The Bottom-Up Revolution Is...Making a Big Impact With Tiny Homes
Jesse Russell is the founder and CEO of Hiatus Homes, a development company in Bend, Oregon, that specializes in small home design and cottage community development. In 2019, he introduced Bend’s first small-scale housing community. He’s also been involved in citywide policy and incentive reform for small-scale development and urban infill.
Russell joins Tiffany on today’s episode of The Bottom-Up Revolution to discuss his journey from Los Angeles TV producer to small-scale developer. They talk about how to navigate the challenges of building small homes, including city policies and project financing, and how this kind of development can benefit communities.
-
Tiffany Owens Reed 0:06
Hi everybody. Welcome to another episode of the bottom up Revolution podcast. I'm your host. Tiffany Owens, read, I hope, wherever you are, that the weather is starting to warm up and that the snow is starting to melt. If you get snow, I'm in Texas, so we don't really get snow, but it's definitely getting warmer. I am always excited to bring you all another conversation. This is a show where we talk to ordinary people who are working in a incremental, bottom up fashion to improve their city. And today I'm excited to bring with you a conversation with Jesse Russell. He is the founder of hiatus homes based in his hometown of Bend, Oregon, and 2019 four years after moving home to start building tiny houses, he introduced hiatus Benham Ben's first small scale housing community. The development features 22 lofted 500 square foot cottages, thoughtfully arranged in clusters around shared open spaces and connected by pathways designed to foster a strong sense of community. Since then, he's built more than 40 more units in his city. He's also been engaged on the policy side, where his efforts have led to city wide policy and incentive reform for small scale developments and urban infill. Jesse, welcome to the bottom up Revolution Podcast. I'm looking forward to this conversation.
Jesse Russell 1:29
Yeah, thank you so much, Tiffany for having me on. I'm excited to talk with you about all this.
Tiffany Owens Reed 1:34
Yeah, it's gonna be fun. Um, so I know a little bit about your story. We got to talk before this recording, and I've read a little bit about you, so I know that you're originally from bend. You spent some time traveling around and then worked in TV production in Los Angeles. I would love it if you could share with us a bit about that shift you made from working in TV production and the bustling metropolis of LA to moving back home, to bend to build tiny homes. What was that like? Not just, I mean, I would love for you to share with us, like, Hey, this is what was going on. This is kind of why I made this change. But I'm just curious also, like, what resonated with you personally about making this kind of change and deciding to move back to your city to to, I guess, like, help with this housing need. Yeah,
Jesse Russell 2:21
great question. So, as you said, I grew up in Bend. I was born in Eugene, Oregon, and then we moved to bend when I was in the third grade. My mom was a bartender up at the mountain. We were able to afford a home. You know, we owned a small house here in the west side where I live today. I think that house was maybe 68 or $78,000 you know, back in the the early 90s. So, yeah, grew up here in Ben. Love living here in Ben, it's a beautiful place. We have a, you know, ski and snowboard mountain outside of our our town, beautiful forest everywhere. A lot of hiking, lot of mountain biking. So, just a great place to grow up. As a kid, the population was probably about 20,000 people at the 1000 people at that time, so yeah, grew up here, graduated high school, went to the University of Oregon, I got my degree in in journalism, video, documentary work, and the first job I got out of college was as a reality TV producer. I didn't know what reality TV was at that time, and most people didn't. But that led to about a 15 year career in producing reality television, which led me to LA, and then I was living in LA for for about 10 years doing that, and I just got really burnt out. I got burned out on the lifestyle. I got burned out on the city, and I wanted to go home. I wanted to try to figure out a way that I could, I could get back to bend. And at that time, too, I was going through just a lot of change in my own life. I was trying to, you know, be a lot more healthy. I was trying to, you know, both body and mind, doing lots of yoga and meditation camps and all I was doing all that stuff, just trying to figure out what my next step could be. And then part of my job at that time was to go around to networks hear what kind of TV shows they had and what kind of TV shows they were looking for. And I went to a network that had they had tiny house nation. They were going to launch their network with this show called Tiny House nation. Now I'd never even heard of tiny houses, and they described it to me. I went back to my office and I went into the, the probably longest rabbit hole on the internet I've ever been in just looking at these beautiful, cool little houses that were on a trailer that most of them, you know, had the little lofted bedroom and a little kitchenette. And I just fell in love, kind of instantly as a kid living in Bend. I hated paying rent. I would, you know, at some famously, at one of my buddy's houses, they'd moved into a house and there was a carport with a small attic above it, and they jokingly said I could rent it out for 100 bucks a month. And I was there the next day cleaning it up, and lived there. So I've always as a kid, loved living in small little spaces, and so maybe that's why, when I saw these things, I thought, wow, this is. Something, and really felt like it could be something that people in Ben would love. You know, we're just kind of a entrepreneurial town and and that sort of thing. So yeah, called my my buddy kit that I grew up with here. He had a big shop outside of town. And I said, Hey, man, I'm going to sell all my stuff in LA and I want to move home and and build this tiny house on a on a trailer. Will help me? And he said, Yeah, sure. I sold all my stuff, packed up, arrived at his house with his kids and his wife, and slept in the shop, and we built the very first tiny house on wheels that was called the hiatus. And that's how kind of all this started. So
Tiffany Owens Reed 5:36
at the time, when you were exploring this new pathway for yourself. Like, how much of this came from understanding, like, how your city was changing in terms of, you know, the population growing and housing prices going up, or maybe, or did that maybe come later and you saw, like, oh, wow, these tiny homes that I'm really interested and intrigued by can also be a solution to this, other than, like, how did those two parts come together. Yeah,
Jesse Russell 6:02
it was together. I mean, I from LA, I was still coming back to bend all the time. My, you know, family was still here, my friends were still here. So I watched the city go from, you know, 20,000 person little ski town that nobody knew about, to, you know, 100 plus 1000 people, where the prices, you know, the median price for a house is $700,000 like that all happened in my lifetime, and so even when I was moving back myself, that was a problem for me. I didn't have the money to buy a $700,000 house. But, yeah, you know, in conjunction with what those small little houses were, they're really inexpensive, right? They were inexpensive to build, and they were on a trailer, so they weren't attached to a foundation. So it seemed to me it'd be a great thing for the city to be able to just, you know, build a few of these little tiny houses, and people could own them. And it would, it would bring the cost of, you know, the first purchase of your home down by a lot. So yeah, that was, that was all in my mind when I when I saw that first tiny house. I love
