Suburban life may be once again in ascendance, as Millennials, pushed away from exorbitant city prices and finally able to afford their first houses, are rediscovering suburbs’ spacious charms. — Lcucia Graves, The Guardian
TOP STORY:
Driving Urban Change
Country Mouse or City Mouse? In early America those were the choices; life in a rural community where people either worked as farmers or in the occupations sustaining them or a home in the city, usually built around industry or commerce, where there were more varied employment opportunities.
In rural America, many people lived on farms, often far from their nearest neighbors. When they needed items they couldn’t produce on their own, to see a doctor, or to socialize, they went “into town,” usually a compact area of single family homes, built around a church, school, jail, and commercial area. Living in a large city was a quite different experience. Transportation constrained development; people needed to live close to work and services, and space was at a premium. Density was high and apartment (or tenement) dwelling was the norm.
As cities grew they expanded outward and people could not always walk to their destination, so urban transit became critical. Scott Bernstein, president of the Center for Neighborhood Technology (CNT) calls this “location efficiency,” the concept that a person’s job, grocery store and favorite hangout are all convenient to him or her. Most cities developed a relatively efficient system, subways or thousands of miles of railway for streetcars that utilized the urban grid efficiently. “It happened everywhere, it happened brilliantly,” Bernstein says, “and we threw it away.”
Because we all got cars…. And then we got the suburb.
View from on High
Emily Badger, writing in CityLob says, “Descend from 40,000 feet into just about any major metropolitan airport in the United States, and patterns of the trajectory of American life over the last century become clearly visible. Old urban cores are etched out in tight grids modeled off a sheet of graph paper. Further out, all those neat lines and right angles begin their curling meander into suburbia. Sparsely populated roads loop through the countryside in an odd geometry designed around the residential real estate dream of post-war America.” This all culminates, she says, in a cul-de-sac for every family.
The car and the desire to escape from crowded cities drove the initial move to the suburbs, but economics propelled it, especially as baby boomers established their households. Land close in to the cities became scarce and costly so the suburbs sprawled further out into formerly rural areas; families followed in search of affordable housing. Sometimes the outbound migration left core cities to crumble. In other cases, housing was replaced with office and commercial buildings. A city’s population might drop by half at 5 p.m., only to double at 8 the next morning.
And the conduit from the bedroom to the board room was the arterial highway on which suburbanites began to spend hours each day, burning leisure time and gasoline. In effect, Americans traded housing costs for commuting expenses.
Back to that view from an airplane window.
The view of leafy suburbs also paints a portrait of a landscape designed for cars. Residents needed them to get almost anywhere, through corn mazes of streets that could turn a 1,500 foot as-the-crow- flies distance to a store or the library into a two-mile trip.
Shifting the Housing Burden
In post-war America, suburbia was the defining point of the American dream (after all, you can’t put a white picket fence around a two-bedroom cold water flat), but it has always been an edgy relationship. Devotees of suburban living cite the relative quiet, safety, and open space while its detractors joke about cookie cutter developments and complain about a lack of cultural amenities, and diversity. But among the biggest complaints has been the cost of transportation in time, lifestyle, and money, because the auto has captured center stage in suburban life.
With the largest generation of Americans in history now forming households, developers are pushing the suburbs out even further, in search of land and fewer hurdles to building on it. Those buying there (and more about this in a minute) face even longer and costlier commutes and there is an increasing realization that there is a real trade-off between housing and transportation costs.
Location Affordability
One example is the index that evolved from Bernstein’s location affordability concept. In Atlanta, for example, the index measures housing costs near downtown as representing 30 to 36% of a median household income, right in the ballpark of the one-third standard economists (and the mortgage industry) have recommended as a maximum for years. Transportation costs add another 17 to 20%. Powder Springs, a nearby nice, but not exclusive suburb was a cheaper place to buy, requiring about 30%, but transportation costs ate up another 25%, and we arrive, in both locations, at essentially the same cost burden.
Inner city San Diego has a much wider range of housing costs, but transportation adds only 14 or 15%. Moving outside the circumferential highway means housing costs in the mid-30% range, but with transportation adding another third.
Looked at from this perspective puts a little different twist on mortgage underwriting guidelines. Suburban home buyers may be trading lower housing costs for higher transportation expenses, leading to sometimes identical housing burdens, but the latter doesn’t figure into the debt-to-income ratio. This may be one reason that CoreLogic recently noted that low-credit borrowers, those with high DTIs and/or lower incomes, are increasingly buying in the outer-most suburbs.
Blurring the Lines
Even as the footprint of metropolitan areas sprawl out further and further, the lines between city and suburb are beginning to blur. The Census Bureau doesn’t even have a definition of suburb or suburban, only “urban” and “rural,” and its definition of urban covers 81% of the nation’s population.
Jeff Kolko, writing in FiveThirtyEight.com, notes that many cities, especially in the south and southwest, are looking increasingly suburban as cities (which is in fact only a legal designation) expand their boundaries incorporating outlying areas. He reports a recent survey found that residents’ perception of whether they lived in the city or the suburbs often didn’t match their ZIP codes. Fifty percent of those who said they lived in the suburbs were actually inside city limits.
IT PAYS TO BE A FAN
Apparently sports fans possess more than team spirit; they have deep wallets as well. Realtor magazine says, “Fans show a willingness to pay more to live near their favorite sports team,” meaning sellers of such properties can often command a premium.
