Death of Sprawl, Part 2: How Exurban Meltdown helped bring down the US Economy

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candysweet.jpg
(photo copyright Los Angeles Times)

Evidence that speculative auto-dependant sprawl was one of the major factors behind the Great Recession is emerging through real estate market studies of major US metro areas, from Washington DC to Southern California.

Note the New York Times on November 6 (p.A13):

New research about the recession has also bolstered one of transit's central premises -- that highway-driven sprawl is bad for a city's economic health. Recent studies at the University of Utah, for example, concluded that foreclosure rates in the Washington area were much lower in counties served by the Metro rail system, compared with the next ring of counties farther out, and that home prices in Phoenix had also fallen in direct proportion to the distance from downtown. 

A new report I wrote for the Post Carbon Institute (link to pdf) includes the case of Victorville, California, a virtually 100 percent auto-dependent city of 107,000 that grew from 64,000 in 2000. Real estate prices started to crash in this Mojave desert community in 2006 when gas hit $2 a gallon. Victorville is now one of the foreclosure capitals of the nation, as home prices fell from an average of well over $325,000 in 2007 to under $125,000 in 2009.

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Source: City-data.com (11/09)

The market was so decimated that large new homes, some might call them McMansions, were demolished in Victorville (see photo at beginning of post) earlier this year to free the city from liability resulting from possible vandalism, crime and fire danger.

As gas prices hit $3 and $4 a gallon, people couldn't afford the thousands of dollars of extra gas expenses that were required to commute to the Los Angeles area, which is almost 100 miles away. As a result, home prices crashed, foreclosures proliferated, developers went bankrupt, and the city and the region are now suffering. At the same time, San Bernardino County was successfully sued by the California Attorney General's office for allowing development in its communities, such as Victorville, with disregard for global climate change and regional air pollution.

Similar imploding exurban real estate prices started the 2007-2009 national foreclosure crisis, with these toxic assets setting off the derivatives financial meltdown and, you know the rest...

Victorville is by no means an isolated example. The amount of suburban and exurban development that occurred in the 1990s and early 2000s when fuel prices hit their historic low prices (see graph below) has created a massive expanse of excess houses and infrastructure requiring untold resources to build and maintain.

historicgasdoe.jpg 

Largely because of such sprawl, stimulated by inexpensive gas prices and a lack of local government controls, California's main source of greenhouse gases come from the transportation sector.

Clearly it's time for the focus on "green cities" to expand outward to greening the suburbs and the exurbs, because that's where the majority of our nation's population resides. Though 80 percent of the nation lives in urban (developed) areas, only 20 percent of those "urbanites" live in big cities. About 60 percent of US population lives in metro area 'burbs of under 100,000. 
 
During the last three years, outer-suburban or exurban areas lost far more value than real estate in urban or suburban areas served by public transit with walkable, bikeable and mixed-use zoning options as my report and others, such as Prof. Arthur C. Nelson's at the University of Utah, are demonstrating.

This is the first time in US history that sprawled low-density suburbs or exurbs have fallen faster in average value than city or inner-suburban areas; suddenly "Smart Growth" is more than a niche market or trend--it will be at the core of financially successful planning and development.

Greater density with non-auto mobility options is going to dominate development as long as we have climate change, volatile resource availability (particularly water) and high gas prices. In addition to economics, there are demographics. The nation's dramatically aging population consists of more single people, retired couples and empty-nesters who want apartments or condos from which they can walk, bike and ride buses or use subways and light rail. 

The redesign of suburbs and exurbs will require some painful Victorville-type actions that may waste resources, such as tearing down certain neighborhoods or homes. There are other options, however. Ellen Dunham-Jones and June Williamson demonstrate design examples in their excellent 2009 book, Retrofitting Suburbia.

Not all future metro areas need to follow the hub-and-spoke format with central cities and their suburbs. Metro areas might consider, for instance, designing growth and transit corridors around multiple regional centers of economic activity, which was the aim of the Los Angeles area's Compass Blueprint.

California's anti-sprawl Senate Bill 375 is the nation's first such statewide measure. It now is being guided by an official strategic growth process, which is being led by a council with modeling tools for preferred scenarios developed by Calthorpe Associates, transit-oriented development champion Peter Calthorpe's Berkeley, CA firm.   

