The Option of Urbanism Investing in a New American Dream

After World War II ended, men and women all over America chased after The American Dream. A three-bedroom home. A backyard for the kids and the dog. A white-picket fence. Maybe a detached garage for grandma and grandpa when they get too old to take care of themselves. Far out in the suburbs, they’d be safe from the noise, danger, and filth of the city. However, the dream quickly turned into a nightmare as highways were built, the cities emptied, and suburban sprawl took over.

Now, the children of the children of the baby boomers are abandoning the ways of the previous generations and making their way back to urban living.

Walkable urbanism means being able to easily walk between school, shopping, parks, employment, and friends. “Walking distance” typically means a 1500-3000-foot radius. A little over one-half of a mile. This also usually includes public transportation be it bus, train, or even bicycle. On the other hand, drivable sub-urbanism means getting in the car for nearly every single trip. As a consequence of low-density building arrangement, automobiles and trucks are the only practical form of transportation.

Leinberger believes that America is moving towards a virtual, knowledge-based economy. As of 2006, only 25% of Americans over the age of 25 had a college degree. According to employers, offering a full range of lifestyle choices is important to attracting an educated work force, so suburbs seemed like the only logical choice. Drivable sub-urbanism created economic wealth for the country, which became integral to the 20th century version of the American dream.

In 1939, New York City held the prestigious World’s Fair?”the official theme being “The World of Tomorrow”. Expositions worked hard to push the idea of the 20th Century American Dream onto fair-goers. They were told that the distant future of the 1960s offered large home, spacious yards, and room to really spread out for the first time. The main focus quickly became “superhighways” and magic motorways. Pedestrian sidewalks would one day float above cars. The big hit of the fair was the “Futurama” exhibit. Sponsored by General Motors, Futurama influenced the public perception of a publicly funded superhighway system and a society that largely consisted of automobile ownership. The exhibit helped plant the seed in American consciousness.

During World War II, all car production and building industry halted. All production went toward helping the war effort. Once the war was over, production shortages created a pent-up demand that exploded after the war. New demand and demographic changes were compounded by a hunger for a better, more richly deserved life at the start of the baby boom. This laid the groundwork for something entirely different than any society built in history. In the blink of an eye, The American Dream went from 40 acres and a mule, to a home outside the city with a swimming pool and two-car garage.

In 1956, President Eisenhower enacted the Federal-Aid Highway Act. The bill authorized $25 billion dollars for the construction of over 41,000 miles of interstate highway systems over a 10-year period. It was the largest public works project in American history at the time. Though the 46,837-mile system was not actually finished until 1991, this act created jobs, increased mobility for national defense, connected the country’s truck transportation network, supported manufacturing, trucking, and construction companies, and most importantly, linked the nation together.

Though it seems like some good may have come from the Federal-Aid Highway Act, this new, Futurama-inspired domestic policy affected the economic and fiscal health of nearly all large American cities?”most eventually collapsed socially and financially. By the 1980s, cities had sunk billions of dollars into Urban Renewal efforts. Urban Renewal failed spectacularly. Historic buildings were destroyed. Downtowns were wiped out. The general market did not seem to be interested. They were comfortable in their sprawling, suburban homes.

Tn 1945, only 1% of land was urbanized. 66% of all Americans lived on that 1%. The rise of drivable suburbia can be attributed to transportation. Transportation drives development. Outside of the cities, there was plenty of space to build, and developers never had any shortage of land. This also made it incredibly cheap to develop. According to Leinberger, housing, entertainment, universities, and hospitals are the main development drivers.

Once those are built, the smaller developments always follow. Neighborhood-serving retail, restaurants, office space, storage. Housing represents 56% of the built environment. The majority of that quickly moved to the suburbs following the war. Because it was harder for neighborhoods to have everything they needed (grocery, shopping, pharmacies, etc.) the 1960s saw the rise of the regional shopping mall.

There were obviously no historical precedents for the post-war economic boom. Few real estate developers prior to the Great Depression were still in business in the later 1940s. Because Futurama had successfully planted the seed into American’s mind before the war, men came back with GI money ready to settle down, somewhere quiet, away from people, away from the city. Really, they just wanted a piece of dirt to call their own?”known as terrestrial affiliation. The good news was that they successfully implemented the Futurama-inspired vision of the future. But the bad news was that they successfully implemented the Futurama-inspired vision of the future.

Because this was entirely new for humanity, no one had any idea of the consequences for creating this drivable sub-urban growth. It would be unfair not to acknowledge the good things that came from these newly developed neighborhoods. It became cheaper to build homes; wood-frame houses were perfected, billboard architecture allowed for cheaper construction and synthetic finishes on buildings, and development financing encouraged exploration of even cheaper construction methods. Public schools were better funded, drivable suburban communities became much safer than walkable urban communities, privacy was increased, and abundant free parking?”which the people loved.

