The Ground Floor

In Years to Come New Real Estate Development Patterns will Evolve

This post was written for The Ground Floor by Trisha Riggs, vice president of communications at the Urban Land Institute.

In: Inner-ring suburbs. Out: Exurbs. In the years ahead, changes in demographics and consumer behavior will drive new real estate development patterns that reflect a trend toward more urban suburbs, according to industry experts at ULI’s Real Estate Summit at the Spring Council Forum in Boston.

Well-known analysts Joel Kotkin, Robert Lang, Richard Florida, and Christopher Leinberger offered different views on what’s ahead, but they all agreed that most of the growth in U.S. urban regions (more than 100 million will be added to the population by 2050) will occur not in downtown cores, but in the suburbs.

The catch: The suburbs will grow differently than they have in the past, reflecting a trend toward denser development and smaller homes on smaller lots, and less dependence on cars. The winners: close-in suburbs with an urban feel, featuring town centers as a focal point, with ample recreational, shopping and entertainment opportunities, and which are near employment centers. The losers: big houses on big lots in isolated suburbs on the edge. The reason: three major demographic groups, all of whom place high value on time and convenience, none of whom want long commutes or long errands, and at least some of whom have soured on homeownership.

The groups:
• Aging baby boomers (55 to 64 years old): Although they are nearing retirement age, many will keep working out of necessity or by choice. Some will be forced to stay in their suburban homes until values recover. Those who are able to move will not choose traditional retirement locations or senior housing, opting instead for more mixed-age living environments that cater to their active lifestyles. Suburban town centers with a walkable urban "feel" will appeal to this group.  
• Younger baby boomers (46 to 54 years old), now in or entering their prime earning years: This group will also face a tough time selling suburban homes, hampering the ability of these boomers to move. Because the recession has left many younger boomers with flat incomes and less home equity, their ability to purchase second homes will be greatly diminished, curbing prospects in general for the second home market. However, like their older counterparts, they will be drawn to more connected, compactly designed communities when they are able to switch houses. 
• Generation Y: This tech-savvy generation has a population of about 86 million, more than the baby boomers. Gen Yers place high value on community; on diversity; on places (either virtual or actual) to gather; and share information, ideas and opinions. As they enter the housing market, they will be far less interested in homeownership than their parents were when they were young adults. Gen Y will gravitate toward walkable, close-in communities, choosing housing on outer edges only as a last resort because it is the most affordable.

One point repeated in several presentations: The housing collapse is a major factor behind some of the change in attitudes about where and how to live. Despite the recovery that is occurring in some housing markets, the number of foreclosures and "underwater" mortgages (loan amounts that are higher than the current value of the homes) continues to rise. The growing number of consumers who are choosing to walk away from those mortgages suggests a fundamental change from the long-held notion of homeownership as the ultimate "American Dream." This disillusionment over homeownership as a way to build wealth could persist for decades to come, as those entering the housing market will be more apt to rent longer, and to place more emphasis on buying for shelter rather than investment purposes.

Describing the new suburban development pattern as "smart sprawl," author and a fellow at Chapman University Kotkin said, "We can solve the problem of sprawl within sprawl itself." Mid-size cities, he said, will prove attractive to Gen Y, not only because they are affordable, but because many have transformed themselves into recreational and/or entertainment hubs, providing an urban lifestyle that is within their means.

According to Florida, author of The Rise of the Creative Class and other books on social trends, the "engine" that powers the next economic boom will be human creativity, and the places that meet the needs of the most talented and innovative workers from all types of employment sectors will be the most successful. "Place will be the organizing economic and social unit," he said.

The different lifestyles of both baby boomers and echo boomers will require the development community to provide products that are flexible in use, and that reflect the high mobility tendencies of the younger generation. "We are at a break with the past," he said, noting that society has entered an era in which time matters most of all. "We must respond by creating efficiencies in housing and transportation."