Tiffany Owens Reed 7:00
how common sense that was, because this is before you got orange pilled, as we say. And then, you know, before you knew about things like, you know, all the codes and the zoning and the missing middle hub, before you got all the jargon you're it's just, I love how, like, your initial reaction was, like, this is smaller, this is cheaper, this is easier. It can help people, voila, which is, it's like we need more of that sort of just common sense thinking. And I feel like, with so many the issues we're facing in our cities,
Jesse Russell 7:28
and it's well said, it's common sense, like I would say the number one thing where I am now, and how much work we've done with the city and through the city and housing code and land use law and all of the complexity of that. It's, it's the thing that I always come back to. I'm just like, well, what, what's the what's common sense say to us here, you know? And so, you know, with that first, that first house, we were in the bend design conference the very first year they had it, and we set up on a little, a little lot right behind the old library, and I went to the city, to our assistant city manager, and he said, Hey, yeah, I just want to, we're going to be in the design conference, and I want to live in this house, you know, for a couple months leading up to the conference, so I can show people what it's like to live in such a small space. And I'd already been living in it when we finished it, you know, out by the shop, and was loving it. I really, really enjoy it. And they were like, yeah, no way. You can't do that. It's not attached to a foundation, so we don't know what this is. It's definitely not a house. I'm like, well, it is out. I had four walls. There was a sink in there, you know, toilet, the whole deal. And that started this journey of really going, like, here's what I want to do. I want to put four houses on a lot and have people live in them. And they just weren't allowing it at the time. So when we did do the conference, though, it was really interesting. We were only supposed to do this one talk, and we actually had to do a whole nother talk, because it was people were so fascinated with this house. And the thing they would do is they would come in and it was a really pretty house. It was, I think we did a really good job on that first one. But people would come in and they would they would say two things, most commonly, they'd say, Oh, my God, it's way bigger than I thought. And then they would say, I could live in here. And that was the thing that really, really fueled me to say, like, I think there's something here, and I gotta just keep trying
Tiffany Owens Reed 9:19
to figure this out. So you did not come from a building background. What was that? What was that like, um, kind of learning? I'm just curious. Like, what did you learn? Or, like, what was perhaps, like, some of your favorite memories from just like, oh, to like, you know, I've seen, I've seen what you all producing now, like, it's really beautiful, beautiful homes. But I'm just curious, like, what was that like, as you're figuring out, not just like how to build, but also how to think about design and how to think about how people inhabit space and like, what we need, like, the relationship between being human and existing in space. So I'm just curious, like. Do you have any like, favorite memories, or were there any interesting, like, influences that kind of shaped how you approached your design work, or, like, your building work?
Jesse Russell 10:09
Yeah, there's a lot there to talk about, and I'll try to keep this brief, but it was really, really hard to say the least. And my friend kit, you know, he and I out of high school, we poured concrete together, and that was about the extent of my construction my work in the construction industry. He's about the most handy guy that I know, and so, you know, basically, I'd wake up in the morning and he would tell me what I should do for the day, and I would work on the house, and then he would come back and kind of help me when he could, because he had another job. So that, that's how I got through that first house. The nice thing about building a tiny house on your own is you do almost every phase of construction, because you're building the whole house, you know, usually by yourself. I did have an electric, electrician and a plumber help, but, um, but, yeah. So even, even from there, you know, I I started the company. And was like, All right, I think this is a real thing. And we, we started building tiny houses for other people, and then I hired a couple guys that kind of helped me. But there were times where, you know, in between a build of a house, I had to do handyman work, because I had to be able to, you know, live. And I would get on YouTube, you know, someone would be like, hey, I need you to hang a door for me. And I'd hung, you know, exactly one door with I would go up on YouTube. And then if I got in a real pickle, I'd call kid up, and I'd say, Hey, man, I don't know this door is looking a little, not very square,
Tiffany Owens Reed 11:33
little janky. And
Jesse Russell 11:36
that would illustrate, I would just say to anybody out there that's like, you know, I really want to get into this type of building. And I want to, you know, do do anything that's related to helping your community out and and maybe being a part of the kind of development of real estate and that sort of thing, you got to take the first steps. And you will be so surprised how many people come out of the woodwork when you need to figure out the next step. And that's happened over this whole journey. I mean, you know, down to the very first development we did, you know, we just had those four houses that I was saying I wanted to do on wheels. And an ex boss of both me and kids actually reached out and said, Hey, acres. I think you should look at and I came out and looked at it with him, and I was like, Well, man, this is three acres. This is like 20 houses. I'm trying to do four. And he's a he has his own development company, and was kind of a mentor to me when I was younger. And he said, Look, I'll help you do this. I believe in these cottages. I believe in people living in these smaller homes, and I'll help you. And that was the deal that first development was a lot of people, a lot of people helping in a lot of ways to get it to actually be successful. So
Tiffany Owens Reed 12:45
I'm glad you brought us to the topic of your first development. I want to ask you, can you bridge the gap for us a little bit? What was that like going from like, okay, you know, first initial home, you take it to the conference, people respond, you're starting to notice all these housing pressures growing in your city, and then you're like, we need to do we need to keep going with this, starting the company, and then you've brought us to this point where you have all this land and you can build this first development. So what was that like in terms of starting to have to figure out how to sort of navigate the political side of all this, the rules, the regulations. How did you Yeah, what was that like for you?
