Rich Richman

Richard Richman is chairman and founder of The Richman Group, one of the nation’s twenty largest residential property owners. The Richman Group has developed or financed thousands of units of affordable and luxury housing in 47 states and also manages thousands of units of housing across the United States.

The Next American City: What brought you to affordable housing development? 

Richard Richman: The idea that you can apply business ideas to social endeavors. This permeates my thoughts about social problems and urban development. Somehow, a lot of people think they’re separate things, but they’re not. The hard problem you do have, though, with applying business ideas to social endeavors, is that it’s easy to measure inputs, but hard to measure outputs. For instance, how do you know if your sanitation department is cleaning up the garbage properly? It’s not easy to do. In the private sector, we have a very good gauge of how we’re doing for efficiency. It’s called competition and profit and loss. When you get to governments, it’s not that easy to measure gain and loss. But it is possible.

TNAC: The Richman Group operates in 47 states. At the same time, we see population declines in large swaths of the country–upstate New York, New England, the Midwest–and cities like Syracuse, Hartford, and Cleveland. What is the future of these places?

RR: I have some unconventional views. You have to let the laws of economics work their ways. There’s a saying on Wall Street–“Don’t fight the tape.” Any effort in the long term to fight the reasons why places may be depopulating will probably turn out to be both a mistake and failure. There are reasons why things happen in a historical sense. I believe that the government should be involved, but it needs to intervene in ways that are consistent with good economic and business practice.

And what we’re seeing is a very dynamic change. Technological and global innovation on a scale human beings have never experienced. I’ve always believed that there’s the sweep of history. I grew up a resident of New York State, and I’ve been a resident of Connecticut since the early 1980s. I see reasons why upstate New York is having difficulty, and parts of cities in Connecticut are having difficulty. It has to do with economic forces that one must recognize. I don’t know if one can easily make changes to economic forces. In the United States, we can hire a Yale-educated computer programmer for four times what it costs to find a programmer in Bangalore, India. That’s going to change the way the world runs. But we can’t fight that–we need to live with it.

So what does Connecticut have going for it, for example? It’s certainly not going to be a manufacturing center. I think it’s going to have trouble even in terms of its service industries because of the high costs of doing business and a high standard of living. At the same time, in the 21st century, having an institution like Yale University in your state is the equivalent of having oil in the ground. It’s really the raw material for economic advancement in the 21st century, if you’re talking about a technology- and service-based economy. I think there’s also a major historical mistake, that all the money has been given to the University of Connecticut without moving major portions of the university to downtown Hartford. [The University of Connecticut is based in rural Storrs, Connecticut.] That would attract thousands of young people to live in the city, and a university has a ton of spinoffs, acting as a catalyst or incubator. So the question is–how do you build off of what you can do, and not fight the tape? There’s also something else that I think is important.

Who’s to say that the current size of the city is the right size? Maybe it should get smaller. Who’s to say whether Hartford should be 80 thousand, 200 thousand or 1 million people?

TNAC: How do you plan to shrink a city?

RR: A lot of cities have done that successfully. But people say, “Oh my god, the city is getting smaller, that’s bad.” But why is that bad? For some cities, getting smaller makes sense. Why is bigger better? It’s definitely an American ethos, that we always think bigger is better. But sometimes, quality is better than quantity. 

TNAC: Is it becoming harder to find sites for affordable housing development?

RR: Today, homeownership has become so affordable that it’s hard even to find sites for affordable [rental] housing. When you want to build an affordable [rental] housing project, you’re competing with people who want to build townhouses, or condos or even single-family homes. And they’ll pay more for the land, and land values go up in many markets.

TNAC: What can be done to make it easier to build affordable housing?

RR: The most important thing is dealing with school taxes. Putting aside the other reasons why communities may not want affordable housing–discrimination, environmental and traffic concerns, and water and sewer problems–and they’re not easy to put aside–then you have to deal with compensating a suburban community for the fact that you’re adding school children when communities already feel like they’re not getting enough support from states for education. If the states compensated communities for the incremental costs of educating these additional children, one barrier to building affordable housing would be removed.

TNAC: Has there always been an affordable housing crisis in America, or is there a unique shortage of affordable housing right now?

RR: I think there’s always been an affordable housing crisis. You have to depend on subsidies to build in high-cost areas (like urban areas), and if you didn’t need the subsidies, the market would build the housing. But the cost of building the housing isn’t that much lower when you’re building affordable housing, especially with all the rules and the building code and the amenities that people expect. So the good news is that you’re getting good quality housing built as affordable housing, but the costs aren’t much different from market-rate housing, and the rents are very different. A 900—square-foot market-rate apartment in New York City could rent for $3500, and an affordable apartment would rent for no more than $600. There’s just no way to make those numbers work unless somebody is going to subsidize it.