After the housing bust, what’s next?
Beyond the double-dip U.S. housing recession, is there a future for the American home market? What I see emerging as growth magnets are established city enclaves and “new urbanist” communities that resemble old-style neighborhoods without the sprawl. They are close to public transportation, walkable and loaded with culture and amenities. They personify the new American dream.
Unfortunately, I also see the slow death of the “spurb,” a word I needed to coin for my book The Cul-de-Sac Syndrome to describe sprawling, car-addicted ex-urban areas far from central cities. While I think many inner suburbs will do fine and prosper, the next wave of real-estate growth favors vibrant cities and energy-efficient communities.
Before I eulogize the spurb, it’s time for a serious housing policy discussion. I agree with Edward Glaeser, Harvard economist and author of Triumph of the City, that the post-war government homeownership policy has over-subsidized suburban growth at the expense of cities. It’s outdated, wasteful and needs to change.
“Homeownership subsidies were a bribe to leave cities for the suburbs,” Glaeser told the Congress for the New Urbanism on June 3. “We need to rethink our fetish for suburban homeownership. It’s risk-enhancing, regressive and bad for the environment.”
More to the point: While suburban homeownership has been a linchpin of the American dream, it’s become an economic pit for millions.
In an era of rising taxes, decaying infrastructure and global warming that “little pink house for you and me” may not make sense anymore. It’s energy intensive to heat and cool and you have to drive everywhere. Wages have not kept up with rising energy costs, home maintenance and property taxes.
While Glaeser told me he sees a “long stagnation” in housing prices, I’m much less optimistic. In many areas, housing prices may not recover for a generation, if at all. If you examine the areas most overbuilt and sprawl-centric, they are also damaged by a freefall in prices and foreclosures: Central/Southern California, Las Vegas, Phoenix, South Florida. I don’t think it’s a coincidence.
Like Glaeser, I agree that we need to rethink the mortgage interest deduction — perhaps convert it to a limited credit that anyone can receive — and downscale all other real-estate tax breaks. We should re-examine the capital gains exclusions for home profits and eliminate write-offs for second homes and home-equity interest.
If there is a future for U.S. real estate, it’s in “people-centric” communities. These are places endowed with ample public transportation, walkability and myriad amenities. You can walk or bike to restaurants, dry cleaners and other services. You won’t need a car most of the time to live there. They may be in the middle of cities or in communities that are modeled like old urban neighborhoods like Brooklyn or Chicago’s Lincoln Park.
Where will real estate growth flourish? According to Patrick Doherty and Christopher Leinberger, authors of “The Next Real Estate Boom,” empty-nester baby boomers and their children will flock to dense, walkable, transportation-friendly areas like Arlington, Virginia’s Rosslyn area or Denver’s LoDo neighborhood.
“Demand for standard-issue housing is going down, not up,” the authors state, “a trend that was apparent before the crash.”
Indeed, demographers like Arthur Nelson at the University of Utah predicts that there will be 22 million unwanted suburban homes by 2025.
There’s a bright side to the shift from quarter-acre lot love to denser neighborhoods: higher property values. Doherty and Leinberger saw declines in several traditional suburban neighborhoods compared with compact, urban settings.
How do you find a people-centric community? You can start by tallying its “Walkscore,”which combines pedestrian friendliness with public transit options.
Many of these neighborhoods, however, are among the most desirable and expensive urban locales in the country: Tribeca in Manhattan, Chinatown in San Francisco and the Pearl District in Portland, Oregon. Yet there are many less-expensive gems such as Old Westport in Kansas City, Missouri or City Center East in Philadelphia.
Although the suburbs will still be desirable for young families, people-centric communities will grow in popularity as demographic trends nudge North Americans into more efficient areas. This is not in any way a failure of the American dream, but a welcome redefinition of it.