Though there was some good to come of sub-urban growth, the bad far outweighed the good. Automobile dependence meant one mode of transportation. It all but killed public transit. Social segregation was rampant; there was a high concentration of poverty, a lack of access to jobs for lower income and minority households, and the formation of NIMBY groups. The effects on Americans’ health were staggering. Asthma and obesity went through the roof. The increased use of automobiles meant an increase in vehicular accidents.

There were also plenty of environmental and economic effects as well. Land consumption was at 10x-20x the underlying population growth. The increase of paved roads and parking led to extreme heat island effect in cities. Water and air quality degraded quickly. Climate change rapidly accelerated as a result of the car-based development and greenhouse gas emissions.

Economically, oil dependency and the potential of global peak oil had a significant impact on the huge trade deficit today. This implicated our foreign policy because our oil purchases subsidize our enemies. Economic struggles even trickled down to the suburban family. Families were now tasked with the cost of upkeep and maintenance on a car that they wouldn’t have needed 10 years prior.

American society unfortunately only considered the upsides of the experiment. As we tend to do. No one realized what might be lost by ignoring 5,500 years of experience in constructing the built environment. Leinberger believe that even if Americans hadn’t ignored the consequences, they still would have done it the same anyway. The United States is now waking up to a new economic and environmental reality, and really dealing with the consequences for the first time.

Since the beginning of television, sitcoms and shows began to sell the idea of what is currently cool. The first sitcoms like Leave it to Beaver, The Brady Bunch, The Wonder Years were all set in the suburbs. They showed people the idea of the American Dream. In the 90s, new kinds of shows about young, single friends living in the city came on air. Sitcoms like Friends, Seinfeld, and Frasier all showed that living in the city could be cool.

Urban life was hip now. As young people started abandoning the ways of their parents, the 1990s showed a revival in many American downtowns, due largely in part to the drop in urban crime. After recovering from the disastrous urban renewal plans, cities started to develop new, walkable areas in blighted or empty areas of downtowns. The U.S. was quickly on the verge of a new phase in constructing its built environment.

Leinberger believes a new American Dream is emerging. The tidal wave of baby boomers reaching retirement age will change American’s institutions. With people growing older and living longer lives, those who reach retirement age won’t need the big house of the suburbs but will be too young or too healthy for nursing homes and assisted living facilities. This will have significant impact on the built environment by creating a demand for more walkable urban housing.

Boredom is also a contributing factor to the shifting demand of walkable urbanism. People get bored and want things to do?”they also want options. According to Leinberger, the breeding and attraction of young, highly educated people to start new companies, build the local tax base, and become more “hip” is driving many urban and suburban economic development strategies in the 2000s. The creative class?”software engineers, medical professionals, high-tech entrepreneurs, and teachers?”will gravitate to metro areas that offer choices in living arrangement.

New York City has the most extreme premiums for walkable urban housing than anywhere in the country. Condominium prices have risen substantially more than suburban homes in the last 20 years. Housing prices in walkable urban areas have a 40-200% premium over drivable single-family homes. The disparity in pricing shows more demand for walkable urbanism than the real estate industry can produce.

The U.S. Census says that the country has been adding $1.2 trillion dollars in new construction each year during the mid-2000s. Because the younger Gen. X and Gen. Y are more likely to rent in areas of walkable urbanism than any other household, suburban developments are starting to catch on and accommodate. They create was Leinberger refers to as “lifestyle centers.” Lifestyle centers include a pseudo-Main Street with teaser parking on sides or streets with national retail stores built up to the sidewalks.

It creates almost a Disney-like atmosphere in that it gives some false sense of urbanism in suburban areas. Up to 70% of pent-up demand for walkable urbanism will be satisfied by the suburbs. Suburban town centers, greenfield towns, and redevelopment of strip centers will take the majority of a projected $30 trillion dollar development by 2025.

While walkable urbanism seems to be a cure-all for our traffic congestion and suburban sprawl, it has come with unintended consequences, the first one being a lack of affordable housing. In the last 20 years, many neighborhoods have experiences rapid gentrification. Tax bases have increased, and buildings, amenities, and services have improved.

This has created mixed-income neighborhoods. However, finding quality work-force housing has become increasingly difficult. Teachers, grocery clerks, police, and other public employees cannot afford to live in urban walkable areas. The most common way to find affordable housing has been described as “drive until you qualify.” Meaning, housing prices drop once you’re out on the fringe of the city?”seen as one of the major benefits of sprawl.

To combat this, the federal government created inclusionary zoning policies. These policies mandate that any housing development over a set number of unites must make some percentage of the housing (10-20%) affordable. However, the required subsidy slightly reduces land value in the entire area to which the law applies. Leinberger believes that the best potential way to encourage inclusionary housing ordinances is to link the issue to federal transportation spending, which is channeled into a metro area through the state department of transportation. Investing in this would take pressure off the interstate highway system.

