Real Estate may save us after all, say strategists Christopher Leinberger and Patrick Doherty, but only if it responds to a growing demand for walkable, dynamic neighborhoods. Real estate represents 35% of our economy’s asset base, so its recovery is essential to the country’s “economic renaissance.” However, write Leinberger and Doherty in a recent article, changing housing preferences driven by Millennials and aging baby boomers will make that recovery look quite different than previous decades:
“We’re unlikely…to see a real estate recovery based on a continuation of the type of development that has driven the industry for the past few generations: low-density, car-dependent suburbs… at the edge of metropolitan areas. That’s because there is now a massive oversupply of such suburban fringe development, brought on by decades of policy favoring it—including heavy government subsidies for extending roads, sewers, and utilities into undeveloped land. Houses on the exurban fringe of several large metro areas have typically lost more than twice as much value as metro areas as a whole since the mid-decade peak
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“The baby boomers and their children, the millennial generation, are looking for places to live and work that reflect their current desires and life needs. Boomers are downsizing as their children leave home while the millennials, or generation Y, are setting out on their careers with far different housing needs and preferences. Both of these huge demographic groups want something that the U.S. housing market is not currently providing: small one- to three-bedroom homes in walkable, transit-oriented, economically dynamic, and job-rich neighborhoods.”
This idea is not new to the livability community. At Partners’ “Building Livable Communities” forum earlier this fall, DOT representative Beth Osborne cited these changing housing preferences as one basis for the new federal livability agenda, which is channeling more funding toward walkable, efficient neighborhoods. According to Osborne, studies in the early 2000s showed that up to 30% of the population preferred a mixed-use urban living environment, yet current housing options were meeting only 2% of that need. With changing demographics, she believes that situation may be even more out of balance now. “Millennials are doing things differently,” Osborne stated.
Leinberger and Doherty confirm this, writing that “fully 77 percent of millennials plan to live in America’s urban cores.” That’s a big opportunity, they say, if we can just prepare ourselves to take advantage of it. “It is now possible,” they conclude, “to unleash latent private-sector demand by implementing reforms that will end our subsidies to sprawl and focus our nation on sustainability.” With support for livability from a growing list of local and federal sources, the real estate market may be able to respond to new demands, and set us all toward recovery.
Click here to read Leinberger and Doherty’s article, “The Next Real Estate Boom.”