On a more granular level, cul-de-sacs, which are impediments to non-automotive mobility, can be re-engineered to accommodate more direct walking and biking access.

Some innovative buyers are devising ways to use the glut of unoccupied or unsold large homes for business or residential purposes other than single-family living. Based on major shifts in market demand, home builders are downsizing and are constructing more energy-efficiently.

The days of plowing productive agricultural areas under for suburban home tracts and strip malls may be coming to an end. A Denver suburban home developer is incorporating working agricultural land into unsold tract home land plots in numerous communities, in what is being billed as "Agriburbia."

Clearly, energy efficiency, greenhouse gas emission reduction and resource conservation are becoming guiding factors for much more than regulatory and environmental compliance, they are beginning to dictate the very economies upon which our metro regions operate.

We must now rethink how to develop our communities so that sprawl does not re-emerge, and relegate it to history, as an oddity from the era when gas was cheap, the climate was forgiving and resources were seemingly endless. 

Warren Karlenzig is president of Common Current, a consultancy based in San Anselmo, California with international projects on urban sustainability strategy and metrics. He is a Fellow at the Post-Carbon Institute and author of How Green is Your City?: The SustainLane US City Rankings. 

 

 



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3 Comments

What about transit oriented inner city neighborhoods?? They were also particularly hard hit by the foreclosure crisis. And unlike exurban sprawl aren't pre WWII inner city neighborhoods examples of smart growth? It seems to me that foreclosures bypassed areas of established wealth, and most heavily affected the poor and the newly rich.

My research and the research of others shows that real estate values held up in inner-city areas during 2007-2008 when compared to outer suburbs.

During 2007-2008 the following were the relative differences between the change in home real estate values in inner-city locations (within 10 miles of city center) versus locations 50 miles out of the city:

Chicago inner city versus outer city: +3.7%
New York: +11.8%
Portland, OR: +8%
Baltimore: +7.3%
Philadelphia: +5.2%
Los Angeles: +14.2
Tampa: +5%
Pittsburgh: +7%

The issue with inner city housing, jobs and services is that you don't need a car to get to them, and people can get to multiple amenities by transit, foot, bike. Also, these areas don't require the resources of new road and infrastructure construction and maintenance: they already have sidewalks, power and sewage lines. Lastly, inner city or already developed suburban areas can be redeveloped without impacting valuable natural resources such as agricultural land, water supplies and wildlife habitat.

I just finished an Urban Economics class and we spent a good amount of time on these concepts. Thank you for posting this; it's great to actually *see data* that supports theory.


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About the Author

    Warren Karlenzig
Warren
Warren Karlenzig, Common Current founder and president, has worked with the United Nations Department of Economic and Social Affairs (lead co-author United Nations Shanghai Manual: A Guide to Sustainable Urban Development in the 21st Century, 2011); United Nations Center for Regional Development (training of mayors from 13 Asian nations on city sustainable economic development and technology); provinces of Guizhou and Guangdong, China (urban sustainability master planning and green city standards); the United States White House and Environmental Protection Agency (Eco-Industrial Park planning and Industrial Ecology primer); the nation of South Korea ("New Cities Green Metrics"); The European Union ("Green and Connected Cities Initiative"); the State of California ("Comprehensive Recycling Communities" and "Sustainable Community Plans"); major cities; and the world's largest corporations developing policy, strategy, financing and critical operational capacities for 20 years.

Present and recent clients include the Guangzhou Planning Agency; the Global Forum on Human Settlements; the Shanghai 2010 World Expo Bureau; the US Department of State; the Asian Institute for Energy, Environment and Sustainability; the David and Lucile Packard Foundation; the non-governmental organization Ecocity Builders; a major mixed-use real estate development corporation; an educational sustainability non-profit; and global corporations. Read more here.

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About this Entry

This page contains a single entry by Warren Karlenzig published on November 6, 2009 9:28 AM.

Death of Sprawl was the previous entry in this blog.

Breakthrough Energy Research Funded by ARPA-E is the next entry in this blog.

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