housing that fits the needs of today’s buyer (and falls into the guidelines of today’s lenders/banks) as well as a quality home that is seen as something more than a disposable roof over your head…. perfect for Gen Z up to the retirees seeking to downsize without sacrificing luxury. At the time of this writing, I have my “Affordable Luxury Urban Collection” of home plans that are going vertical now in Jacksonville, Florida, because, as I have successfully done in the past, the smaller higher-end homes are the perfect home to be built in upper-end areas to give buyers an option to pivot into nicer neighborhoods at a price that won’t break the bank, but also in gentrifying areas where you wouldn’t want to be the “big eyesore” but rather eloquently slip a product into the mix that will help beautify an area, stabilize values, set a precedent for community niceness, and best of all, spur pride of ownership with neighbors.
I see this affordable luxury thing going from a random idea over a decade ago to something quite substantial across all sectors. Via Property Innovation Group, and the design arm I run of Wild Compass Homes, I’ll be able to expand this idea of affordable luxury from residential to commercial, micro-resorts, flex space, pocket communities, special purpose properties, and beyond. We have a lot of stuff in the works in all stages of development… this is it… where past, present, and future converge in real estate. This new transfer of wealth they’re talking about is real, and it’s going to be time that Americans embrace a new type of living that synchronizes with both the cost of living and personal desires… There’s simply no reason that both can’t co-exist. That to me is affordable luxury.