Parking and Neighborhoods Should be Focus of TOD Revamps

This post was written for the ground Floor by Jack Skelley who chairs the Communications Committee for ULI Los Angeles and represents Cuningham Group Architecture.

Like many cities, Los Angeles has seen transit-oriented developments (TODs) help revitalize its neighborhoods. However, not all TODs have been successful. Site limitations, insufficient planning, and lack of capital are all reasons why some rail stations have not stimulated the most desired investment in their communities.

That’s why ULI Los Angeles, a district council of the Urban Land Institute, recently convened a series of Technical Assistance Panels (TAPs) recommending solutions for four under-performing transit stops in Los Angeles County.  The TOD issues raised in Los Angeles--especially parking and connectivity--are echoed in other major cities including San Francisco and Washington, D.C.

In Los Angeles, the Slauson Blue Line light-rail station has seen very little development activity since its inception. The Slauson station suffers from:

• poor security;
• poor pedestrian connectivity to the surrounding neighborhood including an; above-grade platform that’s separated from street life;
• poor insulation from noxious industrial uses; and
• multiple jurisdictions that inhibit good planning.

“Like any development, a well-designed TOD does not exist on its own. It is part of a web of relationships with other uses in the surrounding community,” said Jonathan Watts, Slauson TAP chair and principal with Cuningham Group Architecture. “Our overall goals include improving these relationships, revitalizing the station neighborhoods with a greater mix of uses, pedestrian-oriented design standards, and improved pedestrian access.”

The ULI panel focused on getting people to the station and adding retail. This included adding a security kiosk, improved lighting, more visible crosswalks and sidewalks. But a key proposal may rankle those who support TODs purely to get people out of cars: The ULI TAP urges not less but more parking…particularly, a new parking structure connecting to the boarding platform. “Adding parking is not ‘good’ from a typical green perspective, but it will increase ridership,” said Watts.

Indeed, the parking issue reappears in TOD TAPs across the country. In the San Francisco Bay area, the problem has often been too much parking around TODs. ULI San Francisco Executive Director Kate White noted that Bay Area Rapid Transit (BART) previously had a 100 percent parking replacement policy: New development around transit stations was required to replace every parking space it removed.

“You’re talking about hundreds of spaces. It can kill a development deal,” said White. “At the same time, a lot of people drive to BART stations and they need parking. We recommended changing the policy and fixing the problem with transit feeder systems.”

Other San Francisco panels have focused on pedestrian linkages. A Richmond, California TOD (with both BART and Amtrak service) is less than a mile from the city’s civic center, but only a small percentage of people working or visiting used public transportation because of poor walkability to and from the station.

“The walk was unclear, unpleasant, and traversed a major boulevard,” said White. “We recommended creating a clear pedestrian corridor, with widened sidewalks, better walk signs, and traffic ‘bulb-outs’ to calm the automobiles. It helped make the area less treacherous.”

ULI Washington conducted a far more extensive TAP in College Park, Maryland near Washington, D.C. The College Park Metrorail Station was not living up to its potential as a dynamic, mixed-use development, even though it was anchored by College Park Airport (the world’s oldest continuously operating airport), its adjacent Aviation Museum, and the nearby University of Maryland. The panel, chaired by David Kitchens of architecture firm Cooper Carry, Inc., envisioned an additional 600 units of residential, a 140-180-room hotel, 40,000 square feet of neighborhood-serving retail, public plazas and open space, and up to 300,000 square feet of office space--all providing desirable economic activity to the area.

Design solutions focused on:

• Sustainability: Recommending the entire development becomes certified through the LEED Neighborhood Development rating system, which combines smart-growth principles with green building.
• The Cultural Experience: Establishing visual connections to the Aviation Museum, and possibly naming the development Aviation Plaza, allowing the museum to be a “cultural catalyst” for increased interest and activity.
• Connectivity: Developing a viable street grid more supportive of pedestrians.
• Civic Space: Incorporating opportunities for children’s activities, outside dining, and places to people-watch.
• Parking: Creating easy access to parking, but “screening” it by other uses, such as the office space.