Jesse Russell 13:25
Well, it was kind of scary at first, because I had never I didn't know how, I hate to say this, but you know, I had reached the age of 40, and I didn't know how our city government worked, and I didn't realize that, or how our cities work, especially as as far as land use, you know, zoning and building code worked. And I had to learn all of that, and I had to go down to the city, and I had to, you know, listen to how it all worked, and dive into code books, which are really boring, and and just go, Hey, this is what we're trying to do. Why can't we do it? And then I would go from there. And so the real thing that was going on is in a residential standard zone, which most of Bend lots were, what's called RS zoned, you could only build one house or, sorry, the density was seven houses per acre, which on like about a 5000 square foot lot ends up being about one house or one and a half houses or something. And so I laid out my my tiny houses on that same lot, and said, Look, this is what we can fit there with utilities and parking spaces, but this is what your your zoning will will allow for. And so it wouldn't allow for that type of density even though the houses were so small. So I said, Hey, what about if a house that's from zero to 600 square feet is actually considered only a quarter of a regular house as far as density goes, and a house from 600 to 1200 square feet is considered half a house. So then what that meant is, if you did have an acre that in RS zoning that only allowed for seven. Ounces per acre, all of a sudden, we were now able to put 28 zero to 600 square foot houses, or 14, six to 1200 square foot houses. So that that was really helpful. So now we could look at property and get more density, and that that part of the puzzle was kind of solved. One of the other really large puzzles was was lot size and being able to divide the lots up. So what happened in 2015 is the city of Ben. I had nothing to do with this, but the city of Ben adopted what was our first cottage code. And this allowed, basically, to take a piece of land, chop it up into really small lots. The houses did not have to face the streets. So you were able to build in these little clusters really similar, you know, you asked if there were any influences early on, Ross Chapin, up in Portland, was 100% probably the biggest influence I had. I read all his books, you know, was always on his website. And he was really, to me, was the guy that was like doing it right as far as these cottages went. So I, I was totally inspired by that. So, yeah, so then when that cottage code came along, we were able to, you know, have these 22 homes and these little tiny lots with shared community gardens and paths that went through them. And, you know, the very first house that we tried to sell was like, I think it was 250 grand, and the last one sold for 325, that, at the time, was the cheapest house you could buy. Yes, the square footage, square footage cost was very high, but the overall cost was was doable for a lot of people. So then the next big hurdle was what we have here in Bend, and most cities have something similar to this, System Development Charges. Those System Development Charges are paid anytime someone builds a house in Bend. At the time, they're about $30,000 and that goes to our Parks and Rec. It goes to our streets, it goes to our sewer, it goes to our water. Each of these little, tiny houses, it was costing, you know, around 150,000 or something, to build without the land was being charged $30,000 just for the the system development charges that didn't again, common sense. Again, I'm like, Wait, that doesn't make sense. There's a house out in one of the fancy neighborhoods here in Ben. That's a 10,000 square foot house. It had seven bathrooms. I'm paying the same price as this guy, and they're selling that house for $2.5 million that does not make sense to me. So again, went back now that we've gotten that that kind of zoning and density, what I like to call density bonus for the zero to 600 600 1200 it was like, Hey, why can't we do that with the SDCs as well? And so then the city, the city, basically, you know, had a stakeholder group. They invited me to be on it, which was great. And they they looked at all of our STC is not just us as little tiny houses, but, you know, everything that we had in the city, and they ended up tearing it so that it is zero to 600 you know, 600 1200 and then there's, there's multiple tiers, and the smallest tier pays the lowest, and the highest tier of square footage pays the highest. And so that gets into this whole, this whole incentive thing. And there's incentives that you get that are, you know, kind of grants and things like that. There's these incentives that cities can set up to try to just, you know, to incentivize this type of housing. And bend has gone state of Oregon and Bend Oregon have have really been leading that. And I was just really lucky that I happened to be from a city that was so progressive and is and is so thinks it's so important to have our workforce living in our town and not forcing them out and just turning this into some sort of aspen or that sort of thing. So, yeah, sorry, just
Tiffany Owens Reed 18:54
No, that's really scary. I'm glad you explained I'm glad you explained this. Yeah, that's really I'm glad you walked us through those obstacles that you that you had to work through. When I introduced you on this show, I read this line about the develop, this development that you built 22 lofted 500 square foot cottages, thoughtfully arranged in clusters around shared open spaces and connected by pathways designed to foster a strong sense of community. I want to ask you about this, more of this design side. So where did you get these, the idea for the shared, open space, the pathways, and then this theme of, like, fostering a greater sense of community. I just as I was reading that, I was like, wait, I'm just, I'm really curious, kind of where that came from. And like, yeah, if you can share a little bit about the thought process behind not just, not just the house, you know, not just the land, not just the parking, but really thinking about it holistically with like, how does this also become a community, you know, and not just another collection of isolated homes and individual lives? Yes, I think you Yeah. I'm sure you know what I'm referring to with that,
