Why the ‘coming housing calamity’ shouldn’t have to be calamitous
Photo: jcbonbonLast week, I wrote about the mind-bending case of a developer who is giving away cars in order to convince people to buy houses in a far-flung exurban development. It’s kind of like giving away cigarettes to sell funeral plots.
The absurdity of the buy-a-house-get-a-car-free approach only became clearer when I read a pair of articles over the weekend — one about demographic trends, the other about shrinking cities.
The first comes from Robert Steuteville, writing on New Urban Network about “The coming housing calamity.” It details how an aging populace and changing households could reveal critical weaknesses in our current housing stock and policy:
Arthur C. Nelson, one of the nation’s most prescient housing market researchers, says the worst is yet to come [in the housing market]. The industry faces demographic and economic forces that will apply unrelenting downward pressure on the market for the next decade, Nelson told a group of journalists at the Lincoln Institute of Land Policy in Cambridge, Massachusetts. He called his presentation “The Decade of Calamity.”
Nelson, professor of city and regional planning at the University of Utah, reported prior to the housing crash that the US faced a massive oversupply of large-lot single family houses and an undersupply of multifamily units — and he warned that Fannie Mae and Freddie Mac would confront deep troubles. All of these views have held up — one reason why Nelson has credibility now. The other reason is that Nelson’s views are based on solid research — some presented for the first time at the symposium in mid-April.
Holding the current demographics constant — that is to say, isolating and examining the change in the populace between 2010 and 2020 — reveals much about the demand for new housing. Ninety percent of the increase will be households without children, and 47 percent will be senior citizens (the latter resulting from the rising tide of Baby Boomers who started turning 65 last year) …
Both of these demographic groups lean toward multifamily and away from large-lot sprawl. The impact of so many new households without children is obvious, but readers may not find it immediately apparent why senior citizens favor multifamily housing. Nelson explains: When those 65 and older move, 80 percent vacate single-family houses, but only 41 percent move into single-family units. The rest — 59 percent — move into multifamily buildings for a variety of reasons such as low maintenance and proximity to services. That’s a huge shift coming from the decade’s fastest growing demographic group. “At 65, people tend to sell houses,” says Nelson. “That’s going to impact society in a very big way starting roughly five years from now.” He calls this effect “the great senior sell-off.”
Sure, you can see this as calamitous, and for developers who are wedded to extending sprawl, it will be. But instead of wringing our hands over the latest apocalyptarian scenarios, we should be thinking instead of the opportunities presented by the shifting needs and desires of the U.S. population.
Those opportunities are both economic and environmental. If people aren’t going to be buying large-lot single-family homes in ever-more-distant suburbs, what kind of housing solutions are they going to want? If they aren’t going to be buying more and newer patio sets and barbecues, what are they going to be buying? Isn’t this a great chance to create stronger, more resilient communities that are more sustainable, using market forces as leverage? And potentially to help build local retail economies? Christopher Leinberger of the Brookings Institution and Patrick Doherty of the New America Foundation have written powerfully about the potential of this kind of development to drive future growth.
More from the New Urban Network piece:
Despite the general bad news for the housing industry, some sectors will flourish — especially transit-oriented development, rental units, and multifamily and small lot housing. Some new urban development will support the continued revitalization of cities, but much will be in the suburbs, Nelson says.
The division of McMansions into multifamily homes, the type of solution that some planners have been advancing recently, is one possibility Nelson suggests.
In a market like this, grand developments might end up being less meaningful than smaller-scale, individually tailored rehabilitation and reclamation of existing buildings.
Which brings me to the second piece that caught my eye in the last couple of days. Roberta Brandes Gratz wrote a post on Citiwire called “How to beat the shrinking cities syndrome,” in which she discusses a recent auction of distressed properties in New Orleans that surprised city officials with the active bidding that it drew.
According to Gratz, the auction — which featured 100 distressed properties — drew 1,000 bidders, and “officials were astounded.” Their astonishment makes sense, considering that the New Orleans metro area lost 11 percent of its population between 2000 and 2010. That shift, the biggest loss among the nation’s largest metropolitan areas, was precipitated by Hurricane Katrina and cemented by a dismal job market.
Gratz thinks there are lessons to be learned from the New Orleans example — and that they counter the approach being pursued in cities like Detroit, where demolition is being celebrated as a necessary prelude to a healthier future:
Why wait years for big developers to buy big swaths of land for redevelopment with the usual generous assortment of subsidies and tax incentives? Why not let the market reemerge slowly with small help offered to individual buyers? This happens to be the way regeneration has occurred in the many once-deteriorated-but-now-revitalized neighborhoods across the country. Developers are never the first ones into challenged neighborhoods; they follow the small investors who take the risks and prove that the market exists. …
The real challenge is to overcome the state and federal regulations and funding opportunities that make this revitalization direction so difficult. Demolition money is easier to come by. Big demolition contracts are easier to give. Mayors love the photo-op that gives the impression of cleaning up blight. Lenders don’t like the look of dilapidated old buildings, even if they are historic or just solid old construction. They do, however, understand demolition and formula building projects. And even though preservation, restoration, conservation and renovation have saved more neighborhoods than urban renewal ever did, the money to do more of it is the most complicated to get.
I don’t pretend to have the answers for every city, or any city. But I do know that economies evolve. “New housing starts” wasn’t always the definitive measure of our economic viability as a nation. And as demographic trends change and resources become more limited, it’s a marker that needs to be put into a different perspective. Redevelopment of existing properties can create jobs, too. Building on the historic framework of existing cities can take advantage of existing infrastructure that taxpayers are already paying to maintain.
Resources are finite. There’s only so much land, so much energy, so much time to commute.
For inventive, entrepreneurial minds, those limitations shouldn’t be terrifying. We can adapt. That’s what we do.
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