The recommendations of all these TAPs are in various stages of fulfillment. In the meantime, ULI Los Angeles will host a June 4 TOD Summit, evaluating progress on four separate TOD TAPs, including the Slauson Blue Line.

A Response to The New York Times

Editor's Note: Rick Rosan, president of the Urban Land Institute (ULI) Worldwide, wrote a letter to The New York Times in response to a column written on September 14 by Nicolai Ouroussoff, in which Mr. Ouroussoff claimed that ULI's recommendations for rebuilding in New Orleans included a proposal that would revert much of the city to wetlands, and which contained no specifics on relocating those displaced by the flooding. Below is a copy of the letter sent by Mr. Rosan.

Dear Editor,

Nicolai Ouroussoff's sharp criticism of the rebuilding of New Orleans ("Reflections: New Orleans and China," September 14) is understandable, given the haphazard redevelopment process that has kept much of the city in limbo--to the detriment of its residents and those who were forced to leave the city by the ravages of Katrina. But his discourse misstated some facts with its swipe at the Urban Land Institute, which we at ULI would like to correct.

In November 2005, over 50 of America's most accomplished redevelopment experts came to New Orleans with one goal: to offer without any charge or compensation their best advice on how to get the city back on its feet, both for the short term and long term. Contrary to Mr. Ouroussoff's claim, ULI's Advisory Panel did not recommend that large parts of the city be transformed to wetlands. The plan focused on rebuilding both neighborhoods and the local economy. Specifically, the advisory panel recommended rebuilding in a way that would balance the city’s dire need for affordable housing with the no less urgent need to avoid moving displaced residents back into harm's way.

Moving Beyond 'Drive until you Qualify'

In a joint effort by the Chicago-based Center for Neighborhood Technology (CNT) and Washington, D.C.-based the Brookings Institute, an interactive mapping web tool -- the Housing + Transportation Affordability Index -- was developed to measure the true affordability of housing by applying transportation costs.

The tool provides housing and transportation costs as a percentage of income on a neighborhood-level basis for 52 metropolitan areas using 2000 U.S. Census data and analysis of household transportation costs.

Urban planners, policy-makers, and transportation and housing advocates measure housing affordability as 30 percent or less of household income. However, housing affordability is not always what it seems.

As Scott Bernstein, president for CNT explained during a presentation today at the Brookings Institute, the old adage of "drive until you qualify" is really no longer an appropriate measure of housing affordability. As gas prices increase along with suburban sprawl, much of the population is paying as much for transportation as they are housing.

Collateral Damage: Squeezing Out Affordable Housing

While everyone's attention is focused on market gyrations, credit squeezes and the housing melt down, not to mention the latest sex scandal and—remember—the endless Democratic Presidential campaign, the affordable housing industry is being quietly closed down.  Look at what has happened:

• Low income housing tax credits—the price for these credits has fallen in the past few months from over $1 per dollar of credit to 80 to 82 cents to the dollar—a 20% decline that is making new deals unworkable.  The main reason for this meltdown is what has happened to Fannie Mae and Freddie Mac; their accounting scandals resulting in the new restrictions on their mortgage purchases as well as the decline in housing prices and the mortgage-backed securities markets all have combined to reduce or eliminate their profits.  Thus the biggest market maker for the tax credits, Fannie Mae, has reduced its purchases of credits from over $2 billion in 2006 to $1.1 billion in 2007 and is now reportedly a net seller of credits.  Freddie Mac has also reduced its purchases as well.  The major banks that were also buyers are now struggling with loses and don't need or want credits.  While the new pricing makes credits attractive investments to the corporations that used be in the market for credits, it will take months or years to get them back in as active buyers.

Compact Communities - Is Density Incompatible With Safety?