Jesse Russell 20:04
yeah. And again, that's, that's Ross Chapin, and that's in the cottage code. Like the, you know, the houses themselves have to 50% of the houses have to face a common area. They have to be connected by these paths. It's all in the code. And now there's Yeah, and there's cottage code, you know, Oregon, in House Bill 2001 they said, Look, in all these residential standard zones, you have to allow for not just single family home. You have to allow for duplexes, triplexes, quad plexes and cottages. So in the state of Oregon, any city that has a population above 20,000 had to go into their code, and they had to adopt this stuff. Now they all adopted it, you know, a little bit differently. But we were already and then we had already had one cottage code. So then I was on that stakeholders group as well House Bill 2001 where we had to adopt these things. Well, our stakeholder group decided in our city, decided to go above and beyond. And we went with in our code 3.8 is a is building development alternatives. And so we have the cottage code. Now. We have a small unit development code, which is just, you can make smaller lots out of it. We have a courtyard development that's really cool. It's kind of like a townhouses that all have a shared court. We have micro apartments, which are these smaller apartments with communal space. So we we have a lot of these building alternatives, but the the cottage code specifically, yeah, it's really meant to, like, know your neighbors, you walk out and you walk down to the garden, or you walk down to the fire pit, and, you know, there's your neighbor there. And it's kind of interesting, because I feel like people self select for that. The people that buy into those homes are not people that are like, I don't want to talk to my neighbor. Well, they're just not going to fire home, I don't think. But, yeah, it's a, it's a way, I think, to try to, you know, bring community into in a really small scale, into a development.
Tiffany Owens Reed 22:04
So I had the fortune to talk with you ahead of this recording, and I remember when we had that conversation, you used this phrase affordable by design, which I thought was really interesting, because you did not use the normal phrase, affordable housing. Can you just flush that out for me a little bit. What does affordable by design mean? And why do you use that to describe your work? Well,
Jesse Russell 22:29
I can't say it's all of our work. It's the holy grail of our work that we wish that everything we did was affordable by design. We are a for profit company, so you know, very early on, even in that first development, I was going to try to get some incentives. And do you know an affordable, a couple affordable units, and when I started to go down that path and talk to other for affordable with a capital A developers, it was very clear that that's a business model, that your business is either doing that or they're not, or you at least have part of your business that really knows how to do that. And what we wanted to do is just say, like, Look, if we if these houses are smaller, they're going to be cheaper than a bigger house. And so hopefully, by design, these houses will be affordable to someone. Now this gets into kind of a little bit boring into the weeds. But important to know about is the area median income. And that's a way of like, looking at your town and saying, you know, this is okay. So if you know what that is, bend, we don't just have an affordable housing crisis. We also have, you know, a workforce housing, middle income housing crisis, which is 80 to 120% Ami. And that's the zone that we are trying to operate in. We're trying to be able to, you know, create housing that someone who's making, you know, that amount of money. And that's our lift offs, that's our nurses, that's our, you know, that's the cool artist that's, you know, playing country music down at the bar. It's, you know, it's the people that make our our city cool. You know, they should be able to afford housing, whether that's rental or owning stuff. So we look at it as you know, can we, you know, design these units that, just by being smaller, are more affordable, and it works pretty well. But one, one thing about square footage and about, you know, building small is you, you still have a bathroom, one or two bathrooms, and you still have a kitchen. So, you know, what we're doing is really removing a lot of the larger bedrooms. You know, our kitchen, our living room, is combined. So you have these kind of, these smaller spaces. And it does get cheaper. And we have, we do have a lot of our units that fit into that 80 to 120% AMI, including this apartment building, a micro apartment building we're doing, which is 59 units, and a third of those units are deed restricted to the 80 to 120% Ami. So for the 10 years that that building. Is is restricted. A third of those will fit into there, and that rent will stay at that level. So listen, we're trying to do I'm not going to say to you that like we've pulled this off and everything. One of our developments was the most expensive, but by square footage of any house ever, and that just became because the the kind of land that we got for and where it was, it was in a really nice part of the of the city. So those, those became pretty expensive, but, but, yeah, it's something we're continuing to try to do as much as we can, and the more a city can incentivize smaller homes with, whether that's code or it's land use, or, you know, one of the other things the city of Bend did is for that micro apartment, they did a tax increment financing, which meant we got a 10 year break on our property tax on that building. So that really helped to perform and helped us to be able to hopefully start construction in that building soon, it's paused at the moment because of what's happened with interest rates.