The Boston metro area, for example, carries a median home price of $479,900, while the median of one near Fenway, Foxboro or maybe Boston College is $639,500 to $1.24 million. Fans in San Diego and San Francisco appear a little less committed (or maybe just choosier about which stadium.) The San Diego median price of $620,000 becomes $545,000 to $895,000 where stadium proximate. However, a view of Saturday or Sunday night lights may lower prices in SF, with medians of $350,00 to $999,000 against a metro median of $830,000.
Rethinking Suburbia
It was the auto that enabled suburbs but it seems that housing costs will be sustaining them. CoreLogic economist Sam Khater says that not only are low credit buyers moving to the far outer suburbs but that the well documented return to the cities has been driven by educated and affluent households, leading to a concentration of wealth in cities and inner suburbs that is driving home prices higher.
Out of the conviction that the suburb will always be with us, urban planners have, for the last thirty years been rethinking its form and function; a movement that is picking up steam after being derailed by the recession. Central to this is again the auto, but this time with the goal of marginalizing it. It also means reversing what Kolko calls the suburbanization of cities by urbanizing their outskirts.
Creating Transit Oriented
Developments (TODs)
Two of the most outspoken critics of suburbia, Norman Garrick, associate professor of civil and environmental engineering at the University of Connecticut, and his colleague Wesley Marshall, associate professor of civil engineering, University of Denver, are also two of the strongest supporters of Transit Oriented Development (TOD). In their words, this is “the creation of compact, walkable, mixed-use communities centered around high quality train systems. This makes it possible to live a lower-stress life without complete dependence on a car for mobility and survival.” It is regional planning, city revitalization, suburban renewal, and walkable neighborhoods combined and they say realizing the concept can reduce driving by up to 85%.
Characteristics of TOD include a train station as a prominent feature of the town center, a mixed-use (office, residential, retail, civic) regional node; collector transport systems such as light rail and buses, accommodations for bicycles and scooters, reduced and managed parking inside a 10-minute walk circle around the town center. The key to TOD is making the pedestrian the highest priority.
SPORTS FANS, PART TWO
While homes near sports stadiums may cost more, those near a college football powerhouse could be an investment. Personal finance website NerdWallet says homeowners in college football towns can profit mightily by renting their homes on game weekends. A one night rental could recoup 70% of monthly homeownership costs.
Homeowners in South Bend, Tuscaloosa or Ann Arbor can do even better. Renting to Notre Dame or U Alabama fans can bring in about 144% and 101% of a homeowner’s monthly homeownership expenses respectively, while one night rental prices can go from $550 to $1,665 on U Michigan game days.
“Surban” Development
John Burns, CEO of John Burns Real Estate Consulting says, “While urban areas are becoming more and more expensive, the urban lifestyle is becoming more and more popular, so suburban towns and developers are increasingly catering to those looking for a more walkable, dense community. A new supply of smaller homes with little or no yards in high-population areas will meet the demand to commute less and live closer to restaurants and entertainment.” He calls this “Surban” development; suburban development that brings the best of city living to more affordable areas. Among communities he points to as already achieving such status are Naperville, Illinois, a suburb of Chicago; Old Town Pasadena, and A-Town in Anaheim, a neighborhood around the Angels’ ballpark.
The Departments of Housing and Urban Development (HUD) and Transportation (DOT) as well as other federal agencies have embraced the concept of TOD and are providing seed money for planning, technical assistance, loans for clean-up of environmental problems, and converting unused commercial buildings to residential use. DOT recently partnered with a non-profit to develop an on-line central clearing house for TOD related information.
BEST CITIES FOR WALKING
Many of us believe that walkable neighborhoods with access to public transit, better commutes, and proximity to the people and places we love are the key to a happier, healthier and more sustainable lifestyle.
According to a 2017 study conducted by walkscore.com, these cities are the most “walkable” (in descending order, followed by their scores):
#1-New York City @ 89.2; #2-San Francisco @ 86.0; #3-Boston @ 80.9; #4- Miami @ 79.2; #5-Philadelphia @ 79.0; #6-Chicago @ 77.8; #7-Washington, DC @ 77.3; #8- Seattle @ 73.1; #9- Oakland, CA @ 72.0; #10- Long Beach, CA @ 69.9.
Walkability Sells
The real estate industry is beginning to see a potential payoff from these new urban planning concepts. It appears homebuyers are willing to pay a premium for walkability, a big one. The “walk score,” an attempt to quantify the accessibility of a neighborhood, is now being featured on several national real estate search sites. Seventy, on a scale of 0 to 100, is considered a “good score” and one over 90 is described by the score’s developer as a “walker’s paradise” where no car is needed and most daily errands or activities can be accomplished on foot.
The score is more than window dressing. MarketPulse reports that, based on more than 1 million home sales between 2014 and mid-2016, a one point increase in a walk score boosted the price of a home nationally by an average 0.9% or $3,250. Writ larger, the difference between a home with a 60 score and an 80 score was $86,000 in Oakland, $129,000 in LA, $78,000 in Chicago and $106,000 nationwide.
Unfortunately, the most walkable locations are in short supply. In one analysis, “walkers’ paradises” make up less than 2% of active listings, thus being “both highly desired and extremely rare.” With that kind of incentive, developers are increasingly working on ways to develop and redevelop the old cul-de-sac nature of American suburbs into less car-dependent, with infill projects that may give them a more urban feel.
Shifting Values
The world “has shifted much from owning a big house towards valuing time,” Burns says. “People want to be close to work and exciting things to do. The notion of long commutes, never popular, is falling out of favor.”
Robert Bowman, President of the Residential Neighborhood Development Council says this concept of walkable urbanism isn’t new, “but seeing contemporary suburban developers executing on them in an industry filled with typical developments suggests they’re seen as a great opportunity. Laying down the old formula won’t work anymore.”