How capitalism is starting to fill an unmet need

When there is a need, and if the government restraints are not too onerous, eventually, capitalism will fill the need.

Human ingenuity, creativity and innovation clicks at once. And when it does, there is a trailblazer who is the first to take the risk, while others observe from near and far, waiting for evidence to jump in or stay out.

We are witnessing this magic of capitalism in one of the most important sectors to this region’s — and Florida’s — economy: housing for the middle class.

And how this entrepreneurial venture turns out over the next four to six to 12 months will be crucial to whether there will be dramatic progress toward solving this vexing problem of a lack of affordable housing for the working class — for teachers, nurses, public safety officers, clerical workers, retail associates and service workers.

One trailblazer is Manatee and Sarasota counties’ homegrown, locally owned, most successful homebuilder: Pat Neal, his Neal Communities corporation and a new offshoot SimplyDwell Homes.

SimplyDwell is building starter homes in the price range of the low- to mid-$300,000s, low enough that a buyer could have  payments at or slightly below $2,000 a month. “We’re hoping to get to lower than $2,000 a month, which means a household income of $72,000,” Neal told us.

As reported in our sister paper, the Business Observer, SimplyDwell is constructing its first planned community in Parrish, Broadleaf, slated to have 266 homes. The company expects sales to begin in October and open in January.

That will be one of six communities for which Neal already has acquired the land, stretching from Manatee to Collier counties.

Heretofore, Neal Communities has been one of the West Coast of Florida’s most prolific homebuilders, catering to retirees who have sold their homes in Pennsylvania, Maryland, Ohio and Michigan and Illinois. 

Drawn to Florida because of its lack of personal income taxes and far more efficient governments than their home states, these retirees have been purchasing Neal homes whose prices average $700,000. Last year, Neal Communities grossed $612 million in revenues.

But in November 2022, at a quarterly strategic planning meeting, Ivory Matthews, Neal Communities’ vice president of community and governmental affairs, asked the question: “What are we doing about middle-class or working-class people?”

Pat Neal’s initial response: “It’s going to be very hard.”

But what happened next is a testament to the importance of having local business owners who are concerned about the plights of their communities and not just about churning out maximum profitability.

“As a matter of being a community builder,” Neal said, “I said we should try to see if we can do this. 

“We definitely will not make the money on these homes that we do on our expensive homes,” he said. “But it’s an investment in trying to do the right thing.”

To make it work, Neal knew the company needed to innovate its building practices. To lead that, he hired a University of Florida graduate who had become a leading expert in this niche for other homebuilders, Jagdesh Rupnarian.

Rupnarian designed a production system that will have four to five designs and allow no changes. The process will require SimplyDwell’s construction teams to start eight houses a month and finish in 14 weeks. “We can’t stop anywhere along the way,” Neal said.

In effect, SimplyDwell can be likened to Levittown, the first mass-produced suburban homes after World War II. “It won’t look like Levittown, but it’s the same production economics,” Neal said. “The 2023 version but with the lovely designs of Charlene Neal (Neal’s wife and president of the company’s design unit).”

The homes will start at 1,300 square feet and can go from two-bedroom, two-bath and garage up to three and three in two stories. They will be built on 6,000-square-foot lots and 3.5 units to an acre. Typical Neal homes are on 8,5000-square-foot lots and 2.5 units to an acre.

For the prices to remain low, Neal says, the cost of land “needs to be moderately priced that has sewer and water available.”

With those qualifiers, here is the unavoidable reality to solving the problem of affordable, working-class homes: They will be built in the suburbs.

“Central Sarasota, Manatee and Lakewood Ranch will continue to be expensive,” Neal told us. “That’s not going to change.

“I’m paying $120,000 per net acre (for two units per acre), and that number has never gone down in my lifetime” — 54 years of home building.

As always, it’s a matter of supply and demand. Demand for living quarters near downtown Sarasota has far outstripped the supply of land. Thus the high prices for condos and apartments. 

We said to Neal: You’re saying if there is to be affordable housing for the working class, the most likely solution is the same as it has been for the past 60 years: higher-density suburban development.

“That’s definitely, absolutely a promise,” Neal said. “The closer the homesites are to the action, by far the more expensive they are.”

Nonetheless, Neal is optimistic about SimplyDwell filling a desperate need. 

“I know we will sell a lot of homes,” he said. “Mostly I want to do something good. I’ll be able to tell you in January if it’s financially successful.”

Hope that he is. 

While we can applaud all the good-intention lawmaking to provide incentives for affordable housing, Pat Neal is demonstrating what economist Thomas Sowell says: “Study after study, not only here but in other countries, shows that the most affordable housing is where there has been the least government interference.”

If there is an unmet need, eventually capitalism will fill it. Government isn’t needed. We are seeing that now.