Tiffany Owens Reed 26:04
Yeah, well, when I heard that phrase affordable by design, it it just seemed like a term that could really help people think beyond the sort of typical narratives around affordability, and because I feel like the typical narrative around affordable housing doesn't really invite people to think about sort of the deeper economic and regulatory realities that make housing so expensive in the first place, and just focus so much on like the price point. It's the price point. Let's just make the price lower. And so, yeah, you get into these really difficult business models because there's so much emphasis on and it's almost like, I feel like it can sort of be a sneaky way cities can get out of having to ask the harder questions around things like zoning, minimum lot size, parking minimums, SDCs, right? And nothing in that conversation challenges cities to really think about what is it that determines these input costs? Because those input costs are a big part of what's driving the output price. You know that the price of the finished good. So I think it struck me that when you were saying affordable by design, I didn't just mean, like, the smallness of the house. It also, it seemed to me like it was referring to, like, sort of this comprehensive, holistic approach, and it, you know, in addition to the house. But, you know, also, like, no true,
Jesse Russell 27:30
yeah, absolutely, yeah, go ahead, yeah, absolutely. So this is, this is, like, the low hanging fruit stuff, right, that a city can do. I have a anecdote to tell you about because I think our city is does a wonderful job. They still, you know, we still have our difficulties with how long it takes us to permit, you know, and build housing. I mean, it takes us three years to do a small development. You know, it takes us a year just to, like, get the plans ready for the lots. It takes us another, you know, however long, depending on the size, three to six months to do the lots. And then we have to sell the homes, well, that entire year where we're, you know, trying to get the lots done. It's just a, it's a, it's a, really, it adds a lot of cost to the developments. And a lot of this has to do with, like, you know, Kansas City. Can they get more efficient with the way that they, you know, the way that they do their permitting, and it's the dumbest little things that will happen to a developer. We're incentivized to go as fast as we can, because we either have equity or we have debt, or we have a combination of the two of those things, probably from right when we bought the land, or at least, we at least have equity that's burning at that point. And so we did a calculation recently on one of our developments. It's a nine lot development. It's $800 a day that we're paying in equity or debt for this project, right? So we have the plats are printed on Mylar after you've gone through this huge process to finally get the plat recorded with the county. And now we've got nine new lots. It goes around for signatures. So it's going around for the signatures. It gets to the county surveyor, and our our serve surveyor comes back and says, Hey, we got to get all the signatures again, because they want to know, they want to print it on poly paper. I'm like, What the hell is poly paper? I've never even heard of this. And he and this surveyor, they work their company, works in Oregon, Washington, Idaho, and he's like, this is the only, this is the only person that's ever requested poly paper. So we had to go back, because they were printed on Mylar. We had to go back, get all the signatures and give them, anyways, a week, that's a week's time, right? So everybody else involved, except for me, is like, oh, it's only a week, and only pushed a week, yeah, it's $5,000 that's how much that cost. Because this person decided that there was going to be poly paper they wanted to print it on. Now, I'm part of the Central Oregon Builders Association board, and I feel like I'm pretty tapped into, well. What's going on in the city, in this realm, and no one knows about this, like, why was this not, you know, told to the COVID members, told to the building, you know, building and development community. And it's those little, tiny things. It's the 1000 Cuts idea. We have to look at every single thing if you want to do affordable by design, you're right, absolutely. And it was a really astute thing to say, it's not just the house. It's in the house is probably, I don't know what percentage the house even is it? Is this like, how long it takes to actually be building the house and the regulatory environment that you're working in?
Tiffany Owens Reed 30:39
Yeah, I think of people, I think a lot of times affordable housing conversation over fixates on price, and we need to replace that within a fixation on cost and say, like, we understand price is prohibiting people from owning okay, we're not saying that's not valid, but let's stop for a minute, and let's, let's, let's get familiar with another word called cost. And like, actually take the time to understand, like, what are all the costs, and not even just that. I mean, then you start to think about, like, the financing model, what's even accessible, the cost of much like, it's so much more complex, but it gets a lot more sophisticated and robust too. If you actually want to, like, solve the problem of supply and solve the problem of price, you have to be able to deal with the cost side as complicated and as boring sometimes, and as overwhelming as that side can be. I think the types of developments that you're building is the type of outcome that happens when people take the time to actually understand what's going into creating this problem in the first place we touched you, mentioned a little bit of on this in your last answer, mentioned a couple of of financing words. So I know we're gonna have your business partner on and on this show as well to talk more about the financing side. But I just would love for you to touch on that a little bit like what? Because I know if anyone's in the incremental development the if anyone's in this world, like, they, you know, they're probably, like, financing, financing. You've got to talk about, you know, because that is so prohibitive to a lot of people who want to build in such a way as to, like, increase supply in a sustainable manner. Can you talk, can you talk a little bit about that? Like, what was that like, finding financing for your projects? You can take that wherever you want to go. Like, don't feel like you have to go super in depth. Onix, like I said, we're gonna talk with Ryan, but I would just love for you to share your experience and how you all innovated in that and that arena as well.
