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Kaid Benfield’s Blog

When the real estate market recovers, smart growth will claim a larger share. Here’s why.

Kaid Benfield

Posted April 10, 2009

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Even before the recession began, the market for residential and commercial property in the US was changing away from a model of unmitigated suburban sprawl and toward one of more central locations, urbanity, and walkable neighborhoods.  The foreclosure crisis, spike in gasoline prices, and then the full-blown recession have only placed the changes in the market in starker relief.  I believe that we are unlikely to return to the old days of sprawl's utter and complete domination of the real estate map. 

I've been following and reporting bits and pieces of this story for a while now, but haven't really put it all together in a single post.  Here's the evidence, collected together:

Changing values

There is a clear geography to the changes in real estate prices we are now seeing:  close-in locations are now more highly valued than they used to be, and sprawling locations are less valued than they used to be.  I reported this most recently in my map of changing home values in the Washington, DC, region, which shows steep declines in sprawling locations over the last year, but only modest ones (and, in one case, an increase in value) in inner locations.  This is consistent with various maps showing the geography of foreclosure, such as those in Denver and Houston, which depict, sadly, many more foreclosures in sprawling new suburbs than in urban locations.

suburban office parks have not kept pace in value (image courtesy of David Dixon)Something similar has been happening with regard to commercial properties, too, even before the recession.  My friend David Dixon, who is principal in charge of planning at the respected architecture firm Goody, Clancy in Boston, and who studies such things for his clients, reports that, from 2000-2007, there was no growth at all in rents for suburban office parks.  Mixed-use, walkable developments, however, enjoyed a 35 percent growth in rents for the same period.

Rebounding cities

A second set of indicators that things are changing reflects the way that central cities (save some egregious cases like Detroit) have experienced a building boom and influx of new jobs and residents.  A decade ago, when my co-authors and I were publishing our book on sprawl, Once There Were Greenfields, one of our major themes was that central cities were suffering a significant, continued decline due to outmigration of people, jobs, and tax base to the suburbs.  Based on the data available at the time, we wrote that suburbs were growing ten times faster than central cities, and that the share of population growth claimed by center cities had steadily declined and that, in many cases, absolute population in central cities had declined as well.

None of that is currently true.  Central cities and inner suburbs have started to grow again after decades of losses, and urban school enrollments are going up as well.  Perhaps most dramatically, the share of overall regional growth claimed by central cities and counties has risen dramatically.

Dr. DC's rejuvenated Penn Quarter (by: Star_Parrot)John Thomas at EPA has been analyzing the geography of housing permits, and he has seen dramatic rises in the central-area share (and, conversely, drops in the outer-suburban share) of new housing construction over the last two decades.  The central-city share of New York's growth, for example, is now almost four times what it was in the 1990s; Central-city Chicago's rate has gone up five times; even in Denver and Dallas, the central-city share of growth has gone up substantially. 

And note that Thomas's analysis is based largely on data through 2006, before gas prices went up, and before the housing market collapsed.  I suspect that the trends have only accelerated as a result of the recession.  Empty nesters who earlier moved to the suburbs to raise their kids are now moving back into cities for the convenience, and "urban flight" is now largely a thing of the past.

Community preferences

It is also clear that residents want to see sprawl curtailed in their communities and replaced with a much "smarter" kind of growth.  Here are the findings of a survey of registered voters conducted by the National Association of Realtors in 2007:

  • 57% agree that "business and homes should be built closer together" so stores and shops are within walking distance
  • 61% agree that new home construction should be limited in outlying areas and encouraged in very urban areas
  • 81% want to redevelop older areas rather than building new
  • 83% support "building communities where people can walk places and use their cars less"
  • 88% support more public transportation

Montgomery County, MD (by: EYA/Foulger-Pratt Cos.)Arthur C. (Chris) Nelson, now at the University of Utah, and a scholar who knows more about these things than anyone else I know, has examined homebuyer preference surveys.  Nelson reports that fully three-fourths of Americans now prefer either attached housing (apartments, condos, townhouses) or homes on small lots of approximately one sixth of an acre or smaller.  25 percent express a preference for homes on larger lots above one sixth of an acre in size.

Perhaps putting their money where their stated preferences are, Americans have lowered the average amount of land claimed per person for new development by half since as recently as 2001.  Transit use is way up as well, and overall rates have driving are now in decline for the first time in decades.

Shifting demographics 

Finally, and perhaps most convincingly, this is no longer the same America that fled the cities and created the new suburbs that they hoped would be idyllic.  One thinks of the classic suburban household as a couple with school-age kids.  Ozzie, Harriet, David & Ricky Nelson (P.D. via David Dixon)Readers of a certain age will recall the popular TV shows "Ozzie and Harriet" or "Leave It to Beaver" as the sitcom manifestations of suburban family life.  In the 1960s, when those TV shows were popular, it made a certain amount of sense:  48 percent of American households, says Nelson, consisted of couples with kids in 1960. 

That's no longer the case.  Today, the number is down to 33 percent, and by 2030, 72 percent of American households will consist of either single people living alone or couples without kids.  This is partly because the population is living longer, with households of older adults gaining in number after their child-raising days are behind them, and partly because of a large group of "millennial" kids who will become young single adults.  Nelson reports that the net gain in households between 2005 and 2030 will be 88 percent child-free. 

Older adults without children and people living alone, as a market, tend not to seek big back yards and lot-by-lot privacy but, rather, want to be within walking distance or easy public transportation rides of the things they want and need to do.  Older adults, in particular, want to drive less.  As a result, says Nelson, the nation's supply of large-lot housing will increasingly be in surplus.  We will not need to build any more large-lot units to satisy the smaller share of market demand that will prefer them.

I wrote some time back that sprawl as we have known it may not be dead but it is surely not well, and we are already seeing the beginning of its end.  I'll concede that's a lot to wish for, and we may not get there entirely.  But there are too many patterns afloat that all point to the same conclusion:  there can be little doubt that, when recovery finally comes, smart growth will reap the bigger rewards.

Kaid Benfield writes (almost) daily about community, development, and the environment.  For more posts, see his blog's home page.


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Jim NoonanApr 12 2009 04:56 PM

Excellent post. The economy was only the latest factor to slow the pace of sprawl. You have identified demographics as one of the factyors that have not changed even if the economy begins to improve. The other factor is energy. Last years $4 a gallon gas prices were just a warning and although gas prices have moderated many people have seen and recognized the future.

The question now is whether government is going to take advantage of these trends or attempt to fight them. Are we going to actively support higher density growth with infrastructure investments and investment in urban amenities? Are we going to reduce the bureaucratic impediments to achieving these patterns? I think the trends are clear, but the answers to these last two questions are quite unclear at the moment, even among groups that pay lip service to "smart growth".

Kaid @ NRDCApr 12 2009 07:19 PM

Thanks, Jim. That's an excellent comment and an important caveat to keep in mind.

I think the answer is yes, though it may come in increments, fits, and starts. California has certainly taken a bold step in that direction in SB375, tying infrastructure investment to climate planning. The federal transportation bill is coming up for renewal, and I'm confident we will take some additional steps in the right direction in that legislation. In Canada, Ontario is also tying infrastructure investment to its excellent growth plan for the region around Toronto.

But an opportunity was to an extent squandered in the federal stimulus legislation. State and local governments are seriously short of cash, and transit providers are having to cut back service at precisely the wrong time. The optimist in me says that what will eventually prevail is that the elctorate wants this. The main question I have is how long will it take?

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