Reducing the carbon footprint of metropolitan areas will require making them more compact in order to reduce driving or vehicle miles traveled (VMTs). Forgive me for saying this (density being a four letter word) but this will require increasing the density of existing communities and building new ones with appropriate density. 

So what are the best ways to design compact, densely populated, walkable communities which are attractive, safe and lively? One thing clearly needed is enough housing so people live in the community; this is what creates the "24/7" communities which have been shown to be most successful over time. What are the best ways to do this while reducing crime and enhancing public safety?

The Urban Health Advantage

A recent article in New York magazine by Clive Thompson called "Why New Yorkers Last Longer" pulls together some intriguing facts that anyone interested in walkable, mixed use, mixed income communities should consider. The article, as the title suggests, explores why the "average life expectancy" of New Yorkers has grown faster than that of the U.S. as a whole, especially in since 1990. Now it is 78.6, while the national average is 77.9; as recently as 1990, the average life expectancy of a New Yorker was three years shorter than the national average.

Certain factors may be unique to New York, such as the drop in the crime rate (New York is now the safest city in the U.S.) and new drugs that have extended the life of AIDS patients. But other factors are more generic to all urbanized areas.

Here are some excerpts:

Newark Redux?

The 21st century is the Century of Urbanization, and cities across the U.S. are gaining population and economic vitality. But will this new life come to all cities in the U.S.? Maybe not, but take a look at Newark, N.J., historically one of the poorest, toughest, most corrupt and crime ridden cities in the country.

Talk of a comeback for Newark is not new, to be sure. In fact it's part of every mayoral campaign and has yet to take hold. That said, there is no reason why Newark should not become a thriving satellite of New York City if several previously intractable challenges can be met -- and a couple of them look like they are on the way to being resolved, namely crime and corruption.

Alternatives for Growth

Tysons Corner, Virginia -- just a stone's throw from Washington, D.C. -- was carved out of the Virginia countryside and evolved from one major shopping mall more than three decades ago into a two-mile swath of offices, strip malls, car dealerships and housing. Today, Tysons has 8,000 residential units, 45 million square feet of commercial and retail space and 116,000 people who either live or work in the area.

Tysons is slated to be the site of four future Metro stations and Fairfax County is trying to get a grip on how growth should develop. The county has appointed a Tysons Land Use Task Force (www.fairfaxcounty.gov) to examine three scenarios for future growth. The Task Force held a series of six public workshops March 19, 20 and 21 to receive input from the community on various alternatives for growth. Approximately 400 people participated in the workshops.

The three scenarios all assumed mixed-use development but each had a different emphasis. The "housing emphasis" would increase residential density and support a live-work-play community, while encouraging the use of public transit. The "employment emphasis" would assume increased job growth with a focus on using transit as well as providing additional housing for a better balance of living close to work. The "pushing the envelope" scenario assumes growth that approaches the limits of sustainable development for traffic, transit and other infrastructure.

Context is Everything

How a building relates to its surroundings and neighbors is crucial for the creation of an active streetscape and to foster a sense of community. West River Commons, a small (one-acre) mixed-use project in the Longfellow neighborhood of Minneapolis, Minnesota, is an excellent example of context-sensitive design.

Like many pre-WWII inner suburban neighborhoods, the Longfellow neighborhood comprises single-family homes sited on a dense and walkable street grid. Also like many neighborhoods from this time period, the scale and walkability of the area has been comprised by fast moving traffic on arterial streets lined with one-story commercial strip centers.

West River Commons fronts one of these arterials, Lake Street. Its 53 apartments, three townhouses, dry cleaning shop, two restaurants and one cafe are designed in such a way to provide a transition from the activity and traffic on Lake Street to the more quiet residential feel just a block away. The focal point of the project is a small park which provides outdoor setting for the restaurants and serves as an informal community gathering point.

A complete case study of this project can be found on ULI's Development Case Studies Web site. (If you are not already subscribed to the Development Case Studies, you can subscribe here.)