Jesse Russell 32:28
Yeah, and I'll give you, I'll give you, from the perspective of someone who knew absolutely nothing about finance and and was trying to do this, that, to me, was the scariest thing, right? Like, when we looked at the large piece of property and the development of it, you know, as I said, my mom was a bartender, you know, I didn't grow up with a lot of money. I don't have a huge network of people that are real rich or anything like that. So when it got down to the fact that, like, we had this land, the land was really inexpensive, when you think of how much it would have cost today, but it was, neither was 400,000 or something for this three acres. And Darren, who I mentioned before, it was a real estate agent, you know, he was like, Look, I've got a pretty good deal on this. We're going to be able to lock this up for a refundable escrow for as long as it takes you to get through the city with this cottage code, because this was the very first time anyone had tried to use the cottage code. And he knew, and I knew that it was going to take a long time, and who knew if we even would be able to get through the city and use the cottage code for this piece of land anyway? So he's like, it's $5,000 I'm like, Are you sure I should It was so scary. He's like, it's a refundable escrow, meaning they'll give you the money back if you don't go through the project. But that I'm trying to illustrate, at what level I was at at that point, for what you know, scared me. We were able to do that. And then for me, on that first development, that's when I met Ryan, my business partner, through friends of friends, again, a story about, like, as soon as you need to figure something out, someone appears. And so Ryan was a finance guy. He was working at one of the building, private building construction loan places in town, and I'd gone to his, one of the guys he worked with, and he's like, look, we can't loan any money on the dirt so, but you know, my guy I work with, Ryan, is a genius with spreadsheets and performers, and you should talk to him. I didn't even know what a performer was at that time. I'm sad to tell you that, but it's true. I did not know what went in there. I would buy him and his his buddy, Jeff, lunch probably once a month, and they would get the whiteboard out and, you know, try to conceive how we would finance this 22 lot cottage development. And at the end of, you know, a lot of lunches, they patted me on the back, and they said, here's what you got to do. You go out and you raise a million bucks, you're going to purchase the land, and then you're going to have enough money to do the lot improvements, and then you'll be able to get construction loans on each of those. Bucks, and I'm like, a million bucks. Oh, I'm like, that. I don't know where I'm gonna find a million bucks. And what I did is just every week I would sit down and I'd try to think of five people. I had a little pitch deck that showed the property. It showed the little houses and the renderings, and you know what we were trying to do? And I had their kind of, their rough Performa that that, uh, Jeff and Ryan had done to me, and I just kept calling people. And then when I got to the end of a phone call with the person that I knew, I said, Do you know anybody else that might be interested in that? And I was able to raise the money. Um, it took a long time, and the guys that you know were I was buying the land from, were like, Why aren't you buying this land? Because the land kept going up in value as we were trying to develop it. So that was the first kind of like thing. And I would say this to anybody, maybe start smaller than I did. I mean, I would start with, like, look at your code, decide on what kind of a minimum, you know, without jumping into a subdivision. Can you just do like, three or four of these on a lot. And I would try that. I would try to go with that. But you probably know more people than you think that will give you a chance, if you have a if you have a good idea for one of these, you know, college developments Now, beyond that, after it was really successful, after we did that first development. I mean, you know, the proudest moment I had was when I gave my, my buddy's mom back her 1000 bucks she put in, she doubled her money, and she bought a new couch. And every time I go to her house, she sitting on that couch, she's like, Yeah, we want double their money. Got 30 some percent. IRR is on this development. And I said to Ryan, I'm like, Look, this seems to be awesome. Like, can we start a fund? Because he was doing a construction fund, and I'm like, Can we do a construction fund where we can do multiple projects? That way we can raise the money for the for the land, and purchase the land with equity so we don't ever have debt on our on our dirt while we're trying to go through the really difficult process of the city. And I had seen Ben. Ben is a boom town, and then the bus town, and I had seen it go up and down, and people lose their shirt. And the way developers lose their shirt is they have debt on dirt that they can't sell. So that was the idea for the fund. And Ryan said, Yeah, let's do it. So we sent, when we sent our checks back to the people that were involved in that first development, the investors, we sent them their principal check, and then we sent them the money they made check. And then we had a small little pamphlet in there that described our fund. And we said, hey, this is what we want to do. We want to do, you know, four more or five more of these projects, and 80% of that money came back in. And we started the, what's called the hiatus construction fund that we have today, which has four projects in it. It raised about seven and a half million dollars and is made up of 50 investors. And the really cool thing about that fund is these investors are all almost three quarters of them are local or have connections to bend. And really they invested. Yes, they wanted a good return, but most of these investors, if you talk to them, and they're all wonderful people, they really are. They, they will tell you that they're interested in what we're trying to do for the town as well. So those are, those are the dual purposes for our investors. So So yeah, yeah, finance,
Tiffany Owens Reed 38:20
fantastic story. And no, thank you for walking us through that. I think it's actually helpful having someone who's not in the finance side explain it that way. First, you know, just because it is a little bit easier to digest. But that's I love, that story of being able to go back to your buddy's mom and, like, give her her money, you know, with without. You know, that's just a totally different paradigm for thinking about financing, other than what you generally think of, which is like the faceless investor, the far away bank, you know, the Wall Street. I don't even know. This tells you how much I know about finance. I'm I can't even describe financing entities with it with an ounce of intelligence. So, yeah, no. And this is an
Jesse Russell 39:03
innovation that Ryan did, and this was, this was his, mostly his idea to do this. And it was because we did have, he had been working in finance for a long time, and a lot of connections to kind of bigger money that had nothing to do with bend. Yeah, yeah. And we tried to do it, you know, as more of the community. Because, you know, as those people got paid back, and as they get paid back, you know, hopefully that money goes back into most of that money comes back into our community, and is not, you know, often some wherever finance people live, Cayman Islands or New York, yeah,
Tiffany Owens Reed 39:34
where did they live? It's a career industry. Okay, so I have a couple more questions for you. Jesse, I want to ask you, well, first, I'm going to give Jesse and my listeners a warning that after a year and a half of running this podcast, I think the time has come when I'm interrupted by my crying toddler. So if you can hear him in the background, please be merciful to us. He will be okay, but get in the form we'll have. From I know exactly. It's like, Mom, I want to tiny out. Okay? I want to ask you, when you're participating in conversations about policy and regulation reform in your city, I want to know like, what kind of messaging did you bring to those conversations? What did you find was a helpful way to contribute to the conversation and kind of help these solutions that you're presenting help people understand them and see them as good ideas.