There is also the new concept of value latching. Value latching allows governments or nonprofit agencies to latch on to rising property values to pay for the affordable housing. Direct value latching means that an investment, such as land or financing, could be made into a real estate project by the government or nonprofit agency. Rather than a financial return being made for that investment, a certain percentage of the new housing could be affordable.

Indirect latching, however, is more creative. If the government builds transit or overlays a new zoning district to encourage walkable urbanism, there could be mandated financial payments into an affordable housing fund if a private developer wants to develop in the area benefitting from these government actions. Basically, value latching uses gentrification to pay for affordable housing.

The other unintended consequence is a surplus of large-lot, single-family houses on the fringe. Developers can buy undeveloped land build single-family homes for practically nothing. However, now that the younger generations are moving away from that version of the American dream, there are hundreds of thousands of empty, suburban homes waiting for someone to buy them. Additionally, there is an average of one empty bedroom per household in the US which means that there are more than 100 million spare bedrooms that could be rented as affordable housing Allowing spare bedrooms to be built as an accessory unit in the future could be a big step towards providing affordable housing and income for home owners.

Until that happens, millions of large-lot single-family homes will have a hard time finding buyers by 2025. Homes on the fringe will most likely be broken up into apartments or sold at low prices to lower income families. More than likely, the country will fundamentally restructure how it constructs the built environment, trying to catch up with the pent-up demand for walkable urbanism.

One of the more important challenges for achieving new walkable urbanism is finding a way to zone it. The current “Euclidean” zoning codes were adopted by local governments in the early-mid twentieth century to intentionally separate uses. Rental housing was kept away from for-sale housing. Industrial activities and retail away from any housing.

Hotels only near retail and offices. Communities are now engaging new planning processes that ask local stakeholders?”property owners, neighbors, retailers, developers, and planning and elected officials?”what they want to see in a defined, walkable urban district. Some cities have begun to develop codes that are based on the form of the building.

Financing walkable urbanism will also become a challenge. A combination of lack of experience, and blinders of current methods of evaluating real estate investments makes financing walkable urbanism incredibly difficult. Major financial institutions will need to change with the times because few assets provide long-tern cash flow like real estate does. Unfortunately, the construction budget of walkable urbanism is 20-40% higher than construction for drivable suburban projects.

More equity must be invested but must also be patient?”which is hard for investors because equity is so expensive. We first have to end the subsidies for drivable suburban development. Governments have used an unpredictable “Extractions” process, in which a deal is cut between a developer and the local municipality. Basically, the developer pays for something the town needs.

This can lead to uncertainty for the developer and investors and has high potential for corruption. Many state and local jurisdictions use more straightforward “impact fees” to ensure that the new developments help pay for municipal services required by the development. Others take a more aggressive approach in encouraging development that puts the least strain on public resources.

The next step to creating walkable urbanism is investing in the infrastructure. A major source of funding for transportation of the federal transportation bill. Revenue comes from an eighteen-cent-per-gallon federal gas tax drivers pay at the pump. Most transportation funds allocated through the law are transferred from federal coffers to the state departments of transportations (DOTs). The funding is viewed as simply a return to the states of the gas taxes paid by the state’s drivers.

To encourage walkable urban development, a substantial shift must take place in local transportation spending. Only minimal new highway construction on the fringes should be undertaken because the demand for walkable urbanism is so great that the United States is going to have a difficult time keeping up with it. Federal dollars only account for 25% of total transportation surface spending; states and local governments provide the rest.

The complexity in creating walkable urbanism has resulted in the emergence of new entities to develop the strategy for and manage these places. These entities take the form of nonprofit business improvement districts (BIDs). BIDs sometimes raise operating revenues by getting property owners to voluntarily raising their property taxes by 5-10%. Services by BIDs can include increased levels of cleanliness, improved safety through “ambassadors” roving the streets, creation, management, and/or promotion of entertainment, and even the development of a visitor signage program.

Management of walkable urban places can expand into the real estate business. This includes land assembly to encourage new development, providing “gap financing” that can provide the patient equity, and joint venturing with private developers on new projects. Additionally, it includes developing initial projects in a reviving place to demonstrate to the private development community that there is a market for that type of product.

If 30-40% of households want walkable urbanism and 30% aren’t sure what they want, this means that over half of American households want or will accept something other than drivable suburban development. What happens if conditions converge that require a more rapid shift to walkable urbanism? Nearly 75% of CO2 emissions result from the built environment. The earth is reaching a tipping point, and we will need to shift our built environment to something very fundamentally different if there is any chance of saving it. Moving away from suburban sprawl and back to the density that America knew in the 1920s and 1930s may be one of the few ways to help it.

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