Jesse Russell 40:28
Yeah, I think, I think visuals help a lot. I think you, you know, people will read stuff, but like, if you can show like, this is what the house is going to look like. This is what the little development looks like. This is how far away it is from the parking like these visuals were really important, I think, in the beginning, and then going down. And, you know, like getting involved with the City Council, going to city council meetings, listening to them, our city council previous, and now housing is up. It's like, usually the most important issue that we have, or one of the most important issues we have. So there's a lot of opportunity in a town the size of bend to go and give testimony and listen to testimony, and be a part of these stakeholder groups. And, you know, there's a, there's a lot of other groups too, that are, you know, trying to make, you know, strong towns. Is a, is a, is a thing like that, which is like, you know, get involved in your community, and if there's something you want, I tell this to people. When we do a development and we do a public hearing and someone really hates our what we're doing and we're building to code right? Like, I'm not asking for variance. This isn't our code, and it was voted on. And when people get angry about that, I say, I might not be right. You could be right too. But you need to go down and voice your opinion where it matters and try to, you know, try to get other people to believe in what you're doing. You get to decide what your town is like. You just have to be a part of that process. It
Tiffany Owens Reed 41:52
sounds like too specifically for you and for the conversations you were part of that helping people see not just the visuals of the of your ideas and stuff, but also helping them see like the math and like the numbers behind different like these reforms that you were talking about, it sounds like that played a really big role as well. Yeah,
Jesse Russell 42:11
and I would say that as well, because a lot of this, a lot of this change for a city, is hidden or not hidden, but is in what can sometimes be difficult and boring to read code, and I love it now, now that I've gotten into it, I really, really enjoy watching how code can affect a city and how it all works. But for the average person that's just living in a city and is trying to vote on whether they're going to allow smaller houses or denser developments or whatever. I think it really is important to be able to try to take a really complex message and deliver it in a really simple to understand way. And that's why I say visuals are great to have, because it's just so much easier for the average person to understand how some policy issue is going to affect a lot or their city, if they can see visuals for it, but absolutely, trying to take complex issues and make them simple to understand is a really great way to try to get advocacy within your city for something that you're trying to do. Yeah,
Tiffany Owens Reed 43:13
so I want to ask you about housing reform in general, because you know, hearing everything you all are doing and even how progressive and receptive your city and state has been to these changes. I can't help but think of like so many other cities around the country that are struggling to provide actually affordable housing or to, you know, relieve the housing pressure in their towns. And I wonder, from your experience, I feel like, well, okay, I'll tell you. I feel like the conversation or housing has a lot to do with zoning reform. But what do you think it would take for cities to be more open and receptive to things like tiny homes and to the sort of holistic reform work that needs to happen in order to really, like, bring more solutions to the table. And are there any other reforms besides zoning reform that you think we should be talking about? I kind of packed like, several questions in there, but like with that,
Jesse Russell 44:14
yeah, I mean, it's, I think that there's just, there's a large movement, you know, in looking through strong town stuff and and just seeing, you know what's going on in the rest of the country, there is an affordability crisis for housing in general. I think, you know, there's some towns where that's maybe not true, but like, it affects everybody. It really is a non partisan issue, and that's what's been really cool for me, is I'm probably pretty lefty type of, you know, Republican ish type person, and a lot of the people that are on our board for our Central Oregon village Association are probably on the other side. But we all agree that what we're trying to do is, like, try to have more housing and better housing for everybody in our community. Be, and that's a really fun thing to to do, because you cross these political divides really easily to be able to try to be on the same page with what you're trying to do. So yeah, what else in there? I forgot the other
Tiffany Owens Reed 45:15
that's okay. I I was curious. If you feel like there's anything other than zoning reform that we should be talking about. Is there any other kind of like, if you had to think like, Oh, here's another, another way we can be thinking about how to, how to expedite and improve the feasibility of mental development,
Jesse Russell 45:36
yeah, that a lot of that is just within the city itself, right? It's, it's them streamlining their processes for getting housing, you know, shovel ready, lots and housing on the ground as quickly as possible while still being, you know, safe. That is, that is one of the biggest ones that no one talks about. It's even engineering like, you know, we'll have a development where, in the city of Ben, we have a pre app where you can take a piece of land, it's free. You go down engineering is there? Fire, you know, various parts of the city are there. Look at your your like your project, and the project can just be like a couple, you know, site map with a few units to just kind of get an idea and say, Hey, it is kind of the zoning we're thinking. And they'll, they'll give you answers to a lot of your questions. And usually that's usually that's great, but then a lot of time you get further along in the process, and, you know, it's a different engineer or a different plans examiner that's looking at your stuff, and they come up with something different that needs to be changed. And that's really costly. And it's costly with time, but it's also, you know, costly with, with, with with just having the fees that you have to pay, our fees are always going up. So there's a lot of work that is work that the average person doesn't really think about when it comes to affordable housing that can be done within the city. And that's really like city efficiencies and incentivizing the smaller homes. Because if we didn't have incentives as far as density and SDCs go, I don't know if, at least in Bend if we'd still be able to do what we're doing. Because another thing that happens with a town like Ben That's that has had so much growth, if there's a lot or a home that's sitting there that hasn't been developed, there's probably a reason for it. You know, a lot of builders and developers have looked at that property and said it doesn't work for us. Well, most, most of the builders and Ben, you know, we're doing three bedroom, two bath kind of homes, you know, craftsman style stuff. So once we started getting kind of density bonuses and and incentives to, you know, make more dense housing, we're able to look at some lots a little bit differently now than other builders, which is helpful. Yeah,
Tiffany Owens Reed 47:44
okay, well, in closing, Jesse, this has been a fantastic conversation. I've learned a lot just from listening to you. I hope our audience has as well. You've mentioned the many lovable things about your hometown, but this is a question you really can like, dig into showing off a little bit. Tell us what you love about bend, and what are two or three local spots you like to recommend people check out when they come to visit.
Jesse Russell 48:07
Okay? I mean, the reason I came back to bend is, you know, was really my friend, my friends. You know that I grew up with a with a group of people that I've stayed so close with over the years, and there, there's just no place that I've found anywhere else that's like, bend. I've traveled a lot. I've been in a ton of different countries, ton of different cities. And when I left bend, I was like, I want out of this small horse town, and I want to go see the world. And, you know, as I got older and had a family and that sort of stuff, I just was, like, I really, really was, I was missing that community of people. And so that's, that's like, my favorite part of Ben, and people who come to bend that, you know, it became really, really popular to come to Ben, and we've always had this kind of, like, anti California thing when we're younger, you know, stay out of our town, that sort of thing. I think the one thing in Ben that we're really fortunate is that people that move here, even if they've only been here for a year or two, they've moved here for this and like this town, for the same reasons that we do, who have our natives and have been here forever, and that's it. It's a great community of people. We say hello to each other. We care about our city. We care about everybody in the city, and we have unbelievable natural beauty that's that surrounds this, this city, that's the rivers and the lakes and the snowboarding and the skiing and the camping and the fly fishing. And now beer. We have tons of, tons of breweries, and you have to go to the shoots brewery, because that, to me, was our kind of first, my first love as far as a brewery goes. And they've been around pretty much the longest. And then boneyard, you got to go there, just because the RPM beer is probably, probably one of my favorites as well. And then we have, you know, with growth. You know, growth can be really. Difficult for a city, but with this growth, we have some really unbelievable stuff we never had in a small town, which we now have hidden homes, amphitheater, which gets, I mean, you name it, Bob tillen, Neil, young Lumineers, mega death. I mean, we, we didn't get any music when I grew up, and so that's been pretty incredible. And that's a really incredible development to check out. We have a surf wave in our river where you can go, and actually it's a built up wave that has panels under it, and you can surf on that, that that wave. You can float on inner tubes all the way down the center of the city in the summer. It's just a cool it's a cool town, and we want to keep it cool,
Tiffany Owens Reed 50:43
amazing. Well, when I first talked with you, I immediately Googled bend, and immediately text my husband. I was like, so can we sell everything and buy a motor home and just go travel? And can we go to bend?
Jesse Russell 50:57
I'm a good tour guide when it comes to bend.
Tiffany Owens Reed 50:59
Amazing. Well, I'm sold. Jesse, thank you so much for coming on the show. It was really fantastic having you on and hearing your story and all of your insights to our audience. Thank you so much for listening. And we hope to share this, share this episode with someone who you think would enjoy it, and if there's someone in your community who you think would make a great fit for the show, please let us know using the suggested guest form and our show notes. I'll be back next week with another conversation, and the meantime, keep doing what you can to build a strong town.
ADDITIONAL SHOW NOTES
Local Recommendations:
Hiatus Homes (website)
Learn how to bring more housing to your city:
Accelerator program, spring session: Get expert guidance in making your community housing ready.
Tiffany Owens Reed (Instagram)
Do you know someone who would make for a great The Bottom-Up Revolution guest? Let us know here!
Subscribe to The Bottom-Up Revolution on iTunes, Google Podcasts, Podbean or via RSS.
Tiffany Owens Reed is the host of The Bottom-Up Revolution podcast. A graduate of The King's College and former journalist, she is a New Yorker at heart, currently living in Texas. In addition to writing for Strong Towns and freelancing as a project manager, she reads, writes, and curates content for Cities Decoded, an educational platform designed to help ordinary people understand cities. Explore free resources here and follow her on Instagram @citiesdecoded.